The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
ESTABLISHED 1S39
Reg. U. S. Pat. Office
Volume 169
New
Number 4804
Mandate To
i
Price 30
York, N. Y., Thursday, May 19, 1949
a
Copy
Our Economic Position Exceptionally Strong
Congress
Poll conducted by "Chronicle" indicates widespread
dissatisfaction with NASD, its policies and method
of operation.
Large majority of returns by both
j NASD members and nonmembers oppose "5%
i
mark-up yardstick," inquisition by questionnaire
Cents
By HON. JOHN W. SNYDER*
.
,
■
.
Secretary of the Treasury
I
Contrasting present with previous recessions, Treasury Secretary holds current situation is exceptionally
strong due to: (1) absence of excessive speculation; and (2) gradual postwar adjustments to normal
conditions. Says consumer buying is supported by high income and savings backlog and we are only at
beginning of peacetime growth. Says
credit and urges
and field examinations, prohibition of discounts to
1
abolition.
NASD
Returns
constitute
mandate
to
Savings Banks is the
first to be held in
meeting here
repeal Maloney Act.
intensified savings bond drive.
This annual conference of the National Association of Mutual
Favor
nonmembers, and the present trial system.
i
;
main objective should be to maintain confidence in national
our
are
Washington since 1931. The 18 years that have elapsed since your last
years in which broad and far-reaching social and economic changes have
<£taken
place
For many years the COMMERCIAL
CHRONICLE has sincerely believed that
AND FINANCIAL EDITORIAL
;
in our coun~
try.
the National Asso¬
In 1931, the '
ciation of Securities Dealers has been a great deal less than
economic out- look
was
a
blessing to the securities industry. .It has likewise felt
dark. And we
that in consequence of the policies and methods of operation
know nowFiscal Policy as Things Now Stand
of the NASD, vital harm has been inflicted on other seg¬
that the natu¬
ments of the nation's economy. : Prominent in the latter
Since Candidate Truman was visiting all the "whistle ral forces of
category are the smaller business enterprises whose ability stops" of the country last summer and autumn, indeed since recovery were helpless to
to raise capital via the securities markets is being adversely he submitted his
budget and other annual messages early operate in the
affected by the policies laid down by the NASD.
this year, conditions have changed considerably.
It is the en vironment
We See It
As
^
As
might have been expected, the reaction to our
policy was not uniform. Indeed, efforts were
made in some quarters to propagate the belief that the
great majority of those in the securities field were in
opinion of probably a good majority of seasoned observers
that these changes are destined to go a good deal further
in the months ahead. It was inevitable that such develop¬
favor of the NASD and its method of conduct.
v
It
.
editorial
)
part,
we
was
reverse
dowed with
in the
For
our
good reason to believe that the exact
true.
However, knowing we were not en¬
had
infallibility,
we
decided to obtain the facts
case.
Accordingly, we made a decision to conduct a poll
among both members- and nonmembers of the NASD in
order to ascertain the true sentiments of the industry with
respect to the so-called voluntary organization and its poli¬
cies and practices.
To this end, one questionnaire was sent
to all firms
these latter
not
are
except floor brokers and municipal bond dealers,
having been excluded for the
subject to the jurisdiction of the NASD.
(Continued
on page
that they
reason
This
ques-
42)
See page 17 for pictures taken
Southern Pacific
ments
these raise many questions
about equally inevitable that
regarding fiscal policy.
diverse opinions as to
at least push themselves to
as
was
what
ought to be done arise, or
the forefront of current discussion.
which
ate d
at Annual Meeting of Texas IBA
good thing if the
(Continued
on
powers
page
r
e-
by the
Jobi W. Snyder
specul ative
the
boom
recall
to
rate
of
neriod.
It is startling
today that the interest
call money went as
on
"
that be would
face this issue of the relationship between public spend¬
ing, taxation and enlarged borrowing, on the one hand,
and the general state of business on the other, and come
to a definite and sensible conclusion. Indeed, it will be
a* very bad thing if no such action is taken. At the mo¬
ment, two opposing "lines" are developing among the
politicians. One is to the effect that public spending
must be reduced, economies effected, and governmental
activities at least temporarily narrowed in scope in order
to permit reduction in taxes without enlarging the pub¬
lic debt.
The opposing theory of fiscal policy holds
that at times such as these, public spending certainly
must not be reduced, ought, as a matter of fact to be ina
c
excesses
in
20%
as
It would be
had
been
the
stock
high
in
market
1929; and that brokers' loans dur¬
ing that year reached
over
the
8i/2
billion
a
figure of
dollars.
Today,
comparable figure is less than
Vz billion dollars. Even
continued
on page
*An address by
more
in-
32)
Secretary Sny¬
der before the Annual Conference
of
National
the
Association
of
Mutual
Savings Banks, Washing¬
ton, D. C., May 12, 1949.
28
stot© chld
Group.
Company
'
■
2%%
V
*
,
'
ri
r.
•
Equipment
.
Trust
Due
April 1, 1957-63
Prices
from
to
A Mutual Fund
yield
2.30% to 2.60%
Municipal
Canada
across
Funds,we.
.....
Bonds
Monthly Commercial Letter
upon request
COMMON STOCK FUND
(Accrued dividends to be added)
f
540 Branches
Franklin Custodian
Certificates, Series AA
PREFERRED STOCK FUND
THE
Bond Department
CANADIAN BANK
THE CHASE
OF COMMERCE
NATIONAL BANK
BOND FUND
White,Weld&Co.
Members New York Stock
Exchange
Prospectus
*
40 Wall Street, New
Boston
Chicago
Amsterdam
London
®
Philadelphia
THE NATIONAL CITY BANK
UTILITIES FUND
t INCOME (BALANCED) FUND
on
OF NEW YORK
request
York 5
Providence
FRANKLIN DISTRIBUTORS, Inc.
64 Wall
Montevideo
Bond
Street, New York 5
Dept. Teletype: NY 1-708
Head Office: Toronto
OF
THE
CITY OF
NEW YORK
Exchange PI.
New York Agency: 20
NATIONAL BANK
PACIFIC
of INDIA, LIMITED
Bankers
to
the
Kenya Colony and Uganda
Head
Branches
Office:
Underwriters
Bishopsgate,
London, E. C.
in
26,
Distributors of
India.
Burma, Ceylon, Kenya
Colony, Kericho, Kenya, and Aden
and
Zanzibar
Subscribed Capital
Paid-Up
Reserve
The
».
Capital
Fund-
Trusteeships and Executorships
'i
Corporate Securities
£2,500,000
also undertaken
Established
1899
DejjnWitter
Cincinnati
Chicago
Columbus
Francisco
Analysis
Co.,
&
Honolulu
San Francisco
Denver
Stock
Toledo
Buffalo
-
Dominion Securities
Stock Exchange
upon
request
(oRPORATIOTi
Stock Exchange
*
BA 7-4300
Los
Angeles
Direct
Wires
T
.
Members New York Stock
111
WOrth
40
Exchange Place, New York 5»N.Y.
1
'3 M
*
■
>
.
!
'
Exchange
Exchanges
Broadway, N. Y. 6
4-6000
Boston
Teletype NY 1-2708
Telephone: Enterprise 1820
V
Private Wire to:
Honolulu
Seattle
IRA HAUPT & CO.
and other Principal
Exchange
14 WALL ST., NEW YORK
CLEVELAND
New York
San
Los Angeles
(Incorporated)
of
Public Service Co.
SECURITIES
Municipal
England
and
OTIS & CO.
£2,000,000
conducts
every
description
banking and exchange business
bonds & stocks
and
Members New York Stock Exchange
£4,000,000
Bank
•
'
...
New
CANADIAN
COAST
Government in
,Bell SysleniTeletype NY 1-702-3
Hendricks & Eastwood, Inc.,
Phila.
2
The
Kentucky Utilities Co.
i
■
Central Public
1948
report
\
.
,
By SUMNER H. SLICHTER*
'
;
V'V'Y;''
/
'
Points out debts
despite recessions, our economy is in strong position.
1949
Alabama &
V
Professor; Harvard University
Lamont University
Dr. Slichter maintains that
Analysis and Comment
on
: y
v
Utility 5V2/52*
*
Readjustment roi ; Business
"_
,
Thursday, May 19,
FINANCIAL. CHRONICLE
&
COMMERCIAL
THE
(2158)
Louisiana Securities
are
spending is not excessive in relation to cash and demand deposits, and ,
accumulated demand for housing. Favors industry lowering prices by sacrificing profit ;
low in relation to income and
available.
<
there is still
BOUGHT—SOLD—QUOTED
an
margins in order to maintain employment and contends wage increases under present
!
not be effective in sustaining consumer demand.
conditions will
Bought-^Sedd^Qaoted.
7
New York Hanseatic,
Corporation
number of
Teletype NY 1-583
BArclay 7-S660
down
are
by
<$>-
ing since Oc¬
tober. Person¬
on
huge
accumulated
The
c e
backlog of demand which
during the war.
A
second is the increase in supply,
partly of many raw materials and
to
partly of fabricated goods which
had been limiting output.
A third
1948.
personal
incomes spent
is
f
Brokers, Institutions
holdings
consumer
o r
o
o
frjC PONNELL & Co.
Members
New
Tel. REctor 2-7815
TRADING MARKETS IN
were
of
period
slightly
STOCKS
the
below
•
Priced
Industrials
Stocks
STOCKS
Removed
from the
about
Members Nat'l Ass'n of Securities Dealers,
27 William St., N. Y. C.
Inc.
5, N. Y.
Montgomery St., Jersey City 2, N. J.
1
Tel. DIgby
Tele.: NY 1-1055
4-2190
9.5%
of last year,
starts in the
first three months were down to
period
responding
and
300
housing
new
in comparison with 177,same period last year.
158,000
STEIN & COMPANY
three
first
were
New York Exchanges
Contract awards in
months of 1949
below the cor¬
below.
11%
the
INACTIVE
in
Until
the
the number of em¬
ployees
holding jobs has been
slightly higher than last year, but
average hours worked per week
has been less.
In April employ¬
ment for the first time since the
April
end of the war was
Air
American
Filter Co.
the
same
slightly below
month of the
preceding
year.
Common
major questions on every¬
are:
(1) How severe
readjustment likely to be?
(2) How long is it likely to last?
Corp.
is the
Kentucky Stone Co.
Preferred
5%
THE
BANKERS BOND
CO.
Incorporated
1st
Floor, Kentucky Home Life Bldg.
2, KENTUCKY
LOUISVILLE
Long Distance 238-9
Bell Tele. LS 186
Miimiiiiiiiimimimiiiiiiiiiiiiiimun
condition of the economy.
are,
I think, fairly clear. It jmay
like a truism to say that
sound
American Furniture Co.
Moore-Handley Hdwe. Co.
Dan River Mills
—★—
Scott, Horner &
Mason, Inc.
Lynchburg, Va.
LD 33
Tele. LY 83
llllllllllllllllllllllllllllllllllllllllllllh
Southern
of
true
was
also
hundreds
durable
and
we
and houses was
cars
of
true
durable
which
dwelling
less rapidly
families. What
than the number of
of semi*goods for
do not have reliable sta¬
enterprises,, as
accumulated
tistics.
Business
well
individuals,
as
big backlog of demand. Indeed,
wartime
restrictions
even
pre¬
a
vented
the
starting of new busi¬
concerns
ness
in
drop
during
that there was a
so
the business population
the war followed by a
1947.
rapid rise in 1946 and
goods became available, buy¬
bid - eagerly for them.
The
As
ers
demand
eager
for
mani¬
goods
fested itself througout most
did
the
readjustment
is
to
due
a
changed relationship between sup¬
demand, because such a
change is the explanation of every
readjustment.
It is useful, how¬
ever, to examine just what has
brought about the changed rela¬
ply and
tionship
supply and de¬
There are three principal
mand.
address
*An
Slichter
tional
between
before
Professor
by
Federation,
Millers'
Na¬
Chicago,
the
that
of 1945
the war with Japan
end
until August.
In
not
year
sumer
goods
increase
readjustment
The causes of the
Trading Markets
increased
also
of
number
The
-
units
index
industrial
of
tion,-. for example,'rose from
1946
in
187
to
to
1947
111.,
outlay
in
consumer
was
Between
cant
1947 and 1948 a
change occurred
began to outrun
consumer
goods.
—
signifi¬
incomes
expenditures on
Between these
expenditures went
cents for every
gain in incomes after taxes.
years consumer
up
only
dollar
by
68
A second reason
May 11, 1949.
for
only $1.47 for every
dollar rise in incomes after taxes
—indicating some drop in the urg¬
ency
of demand.
Between 1946
and 1947 the urgency in demand
continued to drop with the result
that expenditures
for consumer
goods increased $1.21 for every
dollar rise in incomes after taxes.
goods
STATE AND MUNICIPAL
units started rose from
896
to
1947 and 928,was
also a
853,500 in
in
1948.- There
considerably
better
balance in
production, with large increases in
items., The in<iex, of iron and steel production,
for example, was over 38% great¬
er'in 1948 than in 1946, and in
some
the
first
of
months
two
fan more than 13% above
1949
\"
i
was
ply of goods has been aided dur¬
ing the last year by a drop in mer¬
chandise exports and a rise in
merchandise
net
imports,
which was $9.6 billion in
1947,
dropped to $5.5 billion in 1948.
J
Finally, the change in demand
of
excess
holdings
to
three
but
the
years
Index
of cash
consumer
ing
NEW
CHICAGO
The smaller purchas¬
of cash and bank de¬
the less inclined individ¬
are
to reduce
obtain
them in order
YORK 4,
N. Y.
PITTSBURGH
DETROIT
HEAD
OFFICE—Edinburgh
Branches
throughout Scotland
LONDON OFFICES:
3
Bishopsgatc, E. C. 2
8 West
49
Smithfield, E. C. 1
Charing Cross, S. W. 1
Burlington Gardens, W. 1
64 New Bond Street,
goods.
time, the
more
some
-
Incorporated by Royal Charter 1727
changing
relationship between demand and
supply simply caused prices to
rise at a decreasing rate.
As a
matter of fact, there was only a
1.8% rise in the index of whole¬
sale prices between January and
For
■
Royal Bank of Scotland
23%,
power
uals
Inc.
Trade
GENEVA, SWITZERLAND
personal holdings of cash and
denosits
have
risen only
posits,
to
<
Y. Cotton Exchange Bldg.
bank
about 12%.
of
And other Exchanges
-.•»
price
about
advanced
has
and
During the last
demand deposits.
Exchange
Exchange,
New Orleans Cotton Exchange
N.
;
Exchange
Board
Chicago
-
over
jand supply relationships has been
brought about by the rise in prices
relative
Curb
Cotton
York
Commodity
•
•.
Exchange
York
New
v.
Stock
The
imports.
exports
members
York
New
it
The sup¬
almost 23% above 1946.
V:'
New
the cor¬
1948
in
metals
non-ferrous
1856'
H. Hentz & Co.
responding months of 1948. Like¬
wise the index of production of
Consequently the index
of all prices began to decline.
:i As
price declines spread and
became more general, there oc¬
curred a very important change
in business conditions.
Buying in
W. 1
TOTAL ASSETS
£ 155,175,898
Associated
Banks:
Glyn Mills & Co.
Williams
Deacon's
Bank,
Ltd.
Whether It's Hot
rising.
of
anticipation
ceased and some
ers
began
fall.
The
higher
prices
prospective buy¬
wait for prices to
voluntary accumulation
to
of inventories ceased and new or¬
ders
dropped.
months
after
In less than three
the decline in the
general price level started, indus¬
Or Gold
Be
to
sure
Reporter's
umn
every
"Chronicle"
those
new
read
"Our
col¬
Report"
week in the
see
how
issues
are
to
going.
production began slowly to
Furthermore, there soon
a
drop in new contract
trial
drop.
set in
(Continued on page 34)
Firm
Trading Market:
Over-the-Counter
LOCAL STOCKS
COMPANY
Quotation Services
for 36 Years
Common
Properties
Tlie Robinson-Humphrey Company
National Quotation Bureau
zippin & company
Specialists in Foreign
(Established 1892)
Established 1894
Established
very scarce
CORPORATE BONDS
Teletype SPBG 17
branch offices
our
776,200 in
1946
AND
SPARTANBURG, S. C.
Mobile, Ala.
Direct wires to
in
Textile Securities
L. D. SI
NY Maai
HAnover 2-0700
New Orleans, La. - Birmingham, Ala.
dwelling
FRESNILLO
A. M. LAW & COMPANY
St., New York 4, N. Y.
170
192
non-farm
New.
,r
for the changed
BONDS
York Stock Exchange
Members New
25 Broad
produc¬
expenditures for con¬
were
$11.3 bilHon
more than in the year before, al¬
personal incomes after
(3)What can be done by business though
and government to limit the se¬
taxes were only $4.7 billion more
In other
verity of the readjustment?
My than a year before.
July, 1948. Eventually the chang¬
remarks
will
deal
with
these words, for every dollar gain in
ing .relationship between supply
three questions.
incomes after taxes,, individuals
and
demand, however, brought
increased their expenditures for
about a slow decline in prices.
II
consumer goods by $2.62. In the
Some prices began dropping early
As a foundation for answering
next year, between 1945 and 1946,
in 1948.
By August and Septem¬
these questions one needs to an¬ expenditures for consumer goods
ber the number of prices which
alyze (1) the causes for the read¬ again increased faster than in¬ were
falling was large enough to
This time, however, the
justment and (2) the fundamental comes.
offset the prices which were still
minds
one's
Common
22%.
—although
The
Black Star Coal
meantime
the
number of families had increased
the
In
Harbor.
the
orders for non-durable
Low
the
at
example, was
time, >of Pearl
sales
first by about 2.5 million and the aver-,
New orders age real income per f capita"{by
retail
1948,
period in 1948, and new
goods, were
same
than
less
the correspond¬
automobiles
of
in the country, for
quarter of last year.
for durable goods in the first two
months of 1949 were 4.7% below
STOCKS
OIL
Prof. S. H. Slichter
number
the
1945
months
were
accumulation of demand
By the end of
huge
during the war.
first
1949
of
a
about 4.7% above
ing
MINING
p e r-
the
to
Everyone knows thai there-was
incomes
three
NEW YORK 5
BROADWAY,
120
Exchange
Curb
sonal
in
Stock Exchange
York
though
relative
prices
of cash and bank de¬
Let us examine briefly
these three reasons.
al¬
example,
in
rise
the
posits.
d sis
dropping. For
g
Bought—Sold—Quoted
York
s'
been
have
of
Trading Market for
been the increase in
particularly since 1946.
supply has
the proportion
RIGHTS
New
up
supply,
o m e
nc
falling sin
y8 % due 1959
Net
catching
urgent parts of the
more
relationship between demand and
December ancl
Amer. Tel. & Tel.
Banks,
the
the
is
One
reasons.
al i
Steiner,Rouse&Co,
Industrial production
9% and the consumer price index by nearly 3%;
over
has been fall-
3
'■"<
'•
-r:i
I
;
..
going through a readjustment. This is made plain by a steadily increasing
facts. Prices have been falling since last August and September. Wholesale prices
Business is
York 5
120 Broadway, New
-//i;:.-?
v'
RHODES-HAVERTY BLDG.
Teletype AT
288,^
208
South La Salle
ATLANTA 1, GEORGIA
Long
Distance 421
Tele. RAndoIph 6-4696
Incorporated
Established
Securities
St., Chicago 4
Tel. CG 451
46 Front Street
CHICAGO
1913
Hew York 4,
N.Y.
BAN FRANCISCO
'Volume 169
THE " COMMERCIAL
Number 4804
INDEX
r
,
Our
Economic
—Hon.
Page'
Position
John
Exceptionally. Strong
Snyder
W.
Cover j
The Readjustment of-Business—Sumner II. Slichter
.
Selling Investment Company Shares—William C. Cusack....
4
The Great
4
Stock Market Divergence of 1949—A. J. Messing
Certain Aspects
.
How
of the Bond
Market—George J. Lettess
Revive the Stock Market— William Gum pel
to
During the past several weeks
the
Broadening the Utility Equity Market—A. F. Tegen
8,
9 j
Market Stagnation—Edrnond M. Hanrahan
Legislative Program of the SEC—Louis Loss.
12;*
*.
Boosting Federal Expenditures Now and Later—Sen. Harry F. Byrd
13
Broken
Government
18
Let
Railroads Be
Bank Capital—Not
Joseph Stugg Lawrence
—
Socialism—The
Inflation
and
Heimann
De-Regulated!—Robert B. McColl
Adequate
American
,
19 [
the
21 j
Pattern—Emerson P.
Postwar Profits—W illiam
J.
Schmidt....
final
.
At
25!
Kelly
•-
«
;•
•;;
•
•['/;/.
.•
General Comments
No
.7 7 '
•:
,
'
*
..
(Editorial)
by Dealers Anent NASD............
A
Breath
of
a
time
not
Fresh
to
Air
1.4
,....
Meeting of Texas IBA Group
Szymezak Opposes Move
Comments
Action
of the
does
business.
elected
Payment
22
Allan
Sproul Backs
Thomas
Panama Interest Coupons of 194-3
Instalment
Credit
Graham
Opposes Bill
Authority Bonds
Housing
Camille
Gutt
Controls
Authorizing
Banks
Abroad..;..
permit
LRegular Features
As
We
[Bank
See
and .Insurance
Business
"...
:
(Editorial!
It
*.
Stocks
25
reasons
Coming Events in the Investment
;
Dealer-Broker—Investment
Field....,
•;
Id.
r-.
Recommendations•
18
K
Einzig—'"Britain's Stake in U. S. Deflation'"
Mutual
of
Business
pay
a
routine
examinations.
possibility of two examinations
7
Funds
Activity.
business from
16
,
Established 1899
Bell
ever
heard.
It is
just,
Notes
News About
Banks "and Bankers.
%pbservalions—.'l.; Wilfred
Our
Reporter's Report....
Our
Reporter
on
i
LAMB0RN & CO., Inc.
WALL
99
W;hy
doing
an
SUGAR
should' we
ai year
be subjected to the
by two different bureaus?
'
.
awfully good job and
dealers
we
owe
\
-
you
Raw—Refined—Liquid
Exports—Imports—Futures
a
Prospective Security
DIgby 4-2727
<
the NASD and the 5%
mark-up fule.
' s;
*
47
BOSTON, MASS.
Governments..
....-'20
Offerings.-.
.
7
I resent the
pontifical attitude of NASD in general, particularly^
in the method by which the 5% rule was crammed down
will say,
we
.r,.45
*
STREET
NEW YORK 5, N. Y.
campaign against the NASD and 5% mark-up rule is not
in best interests of the security btiyer. Please remove our name from
your mailing list for further propaganda in your efforts to abolish
5
.
City 1
Your
24
May...
SU 464
Salt Lake
vote of thanks.*
i
10
...;..
Teletype
160 S. Main St.
BOSTON, MASS.
NSTA
request
8c COMPANY
Sad, isn't it?*
BOSTON, MASS.
You're
40 |
-
upon
■
my
'
Indications
Amalgamated Sugar
dues paid to the NASD are nothing more or less than a
fee, the same as we pay: the state.- Why should we have to
license fee to the NASD? Regarding examination, the SEC
makes
27.1
From Washington Ahead of the News—Carlisle
Bergeron
Specializing in
Our
license
8
'
DIgby 4-2370
6
Teletype NY 1-1942
BOSTON, MASS.
46
'.
"Broadway, N. Y.
Edward l. burton
co.uid be prejudicially condemned-before he is
plain wrong.*
•
;
f
9
;•
SIEGEL & CO.
39
Analysis
I
CV/j.
Securities
our
prefer to exercise your option to remain
anonymous. The basic principle of judicial procedure is
impartiality.
It is impossible to have this prevail in.
any industry where competitors
sit in judgment of each other. Ijt is just contrary.to human nature..
The real danger in a situation of this
type would be wherein a broker
15
•.
Corp.
while
With respect to the former,
BOSTON, MASS.
"'7
.
Lithium
signatures,
signed, because of necessity of protecting
:
.Cqver
c.
their
possibilities of government retaliation for views held;
25
•
Man's. Bookshelf......
Canadian
affix
to
or the dealers in this
In my opinion there is no reason at all for
its being.
For obvious
;:
to
BOSTON, MASS.
Not
Approves Limited Sale of South African Gold.."....
referred
slightest benefit to the security business
24 i
.
comments
BALTIMORE, MD.
Local
Sell
to
Puget Sound Pr. & Lt.
•The only reason we belong to NASD is that we are
a small firm
and it is a must. In our opinion it is a "Union"
that is worse than
1he CIO.*
;
23 '
Investment
reproduce the text
Southern Production
matter of fairness not to reveal their
22
Final
Outlines Basis for Capital
us?
BALTIMORE, MD.
20
Chairman Thomas B. McCabe Urges Broader Federal Reserve Powers
August Maffry
on
Obsolete Securities Dept.
In all the years the NASD has been in
existence I do not recollect
single act of this so-called voluntary organization that has been
21
on
But,
statement.
20
Establish Free Gold Market
to
and
the
present
we
17
(Boxed)...
Reserve Amends Margin Rules—SEC
on
ballots
identity
obtaining specific permission
do so. Where*the comment was made
anonymously., this
indicated by the symbol (*)
appearing at the end of the
9
a
Federal
the
replied anonymously.
consider it
as
3
-
Seasoned Stocks Best Purchase, Says Edwin J. Schlesinger
Annual
stock.
Why not dump it
you!
regard mention should be made of the fact
firms
we
is
at
that
Petroleum Ht. & Pr.
point
In this
some.;
others
•
....Cover
.'
Depression in the Offing, Says W. W. Townsend
Pictures Taken
of
#
Congress
to
tabulation
this
above.
27 :
'
Mandate
when
thought
you
ch the heartache it has caused
of the ballot itself.
that
i
bought
to the
editorial on the cover page of
today's CHRONICLE
bearing the caption "Mandate to Congress." Therein we not
only analyze in detail the results of the poll but also present
Serious Problem
a
what
you
operation. These statements dealt with the impact of the 99 WALL STREET, NEW YORK
"5% mark-up" philosophy on the market for securities of
Telephone: WHitehall 4-6551
small business enterprises.
Starting with this issue we are
reproducing remarks made by dealers concerning other
phases of the NASD set-up.
L \
ACTIVE MARKETS
7
In connection with the subject, we would call attention
11
the
industry regarding the National As¬
policies and methods
of
Stimulating the Securities Markets—Francis Adams Trusloiv..
II.
of the securities
was
sociation of Securities Dealers and its
7 '
Promises—Henry
TO HAVE
AND TO HOLD
poll conducted by the CHRONICLE to ascertain the atti¬
tude
6 (
The Business Outlook and Bank Investments—Marcus l\adler
The SEC and the Equity
AND COMPANY
have published hun¬
we
3
llCHTEIlSTEIII
B. &
dreds of comments received from dealers in connection with
6'
\
:
(2159)
Expressions reveal marked discontent with respect to
over-all policies of Maloney association
A
2
'
CHRONICLE
Comments by
Dealers Anent NASD
•
i
FINANCIAL
General
777
Articles and News
&
the throats
Public
Utility
Railroad
Securities.
Securities
Securities
State
in
46
/....
Industry,
'What
to
44
•
if there
anything?
.iv...
.
I
-43
FINANCIAL
•
.
t
-
Drapers'
Gardens, London,
Edwards & Smith.
and,
COMMERCIAL
The
and
Reg. U. S.
Patent Office
WILLIAM B. DANA
Park
-
v.>
-
ary
Place, New York 8, N. Y. VO
to
9576
WILLIAM
WILLIAM
SEIBERT,
.Vj
.
;
'
"
•
..
* Commented Anonymously.
'•
? Other
Chicago
Offices:
3.
111.
'
In < United
Territories
Union
Canada,
Other
of
135
S.
(Telephone:
;
La
Salle
8tate
and
$35.00
We
Members
$25.00
year:
Note—On
Quotation
year."
year>
St.,
—*
of
the
'
made
in
New
interested in offerings of
*•.
York
Monthlj,
fluctuations
"■*"*'
'
v
telling
,
-l
,J*
-
'
-
your story to
bank¬
cials, professional and institutional
security buyers
—
and individual
investors. You reach all kinds of
investors
Times.
Spencer
Members
25
'
New
York Stock Exchange
Broad Street, New
V
- HAnover 2-4300
in
remittances for for¬
funds
reach all?
ing executives, corporation offi¬
„
r
in
-
eign subscriptions and advertisements must
be
you can
in
The
New York
year.
(Foreign postage extra.)'
account
when
.
PREFERRED STOCKS
Record—Monthly,1
Record
the rate of exchange,
0613);
;
rely
Members New
(Foreign ^postage extra.)
Earnings
ONE
36)
High Grade Public Utility and Industrial
Other Publications
and
per
Monthly
$25.00 per
are
of
per
WHY MISS
means
S.
per
'
on page
New
tT.
$38.00
I
(Continued
r
'States,
•
Covering the financial market
"March1
Countries, $42.00 per^year. -v
Bank
etc.). ;
at
of
/
t
(
Possessions,
v
city news,
Act
Subscription! Rates'
.
Evwy Thursday (general news and ad¬
vertising issue) and tevery Monday, (complete "Btatisticai issue — market quotation
records, corporation news, bank clearings,
and
the
business
•
•'
::
r-
•tate
under
office
amount
BOSTON, MASS.
much
matter Febru¬
post
don't
Eng-
8, 1879.
Thursday, May 19, 1949
J
the
Dominion
President
BIGGS, Business Manager i
V
„
at
Pan-American
DANA
D.
1942,
N. Y.,
Subscriptions
KERBERT D. SEIBERT, Editor & Publisher
second-class
as
25,
York,
'[
r
C.,
..
COMPANY, Publishers
REctor-2-9570
-
E.
c/o
,v;:Copyright 1949 by William B.'Dana
Company '.I
<
CHRONICLE
Reentered
•■•A
25
Weekly
decent way;
a
I also resent their attitude of infallibility.*
t
Twice
that
<
77
Published
violations
prkfor to have thejover^the-counter security
self-regulaled rather than herrrfthe government do it. \
:
38
v
occasional technical
are
7*^7;:;
pf 5
(Wtdter Whyte Says).....;
Washington and You...
;
19
let decent members alone to conduct their business in
and
Market
of the members withdut as much as a by your leave.
I
particularly resent their right (asfeumed or otherwise) to snoop with¬
out cause.
If there is a complaint—yes—otherwise why don't they
22
Corner!............
Registration...............;.....
of Trade
Tomorrow's
7.
.V. i.
Salesman's
Securities -Now
'Tlie
V..'.
•
Albany
-
Chicago
-
York 4;
'
" !
Glens Falls
Hubbard 2-8200 1
"
~
.
.
the
newspaper
they
upon.
York Curb Exchange
50 Congress Street, Boston 8
Teletype—NY -1-5
.
"
'.. • /
Schenectady
w
?
'
Worcester
Sljr iNrto fork Simcjs
"All the News That's Fit to Print"
■
COMMERCIAL
THE
(2160)
4
CHRONICLE
FINANCIAL
&
Thursday, May 19, 1949
Stock Market
By WILLIAM C.
»
,
CUSACK*
Keystone Custodian Funds
T
;
^
i
Divergence of 1949
*
Cusack, setting down as fundamental principles for salesman: (1) knowing his subject; (2) hav- i
ing confidence in it; (3) knowing when to go; and (4) knowing what to say when he gets there, places j
emphasis on cont.nuous and uninterrupted services to clients. Cites example of life insurance companies
in stressing service idea, and advocates salesman working out investment programs for customers. Urges
I
v salesman not to neglect existing accounts in eager search for new ones.
V
i
By A. J. MESSING
Mr.
*
*
r
it.is selling
fundamental
into play. One of them—and the first one—is that a
My interest is in the field of the investment company, and whether
investment company shares or selling securities of any type, there are certain
principles of salesmanship that come
man
m
u
tS>-
s
business, how the idea
Belgium about 1815, and
through Europe, taking
deep root in both England and
Scotland, later spreading to the
United States in about 1890—the
know his sub¬
h
Social
of these
principles be¬
fore, but I am
going
to re¬
peat about ten
bx tnem.) Sec.ona, he must
iirst
Reference
...
Security
;
Now; I think the suggestion I
to make, and this is one of
first,
sales-wise, with ref¬
to
erence
one
the
-.
younger
•
growth in the 1920 era, growth of
die management investment trust,
die so-called fixed trust; and then
die
had reaction,
of
go,
Act, and the development of
the class theory of securities as
in
the Keystone setup; and then
a
convic¬
to
fourth,
he gets
And,
v.hen
of the '30s when we
and the inauguration
the SEC, the 1933 Act and the
period
in
later
there he must
lation
say.
equally hard to retain them.
And
point, he must have
ability to place himself in the
person's position, so as to
vestors that
securities.
Today, where there is legislation
in certain Legislatures making in¬
vestment trust shares legal invest¬
ments for savings banks; making
investment trust shares legal in¬
vestments for trustees; and an¬
other
State
making investment
trust shares legal investments for
lem.
:
pany
v
..
And then
there is something
ielse sales-wise, that I always bring
info play, and that is this: a man
not
must
only know
the
words,
but he must know the music that
.goes along with them. That comes
ifrom trial and error. That comes,
,
j
'planning.
He must
there
stop in
his efforts to obtain those objec¬
tives. I am going to take a little
never
this
as
such an extent that
special examinations for
want to participate in
points that
sales-
Now I have just two
poetic license with the poet who
talking about the heights of
great-men, and I am just going
wise,
was
like
would
I
and
for
one
bring out
the
younger men
older men, and
the
for
one
to
use
ries
the
Were
j
not
attained
by
Companies
flight,
But they, while their companions
slept,
,? •
j
Toiled
;y/
y-y
yy:yy.y,-..
,
A few weeks
,
the
shores-"of
in
there
ago
came
America
he talked about the
lesson
a
of
the
in
his
of
course
talk
to
the Connecticut Mutual Insurance
Company and I noticed the word
here
"service"
technological
are
Boston
repeated in there again
dozen times.
7
and
28,
to
12.)
The
5
May
the
great
was
-
here, and he said it
interesting to him to observe
that
;
the
Great
leader
Britain
formerly
industrial
in
was
develop¬
ment, but that today Great Britain
is
second
and
leader.
America
is
the
the
at
est
contain
all
of
the
respective
lectures;Inquiries in that
re¬
should be addressed to
Douglas
Bellemore;
Chairman, Economics and Fir
H.
Department, Boston
University, Boston, Massachuf
nance
♦
ill If
our
a
speaker
shores
(group
were
today
of security
security salesmen,
to
and
talk
to
investors
and
to
come
if
he
a
and
re¬
years
the
in
or
more
they
sold; peo¬
in and buy it.
true in securities
as
it
selling of insurance.
presentation, also,
in
their
do
what
Then
of
most
know
us
who
man
England
was
little financial worry and uses in¬
is
!But
we
won't
but
we
take
too
gained a tremendous' know-how
on
how to sell and how to
use
vestment company shares.
in¬
You may" know the historical
background
of
the
investment
:of
*A lecture by Mr. .Cusack,
one
two, the 12th of a series in a
pn
Investment Salesman-
course
ship, sponsored by Boston Univer¬
sity and the Boston Investment
;
|Club, Boston, Mass.,
to
educate
picture of the
with
And
his
.
child,
who has
man
a
reference
to
that
point, you may have seen an ad
the paper the other day about
in
Socrates.
paper;
It
in
was
a
commercial
I wasn't reading anything
"Socrates
or
historical.
took
a
walk
It
into
said:
thousands
place, and on his return
he found so many things he didn't
want."
If there is one thing in
America that the
ica
as
^
people of Amer¬
want, and where you and I
security salesmen have an op¬
^
the
present time
group
as
Some cynics
or
definitely do have
have
cannot
a
will argue that you
bull market in a
period of business recession. The
entire history of the stock market
disproves that theory.
And to
might add: Except for the
short bull market in 1948,' why
them I
the huge increases
were
in profits
1948
and
1947
in
dividends
and
translated into much higher
never
stock prices
earnings?
don't
Gap,"
we
"Island Reversal
an
we
are
pers
,
at the time of rising
'
',
,' ■
Black to Succeed
some¬
thing else which, in my opinion,
just as dynamic, in
last year's 30-point rise,
the divergence between
time,
as
namely,
industrial
the
McCloy
prove
I
ages.
and
the
rail
ready to
am now
Top
as
aver¬
The Executive Directors
express
the definite opinion that the lows
of the year
struction
have been made, be¬
opinion, the diver¬
for
Bank
International
of The
Recon¬
Development
and
on
.
to
my
out
spell
social
is
men
secur¬
worry.
can
meet
salesman
of
major reversal
a
'
of the trend.
.
,
Frankly, I don't know whether
advance Will
Earlier
months.
start tomorrow,
month
this
in three
or
I
year
ex¬
pressed the opinion that the mar¬
ket would do nothing for several
months
while
Congress decided
such matters .as taxes, labor,
anti-inflation, etc.
I think that
we already know just about where
we
stand on those matters.. And,
upon
in my
opinion, those matters mean
and
build
a
.
Eugene
a
him
that
financial
you
rendering
part of
are
And
service.
means
that
will be vpry glad to explain
operation of Social Se¬
you
to him the
curity
the
and
information
in
order
that
to
collect,
namely; the proof of birth, the
proof of death, the marriage cer¬
necessary
tificate.
talk
And then you go on and
about
the
Social
Security
number, and from there talk about
financial planning.
And
as
mation,
of
in
you
convey
this infor¬
will find that
you
many
blockade
or
are
of. the
Berlin
part of our cold war with Rus¬
In saying that I do not know
sia.
this advance will
start, I am perhaps acting some¬
what prematurely. As yet no up¬
when
exeictly
has
trend
established.
been
But
between-the' two
averages
is, in. my opinion,, of
sufficient
importance
and
has
lasted long enough by far to war¬
rant
the
presumption that the
the
the
of
witnessed.
decline
have
witnessing
such
as
thatr
important -reversals
As
so
been
It is out of divergences
we
are
now
occur.
frequently mentioned in the
past, the rails broke their Novem¬
ber lows as far back as February;
the
up
industrials
have not
to this time;
done
so
and with every
less
day that passes are less and
likely to do so.
And thus, a di¬
vergence in the averages has been
created at a point sufficiently low
to
generate an important bull
phase from these levels.
people who participate
Social
Security have a few
Favored Groups
government bonds, have some in¬
count.
same
and
All
people
have
this
is
may
a
savings
sound.
ac¬
These
be interested in
At
early stage it is
difficult to predict
groups
ex¬
the
of
The
of
in
what
I
International
Chairman
Black
on page
35)
be
the
coming
believe
bull
will
Bank
and
Di¬
elected
Eugene
R.
President of the bank and
of the Executive Di¬
Chairman
rectors.
Mr.
.
resignation and
Black's assumption of duties
Mr.
will
take
July
his
1,
utive
effect
duties
continue
to
as
act
of The
Mr.
as
will
Black
Executive Di¬
International Bank
for the United States.
he has tendered his
Senior
than
later
he assumes
President and
the Board of Exec¬
of
Directors,
rector
not
Until
1949.
new
Chairman
a
/•'
'
....
McCloy's
Meanwhile,
resignation
Vice-President
as
the
of
Chase National Bank, effective on
before July
or
President
on
been
of
1.
Truman
May 18 that Mr.
announced
McCloy had
appointed Military Governor
the
U.
S.
occupation
replacing
zone
in
retired Gen.
Luicius D. Clay. Mr. McCloy
will
facilitate transfer of control of the
zone
from the Army to the
7
(Continued
.
Executive
the
of
,and
rectors
which will have the best
advances
J
.V
18
Germany,
this
tremely
"
.V
accepted the resignation
John J. McCloy as President
May
divergence
lows
John J. McCloy
Black
.
.
these
surance,
R.
lift¬
to the market than the
more
.
the
market
portunity to service them, it is in
April 20, 1949. the field of financial security, and
the
as
It
clientele by going to see each man
who is in this Social Security and
is
to relieve him.
classical
r
y
^
like
surance
much
in the industry,
will say that America has
us
You
in?
ing, the picture of the
America
.Credit, those of
thing he is
one
that financial service
the
first but that today
the lead.
,
they do, they paint pictures; the
picture of the man who is retir¬
ferred to the investment company,
he might say that at one time
possibly in
And what is
tell
would
but
a
interested
as
1948,
in the industrial
averages has.not been closed.)
March,
ing
ity, freedom from financial
come
other
other similar incidents which
.
ple just don't
That is
Shares i
100
theory signal
given by May, 1948, and
conclusions, all of
transpired.
(The gap of
few
the
potential inter¬
for copies of a brochure to
that insurance must be
-;
Investment Company
of
Dow
next week, next
^
is
M
end
market
ment Club is anxious to learn
lems, not what you are trying to
sell, but his problem.
about
bull
Invest¬
Boston
125,000 service transactions. And,
second, they drew the conclusion
talked
aver¬
substantially.
again, and
between the averages has
sufficiently long duration
setts.—Editor.
1
fcchievements
just below the
at the time would not be
closed "perhaps for years," that a
ages
as
And in analyzing their report,
I'found two things: One, that in
the calendar year of 1948 they had
and he
scientific
1948,"
advance
been of
Institute
Technology,
of
gence
issues of Mar. 3 to 31;
our
development of the Massachusetts
of
that the gap
Reversal
in
about
a
Island
lectures appeared on page 4,
Dr.
from
report
a
"Great
in
ice."
obtained
was
under
cause,
gard
I
unduly depressed. This
has not formed any base
yet; but the probabilities are
that the lows have been witnessed.
1948,
the rise
(Previous
made reference to the word "serv¬
:;•?
Winston
was
selling
Danser
yyy --yy1.
Churchill, and when he
the
take
can
we
securities from
the insurance companies.
Harold
through ! the
night."
•
,
upward
think
I
just
as
way, I wrote a market letter pre¬
dicting that the formation just
preceding would be known as the
the maximum
Lessons From Insurance
Selling
sudden
se¬
transcripts
of
being published in
CHRONICLE.
and
•"Heights of salesmen reached and
kept
an
the
in
and
Investment Club
April
use
give
we
lecture
University,
them.
can
Messing
J.
getting
have
Investment Salesman¬
on
older men,
opinion,
Arthur
At
ship, sponsored by the Boston
both younger men and
the word "salesmen":
And, finally, 1 think that the cop¬
29,
.
could
in my
to
page
additional
which
career.
a
this
On
who
one
Under One Cover?
•
to
are
those
the
Do You Want Articles
portant contribution of the invest¬
ment
company
to the financial
picture
and
they are going to get, and should
their
little man,
who is buying
man
greatest
enjoying
30-point
were
which
Exchange has recognized the im¬
'points and also knowing the weak
points'of the subject, he is going
to miss part
of successful sales
about the
the
show
probably
percentage appreciation. The oils
have probably had all the reaction
rise. On March
a
today the New York Stock
And
Now, unless
a man takes into
•play all these things, plus one or
itwo
more,
knowing the strong
.
companies.
insurance
what to do with ref¬
Security. We
on
from present
will
the industrials
accu¬
aircraft
The
areas.
I
are,
to enjoy important ad¬
levels. I think
rails, if judiciously chosen,
position
vances
48
to
deflated and*
important
manufacturing stocks should be in
that the
would be
.
;too, from experience.
mulation
about
specific sug¬
a
securities
who partici¬
pates in Social Security. A spe¬
cific sales suggestion that I would
offer to the younger men is this:
Meet the prospect, the working
man, on
common ground; go to
see
him about one of his probthe
dollars' worth of investment com¬
understand the other man's prob¬
offer
to
talked
today
about two billion
own
ad¬
airlines;
amuse¬
liquor ..issues : are
thoroughly
believe,'• in
from
about 65 while
-
to this Social
erence
that
other
?
gestion
pany
another
want
have
formula plan,
obtain accounts, but he must work
j
average
and when they get there they
know what to say, and the
I
Com¬
Investment
the
rail
the
and
ments
vanced
going is rough.
Federal regu¬
with
1940
and
The
rise.
don't
Act, and the development in
period, too, of the so-called
until today we have
arrived at a position where .there
are approximately one million in¬
Another point is, he must work
and diligently, not only to
hard
the
spectacular
<
1934
go.
ore
m
-
Certainly,
'
he must know
to
even
men
where
know what
-
especially. You heard Harold Dan-
subject. Third,
Cusack
•
ap-
peared to want
at any
price,
e n j o y e d an
-
the'
tion about that
C.
rails, which<£-
...
,
A
Social
to
.f
i'
During the early part of March, 1948, nobody seemed to want
Within a few days thereafter, a dynamic and major bull mar¬
ket -started which carried the Dow-Jones Industrial Averages up
about 30 points within a matter of a few weeks. In the interim, the
stocks.
have
starting about. 1894 and
in
1904—then the
one
another
Security.
Maintains entire market history disproves
occur during business recession.
theory that bull market cannot
ser
say-that some of them are
getting out of this business. Why?
They can't, make a living, they
say.
They, don't know where to
have
still
important bull phase.
nobody
spread
a v e.
some
by that I mean the use of Federal
company
started in
-( Y o u
heard
ject.
& Stern
Market technician asserts present divergence between industrial and
railroad averages indicates early reversal of the market into an
;
:
William
Herzfeld
•
market. Department.
State
Volume
169
COMMERCIAL
THE
Number 4804
&
FINANCIAL
CHRONICLE
(2161)
5
University of Idaho
Steel Production
The
:
.
Electric Output
Carloadings
>
Retail Trade
State of Trade
>
;
By A. WILFRED MAY
Index
Tenders
Auto Production
Industry
'
V
1
J
rIn
the
past week
industrial
total
decline both for the week and the
There
production
showed
difficulties
'>
the
lighted
corresponding period in 1948.
•
Be
was a
one
proceeds
A. Wilfred May
widely in the past three months—due
largely to administrative factors, such as the beginning in some States
of new benefit periods.
controversial
"analysis
the
of
fore
claims data for the past 12 weeks shows that the volume of continued
claims is now at about the same level as in early March." The
May 7
figure of 1,980,800
compares
only
$1.2
The
subject
offering by the University
$650,000 not to exceed
4% interest coupon building con¬
struction and improvement bonds.
Sealed bids for the purchase of the
The
credos.
main
fault
to
it that in this
is
avoided
be
cure.
is
issue will be received
by Kenneth
Dick, Bursar, until 2 p.m. on
May 31
at the
Administration
Bldg., Moscow, Idaho.
ture
semi-annually
1950
to
the
single-
particular full-dress discussion before
This, in turn, closely parallels the trend last year, when continued
claims were running 900,000 below this year's level.
their
and
administration
the
for
trouble.
(The
full
text
1,
from
1970.
1,
Oct.
bonds
The
have been approved as to
legality
by Chapman & Cutler, of Chicago.
With
Slay ton & Co.
to
The
Financial
CHICAGO, ILL.
Chronicle)
V.
Harold
—
Ryan has been added to the staff
of Slayton
& Co., Inc., 135 South
La Salle Street.
most
a
audience, the Chairman of the SEC confined himself
almost entirely to showing the affirmative benefits of the Commis¬
sion, together with disclaiming the responsibility of regulatory laws
;
Oct.
(Special
Disappointing there¬
The bonds
will be dated July 1, 1949 and ma-;
authoritative
with 1,978,000 in the week ended March 5.
an
of Idaho of
of
explanation with the single-cause
cause
said
absolute amount, the
offerings last year
improving Stock Exchange
volume and liquidity and of the capital-financing
depression habitually brings forth a variety of approaches and highly
claims which have fluctuated
bureau,
an
stock
Official notice appears on page
11 of
Single-Factor Thinking
below the figure for the previous week
This is the first drop in three weeks in continued
Goodwin, head of the
as
common
of the $22.5 billion total
devoted to the nation's expansion of plant, equip¬
ment and working capital—this
having the effect
of accentuating unbalanced debt structures and
unduly curtailing the stockholders' dividends.
The May 7 level is 57,000
30.
Expressed
of
provided
claims pre¬
or more
in the proportion of equity to total
years
financing.
Employment Security announced last week that
filing claims for jobless pay who had filed
viously.
■" ' •: ''': " ■ 1
'
v
C.
not at
community, is evidenced in the sharp drop during
'recent
on
A.
all confined to the self-interest of the Wall Street
Bureau of
Robert
out of the con¬
significantly high¬
way
Stimulated?", was participated in by three
men in the fields of stock exchange trading,
top
so-called continued claims for jobless pay in the week ended May 7
totaled 1,980,800.
These claims refer to the total number of persons
'
a
were
utilities and government regulation.
* ' - •
The wide importance of the question^
at nearly twice the levels of the comparable period of last
year, but
it seems to be following closely last year's pattern of
ups and downs
ended April
discerning
capital markets
staged by the New York Financial Writers'
Association last Thursday, May 12.
Discussion of the topic officially
programmed as "How Can the Security Markets
According to the latest report of the Federal Security Agency's
Bureau of Employment Security, unemployment among the 33,000,000
persons covered by the government's jobless pay program is running
The
our
in
the forum
at
week.
same
involved
tinuing stagnation in
slight
a
The
slight rise of about 2% in total claims for unemploy¬
ment insurance in the week ended April 30, establishing a new post¬
war peak.
On the other hand, initial claims dropped almost 6% in
.
be opened
May 31
to
INQUIRY IN A VACUUM
Business Failures
Issue
on
Of $650,000 Bonds
s
Commodity Price Index
Food Price
and
;
Asks Bids
Observations
4
of
With Nehring & Ricketts
(Special
to
The
Chronicle)
Financial
ELGIN, ILL.—Andrew L. Fer¬
Mr.
Of broader interest,
ris has been added to the staff of
y..'-P;*-'■■■:"'"V however, was the complete overlooking by this government official
of those roots of our market troubles which lie in governmental poli¬
Demand for farm products, according to the Department of
Agri¬
culture, continues to hold at a "high level, although there are evi¬ cies—truly a "material omission" be he a member or not of the
Nehring & Ricketts, 4 South Grove
*
,v
■
*
*
•
,
Hanrahan's talk
political party in
dences of
i
weakening." Until 1949 crops are harvested, it adds, prices
will be subject to changes in crop prospects. Commodity prices again
a lower trend caused by
"sharply lower" wholesale prices for
farm products and foods.
^
show
$8,000,000,000
or
an
amount
only slightly below that of 1948.
The
Agriculture Department said larger marketings offset the
price declines.
In April, farmers received $2,000,000,000 from farm
marketings, about the same as March, and slightly under a year
000,000,
From the sale of livestock in
a
4% increase
y\
' ■ ,'•••
Shopping in
many
March,
over
'
❖
«•;:
parts of the nation in the week
was
■
-•
favored
Goods at
noticeably reduced prices
continued to be offered in many sections.
Increased wholesale orders the past week reflected
largely a rise
in the demand for seasonal merchandise. Total wholesale dollar vol¬
moderately below that of the similar week last year. Sea¬
sonal goods suitable for promotions were sought
by many buyers and
deliveries showed general impfovement over a
year ago.
95.6% OF CAPACITY
contracting
]r
on the
downgrade and order volume
little, the effect of f.o.b. selling of steel will stand out
a
soon- Areas which easily operated at a high rate may
are rolling along at a rate under the
national average
points lower than those steel producers in dense
"-/con¬
they
'
and
tonous
ever
several
suming
a
states * The Iron Age," national metal
working weekly
in its current
summary of the steel trade.'
r
y:
•
areas,
or
not
such
situation
a
subsidy
else the votes
warrant
a
are
We
needed.
and dollar-depreciation may
switch from the rentier class into equity securities as the
actually
deficit-financing
evils, such reasoning is "too academic" for the average
nearly all investors during times of
industrial recession and stock price stagnation. :
" °
small investor—and perhaps for
about
The easiness in steel supply will
able to get most of their steel
mean
;
;
;
.
that many customers will
supplies within their
The danger from the present f.o.b. method of
ducers who are in areas which consume far
Another relevant vital
cause
of investor-inhibition is the govern¬
ment's taxation of
private industry resulting in the undermining of
of plant, and subsequently pro¬
fessing the need for itself stepping in to provide the capacity and
its
resources
for
until
steel
leaders
are
---■•>
.
certain
that
buyers, the trade paper declares, v.-
own
areas
it
stock
upon
policies.
How
can
Mr.
the plan
of
reorganization
the
of
'com¬
pany.
.
Citizen
develop
appetite for share-ownership
an
in
property when he sees his government leaders (including the
TVA-ers) following in the footsteps of Great Britain with its nation¬
This
study is available
$2
at
per copy.
KALB, VOORHIS & CO.
Registered Investment Advisers
Members New York Stock Exchange
Members
N.
25 Broad
For
Y. Curb Exchange
(Assoc.)
Street, New York 4, N.Y.
Attorneys,
Bankers,
Investors and
selling faces steel
less
than
The contrast between the destructive investment "climate" that
being fostered at home, and the government's stated attitude in
proposing ,adequate safeguards for protecting the investor's pros¬
pective dollar abroad, was tellingly cited at the same meeting by
President Truslow of the New York Curb Exchange.
Brokers,
Operators
S E RV I C E
is
•
Petroleum Engineering.
•
Geological and Scouting De->,
•
Evaluations
pro¬
•••.
...
•.- v
■
.
.
'
'
seems
a
to
me
that the pricing of securities in competitive
problem-of the bidders and not
a
bidding is
problem of government regu¬
dip sharply before the middle of July, but notwithstanding this, it lation.^ v .• !V" '..
vy •
y •
;
keeps going down slowly. It has already dropped 7% from therpeak
Cutting through the-great :mass> of argument, in formal briefs
reached early this year. This week the steel ingot rate is off one half and
otherwise, it seems to this writer that, in addition to the substi¬
a point to 95.6% pLcapacity.
However, eyes in steel are no longer tution of price for quality of servicq, there remains the fundamental
.
(Continued
on
page
33)
'
'
1
'<
;V
(Continued
on page
~qo yi&
ft:
c
i
>.
i.
•
,v. rj
u
10)
;:/
Lao
iVBd ar..v,% nam tjt.i .r:->a /S'.oy
qi'vii.)*<y
)a;;,rv.yy <J
Ai>-;/•
,*■
K
partments.
is
is
real evidence that the steel, operating rate will
possibilities
common
consummation of
and
•
h
Non-Productive
Foreign
•
for
*
Productive
of
Drilling" Contracts.
Materials
Areas.
Drilling
Domestic
use.
and
1
Royalties, Working Interests
and other Petroleum
Equities
Appraised.
•
no
the
y •.
'
Mr.
Hanrahan depicts our equity security. markets as being
currently financed by the consumer.
This characterization is valid,
but it must be realized that the situation is directly in line with the
Administration's adoption of overall Keynesian consumer-spending
.
Inventories arg still large among some firms, normal in others
Typical of the competitive-bidding protagonists, Mr. Hanrahan
and small in still other groups,-presenting the picture on: a tonnage iadvanced this
tenuously-worded denial of the over-pricing danger:
basis. While the cases, are still considered isolated, many lasge steel I"—[It does not follow that]—over-pricing is the: result of the pro¬
users are attempting to sell in the open market fairly large bundles
cedure established by the Commission.
It is the parties to the deal
of steel they don't need but are mot having an easy- time finding Who determine the
price; we pass om it when it is arrived at.
It
There is still
enhancement
of
com¬
with special reference to
pany
the
1a compre¬
of this
its self-provision
; y
The Compulsory Competitive Bidding Question
produced. |
legal to absorb freight
Chairman Hanrahan in the same talk saw fit to enter into a
there is little chance of wholesale
freight, absorption in meeting
spirited defense of the compelling of competitive bidding in security
competition, observes this trade authority.
distribution.: While this question seems irrelevant to the affirmative
;
Incoming steel business is not as bright as a lot of steel people stimulation, of markets it is important in exhibiting the government's
would like to see it
with a current of unrest
among .steel ;sales anxiety about monopoly in every conceivable field. ^ Moreover, the
people. Customers are still paring down inventories, but this week, regulatory body's contentions are important in manifesting its in¬
states "The Iron Age," it looks orderly and bears no semblance to consistent shift from its
professedly basic concern of protecting the
the sharp and painful process of mid-1937.
security buyer to the seller.
,
,
But
prepared
a
y
be
have
hensive analysis
.
will
third of total steel shipments showed
that 87.2% favored the old
basing point method of selling steel. Only
12.8% favored f.o.b. without freight absorption.
*
consume
Corporation
security state; the White House's continued fundamental
speed clarification of the
legal right of steel firms to absorb freight in a practical manner re¬
plants which
& Southern
to
alizing, its controls, and its capital levies; and with almost every
major effort (witting or unwitting) moving us further to the wholehog of a Labor—not a "property"—government.
How will Mr.
mains to be seen.
Steel users are opposed to
f.o.b. selling of steel
Citizen become eager to put his money into stocks when he can see
but are not vocal enough to speed Congress or the
Supreme Court that over the
past score of years the shareholders have been shoyed
on the matter.
y
' !
'
down to the bottom of the ladder of community groups competing
A special survey by "The Iron
Age" taken among metalworking in the maintenance of their living standard?
Whether
Commonwealth
private property with gratuitous diatribes against "glut¬
Wall Street" and grain speculators at election time or when¬
While
tools.
•
-Vith the ingot, rate slowly
spending cuts); his constant pressuring toward
Special Analysis
attacks oh
was
STEEL OPERATIONS IN CURRENT
WEEK TOUCH LOWEST
'.r.
LEVEL FOR YEAR AT
r
are
lesser of two
:
ume
social
and
:'.:yy; y■
*
Street.
The Political Key
we
recommend
:
by warm, clear weather. Consumers bought moderately more than in
the previous week, although total retail trade was
slightly less than
that of the similar week in 1948.
9 of this issue.)
coniidential— of his Council of Economic Advisers' report reputed
April, farmers received $1,300,yr
p.
{.
talking in a vacuum if we talk about' investor
inhibitions without even recognizing the existence of the' current
newspaper headlines which confront him, such as President Truman's
re-insistence on a tax rise; his stubborn unwillingness to recognize
the justice of property owners' protection from labor unions beyond
the bounds of the Wagner Act; the Chief Executive's ever-repeated
attempts to emasculate the country's monetary system through budg¬
etary raids
(again evidenced in his pigeon-holeing—as suddenly
income, the Department states that notwithstanding
the 10% drop in farm prices during the first four months of 1949
earlier.
on
power.
;
Surely
As for farm
under that of last year, farmers received
appears
-
•
Tax and Oil
Accounting Spe\
cialists.
•
Estate
Consultants.
PETROLEUM
EQUITIES CORP.
Member
American
Petroleum
Institute
595 Madison Ave., New York 22,
MUrrav
Hill
8-4441
N.Y.
6
(2162)
THE
COMMERCIAL
FINANCIAL CHRONICLE
&
Certain Aspects of the Bond Market
Thursday, May 19, 1949
m
By GEORGE J. LENESS*
'
t
Partner, MerMll Lynch, Pierce^ Fenner & Beane
By llflLLIAM GUMF^L*
Ascribing
;
current ii>vestment
f
.
apathy tp lack of familiarity of public
Members, New York Stock Exchange
|
•
| with, securities, as welF as burdena placed on stockholders, writer j i
Reviewing bond market situation, and outlook, Mr. Leness expects no rise in long-term interest rates in % i|,jcontends greater investment demand for stocks'could be secured 1 j
advance of another boom period* Notes narrowing spread of ihcome yields, on, medium and lower grade f
|tax reKeF; (2) permitting life insurance companies" to in- H
bonds during recent
■dvest in high grade common stocks; (3) reduction of brokerage fees
and reduced volume of n?wissues. Sees savings banks holding own in com¬
and commissions; (4) new methods of securities salesmanship andurges intensified activity of mutual savings banks to ^
Favors broadened investment field for savings banks, along .with higher, dividend ^
advertising; (5) closer and better relations between, corporations
payments to depositors.
'-'.'ZC. ? and', stockholders; and (6) simplification of corporate financing.
years
petition with other investment institutions, and
promote thrift.
*
-
In this paper I have two definite topics to cover. One is the present state of the
market and its future outlook] and the second, which is to me even more important,
One
•
>
for the
mystery of why the market has not reflected
bpnci
the, period of record earnings and dividends-. in,recent years .is-, theis the
apathy pf the public in coming into the market. Not only is the stock"
part that mutual savings banks play in our economy and what the outlook seems to be fo^ [market business hurt, but the urgently needed risk capital is lacking!/
them.
PleaSv^
V*
Whatever^
:—\
bear in mind oe said of yield relationships be¬ count has become so standardized
the causes for garded
them
as
"not
safe—a
that, invests tween government and corporate that again in this respect; publid
:.
the fear, psy- gamble," and. 6% for other rea¬
ment bankers issues.
Here again I want to d.is- u t i 1 i t y operating companies?
This proves that least at¬
(;
c h o 1 o g y
it sons.
make
their iclaim prophetic insight, but there credits have arrived at the point
of J the
four
types } of
§}; prevents
the tractive
where differences in values are
living by buy¬ lare trends in the demand for new
|;,.:A.m e r i c a n investments w^s common stocks'.
ing and selling (capital, i.e., supply of securities, expressed in minute basis, point
I jvp u b lie from Its high returns; were considered
: :
securities
for iand in the supply of savings, i.e., differentials.
V
e/investing- its only a mindf advantage as com¬
In the industrial field, inden¬
a modest prof¬ ithe demand for securities, which
s a v i ngs and
pared to the: disadvantages occa-,
it, at least can be recognized and whose im¬ ture and sinking fund provisions
reserve - pursioned by lack of familiarity and
have also become quite standards
most of the pact can be weighed,
■ch a sing lack
of;}safety. In other words:
time. Our day
ized, with the result that indus¬
j During periods of comparatively
power, which the majority/of ? all
people are
to day living .stable
bond markets
there has trial credits, even though in wide¬
are
greater against investing in common;
is based upon jbeen
a
traditional / relationship ly different -industries, bear -a
stocks because .they are not fa¬
than
ever.
the trends in i between the yield on government close yield relationship -to one;
The
unwil- miliar'with them or consider them
the bond mar¬ isecurities and the yield on corpo¬ another.
The. effect has been the¬
not safe—a gamble.
lingness to
;./■•)
ket
and
for rate
issues.
During
different nar rowing of the price gap, be7
These. facts throw light. upon the
part with sav¬
William Gum pel
this reason
George J. Leness
cycles in the bond market, his¬ tween A and Aaa bonds in this,
ings for risk whole problem.
f »
can not speak
torically this relationship has va¬ field as well. There is little on the
//ventures is \, Millions of Americans are blind
to you as a profound economist or ried.
It also has varied greatly horizon to form a basis for prom¬
hindering a continuing prosperity to the fact that they can buy
an economic
prophet, but rather during important changes in bond ising a change in this direction.
.
„.
reason
.
.
.
,
.
•
-
as
manual
a
laborer
in
the
market levels.
vineyard. It is clearly basic in both
ever,
Eventually, how¬
it usually has stabilized it¬
to within reasonably stable
your business and in mine that
itaanagement of the Federal debt
appears to constitute the base of
self
all thinking
corporate bonds
ture
interest
with
individuals
$ome
thought
that
As calculated by Moody's
Investors Service, a composite of
to fu¬
respect
rates.
limits.
There
13%,
were
currently yields
taxable Treasuries of
while
a
year
basic
maturities
ago who
rates
money
provide
a
of
15
years
yield of 2.40%.
and over
The ad-
.
porate bond holdings as issups,
fording
a
of
nation
iu
relatively good epmbi-,
yield and quality are
Reserve Banks, the question of a
possible imminent break in the
maturities.
peg was not unreal.
yields
over
low
20%.
the
.
thought
There
also
was
that
a
an
as
During 19.45, at times
average corporate
governments was as
of
excess
I think it is safe to
expected change in the Adminis¬
tration might carry with it modi¬
that during recent years the
yield relationship between high
fications in debt management pol¬
icies.
However, no change took
place in the Administration here
ernment
Washington and,
more
Prospective Supply of. New Issues
say
grade
corporate
closer
tangibly,
years.
bonds and
securities
than
it
hat;
has been
gov¬
been
in- many
The closeness of the spread
prospective sup¬
issues, the outlook is
Concerning, the
new
contraction! C inthe
for
of
amount
corporate
new
offer¬
our
so
was
was-
the
of
Exchange,
"
wrote:"There
af-?
offered.
ply of
clearly
President
tp;. be* Stock
deferring expansion pf cor¬
from
•
| vantage in rate of return from
corporates, accordingly, more of¬
With heavy sales of government ten than not provides from-40%
issues in progress between finan¬ to 60% more in
yield than gov¬
cial institutions and the Federal ernments
with
comparable
in
appears
anything to be gained':
New
Mr.
never
York
Schrarq
*
without such
.
and those
of
medium to lower grade has
During the heavy
purchases of 1948 by the banks of ;narrowed
during recent years.
the Reserve system, there never Bonds which are rated A on the
was any question of the financial .average provide, a 13% higher rate
ability of the System itself to of return than bonds rated Aaa
absorb
enormous
quantities
of and, bonds rated Baa afford a
government bonds, rather the de¬ 28% yield advantage.
The his¬
bate was as to the wisdom of so torical yield advantage provided
doing.
by A bonds over Aaa bonds has
It
»
looks
now
the- been
though
as
more
like 20% and the yield
problem of
advantage
obtainable
in
terest
bonds
those
Aaa
any general rise in in¬
rates has been postponed
to at least the later stages of some
new
business boom.
Currently,
leeway for a new expansion of
business
loans
by
commercial
banks ;is being made by conver¬
sion of short-term borrowings, in
an
important number of
longer-term
cases,
into
obligations
over
approached 50%.
■
...
rated
V
-
;
Baa
has
addition
-
;
to
bond in¬
sold to
insurance
companies and other dentures. As a result of the Pub¬
lic Utility Holding Company Actfenders.
The recent reduction in
Reserve requirements is another and the increased powers given
by law to various state Public
step in this direction.
i
'I
-
.
No Rise in Interest Rates
,
indentures from coast to coast to¬
Expected
•
Because
of
the
testing
period
Which the government bond
mar¬
ket
has experienced during the
past 18 months, it is difficult in¬
deed to envision for
some
extend¬
ed period of time any sizable rise
in rates on- government obliga¬
tions.
j
If this be true,
what
can
*An address by Mr. Leness at
29th
-
Annual
Conference
of
Na¬
tional Association of Mutual Sav¬
ings
Banks, Washington
May 13, 1949.
D.
Utility Commissions utility bonds
C„
day are pretty Much standardized.
The
bondable
property
ratios,
improvement
funds, withdrawal
provisions, etc., are all so. similar
that the prospective purchasers of
public utility company first mort¬
gage bonds expect, to see nearly
identical provisions for each mort¬
gage regardless of the size or lo¬
cation of the company.
Further¬
more, as the results of actions by
the Securities, and Exchange Com¬
mission and the various local state
commisions, the ratio of debt to
equity and of' debt to plant ac¬
that
York
the. New
Exchange and its member.
begun; a nationwide,;
firms
have
.
.
.
unit
have, of course, been greatly in¬
flated by the postwar rise in con¬ i, /This article expresses the per¬
struction
costs
and
commodity, sonal views of the writer, t it is
npt presented as the opinion of
prices.
Depreciation charges and rein¬ Tiendix, Luitweiler & ' Co., with
whom he is .associated.
/
vested
earnings
have supplied:
-
of Investors" will
than
An
aggregate of $8.2 billion annually
$13.9 billion
half
the
of
year, or more
funds
time
accumulation
government
of
securities,
accounts payable
J:
terest
•
holders
the
tion
of
lation
last
of
•:'/.
and
the
obligations
chases
are
i:
•
-
0F ASSETS, EARLY: 1948 ;
—
;
For and Against
*
•
or
//
.
above)
————Type of Asset
Bank
...
——■
Savings
s-
Deposits
Real
Common
Bonds
Estate
Stock
j
satisfactory
or return
i%
.18% ' .37.%.-, 4%
tiz.18
, ;54
Safe, not'a gamble
[ Interest rate
12
4r
• •:
j.
.2,
•
J: Familiar with
/
t»
Help country
32%-,
60%
9%
5%
new
Against—
r
1
are
sales.
democracy for all peoole of
world, occupies - only 6% of
(Continued on' page 30)
For—
the same as those
involved in the current easing of
general business, activity. In doL
lar figures inventories have about
regained a normal relationship
with
American indus¬
; ' ,
, /
America, that has accepted the
leadership in the fight for freedom
'
issues, particularly.: in re¬
to the high total reached
year,
stock¬
try.
; Holding Various Types of Assets
and borrow/
the total amount
and
the
market,
stock
industry, v the
^—Reasons-.
and-
increases
ings
money
the
of
investment
(Spending units with incomes of $2;000
--
war¬
cash
'
.
-REASONS FOR AND AGAINST HOLDING- VARIOUS TYPES
;
required.
provided by drafts on
was
in
a
only be success-
in the lpng' run. if we use
aggressive: marketing tech¬
niques, adopt better methods of
salesmanship, fight for more lib¬
eral (tax) laws in the mutual in¬
ful,
more
■
from banks.
After adjust¬
supply and de¬ ment
for debt maturities and other
mand, another factor has affected
capital retirements, an average of
corporate bonds which, in my
more
than $3
billion annually
opinion, has tended to bring the
(with nearly $6 billion in, 1948)
yield relationship between Aaa
was supplied by new issues.
and A bonds closer together, i.e.,
The facts pointing to contracf
the standardization of
In
Stock
The $14.4 billion of ne.w
money
issues - marketed during
1946, 1947 and 1948 has been ^art
of the postwar replacement boom
just as much as steel industry op-,
;
and with
erating ratios of 100% of capacity pressed by people with incomes oi busi.nessmen
or
more,.. the
majority these people lies both the future
have been part of that boom. As $2,000
prefer [assets' with fixed valuf of our own-business and the fu¬
compiled by the United States De¬
(bank deposits and government ture of private finaneing of Amer¬
partment of Commerce, the .com¬
b'ondk) to assets with, changinr ican
industry . . <!."
This great
posite investment account of all
business corporations during the jvalud;;(real estate and securities.); program
to. create the ■ "Nation
ings.
end
grade corporate issues
(No wonder
flow of pri¬
a
vou
ment securities.
of
campaign in order "to teach the 1
investors with large incomes or.
substantial savings that they can \
vate capital the government may.
participate in sharing the coun¬
in the end, have to take over the
try's. industrial progress." ; Who
task of financing business.
That are the stockholders of tomorrow?
would be the first major step in
Ai, financial 7 writer states: "We
the nationalization of industry." have
developed a new crop of
According to a Federal Reserve potential investors.
The farmers,
Survey of v Consumer Finances for instance, have surplus funds
Part-3,. July, 1948, which reported which should be made available;
(the reasqns for and against hold¬ to industry and so have a great
ing various types of assets, ex¬ many wage .earners' and small ;
.
has, of
Holdings of all XJ. S. Govern¬
serve
securities
greater shortage of such
from
individual ' sources
a
course, made it difficult for past three years has been, some¬ [only 5 % '■ favored investment in
savings bankers to earn a very what as follows — additions to pommon; stocks: 9%. favored .inhigh rate of return for your de¬ plant and equipment $14,5. billion, yes'tment in real estate; 60% pre¬
ferred ' savings
Banks have been able to reduce positors.
bonds, and 32%
///'
increase in inventories $6.7 bil¬
their holdings of U. S. Govern¬
ifavojred bank deposits.
62% of
lion and expansion in receivables
Narrowing of Income Yields
ments .by more than $2 billion
.those, who. expressed themselves
$5.0 billion, or a total of $26.2 bil¬
since the end of last November. i
Another trend that has become lion annually. The sums required were against common stocks. 30%
Approximately the same contrac¬ quite noticeable is that the yield for expansion of physical capacity because they were "not familiar"
with them, 26% because they retion has been accomplished jn Re¬ differential between the highest
increases in inventory,
deflation is the order of the day.
tn contrast to heavy purchases
during 1948, the Federal Reserve
income-producing
the foremost American companies.
time
a
was
history when equity capital
necessary, and there never
capital
.
should be increased more
sharply
to
counter
inflationary trends.
plausible
if
The
there
Therefore,
little
-
r
Not ;safe,> a
or
4
t
3
l
i
t
$
_ _
.familiar with
Price too
of
to buy
high, capital loss expected
money
4
4
f
:
1
19
return low--.
Not liquid
Takes lots
:
^amblei------i,-
Interest rate
;r Not
.
»•
,
I
12
1
26
f
"•
r'
? "
307
4
3
'
3
34
-
Installment payment
on
still
but
23%
automobile pur¬
abnormally low
and
receivables
expansion
generally should
§No
.
be
checked
reason
All units
as
' 58%
9%
44
given
30
100%
33
100%
100%
62%
33
-
100%
dollar sales volumes level off and
even
in
"The questions were: "Suppose a
decline from figures reached
put it in
1948.
Expenditures for new
plant and equipment also appear
TLesstthan
passing the peak. A survey
by our firm last October
uncovered a prospective 13%- demade
on
page
38)
J
bank
or
in bonds
It; 'invest it in real estate;
to be
^ontinue
a
thing for him to do with the
,
V:
•
crie
he
can
nowadays—put it in the bank; buy s.avings bonds with
buy common stock with it? Why do you make that choice?",.
money
or
one-half of
lc/r.
SMost
of
the
respondents
,
gave
.
•
;
.
•
'
.
-
-;
'
" /
/
for or against .holding one of the four
indicated by this line, did not discuss each
^
/
reasons
aisqts. b.ut some respondents,
;types';ot-assets. ■
^
of- the ;fonr
'*/
/
-
•
tNot applicable, not coded.
types, of;
■
or
decides not to spend his money. He can either
invest it. What do you think would be the wisest,
man
as
»•/« •
•'
.;y
■»•••}
•
\
•
t
Volume 169
4804
Number
From
THE
->
r
t
t
*
•)
* '
\
v
*
t
COMMERCIAL
t
&
The Business Outlook and Bank Investments
Washington
By MARCUS NADLER*
University
Professor of Finance, New York
Ahead
of the News
arewncw receding and nation is returning to more normal
for commercial bankers to review and analyze their individual
positions carefully so as to adopt investment policies they can follow under changed conditions. Says
principal aims of investment policy should be: (1) maintenance of adequate degree of market stability;
(2) sufficient liquidity; and (3) satisfactory earnings from investment portfolio.
Dr.
couple of years ago the House Un-American Activities Com¬
mittee
Veterans'
found out that the
Bureau
paying GI benefits
California, two in
New York State. There was no question at all about the Communists
'
operating the^
schools with an unusual breed. They are ter¬
straight
out ribly sensitive and their having
to
■
students
Communist schools,
three
of
be
Communist
to
curricula.
was
in
one
would
screened
of
not
one
It
a case
two
or
sion
that
they
have
delicately tuned
being on the
faculty. It goes
or
without
s a
y-
ing that if the
benefits
k i
n
d
the
,
number
Bargero*
in
this
of
cases
colleges
of
a n
d
institutions
studious
the
to
heroes
would be very
these
limited, indeed. But
three schools openly
were
;opefated for improving the minds
of Communists.
.
You would think that when the
*
House
this
Committee
matter
came
called
and
across
it
to
the
attention of the Veterans' Bureau,
its
bureaucratic
would
face
have
been quite red and it would have
expressed
indignation ;„that
wool
been
had
kindly
pen.
pulled
over
the
its
But this did not hap¬
eyes.
instead,
the Bureau said with
shrug that it had
impatient
an
known about the three schools all
the time.
But
law read that
the
if the
.
a
state government certified
school as O.K. the Bureau had
to
accept it.
;
Do you know
tee
had
several
and
to
hound
months
the. state
officials
were
stopped?
erans'
the
Bureau
letter
benefits
Assuming the Vet¬
was
acting within
before ■the
>
the
of
law,
was
attention
situation
to
the
President
or
there
of
are
studying the in¬
atomic
science
under
•scholarships given by the Atomic
to
be
they
see
this
The
fact.
slightest jar
is liable to • throw their thinking
came
Committee,; as .a father
might explain to a tiny tot, that
there is no telling where genius
to
that
use
genius
don'tknow
education.
am
the
Day up to the
is
just
about
on
the
only thing, I am quite sure, that
he doesn't want the Federal Gov¬
ernment to
run.
Strangely enough,
Congress is getting ready to
too,
Federal aid to education
bill.; Modified by Senator Tafti it
is
supposed to have safeguards
pass
United
the
a
discovery by members of
hit the headlines and
of the "broadest" minds
emerging,
are
therefore,
sale
V-J
prices rose from 105.5 around
Day to 169.5 in August, 1948,
increase of 66%.
an
constant
ing
decline
power
in
There
the
was
a
purchas¬
of the dollar, at a time
at the dis¬
when the liquid assets
midst
of
a
readjustment
used delib¬
rolling
amounted
people
to
had any
the sellers' to the buyers'
This writer is inclined to agree,
however, with the viewpoint that
Communists won't get
posits
and
to
government
bonds,
and
$298 billion.
If the
erately.
of the United States had
experience with runaway
inflation in the past and had been
scared about the future purchas¬
of the dollar and spent
freely, this country
could have witnessed an outburst
ing
power
these
funds
*
An address^ by Dr. Nadler be¬
of course, why. they
get any sort of education fore the Convention of the New
or training on taxpayers' money.
Jersey Bankers Association, At¬
But there is little doubt in my lantic City, N. J., May 13, 1949.
mind that the hush-hush nature
is*
no
increase
unemployment.
in
reason,
Oak
Ridge
-
were
considerable
amid
these
words
are
an apt word
conversion from
"Rolling" is
describe
the
market,
which did not hit the entire econ¬
disappears,
failures
has
In many
increased.
Instances, profits have been con¬
verted
into
losses,
and
those
workers who have lost their jobs
have
been
forced
standard of
living.
to
lower their
-
.
;
not
affected
mobiles,
This announcement is neither
heavy steel or auto¬
although
it
is
{
more
willing to buy because of the
(Continued
probable
thrown
on page
14)
as
offer to self
nor a
solicitation of
an
offer to
the Prospectus.
open
fanfare
an
buy securities. The offering is made only by
the gates of
if
were
new issue
new era had arrived.- The sev¬
semi-official Wash-i eral thousand residents of the
shocked. "This,"?they) community could come- and • go
a
was going too far.
Steps, without i. showing passes to the
promptly taken in Congress guards and visitors' no
longer
towards having the applicants for were to be screened.
these fellowships screened by the;
It so happens that'last October
fbi.
;■
j I had not the slightest difficulty
But the flurry of anger or ingetting a pass, along with about
'dignation was short lived.
Mr. 20
politicians, to go in and conduct
Dave Lilienthal, head of the AEC,j
a political
rally which some 10,000
appeared before a Congressional
persons
attended.
And at that
Committee with his usual selftime
it was explained the
pass
assurance.
Nothing to get excited
monkey business was to be elimi¬
about, he Scqd. In the first place nated soon. The
delay was not to
80,000 Shares
agreed,
1
were
'
_
.
it wasn't his fault.
,
.
United Biscuit Company
of America
$4.50 Cumulative Preferred Stock
w
(Without Par Value)
The Commis¬
permit the hiding of the plants
and the secret material.
It was
applicants to the National Re¬
just to wait for an auspicious.oc¬
search
Council,and he would casion when. a celebration could
sion had farmed out .the selection
of
much
r a
t her
a n
occasional
be
made
of-it.
J
If there was one thing on which
most*strongly it was that
he felt
the
'
Federal
Government
;
*..s
.
a
should
its hands off of education.
It wouldn't be doing this if the
keep
cepted.; It
that
was
A copy
of the Prospectus
Underwriters
as
may
may
case
Share
of deliveries after date of
gress.
It is
be obtained within any State from such
the FBI, in fact,
about them.
an
open
ton that J.
secret in Washing¬
Goldman, Sachs & Go.
Edgar Hoover doesn't
May 19, 1949.
issue)
of the
regularly distribute the Prospectus within such State.
tipped off members of Con?
applicants had to undergo screen? like many things that are going
ing...
,y
y::,,;.. ..." ; ..
on
and. not infrequently his FBI
v! ';A
scientist accompanying Mr.
;t- li a t these slips a hint of this ^or;Hhat; to
-fnrCrififihi' fart- nre
searchers ;lorv1 ScientificIfact! are proper influences. imCongress.:,,
or<s
Price $103.50 Per
(plus accrued dividends in the
v-;.\
Commy get by than to hurt this
And to get back to Mr. Liliencouncil's feelings.. Thesd students
thal's objections to the scholarship
"were not permitted to get to the
being screened, they
atomic secret stuff, he explained applicants
have been screened all along. The
'suavely, and as to the suggestion
two
known
Com m i e s ; were
that
the
applicants should ' be
screened, but nevertheless ac¬
screened—it was unthinkable.
-
The readjustment has been ag¬
industry after another. So far, the gravated by two important psycho¬
readjustment has occurred in many logical developments. The decline
in commodity prices has created
soft
goods
lines, in
household
equipment, and in food and farm more buyers' resistance. Just as in
products.' As yet, however, it has periods of rising prices people are
at once but has affected one
omy
of official and
ington
Thet
all
of the Commission is for the pur¬
ago
,
practical purposes competition
makes both manage¬
ment and labor lazy and
slack,
and results in decreased efficiency.
the country, a too, rapid increase The recent decline in profits is
in the volume of loans was pre¬ bound to lead to an increase in the
vented.
The
deposits
created efficiency of management, while
the
rise
in unemployment will
through loans were to a large ex¬
lead to an increase in the efficiency
tent counteracted by the refund¬
of labor. These factors will reduce
ing operations of the Treasury,
which redeemed maturing obliga¬ the cost of production and lower
the break-even point and lay the
tions held primarily by the com¬
foundation for sound business in
mercial banks.
the future.
The readjustment is
Where are we today? Today the
painful, however. The number of
United States finds itself in the
of of 1948. But here, too, thanks to
there followed a swift ac¬ the" activities of the American
celeration of the spiral of prices Bankers Association and the good
and wages.
The index of whole¬ common sense of the bankers of
1945,
tide.
the young
industries,
a
Lilienthal.
What is being passed
is a con¬
cession, a bending to the Leftist
A few weeks
Congress
from
against the Federal Government posal Of; the petople were at record
encroaching upon the administra¬ levels.'
tion of the fund. But eveh if it
At the end of 1948 the liquid
has
these
safeguards .' now,
the assets in the hands of individuals
educational
aid
proposal
didn't and corporations in the United
have them when advanced by-the
States, consisting of currency, de¬
AivM
even some
We
these
;
;
middle of 1948
that before many
peal of controls in the summer
getting its hand
It
eco¬
amazed
observed Mr. Lilienthal in opera¬
I
and
.
long the
American people will have to put
up with this sort of stuff. Having
Government's
social
Federal
without
how
tion for many years,
at his concern over
are
V-J
From
the
inflation,
readjustment is wholesome, and
period of inflation, which
States was for a time threatened the entire while painful to many, is probablythrea tened economic and social structure of one of the best things that could
have happened to the economy.
with probably
the United States. In this process
Or. Marcus Nadler
one
of the of
inflation, the banks played a ; The great progress made by the
most
serious
United States economy in the past
part.
The volume of bank loans
economic dangers that^ever con¬ increased from $28 billion around has been based on free competi¬
fronted this country. With the re¬ V-J Day to $48 billion at the end tion: A sellers' market, where for
letting it do any harm,
I
we
today.
may
how
we
from and
where
the
be found, and the real smart
executive such as he is, knows
know
where
Lilienthal gently explained
Mr.
to
of
nomic consequences of which are
are
must
we
first
of gear.
out
we
heading. To do
imperceptible
Nevertheless, it is essential to
months are over
also, will be in
horrible to contemplate.
Fortu¬ the midst of a buyers' market.
"Readjustment" is a better word
nately for the United States, the
people maintained confidence in to describe the situation than de¬
By read¬
the dollar, and instead of reck¬ flation or depression.
lessly spending their current in¬ justment is meant the conversion
come and
savings they continued of a sellers' into a buyers' market^
to save.
This prevented a really which is usually accompanied by;
disastrous
inflation from taking an increase in competition, a de-f
cline in prices and profits, and ar^
place. ;
of
idea
where
is always clear, and after
It is an
what should and what should not have been done.
see
leasts
at
some
very
can
readily
have
Energy Commission and paid for, pose of not letting Congress know
of course, by the American tax-i how it spends its funds.
payers.
The
can
should
learn that at least two
we
tricacies
of
the
to Congress?
Now
one
entirely different matter, however, to look into the future.
nobody among its .vast and un¬ any secrets that are not known
wieldy personnel with enough en¬ to everybody that wants them ex¬
ergy, or
indignation to call the! cept the American- people.. This
Communists
It is always easier to look backward than forward. The past
;
the event
that the commit
patriotic groups | Leftist friends of Mr.
involved and the Bureau for sev¬
eral
so
most
the
hear
scientific
were
withheld
discourage
of them from applying for
scholarships. You get the impres¬
Communists
available
Introduction
many
was
Carlisle
Nadler, pointing out forces of inflation
pattern of business, holds time is ripe
By CARLISLE BARGERON
A
7
(2163)
CHRONICLE
FINANCIAL
8
(2164)
COMMERCIAL
THE
FINANCIAL
&
CHRONICLE
the
cites
ferreds.
ployed to handle the distribution.
Of course steps may have to be
taken to stabilize. Under this plan
By A. F. TEGEN*
President, General Public Utilities Corp.
Utility executive
depressed market
and
academic
terest
i
in
that
this
in
reasonable
want
tors
n-
earnings
our
assurance
be increased
can
proportion to the increased cap¬
and
that
dividend
policies
Vigorous action
market is soft
another
tate
rective
should be liberal.
through
by issuers on this front will go a
long way to stimulate and broaden
the security markets.
subject to
the
of pri-
fields
v a
t
and
capital,
e
free enterprise
ahd
taxation.
Oh
However,
Where
The
do
We
Recommendations and Literature
but
i :
saying that those in
the security business are making
too
much money for we know
they are not. But we think that
new selling techniques and tech¬
niques for minimizing risks should
be developed.
We point to the
thought that
for
the
pose
pur¬
Of
forum
this
it
A. F. Tegen
was
"
better to be pragmatic.
dur business, that is the public
utility business, is in a substantial
growth cycle. There are going to
be 10,000,000 more people in the
United States in 1960.
New York State deal
creasing
commercial
tinue to
we
at
customers
We
mechanize.
We
are
sure
con¬
our
own
brings
about
Act
under the Holding Company
had
least
at
one
to be home owned!
can
to
able
in
social
be
home
If it
owned
be home owned
is desir¬
and
even
financial
Competitive
writers to direct their attention to
While
broadening the base by reaching
people who now turn the financial
pages as if they were meant only
for professionals. We expect them
tt) reach the popular magazines.
Some people tell us there is a
shortage of equity capital. I am
inclined to doubt that but I am
we
are
on
if
com¬
the subject of
bidding,
do not need
the protection of the
rule.
ter
We think
deals
on
we
make bet¬
can
negotiated
a
and therefore urge its
as
to
commons
and
basis
elimination
preferreds
Certainly if broadening the equity
market
is desirable, competitive
bidding is no help. We would not
whole will not need
object to
a great deal of
equity capital be¬
yond that which our industry will
seek. Our concern is that the rent
rule which
a
would
be
invoked if, in a given transaction,
there seems to be a violation of
the
for
equity capital is too high.
Stated another way, the prices of
public
the
investor interest of
or
nature
which
ostensibly
prompted the present rule in the
equity securities are too low and
I suppose the object of broadening
the security markets is to firm up
first place.
The registration and prospectus
technique has become so much a
the demand and, hence, prices.
nart of
have been saying,
until recently, that the utility in¬
dustry could not earn enough to
attract
tus
our
security issuing picture
that
Said
we
would
not
expect
to
change it, except that the prospec¬
an¬
our
end of the
is Up to
earnings.
Toward
or
than
November of
showing.
to
That
succeed
is
we
now
our
a
are
subscribe to the view that inves¬
writers
can
help in
Coverage of financial
is often too brief and some¬
news
times
not
many
articles
wholly
accurate.
How
about
some
articles in the popular magazines?
If the equity market is to be
rights.
Based
the
prospectus.
was
not
am
offerings
pre-emptive
that
in the best interests of
are
rights have
Of
where the
course
value and the stock¬
a
holder sells them he gets a capital
dividend and he undoubtedly likes
that but that doesn't alter the fact
that his gain often is more appar¬
than real.
I am glad to note
ent
that the SEC has
of
around
come
constructive view
a
to
the matter
on
pre-emptive rights.
It
has
equity
been
The
said before about
$10
down
is
arrangement
and
days of the 20's
in
minds
our
Drug
Industry
Hirsch
&
Co.,
Circular
—
$10
month
still too fresh
are
for
a
to
us
want
to
of
Open-End Selling
But there may be another way
to reach
small investors or new
accounts who in the future may be
a
considerable
funds.
as
a
have
equity
not interpret this
Please do
latent,plan of GPU since
pre-emptive rights in
charter
and
could
not
we
25
Broad
Street,
Ero
Economic
speculative appeal — Straus &
Blosser, 135 South La Salle Street,
bonds
Belgium,
of
Great
Sweden,
Norway
and
Britain,
| ing when either the earnings do
1
not warrant it
or
when the equity
Chicago, 3, 111.
Netherlands,
Denmark
New
—
Also
study—Zippin & Co., 208 South La
Salle Street, Chicago 4, 111.
"tap
issues" of the U. S. Treasury. The
idea
might work out something
like this: A company would calcu¬
late its equity
needs, say for 12
months
ahead
or
other
some
ap¬
propriate time, and determine the
number
of
shares
approximately
which
maximum
would
amount
have to be
the
Of
would
to
desired
course
be
fixed
Statements
34
of
4%
that
presumably would be only enough:
cover
capital needs for a given:
period and would have to bear a
to
reasonable
relation
the
to
Toll
Road
Revenue
Circular—Allen
TVA
Broad
Area—Illustrated
—Equitable
brochure
Securities
-
Tenn.
St., Nashville 3,
Wall
Street, New
2
and
York 5, N. Y.
Over
Stock
the
-
-
Index
Company, 30
Street, New York 4, N. Y.
Food Fair Stores, Inc.—Circular
—Sutro
Bros. & Co., 120 Broad¬
New York 5, N.Y;
way,
Industrial
Counter
—
Bonds—
&
Corpora¬
322 Union
tion,
Booklet
Marlin-Rockwell
recording
Corp.
—
Cir¬
cular—Barnes, Bodell & Goodwin,
10-year performance of 35 indus¬
257
trial
COnn.
stocks—National
Quotation
Church
Street,
Haven,
New
Bureau, Inc., 46 Front Street, New
York
4, N. Y.
Middle
*
Alaska
Dermott
,■
■
■
New York
issue
current
Survey"
& Co.,
"Fi¬
of
South
Utilities,
Inc.
—
Analysis—G. A. Saxton & Co.,
Inc., 70 Pine Street, New York
5, N. Y.
-
Airlines Incorporated—
Study—in
nancial
*
*
Peter P. Mc-
—
Wall
44
Missouri
Street,
Pacific
Circular
—
—
Sutro Bros. & Co., 120 Broadway,
New York 5, N. Y.
5, N. Y.
Amalgamated
—Edward
South
City
.
L.
Main
Sugar—Analysis
& Co., 160
Street,
Salt Lake
New
Burton
1, Utah.
Hanover Bank
&
Trust
Co.—Analysis—Blair & Co., Inc.,
44 Wall Street, New York 5, N. Y.
Also
available
are
Wisconsin Power and
studies
Company
and
a
Oregon
,'v
review
of
Cement—Late
Co., 10 Post Office
Square, Boston 9, Mass.
of
Petroleum Heat & Power Com¬
the
pany—Analysis—Goodbody & Co.,
115 Broadway, New York 6, N. Y.
Also
Electric Utility Industry.
Central Public Utility 5^&/52—
Analysis and comment on 1948
report—New York Hanseatic Cor¬
poration,
120
Broadway,
New
York 5, N. Y.
V
available
are
leaflets
on
Irving Trust Company and Central
Hanover, and a discussion of the
current
situation
in
Texas
Crude
Oil.
Ryder
Analysis
16mm
Services,
Write
—
Inc.
copies
for
—
to
H. R.
O'Neil, Jr., Dempsey-Tegeler
Co., 210 West Seventh Street,
Los Angeles 14, Calif.
Chicago Daily News, Inc.—Cir¬
cular—Swift,
Portland
data—Lerner &
Light Com¬
and National Fire Insurance
pany,
Service
Public
England
Co.—Analysis—Ira Haupt & Co.,
Ill Broadway, New York 6, N. Y.
&
Henke & Co., 135
Street, Chicago, 3,
Safeway Stores, Inc.
Commonwealth
&
Corporation—Comprehensive
M.
randum—A.
Southern
—
Kidder
Memo¬
&
Co.,
1
Wall Street, New York 5, N. Y.
spe¬
cial
analysis of the company with
special reference to the enhance¬
ment possibilities of the common
stock upon consummation of the
Southwest Airways—Circular—
Marache, Sims & Co., 458 South
Spring Street, Los Angeles 13,
Calif.
plan
of
reorganization
of
the
company—$2.00 per copy—Kalb,
Voorhis & Co., 25 Broad Street,
A.
New York
4, N. Y.
Commonwealth
Corporation
Faroll
York
—
•
&
Circular
Manufacturing Co.
—
Newburger &
Company,
1342
Walnut
Philadelphia 7, Pa.■/. ~
Southern
—
V
E. Staley
Memorandum
•
the
offered
and
analysis of
an
Fernandina Port Authority, Fla.
Operating
Municipal Electric Systems in the
—
bring
amount of proceeds.
available is
Kerr-McGee Oil Industries, Inc.
in.
"open end" idea of the
the
Manufacturing Company—
and the ultimate effect upon gov¬
ernment
This suggestion is borrowed
the
and
of
Cor¬
Analysis of low priced stock with
of
South La Salle
from
trusts
study
a
Cement
Europe
Recovery
our
plan.
investment
is
New York 4, N. Y.
the
use
available
poration.
of
source
Y.
Pennsylvania-Dixie
—
participate.
Extension
Co., 15 Broad Streef, New York 5,
N.
Also
Central
suggested
that
be sold in in¬
securities
stalments.
of
Bank
Commerce, Toronto, Ont., Canada.
recent
on
sure
Canadian
Too
written for the
are
sophisticated.
tical comment—Eastman, Dillon &
Monthly commercial
—
The
—
Street,
Joseph
■
&
Co;, 29 Broadway, New
6, N. Y.*
'
"
' "
"
out¬
Consolidated Paper Corporation,
Limited—Analysis—James
Ricli^
sell such shares to accounts in a ardson &
Sons, 367 Main Street;
given area or to new accounts Winnipeg,. Man., Canada and 80
generally — through
established King Street, West, Toronto, Ont.,
Suburban Propane Gas Corp.—
Analysis — Amott, Baker & Co.,
Inc. ,150 Broadway, New York 7,
N. Y.
.
'
.
standing shares. Jt would offer to
up on purely theoretical concepts.
I was referring to the fetish of sales
outlets.
The
price to the Canada.
•
equity ratios. This is not a plea purchaser could be the closing
for debt financing nor is it a plea price of the previous day.
Doehler-Jarvis Corp.—Circular
The
for thin equity ratios but it is a sales outlet would get a commis¬
Auchincloss, Parker & Redpath, 52
olea not to insist on equity financ- sion approximately twice the com¬ Wall
Street, New York 5, N. Y.
We
~
four pages and
regulatory Commissions get¬
ting off their perches and easing
contrary
sociation, May 12, 1949.-
over
it
the
beginning
*A talk by Mr Tegen before the
New York Financial Writers' As-
comprehensive,
group.
Something
deter¬
apparent.
too
a sales talk by the
Why kid ourselves
—the sales talk is more important
last year—there was evidence that
thftt might be the case. However,
yOU
underestimated
mination
to
make
still
should include
selling
the
inflationary cycle—that
October
is
should not be
other way, you expected that an
increase in equity caoital would
dilute
Financial
this job too.
The
Bidding
let me say
that for my money it is "no go"
as to commons and preferreds. We
saying that equity capital
isn't coy about coming out. I am
told that, in the years just ahead,
capital.
wish
well
fine if the issuer is kept out of it.
competitive
lidt
equity
organizations,
to join the
effort. An orchid to Merrill Lynch
on this subject.
it
in part,
just how do you do it under
petitive bidding?
last year's Federal Reserve survey
of investors' attitudes.
you
dealers'
very
may
stockholders.
gain
in that it enabled the local utility
the
Many of
security
rights
replaced almost
of Pened preferred
6,700 accounts in the terri¬
When Jerome Frank was
gram
shoulders to the wheel and unsell
as a
\^th them.
Any other
interested
parties, such as the
securities
Chairman of the SEC, he said that
he regarded the divestment pro¬
security
security
dealers' associations will put their
industry
This
reported
familiar
accounts—only 84 of which
in
the
Penelec
territory!
like amount
with
We hope that the
exchanges and possibly
the
shares.
our
is
I
tory!
(4)
expect
them
it
letter
of
July 1948
that 62%
of a sample of people With liquid
assets said they were against com¬
mon stocks because (a) they were
not safe and
(b) they were not
wherein
really broadened, it may be neces¬
sary to do away with pre-emptive
a
expect
We
of
some
like
we'd
and
up
my
special complaint
competitive bidding—that it
were
regulatory com¬
missions to help and in some cases
come off their perches and ease
up
on purely theoretical
concepts.
(5)
we
areas
speaking of old
ownership. We are
find equity investors
areas
These
our¬
reflected
the
Bulletin
Reserve
to 838
selves into the selling effort.
result
of the
We hope that they will
in the territory we serve.
As an
example, I cite the case of Penelec
when it sold competitively 101,000
shares of preferred stock in 1945
(2) We expect people who are
in the business of seeking out such
CSpital to do a better job for us.
unhappy
more
substantially ignores the investors
mtist pay.
(3)We
You
not
am
you can
to
(1) We will need equity capital
inject
I
in
sure
irt each of the next several years
at ft lower rental than we now
should
that
into
reach
serve.
going to grow and we will
lieed equity capital to finance such
growth. Stated directly:
we
exam¬
done.
firms mentioned ivill be pleased
the following literature:
interested parties
send
to
Canada
made to the
expand their effort to change the
picture presented in the Federal
time customer
are
Possibly
wish
also
would
and
will
as an
be
can
selling effort for equity securities
in¬
an
Industrial
what
know, of course, that established
sa]es outlets did the job.
Customers
sell
we
rate.
of
ple
Will live longer. Our standard of
livihg- calls for home conveniences
which use up the kilowatt hours
and cubic feet
not
are
It is understood that the
circumstances
when
Exchanges' Part
securities.
this
let's
regula¬
Dealer-Broker Investment
cor¬
Exchanges can play in
broadening the market for equity
should like to
us
and
necessary,
the
part
Many of
cern.
are
Reference was also
feel that it costs
too much to sell equity securities.
occasion, I
regulations,
or
change?
have another con¬
we
notions
■
with a senior issue
reconsideration by the
a
Commissions
Selling Costs
other
some
measures
to
usually do not come on change the notions
single date.
The idea might tions. ,: '•/ ;'r ■'v'"'"" fV;
what's wrong
subject
If it does violence
workable idea.
which dic¬
reasons
course.
ital
meander
re¬
given day
wouldn't
purposes
when there may
or
other good
be
pre¬
on
into pre-emptive
rights and
quite possibly into the Securities
of 1933, Stock Exchange reg¬
ulations and the Holding Company
Act. However, it strikes me as a
where that is necessary but
"
an
a
plan
the
possibly
work
a
One
with
Of course, it bumps head
capital requirements for expansion
My part in this program is to present the views of an issuer on the matter of broaden¬
ing the market for equity securities, on the assumption, I suppose, that such broadening will
assure issuers of
equity securities of getting the necessary equity capital on more attractive
could take
guarantee of
no
ceiving proceeds on
financing problems
well
1949
Act
the issuer has
of the utility industry, among which is that present
level makes the "rent" for equity capital too high. Calls on regulatory commissions
to "get off their
perches" and their "fetish" of equiiy ratios. Suggests open-end and tap issue technique
for distributing new offerings.
terms.
especially
manager
Broadening the Utility Equity Market
i
work
be appropriate. A dealermignt very well be em¬
might
;
Thursday, May 19,
mission
if
transaction
it
or
were
an
Exchange
whatever
amount
„
Time
With Collin & Blood
CANTON,
Montis
with
Dresser Industries,
Inc.—Analy¬
Incorporated—Analysis-
William A. Fuller & Co., 209 South
Salle Street, Chicago 4, 111.
La
has
Collin
OHIO
—
become
and
Harlan
H.
associated
Blood.
He
with Otis & Co. in the past.
was
Volume 169
Number 4804
THE
COMMERCIAL
No Depression in Offing:Townsend
Economist points to
absence of over-extended private credits
precluding repetition of the business collapse of 1921.
result of the publicity given
sporadic lay-offs in the country,
the profits of industry may be
somewhat less than they were in
1948, but there is no present rea¬
son to anticipate their disappear¬
the
to
at Chicago, on
May 12.
"No
Equity Maiket Stagnation
Chairman, Securities and Exchange Commission
....
diversion of
financing into private placement. Maintains Commission in lieu of either encouraging or
discouraging speculation, Commission performs constructive function in making information available.
Association's-
Beach Hotel
ance."
In spite of short-range and
short-sighted temptations to finance with excessive debt,
advantages of sound equity capitalization are obvious. I think I can safely assume
that our problem is not to educate ourselves to the need for
equity financing, but to find
the
of stim¬
ways
viduals to whom direct investment
recently
is
ulating it.
Industry
consumer
novel adventure
added about
according to
sound proportions of equity and
pression which
$22.5
debt.
everyone
to
-
one ever
heard of
de¬
a
billions
its
is about three-
quarters
averted.
To¬
long-term debt
ex¬
as any
danger clear¬
ly anticipated
issu
W. W. Townsend
undermargined po¬
group
wage
a re¬
It
in
calls
income
financial
our
is
there
of
excess
no
optimism,
no
commodities, no
expansion
and any depression that may over¬
take us will be largely emotional
and probably of very short dura¬
tion," Mr. Townsend pointed out.
Continuing, Mr. Townsend
speculation
Current
in
unwarranted inventory
tion
American
"It is
important to recognize the
between
a
recession
depression. A recession is
a return from an abnormally high
level of activity to a normal level
a
Recovery Programme, Volume I—
Organization for European Eco¬
nomic Cooperation, Paris, France
—Paper.
of
activity and is healthy. A de¬
pression is a retreat from a normal
level of activity to a subnormal
level of activity and is unhealthy.
"A large part of the troubles
beset the
which
of
Enterprise Association,
Interim Report on the European
difference
world today
traced to confusion
be
Hutchinson—
P.
Inc., 4 East 41st Street, New York
17,
N.
Y.—Paper—500
(special
prices for quantity orders).
stated:
and
Problems of Immigra¬
Policy—E.
can
for
laws
economic
search
some
Goodyear,
The—The
Story' of the Rubber Industry in
America—Hugh Allen—The Cor-
& Gross Co.,
day
1771 East 25th
Cleveland,
Ohio—Cloth—
Street,
$3.00.
"
■
■
and
the
Utopia in which
Goldman Sachs Group
can
be provided at
no
Offers United Biscuit
moved
well into the
recession
There is no evidence, as
yet, that an actual depression is
in the offing.
pretty
"Thrift is being deprecated and
production is supposed to be the
consequence,
not the cause, of
purchasing power.
Democracy
means one thing to us and another
thing to the Russians. The basic
laws
economic
can
be
circum¬
cannot be repealed
they
vented,
Sachs & Co. heads
underwriting group that is of¬
Goldman,
an
fering publicly today (Thursday)
80,000 shares of United Biscuit Co.
of America $4.50 Cumulative Pre¬
ferred Stock (without par value)
share. Proceeds from
be applied to the
payment of $3,000,000 of shortterm
bank loans,
and approxi¬
mately $4,000,000 will be required
at
$103.50
the
construction
and in Nature there are neither re¬
wards
March
nor
penalties, only conse¬
of
quences.
"Prices and
profits both depend
"upon the public's capacity to spend
and their willingness to spend. At
no
time in our previous history
have we had so much purchasing
in this country as we have
had during the past few years, as
power
result
credit
war,
has
in
of
the
monetization
of
order to implement the
and later to win the
Deal
and at no time in our history
much of this credit-created
so
resulted from the moneti¬
zation of government credit.
"In practically every previous
period of credit expansion the
proportions have been approxi¬
mately 10% government credit
and 90% private credit.
Today's
proportions are 57% government
credit and 43% private credit, and
because the government can print
the money if it is demanded, that
much of its purchasing power is
noncollapsible. We have literally
put a floor under about $70 bil¬
lion of excess purchasing power.
money
"Under
these
bargains when they ap¬
pear
to be definitely bargains
practically guarantees against any
such experience as we had in 1921,
1929
up
or
"With
1937.
volume
in
process
on
31, 1949 and the acquisition
equipment author¬
additional
ized
for
purchase
billions to plant and
equipment and over $4 billions to
net working capital.
It is obvious
that the vast part of this increase
in our
productive capacity was
provided by the American con¬
$17
over
reasonably well
assured, with material costs de¬
creasing, with the threat of a
fourth round of wage increases
practically lifted from our shoul¬
ders and with the productivity of
the worker himself increasing as
not the investor.
sumer and
Provision
is
vestment
tinue
to
July
1,600
1973,
1989,
shares
ignore
that
to
our
to
ap¬
a
year
Co.
always
Financing
manufacture
in
the
distribution by
delivery system of
varied lines of crackers, cookies
and biscuits. The territory served
includes most of the trading areas
of the United States, except the
Pacific Northwest, certain areas
its
own
in
and
truck
New
York
in
districts
City,
and
certain
California and in
the
to
Group to Study
Bigelow
Brown &
A
of
security analysts
headed
by
Stanley
Heller
of
Stanley Heller & Co.. Members of
the
group
New
will leave
York
on
Stock
Exchange,
May 21 for St. Paul,
Minnesota where they will make
a
survey
of
Brown
for
is
those
balanced
justed
choose
between
according
It
of
group
covered, is good for morale—but
wonder whether the
should not fool ourselves about
of
equity
as
changes
potential
many
our
in
middle
know
that.
are
Not
ous.
but
only
con¬
can
the
real
problems that
we
stood.
face.
What keeps the small investor
from
The
buying
Federal
equity
theories
that
securities?
Reserve
However,
are
under¬
be
"Bulletin"
understood
were
all
if
even
that
(Continued
would
be
on page
these
would
neces-
36)
This is under
no
circumstances to he construed
as an
offering of these securities for sale,
or as an
solicitation of an offer to buy, any of such securities.
The offer is made only by means of the Prospectus.
■offer to buy,
or as a
NEW ISSUE
May 18, 1949
costs
some¬
extent obvi¬
some
the
are
800,000 Shares
expenses
shareholders
existing
consider also what
must
they get in ex¬
Southern California Edison
change for sharing their position
with new stockholders or adding
the charges
Company
on earnings ahead
selling senior securities.
of them in
'
&
none¬
is
well-satisfied
retained;
earnings
lack
Saving Trend
The
war
trend in
emergence
wage
so
on
Bonds
Price $32.25 per
a
toward the
share
the one hand of a
earning enough to
make
large segments of pur pop¬
ulation a potential source of di¬
rect
of
investment, and
and rapidly
stitutional
ings.
the other,
growing in¬
on
vast
accumulations
Into
channeled
these
vast
of
sav¬
institutions
funds
and,
Copies of the Prospectus
are
may
be obtained from any of the several
Stales in which
underwriters, including the undersigned, only in
be¬
such underwriters
of custom, law and
economic
necessity these funds tend to find
their
way
into
investment
in
and
in
which
are
such
qualified to act
Prospectus
may
as
dealers in securities
legally be distributed.
bonds.
With
must
we
this
emerging
pattern
corresponding adjust¬
ways of finance, if
come
in
ments
are
the
not
to
kets
a
source
miss
the
oppor¬
securities mar¬
constant
and
adequate
of capital.
The challenge
tunity to keep
our
The First Boston Corporation
Harris, Hall & Company
(Incorporated)
■
-
-
■
'
1
.
Dean Witter & Co.
■'
Blyth & Co., Inc.
is to direct the resources of indi-
Bigelow,
manufacturers of calendars, play¬
value)
than
accentuated
economy
group
par
satisfied.
Tied to
years
our
($25
his
misfortunes
rather
income
high taxes is not
see
Common Stock
but the small
whose
of
to
i
-
real, are the costs of in¬
ternal financing. For it can take
place only as a result of with¬
holding
dividends.
The
large
stockholder whose income must be
shared liberally with the govern¬
ment
*A talk
by Mr. Hanrahan before
forum-dinner
ing cards, and other remembrance
Finahcial
advertising novelties.
May 12, 1949.
of
I
potentialities
hedge
a
and
I wonder how
Healthy griping, as the army dis¬
investors
ad¬
be
stocks
to
market conditions.
to
complain rather than to construct.
we
appraise.
portfolio should
as
bonds
convenient
a
who
of distribution taken into account
cause
Gulf States.
Heller
Commission
target
understood, and the
a
issue is floated
a new
America
of
principally
engaged
difficult to
Exchange
Commission
in
helping business to have access to
these
pools of saving for the
building of productive capacity.
can
the costs
are
is
not
are
familiar theory to all in the
financial community that a wellis
capital mar¬
safely as¬
economy
thing. When
ginning at $108.50. For the sink¬
ing fund the shares are redeem¬
able at $104.50 prior to July 15,
1959 and at $103.50 thereafter.
Biscuit
are
risks
equity capital issues.
shareholder
United
rules
us can
prosper,
tion of the company at prices be¬
V
in¬
goods and employment without a
broad and receptive market for
new
to
to
is
and
The
deterrent,
there¬
fore, is probably not so much that
a gamble is
involved, but that it
is a gamble in a game where the
perhaps con¬
our
of
none
the role of the
con¬
not afraid of
are
The
Securities
make
can
gamble.
a
pertinent
most
I
was
theless
the
redeemable at the op¬
are
could
new
Somewhat less obvious but
sinking
ending
15, as follows: 1951 to 1961,
shares per year; 1962 to
2,000 shares per year; 1974 to
2,400 shares per year.
The
plication of shares
during each
fund
needs for
our
we
kets. But
the
there
we
guarantee that these in¬
ternal sources in earnings would
continue to be sufficient to satisify
for
made
If
had any
that date.
on
circumstances
prices may decline a little further,
but the ability of the public to
pick
a
will
sale
for
New
$5.6 billions came from
The re¬
mainder was internally produced
from accumulations of earnings.
At the same time industry added
outline
continue to
replace and improve the produc¬
tive facilities that provide us with
Preferred at 103V2
stage.
a
securities.
sume
cost.
'
"This country has merely
equity
the sale of long-term debt.
tinue
'security'
Perhaps
contribution
from the sale of
came
the bulk of
in the use
words, misrepresentation of the
basic
of
House
tions
that Americans
The SEC's Role
E. M. Hanrahan
brackets
stocks, and the vast majority of
feeling
was
that common
were a gamble in unfamil¬
iar territory.
I think it obvious
munity of the opportunities we
missing for promoting sound
direct investment by vast num¬
bers of our people.
of these addi¬
shows
stocks
are
earnings. Only
$1.2 billions
which
this
com¬
retention of
day,
of
study
a
finances
siderable feeling against common
part for
re-examination by our industrial
managers and
published
that, in a survey of thousands of
people at representative sampling
points, only 5% were in favor of
owning stocks. Even in the higher
small
and
earner
businessman.
a
and equity se¬
curities, and
through
the
sitions in the security markets, no
requires in part
education of the American middle
of
a n c e
a
To do this
plant,
equipment
and working
capital in 1948
through
the
pected,
9
SEC Chairman points out consumer in lieu of investor is financing increase in productive
capacity. De¬
fends SEC's role against charges of responsibility therefor. Denies Commission's responsibility for great
National Machine Tool Builders' Association at dinner session of the
Spring
(2165)
By HON. EDMOND M. IIANRAHAN*
as
evidence as yet that an actual depression is in the
offing, W. W. Townsend, nationally known economist and partner in
Townsend-Skinner and Company, New York, told members of the
Meeting in
Edge water
CHRONICLE
The SEC and the
There is np
annual
FINANCIAL
&
the
Writers'
New
York
Association.
William R. Staats Co.
Weeden & Co.
10
FINANCIAL
&
COMMERCIAL
THE
(2166)
CHRONICLE
Thursday, May 19, 1949
Shareholders' Trust of Boston at
Missouri Brevities
;the net asset value in effect at
the
Joseph Light & Power Co.,
in the company's annual report for the year 1948 stated in part as
follows: "To finance the construction program for the years 1949-1951,
inclusive, additional capital funds will be required. Plans are in
Charles A. Semrad, 'President of St.
progress to secure all or
stantial part of this new
money
by the middle of 1949. through the
sale of additional common stock
the
to
parent,
company's
to the public."
sale of bonds
the
Conti¬
Corp., and
Gas & Electric
nental
of the common
stock of the
St. Joseph utility
firm is owned by Continental al¬
most all of whose stock in turn is
At
The United Light and
Co.
During February,
1949, a policy of. liquidation of
the
parent companies was an¬
owned by
Railways
nounced.
:■
connection with the liquida¬
In
St.
Joseph's common stock will be
distributed, probably during the
latter part of 1949, to the com¬
tion
stockholders
mon
parent
Joseph firm reported a
net
income
after
charges
and
Federal income taxes pf $574,432
calendar year
1948, com¬
pared with $283,712 for the year
1947.
Current assets at Dec. 31,
1948 amounted to $1,868,820, and
current liabilities $996,363.
underwriters,
including A. G Edwards & Sons,
A
of 78
group
Cook
Newhard,
Rein-
Co.,
&
holdt & Gardner, I. M. Simon &
"
Cov Stern Brothers & Co., Stifel,
Nicolaus & Co., Inc. and Stix &
,
and
Co.,
others,
April'
on
26
publicly offered, for the account
of
United
Gas
Corp. 435,282
shares
of
stock
common
(par
$10) of Mississippi River Fuel
Corp.,
St.
Louis, at
$30 per
share.
In
River
Fuel
ers
of
scribe
for
common
record
on
Mississippi
stockhold¬
April
1949
12,
the right to sub¬
before May 9, 1949
or
additional 327,610 shares
an
of
addition,
given
were
stock
common
at
$27.25 per
share, the proceeds of which are
to
be
used
in the company's
Carroll
Hochwalt,
A.
Vice-President,
santo
will
and devel¬
through the lab¬
opment work
of Monsanto and Vis¬
oratories
William
cose.
Mon¬
a
and
its research
pursue
ley
New
of
Ewing
affiliate.
sales
of $5,773,493,
Of the 56,000 shares of com¬
program.
Of
these
327,610 shares, the stockholders
subscribed
for
shares,
326,216
remaining 1,394 shares be¬
ing taken
by
up
(par
offered
Co.
$1)
the
to
*
The
of
for. The remaining 47,095 shares
publicly offered, after the
rights expired on May 7, 1949,
at the same price, by a group of
were
which
underwriters
cluded
in¬
Prescott, Wright,
Snider Co. of Kansas City.
The
St. Louis and
net
proceeds
defray
part
are to be used to
of the cost of ex¬
additions
tensions,
im¬
and
provements to the utility firm's
properties.
*.
*
■
.
Included
in
*
„
.•
nationwide
the
syndicate, which
May 4 pub¬
on
licly marketed 1,500,000 shares
of Pacific Gas & Electric Co.
5%
series
$26.75
at
Dempsey-Tegeler
Newhard,
Smith,
$25),
(par
A
share and dividends,
following
Missouri
per
the
bankers:,
Co.,
preferred
first
redeemable
stock,
Cook
Moore
Simon &
&
*
.
Century Electric Co., St. Louis,
for the three months ended March
31, 1949 reported net sales of $3,343,511,
and
net
profit,
after
charges and income taxes, of $26,572, equal to five cents per share.
This compares with net sales of
Corp.
Co.,
&
dividend
to the
Among
*
who
on
Co.
&
Were
participated
of
1974
due
j;i
5j»
f
at
,
'
,
the nine underwriters
May 6 publicly offered
Kansas. P o w e r
&
first mortgage bonds,
101.50%
and interest, was Stern Brothers
& Co. of Kansas City.
M.
v
M. D.
was
those
among
Carl
together
104,000
the public
21
of 70,000 shares of Merck
Co.,
offering
cumulative
$4
Inc.
April
on
&
con¬
vertible second preferred stock,
without par value, at $102.75 per
and accrued dividends.
share
April
with
18
shares
30
of
The
Teletype-SL 486
Missouri
firms
reported
earnings per common share for
latest fiscal year as follows: MidContinent Airlines, Inc., 27 cents
City Security Traders Association announces that
Fishbite," which will be held the weekend of June 10,
entirety. Gull Lake itself is a beautiful lake in the heart oi the Paul
Bunyan territory. There are hundreds of lakes within a 30-minute
this big one, and all abound in fresh water, fighting fish,
Walleyed Pike, Great Northern Pike, bass, and many other
species of the finny tribe. There is still some question as to whether
the fish, or the stories about them, are the biggest whoppers; but
such
the
of
as
local
group assures everyone that comes that they will receive
fish, fun, food, firewater and fellowship, to say nothing
golf, boating, etc.
'
before giving
effect to retroactive adjustment of
mail revenue equal to 34 cents);
Midwest
Piping &
Supply Co.,
their limit in
Inc.,
ities
(against
13
cents,
$6.21 (against $4.91); Mis¬
(against
$1.04); St. Louis-San Francisco Ry.
souri Edison Co., 93 cents
and
Subsidiaries,
$3.25);
Stix,
$3.46
(against
Baer & Fuller Co.,
of
As
and
hosts, the Association would like to invite
and the reservations must be in early.
men;
aries, $6.52
to
The
With H. Hertz Do.
FRANCISCO,
(Special
CALIF.—
John W. O'Neill has become affili¬
ated
With Dean Witter
Montgomery
Street,
A. G. Becker & Co., Inc.
Chronicle)
Financial
&
Co., 45
members
of
the New York and San Francisco
South
Becker
associated
&
Co.,
with*
120
Inc.,
La Salle Street.
Mr. Boy¬
&
H, Hentz
lan
the
in the past was manager of
municipal trading department
for
Stifel, Nicolaus & Co., Inc.
associated
will
He
with
organize and direct
a re¬
previously with Frank Knowlton
Mr.
.
'fly?-"-
'
■
'•
-A;' •; v
.
tail Investment Trust Department.
& Co.
With Merrill Lynch
(Special
LOS
to
The
Financial
ANGELES,
Co.
Chronicle)
staff
L.
of
Ingles
Merrill
Fenner &
has
C A L I F.—
.
joined
Lynch,
Wilson
previously with
First Securities Company of Chi¬
cago in charge of research depart¬
ment and with Swift, Henke &
was
Herrick, Waddell Adds Four
(Special
The
Financial
Chronicle)
LOUIS, MO.—James R. AlThomas
G.
Bell,
Jr.,
Co.
Prior thereto he was with sobrook,
John G. Duckworth, and Miles O.
Da vies & Mejia and other Pacific
King are now associated with Her¬
Ccasl firms.
rick, Waddell & Reed, Inc., 418
Locust
& Harvey
Brown
(Special
Beane, 523 West Sixth
to
The
and
Brown
in
MAINE
Ernest B.
Brown &
King Merritt Adds
John
—
(Special
Harvey
to
The
Financial
Chronicle)
*
ST. LOUIS, MO.—W. D. McGee
Harvey to
is
securities business.
a
Street.
Open
Chronicle)
Financial
GREENVILLE,
Street.
to
ST.
the
Pierce,
now
with
King Merritt & Co.,
Inc., 408 Olive Street.
Spinning
Observations
(Continued from page 5)
incontrovertible fact that
o
Eastern Transmission
objects,
junk,
or
real
in
tial new-issue buyers.
Bought
—
Sold
—
SL 456
St.
Louis 2, Mo.
trusts
he
has
SEC—nor to any
t-
*
made
it
clear
that
he
attaches
to
other "single cause"—the onus tor our
capital financing difficulties.
To the contrary, it must be appre¬
ciated that they are the result of a combination of elements running
Landreth Building
Teletype
writer
neither the
Quoted
i
Bell
selling of all objects—be they art
auction technique introduces a
.
«s*
SCHERCK, FIGHTER COMPANY
^
the
estate—the
psychological element inevitably increasing the price.
Thus, in lieu;of stimulating security marketing, the government's
competitive-bidding attitude actually is likely to deter many poten¬
Mfg.
STREET
become
has
G.
A.
Co., 120 South La Salle Street.
become
Southwest Gas Producing
SECURITIES
Louis Stock Exchange
Boylan With
CHICAGO, ILL.—John T. Boy¬
lan
CHICAGO, ILL. — Arthur J.
Wilson, well known in La Salle
Street for the past 20 years, has
This
t
Financial Chronicle)
The
to
Stock Exchanges. Mr, O'Neill was
Southern Union Gas
Members St.
within
John T.
Commonwealth Gas
Stix & Co.
.
ye
bury at the Minneapolis First National Bank for your reservation
in the Land of the 10,000 Lakes," is the call of Twin Cities.
Arthur J. Wilson Now
(against $5.94).
Dean Witter Co. Adds
Rockwell
St.Louis l,Mof
"Please, all
reading distance, drop a note to, or call on the teletype, Bob Pills-
Mississippi" River Fuel
Texas
:
key pusher
$3.53 (against $4.08); and May De¬
partment Stores Co., and subsidi¬
Delhi Oil
OLIVE
every
partner in the United States, but unfortunately the super facil¬
of this amazing resort are limited to 150 investment minded
Black, Sivalls & Bryson
MO.
'
509
Co.
11 and 12, is the most ambitious of the famous summer
parties yet
given by the Group. For this occasion, Grand view Lodge, on gor¬
geous Gull Lake in Northern Minnesota, has been taken over in its
drive
Other
Berkshire Fine
L.D.240
INVESTMENT
&
Twin
"Operation
engage
BUILDING
William S. Hunter
Hartwig
Hartwig, Treasurer—Link, Gorman, Peck & Co.
S. Hunter, Secretary—Lee Higginson Corporation.
have formed
ST. LOUIS 2,
Carl
TWIN CITIES SECURITY TRADERS ASSOCIATION
H.
LANDRETH
I
Becker
William
participating
in
$271,580,
share.
on
Peltason Jenenbaum Co.
William
Sachnoff, President—Straus & Blosser.
William Becker, Vice-President—L. F. Rothschild
»i*
*»*
Sachnoff
D.
Co.
Smith, Moore & Co., St. Louis,
per
other underwriters in the public
•offering
'•
v
V
sinking;
v
also
the
=.,*
public
series due 1979, at
Robert
Stix
,
$10,000,000
(Special
requirements
equivalent to 76 cents
LITHIUM CORP.
the
and accrued interest.
$;?
355,787 shares of
stock
in
debentures
101.31%
Stern
preferred stock, of $53,979,
equivalent to 15 cents per share
on the 355,939 common shares out¬
standing. During the three months
ended March 31, 1948, the profits
common
of
to¬
&
the
available
the winners
April 26 of $40,000,-
on
25-year -3%%
fund
Co.,
&
McQiiay-Norris Manufacturing
Co., St. Louis, for the quarter
ended March 31, 1949 reported a
net profit, after Federal income
and
Morrison Hotel, May
follows:
as
nation-wide group
000 National Distillers Products
SAN
on
a
underwriters,
offering
Brothers & Co. and Stix & Co.
taxes
officers
new
M.
I.
participated,
Inc.
Co.,
of
12 investment
*
league and install its
Co, and Barret, Fitch
gether with
houses.
*
of the Bond Traders Club of Chicago will
hold its annual dinner at the Hollywood
Room,
26, at which time it will distribute prizes to
.
.
Gardner,
&
of
Co.
Walker &
H.
G.
....The bowling league
..
$1,-
company's
April 20, 1949 at $10 per share,
8,905
shares
were
subscribed
five
!■:
Reinholdt
stockholders of record
common
and net profit
894,926 and net of $866,553, or
$2.88 per common share, for the
same period a year ago.
Telephone
States
Southwestern
.1
BOWLING LEAGUE OF BOND TRADJERS GLUB OF CHICAGO
306,308, equal to $3.26 per com¬
share, as against sales of $3,-
Light
stock
six
months
reported net
after Federal income taxes of
2%%
mon
Corp., Inde¬
the
for
ended March 31, 1949
Co.,
&
were
expansion
the
have
Corp.
joined in the formation of a new
company to engage in research
and development work in the
field of synthetic fibers.
The
new
corporation, as yet un¬
named, will be headed by Dr.
and a Director of
American
Viscose,
will be
a
member of the board of the new
The St.
.
and
Co.
Joseph
stock will be held by a
St.
the
large number of public investors.
for the
Chemical
Viscose
American
Harvester
Gleaner
NSTA Notes
p.m.
May 18.
on
pendence,
4
at
mon
*
^
Monsanto
expired
(EDST)
This
commissions.
and
offering
Fork, partner of Morgan, Stan¬
Upon
distribution
common
the
of
*
*
completion of
companies.
this
that
is "contemplated
it
$5,664,540 and net after taxes of
$541,748, or $1.04 per share, for
the corresponding period of last
year.
Current assets at March 31,
1949 amounted to $7,809,802, and
current liabilities $2,732,947.
all
present,
counts
sub-f*
a
orders were
underwriting dis¬
purchase
time
received plus
Garfield 0225
L. D. 123
the gamut ranging from the constant international threats to domestic
political attack to the changed flow of savings and thesr institutional
growth to lack of knowledge about companies or investment to taxa¬
tion to fear of illiquidity—and even to the psychologciaL foibles of
the
investors
must not
gators
or
be
themselves.
But in this
array
the politip^l elements
singled out for overlooking, either by private investi¬
the government's experts.
Volume
169
Number 4804
-
THE
COMMERCIAL
&
FINANCIAL
CHRONICLE
fiscal
Stimulating the Securities Markets
1
By FRANCIS ADAMS TRUSLOW*
V
President, New York Curb Exchange
.
,
adequate equity capital financing. Suggests following factors as inhibiting indi/idual's stock buying: (1) lack of knowledge or
money; (2) lack of confidence in a company or business in general; (3) fear of disproportionate tax
impost; and (4) doubt about later resalability. Advocates more Intelligent security-selling efforts, and
tax reforms devised
through joint committee of Congress and representatives of farmers, industry,;
•!
finance, labor, and the Treasury, as s^eps to improve "investment climate."
V:
There
.
and not
are
turn
local problem affecting
a
Plans
First:
to
$55
spend
billion
country
a re<«
these
now projected
-
the
during
fiv
next
try
a
up
substan t i
a
1
-
.
the
to buy
in
ex¬
ume
for
the
owner -
use
-:-r
■
Second:
the
last
'^.-
few
centage of all
new
capital
raised by selling new stock issues
has dropped from over 50% to
less than 20% of the total.
Third:
the
In
last
■
three
years
is
Stimu¬
Be
the
more
same
question
manageable size.
people who want
X stock increases, the vol¬
transactions, and probably
of
price,
the
we can
problem even
questions: •
\
.
-
-
(2)
How
makes
a: man
what it takes to
can
make him buy a stock be supplied
and
what prevents him be re¬
*
moved?
dropped somewhat
tially lower than they
.
Out
experience
can't
the
sell
of
were
stock
new
volume .and
changes
long-
know
we
three
when
levels
-
the stock
on
;
,
four
years of
that
you
issues
falling.
are
-From these
,
price
established stocks
,
and
substan¬
ago;
Fourth:
„
30%
are
Obviously this reduction to size
of
consideration
which there wouldn't be
But for the purpose of
market.
a
this stimu¬
sellers they will find them
for
a
at
price.
of
"What
The
Suggested
biggest single boost
give to the confidence
could
we:
of
potential buyers would be to put
a
responsible committee (repre¬
Makes
Buy
Man
a
a
Unfortunately, the biggest
of
part
this
job
overcoming
is
the
work
of
misinforma¬
current
tion and old prejudices hung over
from
another
generation which
but from
never
saw,
suffer.
us
Stock?" '
manship.
a Bill de¬
Morton A. Cayne
rather than
discourage equity investment and engage in the securities business
would
press
its enactment, wc under the firm name of Cayne &
would move a long way toward Co.
Mr. Cayne, who has recently
stimulating the Securities Markets been Vice-President of Cunning¬
signed
and
the
to
that
fact
going to
out and
business wakes
our
business
is
up
a
knowl¬
con¬
If
to
rate
must
ing.
be
sure
Hall & Co., 70
Pine Street, New
City, dealers in New York
municipal bonds, announce the as¬
York
reduced, the final require¬
of adequate markets to as¬
resale would be supplied as
sociation with them of William P.
the incidental results; but
important still, the securities
New York office of the Trust Co.
sure
of
that
sure
needless
and
We
•
the
bar¬
of
the
H.
ings,
Rollins
a
served
Fishing!I!
&
the
previously with
Co.
Mr.
Hutch¬
graduate of Yale in 1941,
for five years with the
"money
mainly
of his
Goodbody & Co., 115 Broadway,
New
York
in
the
Pacific area, and
senior partner .held the rank of major at the time
Marcus Goodbody,
•
moment
needed
and
Army Air Force as a combat pilot,
Gone
•••
not raised against sales¬
manship.
which
Georgia,
E.
equity capital cannot be obtained.
without
ulation
with
formerly
Hutchings,
of
one
more
and do the work of find¬
persuading
potential buyers.
Hatchings
With Hail & Co.
markets would receive that stim¬
are
At
William
devoted
ment
that
informing,
riers
are
gives adequate
people to meet the;
be
edge and the money.
Second: He must have the will¬
byi
structure
inducement to
expenses
fullest efforts
our
creating widespread knowledge
were
make, and those who
the rules of securities
approve,
our
inquiry
Co., in the past was a prin¬
is
program
tract from its soundness.
who
markets.J We
a
ricades of badly designed taxation
requires
informed
and
ham &
better "investment
a
Such
and the confidence to use it in the
in unless they go.
purchase of stocks, and if the bar¬
come
those
creating
,
not
bring it in.
stant,
Congress
encourage
cipal of Cayne, Robbins & Co. and
neither very bold nor very new,; Cayne & Co.
'
but its lack of novelty doesn't de¬
receive or be persuaded to
this prerequisite of knowledge,
unless
every
partner j and
em¬
ployee in
to
climate."
not
must
;:Vr
First: He must have the
and present to
straight sales¬
Potential buyers will
servicing
ex¬
state¬
the
lating discussion, I think we can
assume that if buyers are looking
.
simple
ment.
Part of this work
seller's side of the market without
over
A Joint Committee
j
"
eliminates
years
|
use
;
buy
stock and what stops him? and,
What
on our own
) "underdeveloped areas."
Part of this job is
actually reduce
further to two
little
(1)
little checking up on our own "in¬
vestment climate" and
widely and accurately capital formation. If this commit¬
spread to supply this first require-' tee were instructed to prepare
will also increase. To many of us
which all of
our question, the
the volume, of transactions in thb
public securities markets has
average stock prices
Knowledge of what
the words of
Perhaps
around
OHIO —Morton
A. Cayne has opened offices in
the Union Commerce Building to
•must; "be:
"market will be stimulated."
In
the per¬
years
Truslow
■r
-
process,
"How Can the
Stock
If the number of
of
ship.
It
•'
•
peeling
X
CLEVELAND,
our
this! sentative of the Treasury, of farm¬
ers.. of industry, of labor and of
stock finance) to work with a joint com¬
market is.« Basie knowledge, which mittee of
Congress*on the sub¬
we seems unparclonably simple to us,! ject ^of~ taxation and its effect on
particular tion.
any
ourselves
in
only cut to
cost
stock
this
ask
can
part
change
in
-
After
and
for foreign consumption
on
ourselves. Let's do a
industrial improvement- and growth in
on
markets
get Market
who lated?"
can
partners
will put
A.
j
:
stock.
e
if Indus-'
years
;
Francis
j
subject is of national moment'
limited number of pocketbooks.
a
telescopes
our
11
Morion A. Cape Forms
Own Investment Firm
expropriate, confiscate
or discriminate against-those who
risk their money.
I suggest that
1 speeches
four simple statements whicb indicate that our
merely
policies will be sound, that
that
its fax policies will be fair,
it will not
we
Mr. Truslow asserts increased stock exchange volume is prerequisite to
(2167)
separation from the service.
City, members of the
with which people could, if they
New York Stock Exchange, and
Reynolds & Co.
.
ingness to exchange. his cash for would, buy stocks seems to be in Thomas A. Larkin, manager of the
(Special to The Financial Chronicle)
«be able to raise the
It
is
scattered
equity capital a share in a company, in the hope ample supply.
WINSTON-SALEM,
N.
C.—
it needs for its
than it trading department of the firm,
programs, unless that the share will increase in somewhat more widely
there is a rise in volume and prices
has been in the past;*,but it is a have left for a two weeks' fishing Sergius Koltz has become asso¬
vaLue or< will pay him income or
on the public stock markets.
requirement which probably rep¬ rlrip in "the Laurentian" Mountains ciated
with
Reynolds
&
Co.,
both.
resents the least of our problems.
I don't believe there can be
Third: He must be assured that
of Quebec.
any
Reynolds Building.
It is not, however, a requirement
doubt that the question:
"How he will have a market in which
ments
draw a fairly safe
Industry isn't going to
can
we
conclusion.
Adds
.
.
•
Can Securities Markets Be Stimu¬
he
lated?". i&
losses, take his profits,, or recover
question of national
a
importance.
Unfortunately, it isn't
the usual $64 question.
No
like
knows the
one
answer.
However,
sell if he wants' to cut "his
can
cash for other purposes..
that
We
we
may
that
we
completely
can
be
must
a
twealth
Man From
in
this
forget.
our
the
reach
who represent the
"What Prevents
in
wrong
belief
people
Notice of Sale of
University of Idaho
great base of
Perhaps
country.
Ejoxids of Regents of
Student Union Building
—
Negotiable Coupon Bonds
Stock?" ^.. .. v ^ ■„
equity capital can only come from:
NOTICE IS HEREBY GIVEN that The Regents of the University of Idaho will sell
knowledge or the minority of the population at" the office of the President, Administration Building, University of Idaho, Moscow,
with
higher i incomes.
Perhaps Idaho, on Tuesday, May 31, 1949, at 2:00'P.M. the negotiable coupon bonds of the
cial Writers' Association has done money.
""
"
'.
■
*
taxes and expenses have rested so said Board in the principal amount of $650,000.00.
us
Second:' Lack of confidence in
all a service in staging this
Said bonds shall constitute an obligation of The Regents of the University of
heavily on this 20% of the popu¬
a company, or in business or. the
hunting party.
'
Idaho, and will be issued pursuant to Chapter 55 of the Extraordinary Session JLaws
lation whose nominal incomes ex¬ of
future in generaL
Idaho, 1935, as amended.
Bonds will be secured by a pledge of revenues received
If we assume that some answer
ceed $5,000 that they are already from a fee of $7.50 per semester to be charged each full time student for this purpose
Third: ,Fearf
must be found because of the im¬
thatrtaxes5wiH take
•and-a-summer session fee of $2.50 per each regular student, beginning with the second
too crippled in their ability to buy
semester of the school year 1949-50.
portance of the question and if we away too much of any increase in
Punas received from the sale of this bond issue
value or earnings which he might ..stocks. Only time and our efforts! will-ce-used-for the construction of an extension to the present Student Union Build¬
assume
that there are
probably
to reach the largest but most scat-; ing, remodeling the present structure, and for equipment including utilities and related
obtain.
"several right answers and count¬
:
Fourth: A dim view of his abil¬ tered sources of money can answer appurtenances.-:
less wrong answers and no one can
Said bonds shall be dated July 1, 1949, with interest payable semi-annually on
..this question.
be sure which are right, how is ity to resell when arid if wants
April 1 aiid October 1 of each year beginning with October 1, 1949.
Principal and
The requirement
of "willing¬ interest shall be payable at the First Trust & Savings Bank, in Moscow, Idaho.
the best way to get at the prob¬ 'to do .so.
Bonds shall mature semi-annually on April 1 and October 1 of each year as hereIf these are the requirements ness to
buy" and the obstacles
lem?
'
"ittaftcr set forth:
v'
.'v.,,;,.
and the obstacles to stock pur¬ which stand in its way—lack of
812,000—October 1, 1950 to and including. April 1, 1954
:
Narrowing the Question
chases. as I think they are, the confidence and confiscatory taxa¬
$15,000— October 1, 1954 to and including April 1, 1961
the
conditions
which
I think the first thing for me to more these requirements are met tion—are
$18,000—October 1, 1961 to and including April 1, 1370
$20,000—Octobfl' 1, 1970
do is to cut the question down to and these obstacles reduced the are, in my judgment, the hardest ;
•
we
must search
answer
,
diligently for the
and the New York Finan¬
Baying
a
Lack
of
First:
.
~
...
■
.
.
.
•
T
-
..
a
size
which
I
understand.
can
we
more
will stimulate the pur^ to
'
One of the troubles with the prob¬
lem is that it seems so big and
of stock and the
chase
Markets in which those
complicated that trying to think will be made.\
about it all at
once
just results in
fuzzy thoughts and generalities. ;
;
,;,Our
problem
certainly be
reduced to something much more
simple than the question, of how
can
,
to
stimulate the "Securities Mar¬
kets."
Let's forget all about the
stock exchanges that are
many
lumped in that phrase and con«sider only one exchange—prefer¬
ably
of course,: the
let's
recognize,
that
Curb.
Then
1jhe
Curb,
hundred
in
the
separate
markets
.
question will be found in
seeking ways to generate these
requirements and diminish these
obstacles at the grass roots level
of the individual who could be¬
be dealt in on its floor.
us
reduce the problem
'down to the level of amy one of
,.*A talk by Mr.' Trtislow before
forum-dinner of the New York Fi'
•
?
^
extraordinarily
-
-
-
easy
to
ings.
It
the
statements i
securities
-
confidence is to be restored it
is
'
essential
that
voicing
policies be avoided.
5!
and
dated from. July
any
irresponsible
half-baked
1,
shall be
Bonds
on
be submitted providing for a twenty-five year amortized
(providing for approximately equal payments of combined
a thirty year amortized schedule of maturities; both
and/or
'
1949.
Prior
to
October
date,
October!, 1952—not callable
1352 to and including April
1955 to and including April
1955—callable
at
1, 1958—callable
and thereafter—callable at 100
at
1,
October S,
October 2,
.
»
.
V
V
to maturity on 30 days' notice, in whole or in part,
in inverse order of maturity and number as follows;
callable prior
interest payment
is
If
may
principal)
;j
to de¬
proposals
maturities
stroy confidence—the kind of con¬
fidence it takes to risk your sav¬
that can only be supplied by the
combined efforts of the-people in
where to obtain reliable informa¬
can
let
stimulation
greatest
can
extraordinarily diffi¬
cult to built it up again. If men
in " positions
of
responsibility
come a buyer.
make irresponsible promises as to
what government can
and will
Let's look at these requirements
and obstacles and what might be spend and give away to special
done about them: r(
groups in the population it will
~
"
take a lot of action and not merely
Investor Knowledge
other statements by other men in
?
"Knowledge" is a requirement high office to restore confidence.
12,1949.
Then
we
schedule" of"
interest
•
the securities markets.
I believe that our answer to the :; It is
big
nanciat Writers' Association, May
which
I
■,
Alternate
But here
remove.
within which
area
purchases give the
business, govern¬
ment officials,: corporate officials
educators, and perhaps most of
all by financial writers. Knowl¬
edge of how corporations are put
together and how they operate.
Knowledge of what a stock is,
how it can be • bought and sold,
hundred securities
many
supply and
is the
„
i
which is only one of many securi¬
ties markets, is also divisible into
many
;;
Securities
...
1958
1,
102
101
.Provided however, that in case alternate proposals are made for a twenty-five year
or
thirty year schedule trf maturities, ihe last 8100,000 of maturities shall be callable
at par on and after October t, 1952.
On the 31st day of
»—
tion
Building,
consider
all
Moscow,
bids
for
(PST) at the University Administra¬
of Regents will meet to receive, open and
sell the same to the best and highest
1949, at 2:00 P.M.
May,
Idaho,
made
the
said
Board
bonds,
and
bonds will not be sold at an interest rate in excess of four
bidder; provided however,
per annum.
The Regents reserve the right to reject any or all bids, to
waive formalities, !to determine in their sole discretion the most favorable bid received
.and to sell said bonds at private sale if deemed to the best interest of the University.
percentum
i
or
*
All bids spall be
sealed/ and1 shall specify the lowest rate of interest, and premium
discount at which the bidder will
Each bid
is
purchase said bonds.
cashier's check amount¬
of Idaho. Such certified
provided however,
that such amount is to be forfeited by the successful bidder in event of failure to make
ing to 5'/o
or
required to be accompanied by
of bid, payable
cashier's
check' shall
a
certified
or
to The Regents of the University
be
returned" to
all
unsuccessful
bidders;
payment for such bonds upon date of delivery.
We
a lot of time, in and
government, these days try¬
ing to find out how to improve
spend
out of
th&
"investment climate"
derdeveloped
countries.
in
un¬
We
say
the .foreign government must give
assurances
to
our
capital that its
Approving legal opinion of Messrs. Chapman and Cutler, Bond Attorneys of Chicago,
Illinois, will be furnished the successful bidder.
Bid shall be mailed so as to reach the undersigned or be delivered to the under¬
signed at the address slated below prior to- 2:60 P. M., May 31, 1949.
!
!
-
•
-
...
By order of The Regents of the University of Idaho
KENNETH A. DICK, Bursar
Administration
„
.
._
Building
University of Idaho, Moscow, Idaho
12
(2168)
THE
COMMERCIAL
Connecticut Brevities
The
annual
net sales for
Spring-
Corporation
was
1948
■/■•,■■/■
_1, 1
1
FINANCIAL
By
.—
Associate General
without
1958, for a total of $1,284,031.
plant which was in full op¬ The suit alleges that the company
by the year end will im¬ has failed to pay certain excise
prove the efficiency. Two of the taxes,
certain
creditors
"punc¬
older Bristol plants are being va¬ tually^ and failed to provide for
cated and will be sold.
its sinking fund obligations which
:
•'
•
■
«
ft
due April
were
-!
ft
has
Company
15, 194&. New York
.
purchased Henry & Wright Manu¬
to the suit, a protective committee
facturing Company, producer of
had been formed to represent the
high-speed automatic machinery
bondholders.
for forming and stamping parts,
ft
with other types of auto¬
machinery.
The purchase
price of '$1.2 million included
$500,000 cash obtained on a bank
loan.
Mr.- Wollhiar, President of
Hartford-Empire, states that the
ft
along
purchase
the
broaden
to
Frank
of
retiring for
Mr.
the
field
ft
a* recommendation of
directors
ft
to
«
increase
capitalization
to enter
consolidation.
a
The
the
the
author¬
tion
The additional capital will be used
to enable the company to increase
used
its production
wants
present
and
schedule above the
additional
'
,
*
*
spare
** *
parts.
~
ft
on
April 18, 1949, provides for
the separation of the gas and elec¬
tric properties and the stock of
the New York,
New Haven &
Hartford
Railroad
Co.
from
the
transportation business by trans¬
ferring them to a new corporation.
The plan also provides for reduc¬
tion
in
the
ferred and
ent
$100
par
value of the pre¬
common
from the pres¬
share to $50 and $5,
respectively.
Stock of the new
corporation is expected to be of¬
fered
short-term
ft
ft
be
first
ft
Hartford Gas Company has been
authorized by the
State Public
its
Commission
rates
which
by
to
6%.
The
into
went
effect
1949, is expected to add
increase
advance,
May 1,
approx¬
ft
ft
Of the 49,850 shares of
4.30%
preferred stock offered by Scovill
common
New
York
and
Boston
(Special
Stock
to
SAN
Exchanges
The
Financial
FRANCISCO,
CALIF.—
M. Dickson has become
affiliated with Hannaford & Tal¬
Exchange
bot,
Primary Markets in
519
California
Dickson
Hartford and
was
liam
Staats
R,
Street.
formerly with
Co.
and
Mr.
Wil¬
Walston,
Hoffman & Goodwin.
Connecticut Securities
/With Waldron & Co.
ii
(Special
New
York:
SAN
BArclay 7-3542
Bell
to-The
added
Financial
FRANCISCO,
William H.
System Teletype: HF 365
with
respect to
ties."
The
"truth
next
year
in
flotations.
staff
CALIF.—
of
Waldron
&
'/■ V "'
'
The year
enactment
the
of
new
1935 brought
Public
Company
Utility
with its
Act
"death sentence"
which experience has shown
rather
new lease on
a
was
life for pri¬
vate
power under public control.
In the next few years there were
amendments to
1938 and
tective
the
1934
Act.
In
1939, following the Pro¬
Study which
Committee
by
William O. Douglas,
first Chapter X of the
got
court
and
Commission,
and then the Trust Indenture Act.
passed
Act
the
Investment
INDUSTRIALS
Write for specific recommendations
of issues with
records
unbroken
of
dividend
payments.
MEMBERS
NEW
YORK
STOCK
&
not
may
these statutes
amiss
be
to
point
are
adpinistered by
independent bipartisan agency,
and indeed that in large measure
they were prompted and are sup¬
ported by both sides of the legis¬
aisle.
The
investigation of
Banking and Currency
which
a
1934 Acts had its genesis
Senate resolution adopted in
1932—although
of
a
harder
a
EXCHANGE
New Haven 6-0171
New
London
2-4301
New
7^2^68-.
York
Canal
NH
6-3662
194
the
a
subsequent
reso¬
Congress did
fresh set of teeth with
bite.
new
The
monumental
mission which produced the Pub¬
lic
Utility Holding Company Act
*An address by Mr. Loss before
Waterbury 3-3166
Danbury 5600
in
But
late
1941
Pearl
important
more
nothing
a bit technical,
explain how this
I
shall
try
about
came
why it is vital that the job
begun 16 years ago should now
finished.
If in the telling of
this story a moral is drawn about
the application of orthodox laissezfaire principles in this field, you
be
consider
may
it
not
altogether
accidental.
In 1933 Congress
subjected most
offerings of securities to the
light of full disclosure. Under that
Act alone, of course, a company
new
continue
to operate in the
long as it manages to
avoid going to the public market
place for its financing.
In 1934
can
dark
so
similar
disclosure
requirements
problems
that
of
came
and
Harbor
pro¬
are
three
interrupted by the war,
program
except that it is our present plan
to bite off a little piece at a time
rather than
to
attempt wholesale
review of the 1933 and 1934 Acts.
most
immediate
this regard
in
concern
is to find
statutory
a
The 1934 Act, in
making registration a
of
Exchange
listing,
condition
provided also for annual and other
reports to keep the information
up to date; and in a 1936 amend¬
ment
similar
reporting require¬
applicable to
registrants of substantial
size
made
were
future
Separate Proposals
legislative proposals in which we
are
vitally interested. One is es¬
sentially a continuation of the
Our
Exchange.
an
addition to
ments
Three
offering securities under the
Securities Act of
of
whether
list
on
1934
two other
1933
introduced
also
Act
provisions.
holders of listed
sential
regardless
not
they chose to
Exchange.
or
an
The
One assures
securities of
information
es¬
their
when
proxies are solicited.
The other
is designed to protect security¬
holders
against trading abuses by
insiders — that is, of¬
directors,
and
principal
formula which will make for the
corporate
highest degree of real disclosure
investors in the offering of se¬
ficers,
to
curities without at the
hamstringing
dealers
filing
same
underwriters
time
and
during the period between
and
the New York Young Republican
'•Club;* New
1949..
Securities
effectiveness
of
the
stockholders.
Such
insiders
must
promptly report any trading in
which they engage; they are for¬
bidden to sell short;
and their
short-term trading profits, result¬
Act
registration state¬
The problems presented by
ment.
making progress.
Our
years
second
set
of
ticular
proposals
York* City, April 28,
In
the Investment Advisers
since
we
sent to Congress
a
case.
the
Public
Utility
Company Act of
applied much the
1935
same
Holding
Congress
reporting,
insider-trading provi¬
registered holding com¬
and
two major cases of em¬
bezzlement of clients' securities
proxy
and funds
panies and their subsidiaries. And
in the Investment Company Act
report
on
together
by investment advisers,
with
recommendations
sions
to
1940
for amending the Investment Ad¬
of
visers
spect
Act
in
order
to
subject
registered
advisers to the same
inspection powers i|Ow applicable
to registered brokers and dealers.
resulted in the
1933 and
provide
Co.
Foreign Com¬
Act of 1940. It has now been four
study of the Federal Trade Com¬
Chas. W. Scranton
1942.
concerns
lution
long
hearings before
as
and
At the moment there
Company
an
in
—
a view to
of agreement
gram.
the Investment Advisers
and
Committee
UTILITIES
ting
ing from going in and out of the
market within a
period of six
that dual aim are formidable and months, are automatically recov¬
Finally, in 1940, as a result of we are not
erable by the corporation without
yet certain that we
the Commission's Investment Trust
the necessity of proving any abuse
see their
solution, but we believe
of inside information in the par¬
Study,
a
unanimous
Congress we are
between
the Senate
Connecticut Securities
1934
Committee of the House of
raised
and
legis¬
distinct from
as
far
Interstate
early
securi¬
came
areas
Representatives
so-called
of
Fowler, Jr. has been
to the
explore
and
industry with
gram got as
lation with respect to the securi¬
ties markets
lative
SPECIALIZING IN
,
enact
out, particularly to' this audience
"the
loyal opposition," that
Chronicle)
Co., Russ Building.
PUBLIC
to
Act.
7-3191
impor¬
provision of both Acts was were extended to all companies
carefully reviewed and the pro¬ desiring to list their securities on
necessary
It
Hartford
but
every
world had found
Bankruptcy Act, with its inter¬
esting experiment in cooperation
Chronicle)
In 1941 the
1933
of
are
disagreement and presenting
comprehensive amendment pro¬
gram to the Congress.
Virtually
merce
we
Russell
Associate Members New York Curb
Acts
into
went
that they
say
and
the
mission
Russell M. Dickson Joins
Hannaford & Talbot
which
perfect.
means
basic
the financial
had been conducted for the Com¬
convertible1 debentures, due April
Tifft Brothers
skill
securities
legislative
single year
forholdingcompanies—a provision
ft
stockholders, 42,739 shares, equal
Norwalk Tire & Rubber Co. is
to
85.7%, were subscribed. The
being sued by New York Trust remaining shares were
purchased
Co., trustee [for the company's 4% by the underwriting group.
Members
major
taken every
was
Holding
ft
over¬
And it does not
with representative groups of the
turning
no
one
much publicized
Manufacturing Co. to its
\
ft
Some
stay.
annual revenues.
*
is
15
per¬
a
imately $279,000 to the company's
per
to preferred stockholders.
there
"blue-sky legislation" of one kind
or
another, the Federal Govern¬
ment
got > around to legislating
expansion.
Utilities
by no
the
it
Connecticut
Proceeds would be used to
pay off
$400,000 in notes and finance plant
or
the
Commission undertook to
things,
in
bonds,
privately to
savings banks.
*
of
during that period.
In
1933, after 47 States and most for¬
eign countries of any importance
mortgage
❖
drafting to
working out
to
be sold
eight
and
adopted by successive Congresses
in the years 1933 to 1940 are here
❖
10
to
fromj the tremendous ef¬
fort
their
back—that the half dozen statutes
bank
but
would
lookholes.
or
proposition
scheme
our
that
agreed
experience
us.
government agency should be.
But it seems to be
pretty generally
action
which
that
no
The Connecticut Public Utilities
Commission has authorized New
200,000
■
The reorganization plan of Con¬
necticut / Railway
&
Lighting,
which was approved by stockhold¬
ers
would
laps
Loss
detract
debate
In
financial
our
after
found
were
of
of
fectly coordinated, without
Louis
but not with
critics.
facets
many
years
The SEC itself is not without its
has
Haven Gas Light Co. to issue
$1,-
machinery
materials and to build up
raw
Proceeds
reduce
of five helicopters, to
runs
inventory of
an
to
to
he may,
loans.
stockholders.
we
d
dogma.
If
any 'one
still
mon and 90,000
shares of class B fil<ed a registration statement with
voting stock to 810,000 shares of the SEC for 36,000 shares of $20
class A and
100,000 of class B. par common stock to be offered to
fortuitous
a
tant residuum. At the risk of get¬
life
take
Co.
remains
to
as
ft
unregistered
and
much
regarding
possible
mergers, but that nothing definite
had developed.
of
having at least $3,-
000,000 of assets and 300 security¬
These
safeguards have
been applied to various categories
of companies step by step. There
so
companies
Hydraulic
so
securities
holders.
many different steps and covering
That
Bridgeport
present-day
our
series of statutes adopted in
a
economic sys¬
management
1
make
to
corporations
tem remain
or
an
ft
Taft
and
our
healthy.
ft
And, to go
the Federal
statutes look mild by comparison.
It would be truly remarkable if
regula¬
free
from
tape.
even
further,
incorporation proposals advocated
by Presidents Theodore Roosevelt
by the
is that
will
ticker
back
through
of
adopted in 1928, the
of the twin chickens and the
elastic
-
meeting that
it had been approached
by other
210,000
shares of class A non-voting com¬
purchase
t
a
proper meas¬
ure
com¬
merger
—
only
char¬
t
s
adminis¬
tered
a
permit the
into
Act
SEC
Stockholders of Colt's Manufac¬
pany
istration, reporting, proxy and
insider-trading provisions of that
year
utes
ft
a
of 1935 dates from another Senate
resolution
several
ex¬
stated at the annual
*
Stockholders of Kaman Aircraft
ized
in
and
—
osophy of the
par
ter amendment to
elected
personnel
Corporation met Saturday, May 14
on
belief
2,400,000
stock
been
other
ft
issue
par
turing Co. have approved
planned.
are
to
$25
of health and
has
No
of
personal
the basic phil-*
change for 600,000 shares of $100
stock. The four-for-one split
became effective May 9.
of
and
Henry & Wright, is
Wollmar
to act
Commission
Simmons,
K.
reasons
President.
changes
facilities
further
operations.
President
Tele¬
supplement
was made to
manufacturing
those
<
England
phone Co. has been authorized by
the
Connecticut Public Utilities
shares
general text which was suggested to me when I was invited to talk to you today
enterprise" versus a "controlled economy." If the caffein can be taken out of
phrases, I suppose the short answer is that we at the Commission favor both. My
"free
ft
New
f
The
was
firm
Southern
v.
.
Trust asks that the debentures be
declared due and payable.
Prior
matic
LOUIS LOSS*
Counsel, Securities and Exchange Commission
;"-V
.
Hartford-Empire
Thursday, May 19, 1949
Asserting SEC statutes are here to stay, but require amendments "a little
piece at a time," SEC!*
legal counsel reviews proposals for: (1) changing disclosure to investors in securities
offerings
without hamstringing underwriters and
dealers^^2) strengthening the Investment Advisors Act; and
(3) extending controls to safeguard investors in unregistered and unlisted securities. Says absence of
applying SEC controls over unlisted securities creates-disparities, and urges universal application of
prox^rufes, restrictions on ^"inside trading" and requirements of adequate corporate financial data. :
new
eration
CHRONICLE
Legislative Program of Securities
And Exchange Commission
total
was
moved from the Bristol plants—
loss of prouac'cion.
The 15,
was
lists
at $30,459,543, the highest in any peacetime
year.i
equal to $3.41 per share. During the year construc¬
completed on the new plant at Forestville and machinery
Net income
tion
of Associated
report
&
a
ted
third proposal—first submit¬
by the
gress in
Commission to Con¬
1946 in
a
report entitled
suit with
re¬
registered
investment
companies, thus bringing still an¬
other category of companies under
the umbrella.
The
What I want to talk about today
is
it followed
to
is
that,
if
public
a
today,
happen
you
stockholder
or
*
situation
of
a
therefore,
to be at
listed
company
utility holding com¬
subsidiary of such a
"Proposal to
pany
in
or an investment com¬
you have access to current
financial statements and other in¬
Safeguard Investors
Unregistered Securities." That
proposal is intended to eliminate
a
double standard of investor pro¬
which has resulted, more
tection
by accident than by design, from
the piecemeal adoption of the sev¬
eral
statutes
now
on
the
books.
or
a
company
pany,
formation about the company, you
are
and
assured of certain information
rights
solicited,
Our proposal,
against the
amend
formation
the
in a nutshell, is to
Securities Exchange
Act of 1934 by
extending the reg¬
when
use
your
proxy
is
protected
of corporate in¬
and * you
are
bf' insiders o for ii their
(Continued
on page
41)
Volume
169
THE
Number 4804
FINANCIAL
COMMERCIAL &
CHRONICLE
(2169)
penditures of the future will range
Boosting Federal Expenditures
Now and Later
proposal, this program may
ultimately cost the Federal Gov¬
ernment
$20
billion. v- Actually
there were some 40 expenditure
items in the President s original
U. S. Senator from Virginia
on
the
recommendations which
required new substantive legisla¬
tion.. If approved, these items in
budget1
increasing Federal expendi-
ever
budget commits govstupendous future outlays, from which it cannot renege.
/Says all social programs, as well as Federal 'Subsidies and public
works undertakings, mean unavoidable heavier future government
costs. Warns, if business suffers slump, Federal deficits will result,
since nation cannot bear higher taxes. Urges unifying all Congres¬
sional appropriations in one bill.
tures, contends trend will continue, because
•
ernment to
-
1950
,
.
ers, or
.
It
tremendous in
terms of taxes
it
siphons
from
our
pocketbooks
through
the
revenue
side,
is
it
and
tre¬
in
mendous
terms of
mon¬
it
ey
out
pours
through
gigantic
bu¬
reaucracy
o n
the
side.
Harry F. Byrd
spending
It
of
"fmS°L13? tho1sai?d1 s1u.are,inc,hes.
of
printed
material.
And,
fre¬
quently, the more significant lan¬
is in extremely fine type.
guage
To
•
analyze the budget is
borious task.
I know
a
la¬
of
some
our
sessions in this meeting have been
devoted to discussion of well-in¬
formed
U.
S.
conclusions
Chamber
based
analysis.
the
on
analysis.
I
with my own
But there is
one phase
budget of steadily
importance to which I
the Federal
of
growing
should
like
tion, and
invite
to
thought and
It is this: Analysis of
judgment.
all recent Federal
that
every
Federal
tied
year
expenditures
MENTS
which
on
Treasury
may
fall
grams
COMMIT¬
responsible
no
renege—no
can
the
what
more
being
are
LONG-TERM
to
government
ter
and
condition
be. v All social
into
this
mat¬
of
long-term
commitment
category if they are
sincerely conceived. The same is
veterans'
true of
Interest on the debt which
will run to nearly $51/2 billion.
(1)
has
gram
subsidy
developed
into
a
hospitalization (ex-
elusive of construction) which will
approximately $5 billion.
to
run
(3) Federal contributions to re¬
tirement funds, including expen¬
ditures for railroad retirement—
of
exclusive
but
social
and
ment
recommendation
the
to
by
authorize
participation in con¬
struction of the proposed St. Law¬
rence Seaway.
This is in the 1950
budget for a mere $8 million, but
the* ultimate
cost
is estimated at
more
alone—
than
a
half-
dollars.
type «of
commit¬
which there is
from
turn is illustrated
no
re¬
by the pending
proposal for Federal aid to ele¬
mentary and secondary education.
military retire¬
security pay¬
item
diture
in
is
the
1950
expen¬
budget for $290 million to
(or subsidize) teachers'
In the opinion of many this
may be a very meritorious pro¬
posal.
But will it stop here; or
is it just the beginning for Federal
pay.
aid to other
tional
phases of the educa¬
system
in years to
come?
And in this connection there is in
has
ment
of
Federal
commitment
the
as
budget
is illustrated
type
outside
the
ise
run
to
costs
—or
1950
"survey
budget
of
million
educational
needs, and study
and
$1
for
ligations.
cost.
The first
of scholarships
is
in
the
nature
of
(4) Direct Federal
The
verse
base
my
the
excluding
but
which
ects,
will
to
run
nearly
$21/2 billion.
place
These five items
costs
than one year. We even tie
foreign relief and aid to five-year
programs. Every time we indulge
in
deficit
spending we assume
long-term debt financing.
Reducing public expenditures is
difficult.
But
reducing
involved. It is too much
expect that appropriations will
withheld from programs, proj¬
to
be
alliance
and
ized
in
be
addition
than just
Some of these promises
difficult.
more
to
pay—such as public works con¬
struction and production of mili¬
tary
the
equipment—are
form
of
such
as
ans'
payments—are
grants-in-aid
V'
gations.
actually, in
Others—
contracts.
and veter¬
moral obli¬
y.';
'•
from year
The
extent
promises to
of
pay
these
may
long-term
be
seen
by
„up <sf
to year, such as:
Agriculture subsidies
(2) Business subsidies
(3) Merchant Marine subsidies
(4) Losses by Federal Corporations
.
(5) Postal
®0r
*
L
e°W'6s
etlOrb
* fWoCerf
Cs
0r'
to
4 Br,.. .
°W Si
will
.
******
******
******
*******
adopted, and that the pres¬
ent agriculture
subsidy formula
will be continued, the cost of these
not be
only
Payroll costs; (2) adminis¬
foreign economic
(4) foreign military aid
(1)
aid costs;
costs; (5) our own military estab¬
lishment costs, and exclusive of
(6) payments from
trust funds, we are
annual Federal ex¬
penditures running to $18
or
billion
will
§
$|
bring
you
the financial laughs of tliej
Win
new
friends and please old
year.
tomers
Illustration of Housing Program
Housing Program recently
The
cus->
adopted by the Senate is a good
example by which to demonstrate
how these long-term
build
sage
1950
commitments
from a relatively minor
in the budget for the first
copies of the Bawl Street Journal (at $1
apiece)
now to ensure
delivery
June 3.
on
up
Send checks to
In his January budget mes¬
the President estimated that
expenditures for the new
housing
rent
by sending them copies, too. Order;
legislation
he
total, slightly
Manager, c/o Lehman Brothers,
proposed
more
than
Yet, under the lowsubsidy feature alone, the
Government
lation
Myron F. Ra teliffe, Circu¬
will
l^William Street, NewJJTork, N. Y^
!*, »'i 1.
•I; T?
enter
•
Over
more.
Federal
b;>-
Br
"•'Cr-t
trative costs; (3)
Annual
f#
' 8'9
domestic ci¬
vilian commitments in fiscal year
1950 may be estimated at consid¬
erably more than $1V2 billion.
Thus, exclusive of:
$200 million.
States,
Washington, D. C., May 4, 1949.
H
„
additional long-term
would
of Commerce of the United
"""'ejorf -"on
,
deficits, etc.
Assuming the Brannan plan
*An address.by Senator Byrd at
a
luncheon
session
of the 37th
Meeting of the Chamber
enlist
42)
these
(1)
year.
1
to
on page
DON'T MISS the"BAWL STREET JOURNAL".
domestic
there are
fluctuate
widely
to
which
others
item
Major Categories of 1350 Budget
is
reason
(Continued
commitments,
civilian
mitments—to
pay—is something
third
The
commitment to rearm North At¬
rejected.
In
public expenditures when they in¬
govern¬
leg¬
islation.
than
more
volve the
integrity of the
policies already author¬
previous substantive
$2y2' billion.
total
Social Security
obligated—by
long-term domestic civilian com¬
ment—in the form of promises to
Federal expen¬
inception of the
cut
ditures is at the
program
costs virtually
impossible of reduction at any
point except the remote possibility
that Federalized education might
more
always
on
contention that
$16 billion in fixed
manent commitment.
operation
cite
Grants-in-aid and shared
programs, including Fed¬
(5)
eralized education,
per¬
are
permanent.
Once
a
State
grant-in-aid program is inaugu¬
rated, it cannot be disturbed with¬
out
upsetting 48 State budgets.
Most major defense projects re¬
quire expenditure commitment for
to
to
evidence
revenue
works
and
I
is
reason
and
which
1
maintenance
second
chapter
public works,
veterans' construction,
Federal aid proj¬
including
pro¬
Huge public
projects require capital out¬
lay expenditures over a period of
years and, in addition, increased
is to show why
reason
virtually impossible to reduce
Federal expenditures substantially
insofar as they implement
vast
programs,
projects and policies
already authorized.
indefinite
an
attention to
reasons:
it is
,
The proposed military
building
fellowships." This direct Fed-
.
*
I have invited your
them for four
and service—for whatever it
may
producer-
would be—committed to huge
ects
the
Government
a
continuing
expenditures
under
long-term contracts or moral ob¬
medical
adequate
care
underwrite
which the Federal Government is
an
payroll
as
provide
own
utopia. The
author of the piah admits the cost
of the plan cannot be estimated.
These
are- only
examples of
scores
of Federal
programs4 by
high as $10 billion
a
year.
It is disposed of in the
1950 budget with the recommen¬
dation for a levy totaling $260
million in payroll taxes to finance
the
program
through the trust
fund technique outside the reg¬
ular
budget.
But it
must be
understood that once employees
(and employers)
contribute
through payroll taxes to this pro¬
gram, the Federal Government is
committed to make good its prom¬
gram
our
distributor-consumer
general
fund
on
this pro¬
Estimates
for
Federal
the
would
taxes which would go into a trust
fund and be financed to some ex¬
tent
material
and
which
by the
supposed to be paid from
additional Federal levy in
this
involves
program
The most horrible example of
long-term commitments would be
the
adoption
of
the
so-called
Brannan
Agriculture
Plan
by
proposed socialized medicine pro¬
gram.
In this case the program
are
dollars
even
military services.
which
is compulsory and part of the
But
giving
military stock, neavy
transportation costs, and highly
expensive replacement of equip¬
levy.
In - the
pending
this type of long-term
commitment
billion
a
away reserve
operates outside the general fund
budget—but it costs money just
the same and it requires another
Federal
an
would appear to oe low inasmuch
Program
another
still
is
over
no
been* fixed.
State Depart¬
estimaie of
trie
maue
something
ment
Medicine
has
for the first year.
buy.
there
But
budget.
another
Still
ment
United
the
construction
States—for
billion
to
we
Socialized
nations for which
dale
Under pressure
which
services
Pact
expiration
ments, $1 billion.
programs.
agriculture
Veterans' pensions, adjust¬
(2)
ment aids and
•
Our
illustrated
augment
the
pro¬
is
type
United States
long-term domestic civilian com¬
mitments. These include:
budgets reveals
more
Another
This
atten¬
your
best
your
'
lantic
the
1
examples of tiny acorns
big spending oaks
grow which I have cited to this
point all affect the general fund
budget, the cost of which is met
largely by straight Federal taxes
on personal and corporate income,
and by excise taxes on things and
com-
multi-billion-
The
First there are payments to be
made on what I choose to
call
staff
shall not burden you
morally bound to make next
year.
covers
thousands
a
authorization.
run-down of the major
categories in the pending budget
for fiscal year 1950 beginning in
July; and bear in mind the figures
I shall give you first do not in¬
clude payroll and administrative
costs. They are merely payments
which the government is legally
and
long-term
/
These
from
$2 billion.
Housing Program was an
example of one. type long-term
quick
a
of
was
dollar program.
•
businessmen, union members, farmis
terms
mitmefits; 'it
GI stu-^
dents.
in
about
cost
would
But
'JThe Federal budget of the United States is a tremendous thing.
It is tremendous in its effect on the course of world events. It is tre¬
mendous in its effect on the freedom of thought and action of individ¬
uals at home—whether they are
pandora box.-
trie
By HON. HARRY F. BYRD*
Senator Byrd, commenting
eral aid to education will open
nearly a half-billion dollars
a year,/ Depending how sound the
loans are under other features of
up to
13
into 40-year contracts
with local¬
ities under which the Federal
ex-
J-,,.?
-.".si.'JtiMShr's
.
.
14
(2170)
THE
COMMERCIAL
LETTER
Michigan Brevities
Exchange reports that trading volume in April
224,229 shares, having a dollar volume of $3,096,965. This com¬
pares with March trading of 272,914 shares with a dollar value of
$3,376,662, and with 213,597 shares, having a dollar value of $2,805,213,
which changed hands in February.^
—
1
The 10 most active traders during sary to defer payment on the cou¬
April were: Detroit Edison Co., pon due June 1, 1949.
McClanahan
Oil
Co.,
Goebel
Brewing Co., Gerity - Michigan
First of Michigan Corp. and
and General Motors
The
of approximately 200
a
un¬
dends
Trading in Rudy Manufacturing
change
commenced
May
11,
Co.
at
which time registration of 201,041
shares of its common stock be-
effective.
c a m e
The
5%
stock
mon
fluctuations
vide
from
stocks made
strong current demand for
commodities and the fact that, a
decline
—————1
allowances
a
to
on
Smith
used
to
products
include
metal
and
chains.
on
and
derwriters who
They
year
exclusive
an
t.ures
First
license
of
dividend
15
to
a
of 40 cents per share on
stock,
common
holders
of
payable
record
July
July
1.
Previously,
distributions
of
25
cents per share were made each
quarter, and, in addition, a 2% %
stock dividend was paid on Dec.
15, last year.
The unaudited
for
ed
Feb.
dend
28,
consolidated
1949,
after
was
providing
the
of
share
on
the
after
high
to
$750,000
received from
were
associated
during
company
&
22
Co.,
an
De¬
publicly
31, 1949 amounted to
$55,204,
was
5 cents per
or
share, against $648,344,
cents per share for the quar¬
67
or
March 31,
ter ended
II.
Schneider
mazoo,
included
was
in
investment
bankers
group
of
April 21 publicly offered
70,000
Inc.
shares
$4
second
cumulative
of¬
dharter
$102.75
Chem¬
ical Co., Detroit, was amended on
March 1 to increase its authorized
common
stock, par $1/ from 1,250,000 shares to 1,450,000 shares;
reduce
authorized
the
prefer¬
$1, from
250,000 shares to 200.000 shares;
and change the conversion rate of
stock,
common
par
Inc.
class B preference common stock,
stock
(par $1) at
share, the net proceeds
common
of which will
be
used
for
addi¬
par
$2, to two
Plywood's
price,
and
for
other
corporate
pur¬
convertible
*
*
*
to
price,
W
the:3%-41/k%
of
Wolverine
bonds
Power
change
but
not
from
the
redemption
liquidation
the
$2.25
$2.40
to
due
Corp.,
Bay
stock
time. The
directors, however, found it
sale
class
1979
any
of
B
$1)
registered
with
of
common
the
SEC
there will be out¬
B
common
175,000
stock
shares
of
preference 'stock
(par
6%
(par
$2).
It is expected that Carr &
Co.,
Common Stock
Detroit,
together
;
w
i t h
Straus & Blosser of Chicago and
Lester & Co. of Los Angeles will
publicly offer the
B
PRECISION CASTING
and
class
L. A. DARLING
and
shares
standing 882,063 shares of com¬
mon
stock,
192,937
shares ; of
neces-
DISPLAY FIXTURES
131,841
preference
March 30,
preference
;
per
777v
posed
on
City, will be paid at
com¬
After giving effect to the pro¬
The Dec. 1, 1948 interest
coupon
on
one
share for each class B share,
mon
share.
poses.
shares for
common
each class B share from
and
; business
cumulative
6%
tional working capital to finance
inventories
and
operations of
expanded
factors
1946.
were
to
for expansion,
pay
.
the
' /
Member
Detroit
Stock
DETROIT 26, MICII.
Bay City
—-
Lansing
—
(Special
Exchange
1051 Penobscot Building
ST.
to The
etc.
Chronicle).
PETERSBURG,
„
FLA.—
Joseph R. Healy has been added
to
the staff of
Muskegon
Heagerty & Co.
Financial
Go.,
Florida
W, H. Heagerty &
Theatre
in
money
•
popular.
7
(4) The law of supply and de¬
were
<
The
(5)
Dollar
unit
(6)
volume
contrasted
sales.
The cost of doing business
degree with which any
the
decline in volume affected the net
profits.
(7) The
j
purchasing
power
of
tion
from
and
when,
Building.
terminated
sible
matter.
*
a
41
of
which
up to
do in
as
.
pos¬
reduction
is
in
another
the immediate fu¬
the
present painful
readjustment is the re¬
the
inflationary orgy in
we indulged from V-J
Day
the end of 1948, so the sit¬
uation in
1951
and
-
depend largely
therafter will
how
on
handle
we
economic and political affairs
our
in the period immediately ahead.
'
We must learn that
taxation
our
system
should be coordinated to
business activity and should take
into account the need for
a
new
cap¬
ital,
formation, since capital ex¬
penditures by business is one of
the important factors in the eco¬
nomic picture.
the
SCHLESINGER.
of
sidering
York
We must learn that
government
billions
East
4?nd Street,
17, N. Y.
May 16, 1949.
the
will happen then
large extent depend on
Just
sult
While it is true
common
stocks,
slump, never ap¬
proach their former prices.
In
fact,, under
certain
conditions,
many weaker common stocks fade
completely out of the picture.
in
once
increase,
all hope, an im¬
international
we
in
What
we
ture.
move
low-grade
when
to
process of
together in the
general direction, many of
same
as
competi¬
expenditures
will
what
than the speculative variety.
However, it should be pointed out,
that-some-students of the subject
differ, with these conclusions. Tney
unison.
de¬
may
and
substantial
a
military
years
in
outlook.
political situation will make
common
stocks, if purchased at
the right prices, give a much bet¬
ter account of themselves over the
they
is
will
Europe
provement
~
New
The making of appropriate
corporations
demand
The-study, which has now been
completed, reveals that seasoned
much
failures
of
materially, when the ERP
7-777VVv
(17) The filling of the pipelines.
that
a
be
short-range
a
by
•
EDWIN' J.
dollar.
is
be
world-wide
should
number
will
The scarcity of merchan¬
7
(16)
dise.'
the
mand.
This
tures
(15) The influence of Russia.
"
-
where
or
hand
cannot
dollars
from
come
out
without
con¬
money
will
the
how taxes may af¬
fect business conditions and in¬
.
dividual initiative. We must learn
how
The Business Outlook
And Bank Investments
that
prices will soon be
in a period of declining
higher, so
prices people
hold
back
because
they anticipate lower prices and
better quality.
Moreover, in a
tight labor market where the em¬
ployee knows he
a job, there is
freely.
Once
readily find
tendency to spend
a
degree
of unemployment- sets in,
however,
even those still on the
job become
careful
more
habits
also
in
because
of
find
may
their
the
spending
fear they
themselves
out
of
work.
operations clearly reflect
the readjustment in business and
employment. The volume of
mercial
a
high level and
will be satisfactory.
conclusion
and
agricultural loans of
of
1948
to
April 20, 1949,
decline.
a
This
billion on
rather substantial
$14.3
reduction
in
loans
reflected
primarily the.liquidation
of inventories, and also in part at
a
cautious attitude
more
on
the part of the banks. The decline
in loans was accompanied by a
in
immediate
the
occur
long
so
islation is
the
on
as
the
future
cannot
the present leg¬
the statute books and
under obliga¬
government is
tion to maintain farm
farm
prices at a
Therefore, while
during
the
next
level.
certain
income
lengthening
in
the
during 1948, it is bound to remain
at a high level.
maturities
of
Construction is also being main¬
tained at
a
building
high point.
private
of
decreased,
the
materials and
a
tendency for high-grade
bonds to increase in price and for
Now
rates to- soften.
the
inquiring
comes
,
of
here
difficult
where
the
we
go
business
of the commercial banks.
ditions
are
at',
As
con¬
sharp
activity or a
serious deflation is. not likely to
take place.
While the readjust¬
break. in
ment
will
many
business
the
continue
men
to
country
would
roll
apd
will continue
labor.
if
were
It would
the
cost
of
to decrease.
again
construction for
all,
we
learn
must
that
stimulate
a
be
con¬
A de¬
private
number of years
So long as the European Recov¬
Program lasts,
in
exports cannot
is
quite
a
answer the United States
make to those who attack our
can
of life and
way
tem* is
to
our
economic sys¬
that our
demonstrate
system not only guarantees the in¬
dividual all the liberties for which
mankind
fought
and
died
for
centuries, but also is capable
giving the people the highest
standard of living possible and at
many
of
the
same
time
eliminating big
swings in the business cycle. Once
have-
we
dictions
demonstrated
of
a
that
but
on
wishful
War will
tacks
of
on
life
come
our
will
pre¬
pending coll?pse of
the economy are not based
on
fact
thinking, the Cold
to
an
end
system and
and
our
at¬
way
abate.
The Approach to Investment
Policy
of
and contribute materially to the
country's economic welfare..
ery
future.
has
cline of anywhere from 15 to 20%
present,a
business
homes
construction
favorable development for
struction
more
how
and
very
agricultural
our
While the
public works and public housing
has increased. It may be expected
that a housing bill will be passed
by Congress, which should set in
motion large-scale construction of
multiple-dwelling buildings in the
larger cities. The construction in¬
dustry is an important one and
creates a large demand for raw
investments of commercial, banks
,
on
further break in farm prices
A
and by a
task
based
is
following considerations.
com¬
the reporting members banks de¬
creased from $15.6 billion at the
least
at
twelve months will be lower than
Bank
end
remain
employment
can
moderate
a
complain about reduced sales
and
profits, in general business
This
solve
the best
to
will
to
problems without the need for the
Government to guarantee an im¬
portant segment of the population
a
high income for the indefinite
Above
(Continued from page 7)
pattern will affect the investments
Moreland & Co.
(14)
for American goods. /'■
into
,
•
of
the
crease
consid¬
The. degree of confusion in
market.
The amount
(13) The personal income.
•
It
What will happen in the more dis¬
tant future, when capital expendi¬
'
■
(2) The type of propaganda- fed
to the investing public.
£ maintain that common stocks, re¬
(3) The length of time during gardless of quality, move pretty
from
With W. H.
national
<
v
in¬
those
of
increase, and that there
is a likelihood of still larger un¬
employment than at present.
circulation.
This
brought
general situation.
money
131,841 class
shares, the net proceeds to be
used
the
.
living
bound to
until
Among the more important fac¬
tors influencing the situation dur¬
ing the period covered by the
study may be numbered the fol¬
lowing:
v
1 7 ~
7* 7
(1)
(12)
it
re¬
beginning
w as
share
per
Trenton
of
of
.
population.
ered necessary
inordinate fimount of un¬
an
and accrued dividends.
The
size
Co.,
&
convertible
preferred stock, without
value, at
par
Merck
of
The
•-**-.
level.
that
v-p ■■
the
who
on
na¬
Co., Kala¬
&
the
per
since
the
1948.
fered 150,000 shares of Plywood,
$2.75
Edwin J. S c hie singer
(8)
E.
to
Simonds
April
on
months
common
ence
Baker,
of
es¬
the
not
the
fear
nine months' period.
troit,
three
the
period after Federal income
taxes
at
Dividends amounting
and
sumed
and
timated Federal and Canadian in¬
taxes.
for
Detroit-Michigan
the
in
of
income
noted,
however, that the readjustment, is
not yet over, that the decline in
prices has not yet come to an end,
in¬
(11) The increase in the nation's
this
was
1949
out¬
deducting $13,580,257 for
come
<
net
arrived
was
rupted
with
$21,393,730
for divi¬
stock
common
net- income
Co.
of
ended March
standing at the close of the period.
The
and
deflation
cost
real
business activity will remain at
•
——
waves
rates.,'/77;7.
debt.
by
inter¬
study
$2,234,773, compared with $6,054,264 for the corresponding period
of last year.
Net profit for the
classes of preferred
equivalent to $3.81 per
was
sales
Stove
both
on
stock,
Corp.
and
(10)
during
in turn
which the various classes of stocks
income of The Dow Chemical Co.,
Midland, for the nine months end¬
which,
;
agreement.
May 3 declared
on
Michigan
Miller^ Kenower '& Co,
The directors of Dow Chemical
Co., Midland,
25-
'Z%% sinking fund debendue
April
1,
1974,
at
Net
the
Corp.
were
manufactured
are
Products
employed, one must reach
that, on the whole,
are
the
the conclusion
•
v-'
April 26 pub¬
on
the
who
(9) The effect of pegged interest
followed
the
j.
•"
•
101.31% and accrued interest,
Watling, "Lerchen & Co.,
roller
automatic machine under
an
Distillers
al
mould¬
bicycle
#
licly offered $40,000,000 Nation-1
bicycle fenders
uses,
braces,
#
v*
ings and trim for household and
industrial
flation
threat
the war,
usual
Included in the group of un-.
and for additional working capital. The Smith firm's present
.
common
six shares for each
basis of
a
be
liabilities
current
pay
The
preferred share.
Manufacturing
Corp., Roseville, at par ($2 per
to
capital.
stock will be held for conversion
in
creases
tional economy.
war
1841,
additional
for
used
be
working
Bailey & Co., De¬
May 9 publicly offered
125,000 shares of common stock
proceeds
of
filed
was
$1) of Pioneer Fi¬
nance
Co., 901 National Bank
Bldg., Detroit. The net proceeds
on
net
The
stock (par
mon
Charles E.
the
p e
' 7
Exchange
Commission
covering
22,654 shares of 6% cumulative
convertible preferred stock
(par
$10) and 135,924 shares of com¬
are
share),
show¬
than
the
c ulative
variety.
May 2 with the Securities and
on
Manufacturers National Bank, De¬
D.
s
pre¬
(par $25).
A letter of notification
company,
troit, is transfer agent.
II.
better
ing
adds the
one
still
January 1928 through> July 1937.
giaae common^
,
stimulus to the economy.
a
If to these'factors
com¬
Editor, Commercial and Financial Chronicle:
Electric
7
machin¬
will probably aggregate over
$15 billion, and this too will pro¬
Says Edwin J.
1,500,000
first
less
request
more
and equipment. Military ex¬
penditures during the next fiscal
Investment Counsel reveals conclusions drawn from
study of
.
condensers
and
a
diversity of
products. It has 250,000 shares of
$1 par common stock authorized.
of
of
redeemable
*
water heaters, refrigeration
troit,
issue
an
ferred stock, series A
formerly known as Rudy Furnace
Co., manufactures residential fur¬
naces,
of
shares of Pacific Gas &
the Detroit Stock Ex¬
on
will
products and
ery
'
Co. stock
Europeans
year
derwriters, in the public offer¬
ing at $26.75 per share and divi¬
Corp.
Thursday, May 19, 1949
TO EDITOR:
Shortly after the big break in the stock market in August 1937, a
study was started by me of the course of common stock prices from
January 1928 up to the present. The object was to see whether high
May
on
4, participated, together with
group
CHRONICLE
Seasoned Stocks Best
The Detroit Stock
Watling, Lerchen & Co.
FINANCIAL
farm
was
Corp., Commonwealth & Southern
Corp.,
Warner
Aircraft
Corp.,
Wayne
Screw Products Co.,
United Corp., Scotten, Dillon Co.,
&
sharp break
place. It
take
possible, however, that
during the current year there will
be a change in the type of exports.
The
changed economic situation
has an important bearing on the
investment policies of the banks,
and
to
policy.
a
is the time for the banks
now
lay
down
a
sound
investment
The investment
bank
should
be
policy of
based
on
an
analysis of (a) its deposits, (b) its
capital resources, and (c) its as¬
sets.
It should aim toward
a
satis¬
factory return, an ample margin
of safety, and a high degree of
liquidity. Investments based only
on
earnings
tion grief.
may cause
the institu¬
An investment program
based only on
liquidity, unless the
and type of loans make
policy imperative, neglects
one of the important functions for
which a bank has been established.
volume
such
The
a
investment
must take into
assets structure
it
cannot
be
policy of
account
a
the
bank
entire
of the institution;
from the
dissociated
Volume
loan portfolio.
2-
the
toward
less
Where the element
mand
3-year ma¬
or
FINANCIAL
&
COMMERCIAL
THE
Number 4804
169
which
deposits
should
in
risk
loans
is
turities.
rather;'great,
kept in assets readily
,
Bank and Insurance Stocks
into
also
must
into
take
ratio of capital to
is
essential.
It
the
account
definition
risk assets. This
also advisable
to consider the ratio
of'capital to
total deposits because many large
depositors pay attention to this
factor.
Finally, the investment
policy of a bank should be adapted
to
the
of
facilities
the management
also
to
bank,
Trustees.
-
The
Composition
The first
Deposits
of
consider is
element to
the composition of
deposits. I con¬
separately
deposits. Although
savings deposits are not always
more steady than demand deposits,
I consider them separately because
a bank has to pay interest on sav¬
ings deposits and must therefore
sider
savings
from
of
nature
risk
a
given by any super¬
vising authority. The usual prac¬
tice in computing risk assets is to
take total assets and deduct cash
of the bank, and
of the Board of
attitude
to
the
of the
asset has been
is
By H. E. JOHNSON
deposits, and
on
the type of loans, that is to
say, whether the bank has a large
of
volume
term
loans
or
mostly
This Week—Insurance Stocks
lower. I mention
present
these
entirely on the good
credit of the United
books at par or
this
because
bonds
rest
faith
and
at
States Government.
of
their
total
of
deposits,
ating
record of
ment
income, Federal taxes and net earnings.
even
less.
After
this interest cost.
earn
banker has made analy¬
a
of the future and this in turn leads
to
however,
■
savings.
greater
indications
•
capital to risk
not easy to
determine and will depend on the
should
it may
There are,
in certain
be
is
be 1 to 6 or even 1 to 8.
factors, he can
choose between two principles in
sis
let
do
can
.bank
I
of
the
on
however,
mercial
is
bank
far
compete as
I do,
the com¬
position to
be wrong.
may
believe
that
in
a
service is
as
con¬
cerned.
<
(3)
The
whether
should savings
How
ing
the savings deposits of a commer¬
cial bank
be invested in long-
can
term assets,
depending
on
the ratio
Most of
capital to risk assets.
deposits,
'
in
industries,
few
a
(4)
deposits be
Broadly speaking, as a
general proposition, up to 60% of
of
.
rela
a
tively few large accounts embrac¬
scattered.
invested?
type
concentrated
or
1
The
-
widely
bank
and the
sist of mortgages,
risk
These
deposits
cap¬
and
to
factors
should
be
care-
The
In
considering tax-exempts, the
they are not as liquid as Govern¬
ment obligations.
The return on
tax-exempts and other obligations
should be large enough to make
up for the inferior marketability
and
for the
Where
a
it
greater risks.
bank
has
hold
few
mort¬
principal aims of an invest¬
ment policy should be:
(1) To maintain an adequate
degree of market stability to pro¬
tect the bank's safety position.
most
expenses
meet operating
and to pay dividends but
also
set
exclusively
securities.
case,
gages
To
a
of
take
Government
extreme
an
where ja bank has no mort¬
and ho corporate or tax-
exempt securities,
in my opinion
that particular institution can in¬
vest up to about 75% of its sav¬
ings deposits in long-term
ernment
Gov¬
obligations.
The remaining 40%
of the
sav¬
ings deposits could be invested
follows:
10%
short-term
in
tions and the
issues
years.
er
or
pend
and
due
or
as
very
obliga¬
remaining 90% in a
well-balanced
securities
cash
Government
or
list
of
other
Government
high quality
callable
within
10
The percentage in the short¬
longer maturities will de¬
on
the
composition
the
of
60% of the assets described above.
Where
gages
ties
a
are
lieve
wards
bank has only few mort¬
or none,
a
where the maturi¬
already diversified, I be¬
bank
the
can
lean
more
10-year rmaturity
.
to¬
and
$
—1.10
American
2.13
8.60
—4.52
8.45
—0.83
Federal
2.93
3.42
5.44
5.21
0.04
—5.55
—0.19
1.46
1.03
L27
—0.02
—0.37
0.82
2.36
0.43
4.00
3.54
3.19
—0.11
3.97
7.08
2.17
4.47
3.61
4.13
—0.28
—1.14
5.50
7.46
4.31
6.70
2.28
2.53
—1.31
—2.51
5.28
1.91
5.00
i
4.18
4.64
—0.23
—1.20
5.86
8.44
1_
0.94
7.63
<
4.63
4.67
—0.15
—1.98
•>• 5.42
10.32
3.13
8.03
4.63
4.17
0.35
—1.62
8.11
10.58
____
Insur.
(Newark)
Insurance
Insurance
._
Fidelity-Phenix
Fire
6.28
8.79
___
Insurance
"Boston
-
Association
'•Fireman's
Fund
Fireman's
Insur.
THome
2.28
—0.01
—0.59
1.54
4.55
21.39
20.90
5.40
6.09
—0.67
—5.60
11.87
2.29
1.97
2.15
—0.33
—1.34
3.48
0.25
—2.53
7.71
—0.20
—2.14
9.80
.
"
13.66
9.12
6.21
7.07
6.23
3.79
3.77
2.20
2.89
3.23
—0.01
—0.59
1.72
4.84
0.06
1.16
1.67
1.79
—0.02
—0.50
1.71
4.61
4.97
—0.12
—0.95
6.03
2.45 '
9.2/
1.80
2.22
0.24
1.71
4.57
,
1.54
5.25
—0.09
2.11
5.59
9.81
3.80
—1.55
.
6.79
2.52
Marine
&
i
"
4.40
—0.32
—2.69
9.07
11.52
2:45
■:
0.42
—1.47
1.39
7.7?
0.35
3.84
2.20
2.55
—0.82
2.55
5.57
0.78
!
Marine
Fire
States
3.99
3.27
3.43 •—0.07
—1.16
3.98
6.26
tData
change in August, 1948.
comparable because of merger of nine affiliates into Home.
effect to capital
to give
•Adjusted
part of the
a
3.10
■
1.25
i,
Insurance
As
4.60
2.23
i.
Security Insurance
Springfield Fire &
not
5.51
2.13
i
—1.16
Fire
Providence-Washington
United
4.30
2.89
7.14
Hampshire
York
Fire
2.34
4.44
—0.54
—5.93
New
Paul
—0.19
—1.76
0.01
2.86
Co. of No. Amer.
New
St.
0.02
—0.03
2.43
2.71
-
Fire
Phoenix
1.72
2.50
1.84
Fire
National
1.43
2.25
—0.68
___
Insurance.
Insurance
2.77
4.77
0.75
Fire
Hartford
•
6.72
0.89
___.
American
Great
Hanover
■
2.22
(Newark)
Glens Falls
investments for in¬
on
$
$
$
0.03
of two years
tabulation by the firm, certain figures
same
relating to liquidating values at the end of 1947 and 1948, dividend
rates, current prices, approximate yields and the 1948 price ranges
are
included.
'
securities should
opinion, banks
in high-grade
These same figures for the above companies taken from the
obligations, irrespective of the at
study are shown below. The current price,has been brought up to
titude of
the bank supervising date and the
yield computed on the basis of the current price.
authorities. A bank operates with
Liquid. Value
DiviApproximate
Price Range
What types of
bank buy? In my
invest only
other people's money and should
invest it in high-grade obligations.
A
December 31,
,
small
too
only
buy
except
than
the
when
ment
which
A
are
$49%
$41%
23.83
0.70
17%
4.03
81.98
76.30
2.40
66
3.64
67.91
72.85
$54%
2.20
61 %
3.58
61'/a
3.01
61
2.40
67'/a
3.56
69
84.93
92.02
2.50
61
4.10
61
Fund
86.17
:89.05
Insurance
Great
they
National
se¬
3.05
,.49%
4.06
' 49
31%
4.16
31
4.52
32%
122%
100'A
4.48
30%
23%
"65
11%
40%
26%
33
York
1.40
2.50
38.46
1.30
118.36
3.50
105%
3.33
109%
84.74
.
43.22
156.56
109.24
North America
Fire
i
24%
1.99
1.30
46.36
3,31
;
37 91
_.
Hampshire
New
:90.58
2.00
53%
3.74
50'%
41 %
49.85
51.92
2.00
42%
4.71
45
40
125%
29
92
27.99
28.95
0.80
15
10%
*
114.86
121.48
3.00
84%
3.55
90%
73%
1
45.72
48.23
1.40
33'%
4.18
35%
30'%
St.
75,70
85.18
2.25
82
2.74
81
66%
47.75
53 54
1.40
33%
4.15
32
23%
55.69
59.35
1.90
44
4.32
74.15
78.10
2.4C
59
4.07
Phoenix
obligations of comparable
Government securities
Paul
Fire
Security
Fire
States
"On
lated.'
Marine
&
Insurance
Springfield
United
'__
Fire
Insurance
new
The
&
:
Marine____
Fire
tStock
stock.
$2.90
includes
on
regular
payments
on
$2.60
annual
old stock
in
basis,
14%
■:*
Providence-Washington
govern¬
highly hiarketable and they
protected.
Tax-exempt se¬
16%
2.00
12.90
41.40
New
yield
0.50
55.92
43.69
Insurance Co. of
bank
24.50
"83
15%
,
137.89
Fire
Insurance
Home
53%
45f
21.30
American
Hartford
47%
-
52.58
(Newark)
Hanover Fire
are
48'/a
63%
1.85
81.03
Falls
<
*54-
74.23
78%
,
15%
18 %
*72
75.46
_
t
51,
67
5.00
60
70.22
Insurance
Insurance
Glens
maturity.
are
3.29
3.00
Fireman's
net- income-after
from
$1.80
102.64
Fireman's
good
a
tax-exempt
obtainable
taxes
$71.91
Fire Association
it "should
character.
not
curities
more
support
securities
in
riskless
should
to
department
Low
Fidelity-Phenix
Continental
.
In my
is
High
22.48
(Newark)
Insurance
Boston
•
statistical
%
T
Insurance
American
in
Federal
acter.
Yield
5-16-49
97.93
Agricultural
certain con¬
may: under
be invested
Price
Rate
$65.14
Fire
Aetna
portion of the bank's own re¬
-1948—^-
dend
1948
1947
5.33
on
47
*60%"
•
40
46
yield is calcu¬
which
1948.
curities, as a general rule, are not
These comparisons are useful in several ways.
They-provide a
highly marketable, nor are they
ready reference of certain important statistics on individual com¬
protected. I also believe that there
panies. Also, they make it relatively easy to compare the results of
should be a definite spread be¬
a
particular company in which a person might be interested with
the
where it has to sell medium- or tween
yields on corporate
other companies in the same industry. In addition they provide an
long-term bonds in order to meet bonds and yields on governments
opportunity to compare on'a statistical basis the'relative attractive¬
of the same maturity. Convertible
its liquidity requirements.
::
can
$
(2) To have sufficient liquidity
to meet the requirements of the
depositors and customers. A bank
should
never
bo
in
a
position
larger per¬
centage than 60% of savings de¬
posits in long-term assets, particu¬
larly if these assets consist al¬
gages,
$
should
"hold
"relatively small proportion should fully analyzed by the bank in
be invested in corporate bonds formulating its policies for the in¬
vestment of its demand deposits.
and tax-exempt securities of high
fact should be borne in mind that
primarily
Fire
Continental
bonds a
of inter-bank
shade below the high-grade char¬
assets.
to
$
—10.00
Aetna
come.
sources
relationship of
1948
1948
1947
1948
1947
$
opinion, banks should not
time. ■
vv:
buy obligations with a maturity of
(6) The capital position of the more than 25 years. Where a bank
accounts
quality.
is
financial center
in its deposits
approach
suitable for banks which rely
ditions,
volume
ital
government
which
bank
a
be great. The second
■_
deposits.
(5) The possible swing in de¬
posits within a short period of
these long-term assets should con¬
term loans and
obligations.
Only a
is
a
loans.
a commercial
(2) The location of the bank,
in
a
large
financial
compete with a savings whether
the basis of the rate of center or in a small community.
-interest.;. I
of
character
believe that
not
bank
Personally,
dividends.
of
for
the swings
where
can
posits. The investment of the de¬
shift of savings deposits from com¬ mand deposits should be guided
mercial banks to savings banks, by the following considerations:
(1) The composition of all other
primarily because of the fact that
the latter institutions pay a higher assets, notably
the amount and
rate
fnand
located in a large
de¬
to demand
turn
us
Net
Earnings
Taxes—
1947
1948
above
the
of
advisable
Investing Demand Deposits
Now
parts of the country, particularly
in New York City, that there is a
?
—Income—
Loss
or
1947
What the ratio of
assets
Gain
Federal
Investment
Adjust, Undwrtg.
investing the balance of his dedeposits.
He
can
either
Demand deposits, on
the other
adopt a policy of spacing his ma¬
hand, aside from the assessment nature of the risk assets. We turities fairly evenly over some
of the FDIC do not cost the bank
know, for example, that there are given period of years, or he can
any money.
1
adopt a policy of investing to ob¬
some loans such as life insurance
In considering savings deposits, loans and loans to brokers and tain a certain return, which usu¬
dealers secured by government se¬ ally means some concentration in
a careful analysis should be made
of the trend of these deposits. In curities and other high-grade col¬ medium- and longer-term issues.
my opinion, the trend of savings lateral, which can be considered
A spaced maturity policy is par'deposits is influenced to an im¬ riskless. I believe, and I say may ticuarly advisable where a bank
be wrong, that a ratio of 1 to 4
portant extent by the cost of liv¬
has a good income from its loans
ing. In addition, many people, I or 1 to 5 is a satisfactory ratio. If and is less dependent on invest¬
believe, are somewhat uncertain the risk assets-are of high quality, ments for its .income. It is also
endeavor to
determining the consolidated earnings and oper¬
As the data for
the various fire and casualty companies are now
self-liquidating commercial loans. available, several of the large investment firms specializing in these
It will also depend on the earnings securities have issued comparisons and analyses of last year's results.
and government securities. To my
position of the bank, whether the
The Bank & Insurance Stock Department of Laird, Bissell &
way
of thinking, FHA insured
bank depends largely on loans or
Meeds, one of the large brokerage houses, have prepared such an
mortgages and high quality corpo¬
on
its investments for earnings.
analysis of 40 fire companies and 13 casualty companies. It is fairly
rate and municipal securities due
For
example,
there
are
some detailed and presents comparable figures covering the operating
within
a
year — in
certain
banks in the country loaned up to results of the past two years.
instances, 2 years, if the credit is
50% to 60% of their deposits. Ob¬
Because of the number of companies covered in the tabulation
particularly high—should be de¬
ducted as well. In my opinion at viously, these banks derive their by this firm, only figures for some of the larger and better known
the present time the obligations of principal income from loans. They fire insurance companies have been taken from this study and are
are
not as dependent on income presented in the following comparison.
the International Bank for Recon¬
from investments as banks which
In addition to the operating results for 1947 and 1948 the table
struction
and
Development can
are loaned only up to 25% or 30%
also shows per share figures covering adjusted underwriting, invest¬
also be deducted if they are on the
demand
deposits
15
be
convertible
cash, how about the rest? The
this must be counteracted by an
I have spoken about risk assets.
answer, in my opinion, will de¬
utter lack of risk in the invest¬ It is ^therefore necessary to ana¬
pend in part on the size of. the
ment sector of the portfolio.
lyze what a risk asset is.
loan
portfolio whether large or
The investment policy of a bank
To my knowledge, no adequate
small in relation to
of
(217L)
CHRONICLE
(3) To obtain satisfactory earn¬
ings
not
to
amount
only
to
to
aside
a
increase
reasonable
capital
re¬
should
bonds
where
own
and
not
'they
be
can
only
their
bought
stand
on
-
of various issues.
r
-
f
While they should not take the place of detailed investigation
and reviews of the long-term records of insurance companies, they
feet on the basis of quality
are useful in supplementing such investigations and comparing the
yield and where the price is
statistical position of individual companies.
dependent primarily on the
conversion feature.
sources.
Average maturity is sometimes j The
cited as a test of investment pol¬ about
question
has been
partially
tax-exempt
which
asked
se¬
selling at a
icy. This, to me is not a good test.
The average maturity that is sat¬ premium. Premium; in my opin¬
isfactory for one bank may not be ion, is not of any real importance
satisfactory for another. A bank because of the amortization. A
which has a large volume of loans bank should buy its securities on
outstanding can afford to have the basis of yield, not premium.
a
much shorter maturity. A bank It is, however, quite evident that
which has only limited opportuni¬ the premium account should have
ties for making loans
can
well a reasonable relationship to the
afford to have a longer maturity. capital resources of the
institu¬
Otherwise,
it
may
cause
The first consideration is to as¬ tion.
mental anguish to the officer him¬
certain
the
liquidity
require¬
curities
ments. This
ness
can
be ascertained
by
self
as
well
as
are
to
the
directors.
bank is often in
a
tion to buy local
curities
because
favorable posi¬
it
local credit conditions. It also
a
has
responsibility to assist the com¬
munity
where it is located,
(Special
the
knows
pro¬
Rosenthal Opens
J,
tax-exempt se¬
to
DENVER
is
thal
The
Financial
Chronicle)
COLO. —Joe
engaging
in
business from offices at
gan
Rosen¬
securities
a
1269 Lo¬
Street.
vided the credit factor is there.
To
sum
the forces of infla¬
up,
With E. T. Andrews Co.
(Special
tion
are
now
returning to
tern
of
time
is
mercial
receding and
a
more
business.
I
believe
to sit
The
Financial
Chronicle)
•
j
■. *
j
HARTFORD, CONN.—Elmer C.
normal pat¬
the
ripe, therefore, for com¬
bankers
to
we are
down and
Burgdorf has
E.
T.
joined the staff oL
Andrews
&
Co.,
49
Pearl;
Street, members of the Boston and.
Chicago Stock Exchanges.
speaking, however,,, in analyze their positions as care¬
With Income Funds
bond, a bank should
what future fluctuations in de¬ buying a
fully as possible and to lay down
consider the quality, the maturity
(Special to The Financial- Chronicle)
posits may be and by estimating
sound investment policies which
and the yield, and not the pre¬
NEW HAVEN, CONN.—John EJ
how large the volume
of- loans
mium.
they will be able to follow so Hotchkiss, Jr. v has been added to
may be.
Fully tax-exempt securities are long as conditions remain more the staff of Income Funds, 152.J
Having made adequate provi¬
Temple Street.-.
1
sion for that portion of the de¬ suitable investments for banks. A or less normal.
analyzing the type of deposits and
.
-
-
•
.
.
Generally
16
(2172)
THE
COMMERCIAL
FINANCIAL
&
19, 1949
Thursday, May
CHRONICLE
Corporation also uses this plan as a guide in the over-all pat¬
'balanced' funds, i.e. funds permitted to own both bonds
search
tern of its
and stocks.
Mutual Funds
:
^;
both institutional and in¬
single investment the two-fold
Fund- enables
Trust
Mutual
"First
dividual investors to obtain through a
benefits of:
By HENRY HUNT
=
the longer-term.
"(1) Formula plan investing over
Excessive Legal Zeal
y
We recently ran across
Prospectus
your
upon
request from
investment dealer,
NATIONAL
RESEARCH
or
of
leading
a
in a sales folder
opportunity to share
The "if any" was ob¬
the following sentence
"Mutual funds olier an
(if any) of American business."
viously inserted (and insisted upon) by the sponsor's legal counsel.
This type of excessive legal zeal, caused
b,y fear of the SEC, strikes
us as being both unfair and
unnecessary.
In the first place, the "if
any" implies that one of these days American industry as a wholemay operate at a loss, a most unlikely occurrence.
In the second
place, it suggests that the mutual fund described might eventually
from
sponsor,
in the profits
SECURITIES
&
CORPORATION
120 BROADWAY, NEW YORK 5, N. Y.
be forced
to
seem
to pass
its dividend, an utter impossibility.
Spme lawyers
their duty to remove as much of the "sales appeal
from mutual fund sales copy submitted to them for
regard it
1 A *
as
possible
businesses
advertising
SPEND
Sunshine!
PUTNAM
Goose
pills)
FUND
were
copy, we
YOUR
forced
might
VACATION
to
see
IN
such hamstringing
submit to
ads similar to these:
FLORIDA
;
And
SUFFER
Down
FROM
Mattresses
.yyAbibU;-
VISIT
INSOMNIA?
(especially
yUv.Av;"''
.
STATE
THE
SMOKE
of Doctors!
OF
y
You
>>; 'Uiuy ""'V-
MAINS
If
Can
after taking
OLD HACKLE
(each doctor
Set (seldom
ruins
You
CIGARETTES
was
the
Really
your
Wellington Fund in
Endorsed
a
DELMONICO'S
RESTAURANT
Television
year)
Riches
.
.
an
"National"
"National
wall
Securities
&
Research
Corporation
has
used
its
investing plan since Jan. 1, 1948 specifically in determining
the investment pattern of First Mutual Trust Fund, one of a number
INCOBROSAlfO
48
recently issued a three-color folder complete with
investing plan. The following is an excerpt:
formula
HUGHW. LONG & CO
of funds which it manages
STREET, NEW YORK 5. N;Y.
2
Fried
or
Hash
.
.
.
or
A merican Business
Im
Shares, Inc.
1st
Custodian
5
5
Stew
5
Fried Eggs
Ham and
and Cabbage
Eggs V
10
.
10
Roast Chicken
Fish
.
10
Beef Steak
)
Regular Dinner 12 Cents
Smith & Handford Printers,
and 25 Dey St., N. Y.
23
.
"Says the 'Book of Indices':
In
these
If
week.
a
(of the menu) an excellent wage was $6 a
with this income ate the regular dinner at
evenings a week he would be paying 84 cents a
days
person
Delmonico's
seven
14% of his wages, for his night meals. Today an equiva¬
lent meal, in New York undoubtedly could not be had for less than
or
$1.50, if that. Seven times this figure is $10.50, and if this sum be
as
14% of the weekly wage, then his current income every
taken
days would be $75.
•
in roughly 110 years wages have advanced from $6 to
$75,per week for the same work. This is ah inflation of the dollar
which averages out to 100% per decade for 11 successive decades.
.!" 'If the value of the dollar in the year 2060 bears the same pur¬
chasing relationship to the present dollar that
the present dollar bears
dollar,'then the progression of
wages for the same
will-have been from $6 in 1934 to $75 today to $938 per week in
the
1834
•"
to
'Those
investors
whc
that the
think
progress
work
2060.
of inflation is
end had better consult the record of the last century
find out how fast and steadily the value of the dollar has depre¬
an
as by this means the mass of chronic have-nots, always in the
voting majority, help themselves to the savings of the productive
minority. Those investors who think that the present Administration
will not find ways and means of carrying much further forward this
upon
request
"All
Chicago
on
had better go out in the
and there in the unrelieved
profitable,
politically
boils
down
another think.'
to the
simple fact that so far as we can
past experience there will
continue to be a basic advance
structure of the country; and also if past experience is
any criterion, common stocks have amply demonstrated their ability
to progress to increasing values in line with the continuing devel¬
opment cf American business enterprise."—From Vance, Sanders
in
—
Los
New Orleans
the price
"Brevits."
Market Comment
Angeles
"The
Cert ificates of Participation in
in
in
a
Diversified Investment Company
IN
market continued to adjust
calm
the
and sedate manner during
itself to our changing economy
April with only small changes
averages.
Underneath the surface, however, there
evident trends with defensive issues continuing to attract
general
more
were
A
so
the coldest night of the year
this
tell from
COMPANIES
—
trend,
darkness think themselves
Prospectus
INVESTMENT FUNDS
most buyers.
During the last five weeks we find that 18 groups of
the year while 19 have sold at
stocks have moved to new lows for
•
1949
new
BONDS
highs.
This
extreme
selectivity has
been
evident ever
of 1947 when the postwar lows were made by the com¬
averages.
Since then there have been such extremes as a
since May
(Series B1-B2-B3-B4)
PREFERRED
5
.
.
Fried
basic
Lord. Abbett &. Co.
New York
investing their capital
Mutton
Chicken
Mutton Stew
woodshed
LORD-ABBETT
INVESTMENT
Funds
5
ciated,
Pl/|
:
Roast
5
.
Veal
or
Hamburger Steak
to
THE
Beef
Pigs Head and Cabbage
and sponsors. National Securities & Re-
r
Keystone
4
4
.
,
4
Veal Cutlet;
...
Corn Beef
.
Roast
.
Half Pie
Beef
.
.
.
Pies
.
Liver and Bacon
Stewed Heart
coming to
9
Sausages
Puddings
Chops
"{"'Thus
its formula
on
1
.
Stewed Liver
seven
The "National" Formula Plan
charts
Pork and Beans
A-
or
week,
to riches but there is a sound way to pro¬
savings for your future security through a
program.
Let your investment dealer show
Pork
2
Fried
,
4
1
.
.
FARE
OF
BILL
Cup Tea or Coffee
Bcwl Tea or Coffee
Crullers
your
planned investment
you the best way!"
Pearl Street
494
by Thousands
easy road
no
increase
and
accustomed
disappointed)
vestments to meet your needs and objectives.
"There is
than
...
Enjoy Good Trout and
eyesight in less than
with less
meal
his
approached
have
certainly
-'AC ,/U
attractively illustrated new folder called
"Which Way?" discusses speculation vs. investing for security.
An
excerpt follows:
YOU are the captain of your fate! You alone can decide whether
to risk your savings in speculating for a fortune or, assure
your
future; security through careful planning.
You may hope a lucky
speculation will bring you a fortune some day. Perhaps—but the
chances are slimmer than ever of making a fortune this way because
of present high income taxes.
If you should lose your savings,
present taxes make it almost impossible to get them back. So why
risk your savings in speculating?
"If you're sick, you call a doctor—if you're in legal difficulties,
you
call a lawyer.
If vou want to accumulate a fund for your
future security, why not consult your investment dealer who is a
specialist in investing. Your dealer can show you the best way to
protect and increase your savings. He can select the types of in¬
tect
Stock Values
who contemplated this menu just prior to the Civil
War in what then was, as it still is, one of New York's prime res¬
taurants could have foreseen the prices on a 1949 menu, he would
Soup
nrw
common
Rising Prices and Common
Sleep
paid $100 for his endorsement)
No Easy Road to
Putnam Fund Distributors, Inc.
50 State Street, Boston
in
three sleeping
SAVE YOUR MOVIE MONEY! Enjoy a Midget Home
'Prospectus upon request
Formula Plan, holders of
Nor will they
pattern based on a scientifically developed formula investing plan.
It is designed for institutions or individuals who are seeking en¬
hancement of capital during periods of rising stock prices, and pro¬
tection of their capital during periods of declining stock prices."
relish
Bass Fishing (expect to catch nothing and you won't be
cJ <Me&ten
in
Bask
(if any)
YOU
DO
on
'First Mutual' will never
stocks at the beginning ,of a bear
have too high a percentage of bonds at the
beginning of a bull market.
"'First Mutual' is the largest mutual fund with its investment
the
"Under
over-invested
be
market.
"If the guest
If other
of their
the under¬
as
approval.
£7/e Sewae
"(2) Careful selection and continuous supervision of
lying securities by professional investment managers.
|
bined
STOCKS
I I I I
(Series K1-K2)
EATON & HOWARD
(Series S1-S2-S3-S4)
INVESTORS S
EATON & HOWARD
BALANCED FUND
COMMON STOCKS
STOCK FUND
Prospectus from
jour
local investment dealer
PROSPECTUSES OF THESE TWO MANAGED INVESTMENT FUNDS MAY
or
BE OBTAINED BY BEQUEST TO
Tke Keystone Company
of Boston
50
EATON
Prospectus
Congress Street
Boston 9, Massachusetts
>']
;rhif/J
your
•
;t-
may
local investment dealer,
'
THE
be obtained from
PARKER
YOUR INVESTMENT DEALER OR TO
&
HOWARD
INCORPORATED
,
INVESTMENT MANAGERS
or
CORPORATION
ONE COURT STREET. BOSTON 8, MASS.
BOSTON
Established 1924
24 Federal St.
333
Montgomery St.
.oil
BOSTON
,
SAN FRANCISCO
if
Volume 169
45%
Number 4804
gain in the
aircraft
"May has often
its mind.
the
war
This
market
level
not
was
bull
year
It
far
It
when
decline
the
the
in
true
in
in
postwar
1946
1947
when
when
it
it
Formed in
the
levels
port
market
is
of
160-165
to
move
for: industrials
it will
up
offerings in the 179-183
have
rails.
If
ability to
its
prove
.rails.
Closing levels for April were 174.16 and 47.27,
"Lifting of the Berlin blockade will help relieve
Houston Ship Channel
Broad Street.
The new firm, like
predecessors, is a member of
the Philadelphia-Baltimore Stock
Exchange.
V:,K,X
its
sup¬
the
.
absorb
Heading the
leigh P. Hess,
for industrials, and in the 52-55 area for
area
on
Pictures taken aboard
ship during Annual Meeting
&
lowest
three-year
for
41-42
and
to
the
are
Group
17
PHILADELPHIA, PA. — Hess
Co.,- Inc., and Woodcock, McLear & Co., have announced the
formation of Woodcock, Hess &
Co., Inc., with offices at 123 South
bull
period.
Underneath that
(2173)
Texas" IBA
Philadelphia
four-
a
its
reached
CHRONICLE
HGSS CsS
April's trading gave few
clues as to the near-term trend but at least there was
good defensive
action which could
encourage a recovery movement. For six months
the market has met
support in the 170-171 area for industrials and
in the 46-47.area for rails.
FINANCIAL
up
evident
was
reached
&
leather
made
has
market
COMMERCIAL
true in 1942 when it started
was
true
was
the
35%
a
1940, when it declined after it
was
in
seen
and
month
a
'phoney.'
market.
high, and it
so
stocks
been
true in
was
THE
firm
new
Ar-
are
Chairman of the
Harold P. Woodcock,
respectively.
of the Board, and
during the, President. Other officers are Wil¬
last year.
At the same time there is no assurance that Russia will liam Z. McLear, Executive Viceso change
her long-term objectives that we could feel safe in re¬ President; Daniel J. Taylor, Ralph
moving the prop of defense business that has supported our economyi E. Hendee and Russell M. Dotts,;
in recent ,years.
Such news should enable; the market to move; Vice-Presidents; and Warren HJ
further away from the critical support levels of the last few
years.: Bodman, Secretary and Treasurer.
tension .that
nervous
has
existed
around
some
world
the
Ability to act well this month would probably give the market a
breathing spell until the fall business trend is more clearly defined.
The
months
summer
have
not
been
a
time
when
the
In
has
market
joint
a
Hess
statement,
Woodcock
and
Messrs.
said:
"The
big decisions as to the business outlook. Perhaps this is the
reason
why no bear market has ever started in June, July or
combining of the two firms will
bring into one well-balanced or¬
ganization the officers, partners
August, and why the
and
September
companies.
investment
made
majority of them have been delayed until
November."—Written by Ralph Rotnem of Harris,
or
Upham & Co.
,
.
sales
departments
of
bothOur activities in the
field
will
be
broad¬
in
the
public
ened
Range
of
available
yields.
Dif¬
Reynolds Co. Sponsors j
ferences and similarities between
Investment Course
vestment
(
PHILADELPHIA, PA.The
Philadelphia office of Reynolds
& Co., 1528 Walnut Street, mem•
bers
the
of
New
York
other
and
leading stock and commodity ex¬
changes, has been conducting at
'the
Bellevue
-
Stratford
Hotel
:
there,
interesting and popular
an
•
Investment
Course
for
Women.
"Though none of their customers
"were solicited; and, in fact, the
whole
solicitation
through
newspaper
advertisements,
approximately 600 applications were
•made and tickets issued for this
was
•
•
series
which
May
4,
began Wednesday,
is continuing each
and
"Wednesday through June 8.
In
Co.
its
advertising,
Reynolds
&
invited the preference of the
"scholars" for
securities
and
Department
Reynolds & Co.
of
individual
investment
counts.
Sheets
I ;>
Income
and
Drexel
New
York
Stock
Exchange
film
objectives
set for 8:00 p.m. Neces¬
Trust
Funds—Albert
far
Trusts.
around the 500
June
the
sessions held
run
thus
mark.
The
is wide in
program
but the treatment is
i
.
•
scope
intentionally
rudimentary and in simple lariguage with careful avoidance of
the
highly
fratern ity
technical investment
j argon, except where
unavoidable.
Each student at the
opening night
was given a note¬
similar; to the type used in
book
the average school, with which to
■
'
-
•
make
notes
marks.
the
of
lecturer's
It has been
re-
impressive to
the
of
group
women
is
and how many of them make seri.
ous
of their notebooks. In ad¬
use
dition,
..
each
closed
student
found
en-
sample forms to
some
be
used at any
.
v
of
ture
speakers
was
of
a
a
variety in the
because
conceived
in the
the
na¬
civic enterprise as well
for the very practical purpose
as
of disseminating information
about,
and
taking
some
of
the
mystery from, the securities busi¬
ness. The topics of the discussions
already given and those scheduled
together with
ers
list of the speak¬
a
follows:
May 4:
Introduction
to and
scope of course.
(a) Regulations for Protection
Benefit
and
of
Investors; SEC;
Security Commission,
Penna.
NASD; Federal Reserve and Stock
Exchange Rules—John A. Mur¬
phy, Partner, Reynolds & Co., and
William K. Barclay,
of
Jr., President
Philadelphia-Baltimore
Stock
•
Exchange, Partner Stein Bros. &
with
curities.
How
definitions
to
buy
of
and
se¬
sell.
Financial
Chronicle)
Robert
and
have
become
J.
Hen¬
associated
York
Los Angeles
and
changes.
Stock
Ex¬
Mr. Bourbequ was for¬
merly Vice-President of Bourbeau
Douglass, with which Mr. Hen¬
&
derson
Bruns, Nordeman & Co.
Add Three to
Bruns,
Street,
members of
&
New
the
Co., -30
City,
To Head Men. Forum
Robert T.
Salit have joined their rayon
department which is under the
Rosenthal
and
with
was
stylist
Haas
production
for many
Bros.
the
same
candidate
stylist
production
tion at the
held
of
the
York
annual
June
on
8
meeting to be
are:
man¬
Albert
J.
of
Dansky
Tripp & Co., Secretary and
Rudolph J. Harper, of Fiduciary
formerly asso¬
brokerage firm of
was
ciated with the
Counsel, Inc., to succeed himself
Treasurer,
as
Arthur Cohen & Co.
Both he and
Mr. Salit are well known in the
T^V ':
;-?J
Nominated
Board
rayon trade.
for members of the
Governors
to
serve
of
three-year terms are: James J.
Carpenter of Bankers Trust Co..
Ziftpin & Go. Move
To Larger Quarters
and
Otto
H.
Coettert, of Central
Hanover Bank
The
&
Trust
Nominating
Francis
Co.
South
be
in
La
address),
their
May 18.
Salle
new
Also, "The Bawl Street Journal"
Bawl Street Journal
will deal with the present state of
Now in Production
Committee
Street, which
surprised at anything,
for
its
annual
flood
of
large banking institution in New
claims the title of the orig¬
inal
Pyramid
give details of
investor
can
Club—and
a
will
it
plan by which
put
$2 out
at
an
com¬
pound
interest,
have
frozen
for.. 200
years
and
ice
(their
and expects to
quarters about
brought
life'
million¬
Lehman
and
Bros.,
Glenn
'
National
State
David
D.
M.
Ellin-
Thompson-; of
Bank, Newark.
underwriting busi¬
the
first
will
time
plan to replace the two-
sur¬
wood, of Moody's Investors Serv-
Street
a
is rarely
is getting
for
story building at 23 Wall Street
with a 20-story hotel, using the
present edifice as a penthouse.
prises when "The Bawl Street
Advertisements
in
this year's
Journal" comes out on June 3 as
paper cover fields is as diversified
a feature of the Bond Club Field
as
the
plunging
neckline,
the
Day.
latest
goings-on in Washington,
The financial burlesque edition
the outlook for the Long Island
will tell how Billy Rose is going
Railroad and the activities of spe¬
to take over the Stock Exchange
cialists on the New York Stock
and run it not only profitably but
glamorously—it will reveal which Exchange.
set
is
P.
and
ness
disclose
Wall
York
Gallagher, of Kidder,
CHICAGO, ILL.—Zippen & Co., Peabodv & Co.,
Chairman; Charles
specialists in foreign
securities, F. Aufderhar, of Savings Banks
have taken much
larger space at Trust Co., George T. Ragsdale. of
208
Rex Cromwell, Dallas Rupe & Son, Dallas; Robert E. Moroney,
Moroney, Beissner & Co., Houston; Jack Taylor, University of Texas,
Austin, Texas. (Standing in background)—Eugene Bashore, Blyth
& Co., Inc., New York City; Robert Brown, Blyth & Co., Inc., Houston
the investment
Milloy. of the First Boston Corp.;
Vice-President; C. M. Haight, Jr.,
ager.
Mr.
Presidency
Other officers selected for elec¬
capacity and for the
and
for
Municipal Forum of New
for the fiscal year 1949-50.
Fabrics
past seven years has been with
the Ben Mann Fabrics
Corp., also
as
Veit, Manager of the
Municipal Department of Shields
& Co.,
has been selected by a
Nominating
Committee
as
the
Corp.
Prior to that, he was asso¬
ciated with A. S. Rosenthal & Co.
in
associated in the
New York Stock
ton
years
also
Robert Veil Nominated
York
Exchange, announce that Frank
Rosenthal, Allen Dansky and Mil¬
Mr.
was
trading department.
Dept.
Nordeman
Beaver
present
Simple
The
Reeves & Co., 271
Beverly
Drive,
Bevdrly
Cal., members of the Nefy
Hills,
Timing—W. Linton Nel¬
Investment Counsellor, Pres.,
Delaware Fund, Inc.
son,
•
(b)
Washington, D. C.
Daniel
South
vestment
'
Boyce.
to
Bourbeau
derson
June 8: Forecasting and
analy¬
The Business Cycle and In¬
manager
course
'
J.
sis.
The program was developed in
the Reynold's office and an effort
type
:
(Special
management of Leonard D. Stertz.
made to have
Exchange Commission
and
Eugene Bashore, Blyth & Co., Inc.,
New York City; Claude T. Crockett,
Moroney, Beissner &
Co.,
Houston; A. S. Wiltberger, Blyth
& Co., Inc., Chicago
LOS ANGELES, CAL.—Edward
E.
Welch, Executive Vice-Presi¬
dent, Wellington Fund, Inc.
time they wish to ask
specific questions,
was
return
E.
Moroney, Moroney,
Beissner, & Co., Houston; Robert
K. McConnaughey, Securities &
Wllh Daniel Reeves
1:
Investment Companies
—Periodic payment plans—Joseph
observers of these classes how attentive
since his
Robert
Bourbeau, Henderson
Whitt¬
but
at
of
acting head of the Rail¬
Division since August, 1947.
road
lesey, V.-P. and Trust Officer, The
Pennsylvania Co. for Banking &
attendance has
leave
on
Savings Funds, Insurance, Com¬
mon
sarily, this made it impossible for
of the applicants to attend
some
was
has been
and methods of
of
and, therefore, the
courses
was
He
Department
Individual
25:
appointed Manager of
Lieutenant in the Navy.
He
been attached to the Buying
a
has
Reynolds & Co.
evening
'
as
"Money at Work"—L. S. Warren,
May
that T. Herbert Shriver
absence from 1941 to 1946, during
which time he saw active service
of
portfolio planning
—Diversification—Relative places
time
Wall
partment.
Administration,
Technology;
Institute
!
Ripley
Mr. Shriver has been with Har¬
riman Ripley since January, 1937,
when he entered the Sales De¬
tive quality—W. A. Nagele, Asso-f
ciate
Professor
of
Accounting,
School of Business
to
past."
ing Department.
Ac¬
indexes of rela¬
as
the
the Railroad Division of the Buy¬
Statements;
Dividends; Interest; Book
Values. Ratios
in
Ripley & Co., Inc.,
Street, New York City,
II has been
;
Financial
we
even
Harriman
63
courses.
sessions.
The great
preponderance of opinion was for
r
•.
announces
18:
than
at Harriman
Sources of financial information—
May
an
comprehensive ' service
William M. Bennett.
Balance
render
Shriver Heads Div.
of \ value
determination
and
to
believe
we
Manager,
Methods
measurement
able
customers
our
Bennett,!
May 11: Further definitions inJ
eluding basic, growth, and cyclical
industries.
be
other forms of in¬
William M,
—-
will
more
Research
morning, afternoon,
evening
or
i
particularly
utility field and
(Facing camera, left to right)—Arnold J. Kocurek, Rauscher, Pierce
Co., San Antonio, Texas; Robert R. Harmon, Shields & Co., Chicago
&
aire.^'
'
back
to
a
himself
be
.Advance orders
for
copies
Journal"
ered
also
on
be
being taken
are
"The
Bawl
Street
(at $1 each) to be deliv¬
June
on
financial
cliffe
of
of
3.
sale
district.
The
that
paper
day
will
in
the
Myron F. Rat-
Lehman
Brothers
is
Chairman of the Circulation Com¬
mittee.
1949
Thursday, May 19,
CHRONICLE
FINANCIAL
&
COMMERCIAL
THE
(2174)
-18
Broken Government Promises
1
'
1
....
1
Mr. Heimann, asserting
By WILLIAM J. McKAY
.
at
currencies
clusion
commerce
toaSlS.
'
In face of
a
on
gain than
in
try
leads
the
to
the
any
of
event
of
abandonment
other coun¬
a
taken
civilization
To. do
progressed; as
they were
broken
and;
of citizens in. their
have
this strong resurgence
an
is
action
any
elec¬
fail to
important bearing on the
event
not
can
A Conservative
situation.
victory
it is will bring the lifting of all exJ
that authoritative change restrictions; a C. C. F. suc¬
quarters in Canada have at last cess will result in imposition of
abandoned their reticent attitude still
more
rigid
exchange re¬
towards this subject. It is frankly
straints; the most likely result Of
admitted that a wave of currency all—no
party with a clear major-i
adjustments in Europe would com¬ ity, could lead to a reversal of
pel official reconsideration of the many of the policies pursued by
parity of the Canadian dollar vis- the long-entrenched Liberal re¬
a-vis the U. S. dollar.
The most
devaluationary sentiment
of
surprising
inot
!
'
:
gime.
popular conjecture concerning the
logical level of the Canadian dol¬
lar is midway between the rate
During the week there was a
minimum of activity in the ex¬
and
a
were
also
quiet
fairly firm undertone. Free
funds
showed
a
disposition to
following a long period of
persistent strength, but the cor¬
porate-arbitrage r a t e remained
steady in the neighborhood of
weaken
the favorable
trade statistics of 1948 and early
1949 continue to cling to the belief
that the Canadian dollar could adsituation
the internals
with
i
Only the rapidly diminishing
■f' few who still base their appraisals
'of the
of the bond market
ternal section
pound and that, of the U. S.
dollar.
*
of the
•
on
11%.
Stocks
were
mostly dull and
Cvantageously maintain its present
slightly easier. Golds and Western
f level in the event of a devaluation
oils, however, continued to attract
of sterling.
Even in the absence
investment demand and the baseof increased competition in export
metals after touching their lowest
markets as a result of European
level
since
early
1948
finally
-currency devaluations, future Ca¬
showed some improvement as* a
nadian foreign trade figures can
result of the rise in the price of
V hardly
fail to register the recent
copper-scrap.
change in world economic condi;k]]
tions.
In these circumstances in
order to maintain the official dol¬
■
-•>'
•
•
•
•
#-
m
e
We
in
de¬
state of
than
we
ise.
little
more
Henry
H.
promise
be
may
~ i
~
oral
or
-
it. is essential that it be
treated as a pledge, and that.it be
assumes,
can
material. It can
but
means
more
no
|
be spiritual or
be good or bad
promise; is a
of deceit and should find
bad
a
.
.
..
promise
false
or
acceptance than a lie.
;
Hitler, Mussolini and Stalin all
promised their people Vmuch bet¬
ter way of life but these promises
were false; they knew they were
false and they proved to be false.
Even in the fulfillment of some
Rodney Darling Joias. I
parity Canada
would be obliged to revert to an
unrelieved
system
of exchange
control
and
trade
restrictions.
lar
its
at
Such
present
BOSTON, MASS.—Rodney M.
Darling has
become
associated
Moors & Cabot, 11, Devon-
directly
policy would be
a
Moors & Gabot, Boston
world
The
multi¬
of currencies,
lateral convertibility
i
and
trade
with
ing the currency deadlock has also
condemna¬
not received summary
as
reluctance
to
bear
to
on
Dominion's
bring
wards
exchange
which
has
been
attitude
soul-satisfy¬
and
lifted their
arms
in
wor¬
that if
they
sincerely
sought
spiritual
comfort, there was inherent in
their very act a promise of peace
and happiness they could attain in
manipulation
on
Canada's vital
We of this
York and Boston Stock
Exchanges,
Manager of the Trading De¬
partment.
Mr. Darling was for¬
as
merly in the trading department
Pont, Homsey Co.
GOVERNMENT
of du
PROVINCIAL
MUNICIPAL
CHICAGO, ILL.—Barclay In¬
Co., 39 South La Salle
Street, will remain open Tuesday
nights until 9 p.m. to serve their
vestment
CORPORATION
clients who
their offices
ness hours.
CANADIAN STOCKS
may
enter
Monroe
find
Street
building
side
at
on
122
the
West
ringing the bell
and being admitted by the night
watchman, since the 39 South La
Salle
Street
is
entrance
closed
The firm also announces that it
will. be
during
WALL STREET
closed
June,
promise
is a
to
or
forbear
to
do
a
specified
act—a covenant—to iafford reason
expect—to cause assurance."
to
In
all day Saturday
August and
July,
our
daily life we have had
yardstick by which
or
weigh our
transactions in work, agriculture,
to
develop
we
a
evaluate
can
trade and
commerce.
Some people
call it money but more frequently
it is credit expressed in terms of
money.
this
after 6 p.m. *
INCORPORATED
"a
-
Monroe Street, by
A. E. AMES & CO
says
It is evident therefore that
yardstick must be stable, un¬
varying, and that the government,
whether it so expresses itself or
not, has a sacred pledge of honor
basis.
to maintain it on a stabilized
September.
NEW YORK 5,
problems we face
difficulty of over¬
results of
broken
promises in the field of money
exchange and credit. You cannot
of
One
the
transact business with any assur¬
when
ance
*Keynote address of Mr.
'Robert Crookstont Dead
WORTH 4-2400
NY
1-1045
evaluate
must
you
.
and commerce in a
currency
or
exchange that has
little
stability. or
certainty of
trade
your
for
rewarded
are
Robert R. Crookst'Ort, partner in
( Singe, Deane
'
burgh, died
on
& .S:cribn;er,
May 121
*
Pitts-
mann
Hei¬
at the 53rd Annual Conven¬
tion of the National Association of
Credit Men,
May 16,1949.
Atlantic City, N. J.,
in
right or wrong
their puzzlement in trying to
doubt
the
understand
of
our
people is beside the point. However, there can be no question as
to
why many people doubted.
They doubted because of the fail¬
government to fulfill prom¬
of
ure
ises in the past.
Not
but many times our
once
if your
dubious
You cannot farm
would
or
living successfully
a
labors
mankind.
welfare of
people have been promised a bet¬
ter way of life and a more peace¬
ful
world
atmosphere
if they
.
value.
the
for
Whether they were
today is the
coming
the
in
work
only
accept
this
that
or
valueless currency. This prob¬
or
lem
is
for
the
than
more
a
financier
or
plan. But though the plans were
problem "adopted, the fulfillment of the
'the cen¬ promises was never realized.
banking authority.
tralized
is
It
problem of the working man and
woman, of the farmer and busi¬
nessman and the people living on
fixed incomes. It seriously affects
a
plan for the future. It.
is hard to
potent force for- unrest, since
gives dictators the chance to
win a following.
a
it
We of this nation are not blame¬
less in the
situation.
present world monetary
We
deliberately
de¬
You will recall in the
our
posts for peace and happiness.
were soon
continued
vised
for
the
monetary yardstick.
a
This
promise made by our govern¬
ment and fulfilled by our govern¬
ment in most of our history was
broken.
forgotten and the world
in its misunderstand¬
These promises were mere
of paper. Next we had the
treaty of Versailles. Scarcely had
the ink been dry before it was
realized that instead of this docu¬
ing.
scraps
made
upset
No
can question or did question
their idealism. But the 14 points
one
ment
to
the 14
points. They were the command¬
ments that were to be the guide
only
gold
history of
times we were given
sound standard man had ever de¬
valued
insuring
for
peace,
It
unrest.
it
was
a
really
false
promise to victor and vanquished,
The Dawes and Young plans fol¬
told,
lowed. These plans, we were
rebuild
time permit o.ther
would enable Germany to
Many questioned the right- and at the
same
government when it did nat^ons to rest secure
in the
this. Expediency is never an ex-- knowledge such plans would pre¬
cuse for broken promises.
vent a return of militarism. Irres¬
of
our
You have throughout
the world
of exchangeand monetary values that is pre¬
venting a sound world recovery
and delaying a return to peace.
Arbitrary values that are unreal¬
today
istic
confusion
a
been
have
placed
on
the
of different nations. These
values are a fraud upon their own
money
pective of how well conceived by
the authors of the plan, the plan
failed.
/
The agreement to scrap arma¬
ments was presumed to be in¬
controvertible evidence of the ar¬
rival of
all
but
an
understanding world—assurances
proved
and we faced the fact
these
erroneous
people. They are a bold-face lie; that in acting in good faith we
they time and again shatter* the made ^ourselves ridiculous in a
faith and liquidate the industry world of militarism.
and thrift of men and women.
The League of Nations, nobly
resort to a managed conceived, went the way of other
efforts to establish peace.
With
economy in which you regiment
people and defraud them of their due ceremony we celebrated the
savings' through' constantly de¬ signing of the
Kellogg-Briand
valuing managed currency, either Pact. Our celebration was fol¬
directly by government edict or lowed by gathering war clouds.
by the inflationary consequences,
Before and during the recent
of your program, you reap a har¬ war we told our
people that Lendvest of social unrest, class hatred
Lease would tide the war victims
When you
and
national-animosity. You build
faith
for wars and for the loss of
in
promise is a
a
broken
pathway that leads to
government.
Your
lower standard of living
life
N. Y.
there
how
understand
not
possibly be any skepticism
a
plan they contend is so
obviously in the interest of peace
and
/ Money and Credit
upon
our
declaration,
verbal
or
written,
which binds the promisor to do
it hard to visit
during regular busi¬
Tuesday night Visitors
the
In
Webster
Barclay Open Till 9
generation rely
nation we are
promised
freedom
and
oppor¬
tunity if we conduct ourselves so
as to be worthy of it. In some na¬
tions no such promise is implied,
but rather, the lying assurances of
a
better way of life through a
state-controlled society.
promises.
CANADIAN BONDS
well
other way.
no
shire Street, members of the New
full
knowing
ship,
Rodney Darling
TWO
the
attributes of religion as we
it now, primitive man and
woman
previous occasions, provides suf¬
ficient explanation.
knew
we
know
to¬
demonstrated
of
Field
in
Promises
Broken
is
before
interest
of the world. Some
leaders
of
government
about
their daily life and it makes for
such chaos and confusion that it
ing
Perhaps the
sterling.
realistic
tories with his sinister motives in
to the long range
could
to
mind. Of course he kept them em¬
wholesomeness
pressure
any
false premise.
Long
might have been expected
I in view of the Dominion's natural
tion
a
promises of Mussolini and
Stalin were equally vicious. Stalin
and his gang, are today offering
their own false promises.
Canada
that
suggestion
these promises,
on
Other
might take the initiative in break¬
con-
Pact.
peace
the
suffer
people- will continue
throughout the world.
ployed, but that wasn't the kind of
employment he promised them.
contrary to the Dominion's inter¬
ests and its own avowed objectives
—freer
they operated
Hitler assured
his people that he would keep
them fully employed. He did so
by preparing for war. He em¬
ployed them in armament fac¬
of
was
the
could
.
v
have
we
Atlantic
North
the
of
is
there
this
by comparison.
more
honesty in
protection of inviolable rights,
the
given action or set of con-j
ditions.
Irrespective of the form ill
A
recent weeks
In
eluded
people
tortured
and
respect it.
to avoid a
have en¬
of
a
fulfilled.
way
Many people were not convinced
written, expressed or implied, oit
it may be a natural consequence
of
govern¬
Until
Heimann
than
broken ot false promise.
A
A
horrors seem' mild
,
tragic
a
respect.
through broken promises in a way
that
would make the medieval
.
is
a
Nations
conflict.
slaved
prom-,
There
seeking
are
third
society
a
respect, it must by its
earn
the worst wars in history and now
sacred
civilized,
a
conduct
Mankind has a right
ment, like an individual, must be
to
expect governments to labor
careful in its promises. It must
for peace but- broken and false
Tealize it is expected to fulfill
promises have brought us two of
them if it wishes its people to
veloped. There
is nothing
more
taken
be
not
pledge that should
a
and must be fulfilled. If a govern¬
ment seeks
broken promises
of yesterday.
misunder¬
standings
should
and
lightly. It is
world today
a
promise by government can¬
not
government.
living in
are
that reflects the
and
s
A
otherwise is to cheat and
defraud and to destroy the faith
forgotten, the
world's prob1
by per-
promises." As these promises were respected1 and followed through
on
and
Canadian
the
before
sound tions, this
'
not
or
has relied
!
over -
,f ormance,
trade restrictions.
Whether
who ruled
universal;
exchange
live by, points out
this generation relies on promises, and promises are what we
days of the early Romans, when they erected temples to Jupiter as the god
oaths, vows,! conscience and the sense of obligation and.right dealing, man
Since the
con¬
stands
the Dominion
that
to
more
port prices as a result of currency
devaluation would also place U. S.¬
European
inevitable
over
artificial
the principal
stumbling block in the path of
freer
intra-European
trade.
In
turn it is now generally believed
that the lowering of European ex¬
constitutes
;
<'
field of money-exchange and credit. Attacks devaluation of gold dollar
as "upset of only sound standard man has ever devised as monetary yardstick," and cautions time has
arrived for government to be careful of its promises. Denounces farm support program, managed econ¬
omy and present socialistic trends as depriving people of just fruits of capitalism.
; matter of timing and degree. Competent authorities both here and
in Europe now no longer hesitate to state that the maintenance of
wartime
exchange controls and*
—
.
V;':
trade restrictions designed to dependence on foreign trade more¬
levels
" " : '
1
.
Association of Credit Men
broken government promises in
burning question of devaluation of certain European cur¬
rencies has reached the stage where it now appears merely to be a
The
maintain
By HENRY H. HEIMANN*
Executive Manager, National
,
i are
of
fear
levying
| confiscatory
would, if
and
what
and
suffering.
amounts to
capital
tax
a
You
a
that
immediately realized by
over
bring on a rebellion.
enable
them
to
move
ceased.
It did no such thing. We next de¬
vised UNRRA. That was to be the
final effort but it proved to be
but the beginning.'. Then we were
told a British loan would help
gallant ally to effect a com-
our
pl ete recovery. The. loan was made
but
when the - money nvas ex•
the people,
and
forward once the war had
;
(Continued
on page
26)
Volume
169
COMMERCIAL
THE
-Number 4804
FINANCIAL
&
CHRONICLE
(2175)
Let the Railroads Be
19
De-Regulated!
By ROBERT 15. McLOLL*
-
Lehigh Valley Railroad
In
•
dull and
a
largely static market'the bonds'of Lehigh Valley
Railroad have been jumping < around rather erratically in recent
"Weeks. Interest in this situation has centered around progress being
made toward consummation of a voluntary debt readjustment plan.
This is the first test of the Mahaffie Act passed last year in an effort
to
expedite railroad reorganizations.
The plan has the approval
of the Interstate Commerce Commission.
On May 10 it was an¬
nounced oy C. A. Major, President, that the terms had been ap¬
proved by more than the necessary 75% of each class of security
affected.
This naturally fostered hopes that consummation of the
plan would not be long delayed.
i;77 It
new
I would like this
-7
try, of which
that there
evening to explore with you the possibility that the railroad indus¬
all a part; may be approaching a significant new period in its history—
reasons for
believing great things may lie ahead—always providing we work
we are
are
for
fectly
tion is taking
place today in
now appears
the
tive
-who
concerned
the
over
,
•putting the plan into effect.
analysts who remember only too; well the harmful affect on Balti¬
more & Ohio of the extended litigation with respect to its voluntary
readjustment plan
a
few
years
ago.
al¬
de-
no
m a n
for
d
steam locomo¬
tives. Approx¬
imately
of
a
11
today
Robert
McColl
B.
i
d
few who fear that the plan
are
is
most
96 %
orders
are
for
s
e
1
e
electrics.
The
is not hard
reason
It has been
ization
to
find.
estimated that dieselAmerican
of
railroads
—
ft had generally been conceded that on consummation of the
costing something like $3V2 billion
-plan, Baltimore & Ohio would be able to. refund its senior mortgage —can cut U. S. railroad operating
bonds at a considerable saving in interest costs. By the time the costs at least half
a
billion dol¬
suit of junior bond holders had gone through all of the courts, mar¬ lars
a year, and perhaps as much
ket conditions had changed so drastically that the refunding was
as three-quarters of a billion dol¬
no longer feasible.
Prospective refunding of senior liens is obviously lars a year. The diesel-electric is
not a factor in the Lehigh Valley picture at this time. Nevertheless, a
powerful economizer.
the prospect of a possible long delay under present conditions of
Diesel Revolution Spotlights
uncertainty has tended to unsettle the market for the company's
securities.
•
"
•'
Possibilities
„
the readjustment plan was,
'As of the -end of last; year
the company had maturities, exclusive of equipment obligations, of
$45,354,000 falling due in the years 1949-1957, inclusive, of which
more than $32,500,000 was payable in the three years 1949-1951.
There
was not enough cash in the till or in prospect to meet these obliga¬
tions. The only alternatives were the present Mahaffie Act volun¬
tary extension of the maturities or the much more expensive and
lengthier process of a thorough reorganization under Section 77. On
the basis of past history it is safe to, pay that had Section 77 been
resorted to the end result would have been- far more drastic treat¬
ment for at least the junior security holders.
;
:
Obviously senior bond holders are not going to accept an exten¬
/ There can be no question but that
and still is, essential to Lehigh Valley.
>
„
.
.
concessions, and without some
sion of their maturities without some
the part of junior security holders. The latter after
benefit the most, from avoiding a drastic judicial ^reorganization.
sacrifice
on
all,
"As
the % diesel
But
revolution
is
doing something more. It has al¬
ready turned the spotlight on the
potentialities for mechanical
which
gress
exists
today
pro¬
in
the
railroad industry.
It's
like
shilling
pulse
Scotsman
a
to
7 You
finding
a
the sidewalk. The im¬
look fdr more becomes
on
strong—very,
the
work
being done to improve rail¬
road equipment today. The draw¬
ing boards are covered with de-
iigns,7Equally; important is the
work; being
done
to
improve
handling facilities. The economies
which may be possible through
sinking funds were established for the senior bond
757c of the interest on the road's junior mortgage
bonds is to be put on a contingent basis. This latter will minimize
i m p r o v e d materials-handling
the danger of the company getting into difficulties over, meeting its
methods are getting a great deal
charges in the future. The sinking funds will help to solve the ques¬ of attention
everywhere.
tion of future principal maturities. : Even with the possible delays
But the moment we start talk¬
concession,
a
holders.
Also,
the whole present process ing about
cost-reducing improve¬
materially to the road's credit stand¬ ments
through equipment and fa¬
ing and, thus, to the market appeal of its various bond issues:," '
cilities, we come up hard against
of litigation
there is no question but that
is constructive and should add
the problem of money—of capital
M. J.
Dodge, Well-
of
Doyle,
Marshall Jewell Dodge, former¬
with it—comes
problem.
Co.,
now
from
while returning
.7; "77");■,7. '77 ■
f ^Following his connection with
Bertron,' Griscom & Co.,' which
engaged in the operation and fi¬
nancing of public utilities,Mr.
Dodge became a partner in the
„;
1932.
-
"
•',"-*7:
-
v•:
>
it
It
General
in
Grant's cabinet.
President
the
get
Henry
•
Co.,
Inc.,
was
T. Mathews
elected
■
•
•"7;v7
director
a
of the Missouri Pacific RR. at the
annual
meeting held
St. Louis.
May- 10 in
77\:77^;: <-'7*:7;"
■
————
—i
l—i—.
-
A, A. Winner Joins
Hettleman Sc Co. ^
•;
-
7
"
Hettleman & Co., 1 Wall Street,
New York
City, members of New
York Stock and Curb Exchanges,
announce
has
firm.
that Arthur
become
•'
A. Winner
with
associated
" 7 "
7>' •'i
'
7
in
in the lowest
year
'20s.
The
refusal
people
the
*"'•'7
"■
Stake
I would like to suggest that
the
of
risk
to
their
American
savings
are
about
1,300,000
in who
any company or industry is not
evidence that they are either fool¬
ish
or
anti-social.
It
is
simply
when
getting
they
it
and
can;
from
equip¬
:
-
certainly not getting
through the securities markets.
is
doubtful
whether
amounts
any
con¬
of
roads at reasonable rates todayeven if it were wise for them to
the
lies much closer to home.
answer
There
in
this
railroads
and
as
a
who
stake
today
country
and
men
employees
are
women
America's
of
have
in
least
at
the
growth*
survival, vigor and security of the
evidence that, a basic situation railroad
industry as any other
isn't right and needs to be fixed.
group in the country. After all,
Risk capital will be attracted to
60 7c
of the costs of operating a
any industry—and create jobs and railroad are
wages. Furthermore,
security.
when, earnings, divi¬ these men and women are or¬
dends and
When
ing
them
of
spite
are
good.
stocks
two-times
at
some
prospects
railroad
are
are.selling to yield 10% in
of
large coverage;
when
whole railroads
are
great
ganized and vocal.
sell¬
earnings — as
when railroad
are;
In
addition,
stockholders
there
and
900,000
are
the
bondholders who have
1,000,000
equally
important stake in the welfare of
the railroads. It has
an
seemedi
never
priced in the possible to organize shareholders
market at less than their cash and
behind
industrial
projects,
but
rolling stock — so that plant is we must not underestimate their
being thrown in free — a funda¬ potentialities.
mental situation needs fixing.
And
there
are
other
groups
Two Sources of Funds Are Not
It
have
is
certainly not. satisfactory
only two sources of funds
when
available.
Equipment trust
good
only
for
buying equipment. Earnings—the
only other source of money for
progress — are today under con¬
stant
threat
from
a
variety of
sources. For example—
Rising costs which are not off¬
set promptly by rate changes;
Competitive conditions — which
are
certificates
are
-
often mean that
rate change isn't
a
solution to any problem because
the
business will
which
can
program.
Enough
survivaJ
roads.
certainly help in any
Shippers and suppliers
substantial
a
stake
and progress
of
Certainly all of
railroad equipment
in
in
us
the
the
industry have
big stake in a sound and
perous railroad industry.
a
With
the
rail¬
our
pros¬
help of employees, I
believe wonders may be achieved;
I say
some
this against a background of
experience. We at our com¬
set
a very high value on the
cooperation,
and
under¬
standing of all our employees. We
pany
help,
want
stand
them
the
to
know
problems
and"
of
under¬
the
com¬
elsewhere if pany. We don't ever want it said
higher rates are actually put into that they failed to
help the com- >
effect.
pany and themselves because they
.Taxes — .part of which go to didn't know the facts.
The same
go
subsidize
competing
forms
of thing is true of shareholders.
:
transportation;
These Objectives Are Important
Wage increases if they are not
earned—no
matter
r
how
To All
well-
deserved they may seem.
If
we
are
to
have
the
help of
Only recently, as you know, the large groups of people, we must
railroads of this country accepted have objectives
important to them.
the recommendation of the Presi¬ I think we have such
aims for
dent's
Emergency Board, created
under the Railway Labor Act, and
will, establish a 40-hour week for
a
employees,
on
top of a 907o increase since 1939.
It will cost railroads something
like $640,000,000
tober,
a
got
First, greater security;
Second, better earnings:
Third, greater opportunity
for
growth and advancement.
But these things can be achieved
Last Oc¬
only by giving customers of the
operating
railroad faster and better service
wage
increase
a
$95,000,000.
The
wage, increases
three-quarters of a
of these
approaches
two
1948 the
railroads of this country had a net
dollars,
income of only
We Have
holders
'
year.
to
billion
security
railroads—
remember,
you
amounting
total
for
and for all associated with Ameri¬
can
,20yo increase. It comes
employees
present time,
mortgage
bonds could be sold by most rail¬
,
Postmaster
railroad
are
siderable
was
,
the
They
V■ j:
>
active in the formation
of the Todd Shipyards Corpora¬
tion, becoming a director in 1917.
Resigning" his
directorship .in
-1936,
Mr.
Dodge
beeame -the
European representative • of > the
Todd Shipyards Corp.
■.
777-7
V ; Mr. Dodge, a native of Hartford,
Conn., and a graduate of Yale in
1898, was a grandson of William
Earl Dodge of New York, philan¬
thropist, publicist, and founder of
Phelps, Dodge & Co., now Phelps,
Dodge Corp.
Mr. Dodge was a
grandson of Marshall Jewell, four
-times Governor of Connecticut,
American Minister -to Russia and
.-He
a
constantly improved
ment trust certificates.
•
Exchange firm of
Palmer & Co. until its dissolution
in
At
earnings
they are
NeW York Stock
s.
can
American
railroads are getting money al¬
most exclusively from only
two
sources. They are getting it from
-
England, after an illness of
six weeks.
"Where
financial
a
equipment?
Berfron & Co., Inc.,
died last Sunday
-
money to buy
ly a member of the New York
banking firm of Bertron, Griscom
&
the
dividends
of the '40s equal to the
year
fect
.
1
pay
1,300,000 Employees Have Great
a
ization, problem—or at least right
&
O'Connor
not
as
non-operating employees, begin¬
ning September 1. This is in ef¬
CHICAGO,' ILL. -4' /Henry; T. along
Mathews
aid
railroads
investment. Ahead of the mechan¬
Henry T. Mathews, Dir.
Known Banker, Dies
of
L
.
the
but
dividends paid
a
strong.
familiar with
very
all
are
any
bonds
"vanishing race."
The
whole
-
reciprocating steam locomotive is
a
the
of
mo¬
power.
There
Announcement of the, litigation naturally dampened speculative
enthusiasm that had begun to appear when the results of' the voting
by bond holders had been announced a couple of days before. While
might be upest, there are those
prospect of possible long delays in
In this connection there are many
field
railroad-
constitutionality of the Mahaffie Act. Close students of the his¬
tory ol railroad reorganization legislation see little danger that the
Lehigh Valley reorganization will be upset by the courts. Similar
voluntary reorganization legislation has withstood the court test
of constitutionality in the past.
are
clear
revolu¬
a
:
'40s,
<$
is per¬
that
the
there
them.
11
that these early hopes for speedy consummation
.of the readjustment were at least premature.
On May 12 a ^ small
holder of one of the underlying liens filed suit in New York Supreme
Court attacking the plan. This action may well be carried through
the highest courts and presumably in the long run will determine
?.
President, American Locomotive Company
railroad financing, despite need for additional improvements, Mr. McColl lays
cause
to inadequate return on railroad capitalization and unfair national
transportation policy. Says -V
railroads are barred from good competitive practices granted to other carriers, and calls for
releasing
them from shackles which are holding back their
development.
Noting absence of
and
in
$70$ million.
Job to Do with People
a
at
lower costs—because if
not
first
take
of
we
the
do
cus¬
competition
trucks, buses, planes, water
transportation and pipelines, we
from
can't
take
anyone
care
of employees or
else. Our aim must be to
given investors
prosperous,
It appears there
care
tomer in face of hard
a strong, solvent,
dividend-paying rail¬
is some other road
industry — one that is at¬
job to be done before we can do tractive to risk
capital—because
either the financial or the me¬
if we don't attract money, we can't
chanical job.
What is it?
I would
like to suggest that we
have modernization and low casts;
we can't compete
successfully with
other forms of
transportation; we
business; and em¬
ployees cannot have security, good
a human problem.
7
7 We Have a Financial Job to Do
earnings
and
opportunity. The
I certainly agree with all who basis for
7
security for all must be
They are certainlly not doing
any financing — although what say that we want a sympathetic a dynamic, strong, aggressive, for¬
they really need more than, any¬ understanding on. the part of the ward-looking industry.
American
people. The railroads
thing else is more risk capital. The
Nationalization Proved Failure in
trouble is our railroads have been are important to America—-tre¬
World War I
Try to
able, to distribute only about 257c mendously important.
At this point, let's take a look
an
America
without
of their earnings in the form. of visualize
at. the whole broad question of
dividends in recent years. Their railroads..
But
I
think that we cannqt government ownership, national¬
earning power recovered during
count on the general public to ization, regulation.
increase their debt.
first have
a
—that
have first and foremost
we
job to do with people
^
"5 *An address by Mr. McColl ber
fore
Meeting of American Society
of Mechanical
Engineers,. Chicago,
111., April 27, 1949.
can't
get
the
,
Do these offer roads to security
rise up .and solve our railroad
problems fpr us.—qr even to take for all—to a dynamic, strong, ag¬
time out from their busy'lives to gressive, forward-looking indus(Continued on page 31
study the railroad situation.
..
20
COMMERCIAL
THE
(2176)
&
FINANCIAL
CHRONICLE
Thursday, May 19, 1949
be transferred to the general
together with any remain¬
may
A Breath el Fresh Air
Our
Reporter
Governments
on
''There is
send
of short-term low coupon secur¬
ities in the mid-year operation has again put off changes in debx
policy which seem 10 be inevitable, especially in the not too distant
future..
The demand side of the eligible market has been strength¬
ened and will most likely be further bolstered, while the supply side
:
Treasury through the
.
use
If Federal' and all
taxables
.
.
other holders of the three longest eligible
continue to
to
operations.
.
.
for
shorts
substitute
in
longs
lations. We send
ly acceded to
United
in the government bond market.
ECONOMY AT BANK'S EXPENSE
to
keep
debt
payments
the
to
"■
deposit
banks
despite not the slightest semblance of
budget.
still
down
goes
registered
.
.
among
holders
many
of
1
its
once
Robert A. Taft
proposed
the
June
2s.
.
.
^
iA'"
PRICES
BELIEVED
the
1934.
Federal Reserve Amends
.
to
keep the last three maturities, the 23/2S due 1956/58, the 21/4s due
3956/59 and the 2^s due 9/15/67/72 from getting out of hand tem¬
porarily.
...
However, the substitution of low
for higher income obligations cannot
(i
easy
coupon
on
go
market conditions, because the
money
short-term issues
indefinitely under
deposit banks which
losing other earning assets, must sooner or later seek those
longer-term higher coupon bonds in order to bolster declining
are
;
Since the supply of the latter obligations is limited
being further reduced by refundings, the enlarged demand
revenues.
and is
for
.
these
tations.
SAVINGS
.
.
securities
will
in
time
be
reflected
in
higher
quo¬
...
BONDS
Purchases
AND
MONEY
MARKETS
of
savings bonds in the Opportunity Drive by com¬
mercial banks, to make it a
success, probably mean much to the
monetary authorities, but would that be the best thing for the money
markets?
To be sure, investible funds would be absorbed and
...
there
would
be
shift
from
marketable
non-marketable debt,
eligible taxables would
be temporarily taken out of the
market, despite the lack of enthusi¬
asm for non-marketable securities
by most institutional investors.
and
some
a
to
of the demand for the three longest
Nonetheless, it is believed in many quarters that the most
effective method of offsetting the increasing demand for eligible
obligations is by at least maintaining, if not adding to, the
floating supply
of marketable securities, with maturities and
rates that need not be -as costly as would be the
opening up of
the Savings Bonds to commercial banks.
*
.
.
.
ing syndicate or group. However,
Section 11(d)
(1) does not pro¬
hibit an extension of credit by a
it de¬
as
most likely be rolled over into 1%S;
September 2s, a small issue, will be the next high coupon
obligation to come up for consideration.
Too many things can
happen between now and then to master-mind what the monetary
the
.
authorities could do.
situations, and the
the authorities
maturities
tions.
.
.
.
.
are
.
Nevertheless, here is another
.
one
of those
in which it is handled might indicate how
going to take
are
which
.
way
.
sizable
of the December and the 1950
care
and
involve
this
obliga¬
coupon
•
AND
CREDIT
CONTROLS
The chances of the Federal Reserve Board
or
30, do not
seem
reserve
to be any too good.
and
.
.
.
getting
an
extension
on
June
Declining business conditions,
margin requirements and
more
liberal terms under
Regulation W, the latter three at the initiative, of the Board, do not
,
make
convincing arguments for the extension of inflationary
trols when there is
no
inflation to be controlled.
if it
to
by
exercising
a
one
con¬
to
h<ve
the
reserve
.
...
If thsi provision had been
e'imiffa'ed, there would most likely not have been
pcTJcn to the extension of the interim legislation.
stock
right to acquire
such stock which is evidenced by
warrant
certificate issued
or
to
expiring within
90 days of issuance, provided that
(1) each such acquisition under
this
and
subsection
shall
treated
be
loan
when
made shall not exceed 75%
of the
separately,
the
and
current market value of the stock
so
acquired
as determined by any
method, (2) while the
borrower has
anv
loan outstanding
under this subsection
withdrawal
or
substitution
of
be
permissible, except that when
the
loan
has
become
eaual to
or
less than the maximum loan value
of the stock
tion
1
in
as
the
prescribed for sec¬
supplement to this
regulation the stock and indebted¬
thereafter be treated as
ness may
.
requirements of the member banks
anplv to all banks in the country.
a
subject to section 1 instead of this
.
of the most potent forces working against the
request by the Federal authorities for these controls, is the attemot
enable
is to
acquire
subsection, and (3)
Probably
of
stock used to make such loan shall
broadening of the temporary credit controls that expire
lower
regulation
borrower
at the bank
BOARD
SEC comments
as
much op-
or
group,
ly
pro¬
direct¬
indirectly arranged for by a
subject to Section 11(d) (1).
or
person
The Commission's Rule X-11D1-
change.
on
syndicate
selling
no
loan shall
be made under this subsection at
time when the borrower has
any such loan at the bank which
has been outstanding more than
any
nine
the
Federal
Reserve
System
an¬
now
from Section 11(d)
on
reasonable
higher
Governors
of
the
no
RESERVE
than
exempts certain securities
(1). Paragraph
May 19, that effective Monday, May 16, 1949, the Board (d) of that rule provides an ex¬
of Governors has amended Regulations T and U (margin require¬
emption from the credit prohibi¬
ments), increasing from 50 to 75% the loan value for securities ac¬ tions of Section 11(d) (1) for the
quired through the exercise of-^
benefit of original holders of sub¬
subscription rights, whether ex¬ to section 1. In order to facilitate scription
rights.
Certain other
ercised by the original holder or the exercise of a right under this
exemptions are contained in the
by a purchaser of the rights. The subsection, a bank may permit the other provisions of Rule X-11D1amendments
specify
that
such right to be withdrawn from a loan 1.
By reason of these existing
transactions shall be set aside in subject to section 1 without regard
exemptive rules of the Commis¬
to any other requirement of this
a special account and that substi¬
sion, a member of a selling syndi¬
tutions i or withdrawals may not regulation."
cate or group is not prohibited
be made in the account. No new
The Amendment to Regulation from extending credit to original
credit may be granted to a cus¬ T is as
holders of rights, but the existing
follows:
tomer on the preferential terms
under the Commis¬
Effective May 16, 1949, Regula¬ exemptions
if such a credit has been outstand¬
sion's rule are narrower than the
tion
T
is
hereby amended by
ing more than nine months with¬
amendments just adopted by the
striking out section 6 (I) of said
out being changed to the 50% ba¬
Board of Governors of the Fed¬
regulation and by adding the fol¬
sis generally applicable under the
eral Reserve System in that the
lowing subsection at the end of
Commission's rule does not ex¬
regulations.
section 4 of said regulation:
The text of the Amendment to
empt extensions of credit to trans¬
"(h)
Special subscriptions ac¬
ferees of rights.
Regulation U reads as follows:
count.—In a special subscriptions
The Commission requests com¬
Effective May 16, 1949, Regula¬ account a creditor
may effect and
tion
U
is
hereby amended by finance the acquisition of a reg¬ ments and suggestions* on the
changing section 3 (p) of said istered security for a customer question whether, in view of these
amendments and the purposes of
regulation to read as follows:
through the exercise of a right to
Section 11(d) (1), it should adopt
c<(p) A loan need not comply acquire such security Which is
with the
other requirements of evidenced by a warrant or certifi¬ a similar amendment to its ex¬
nounced
Board
stockholders
The July certificates will
so
purchaser.
by any broker or dealer
a
member of such a
or
vided that the credit is not
securities
1
The
a
JULY AND SEPTEMBER MATURITIES
,
warrant
broker-
participated within the preceding
six months as a member of a sell¬
area
acquired through subscription
rights from 50% to 75% and extends same privilege to subscription
.
.
lk % certificates.... Sales of the longer-term higher yielding eligibles
by the Central Banks along with switches and swaps out of them
by non-bank holders of these obligations may be substantial enough
Section
credit for a customer on any
security that is part of a new issue
the. distribution of which he
Margin Rules
a
1
to
in
We hope it is received
on
Subject
dealer to extend credit to or ar¬
other
Increases loan value
Exchange
certain
11(d) (1)
Securities
of
of
any
11(d)
range
INEVITABLE
Easier credit conditions that will mcst likely get easier, do pose
problem to the eligible section of the government bond market,
despite other controls the monetary authorities have, such as the
opening up of the non-marketable F and G obligations to the com¬
mercial banks.
The supply of higher coupon marketable bank
issues will be further depleted when the June 2s are refunded into
Section
makes it unlawful for any
1
be.
to
serves
exempt
to
from
limitations,
glaring inconsistency and shake loose
for many a moon.
a
operate
Act
%
Here is the first breath of fresh air in this
.
not
do
transactions
understand.
bank
HIGHER
to
by the Securities
required for the acquisition of
registered securities through the
exercise of short-term warrants
philosophy which seems
guided its Spanish policy up to this time."
to have
Accordingly mild disappointment is being
.
weak¬
—Senator Robert A. Taft.
Although not entirely unexpected, it was believed in many
spots that the maturing 2s would be given a somewhat longer,
higher coupon obligation than is being offered to them in the
coming operation.
statement re¬
and Ex¬
change Commission, the Federal
Reserve Amendments of Regula¬
tion T and U to reduce the margin
According
leased
from the Communist-front
on,
...
>
SEC Issues Statement
"Certainly, the State Department should rectify
at
in the rest of the
economy
tion."
(1)
t.
v.
.
.
Nations
any
requirement of this regula-
other
'
:
to-4
regard
without
account
resolution in the
a
sistent and difficult to
Refunding of $5,315,135,000 of June bonds and certificates with
one year
1%% maturities keeps intact the refinancing pattern +h'
Treasury has been using, which increases the short-term floating
debt of the Federal Government.
Nothing new has been added to
the picture so far, and the apparent obsession of the money managers
.
provisions of this section,'£
may permit the right tp
be transferred from a general ^cfcourit to the special subscription^;
the
by
Poland calling on the members of the United Na¬
tions to withdraw recognition from Spain, and since
then the Administration's policy has been incon¬
price stability
as
violently disapprove.
"Several years ago, we
right in accordance With
a
creditor
government
we
dxei'r
facilitate the
"In order to
cise of
.
Commercial bank ownership of higher coupon bonds that are
callable in the next year or so is so far in excess of the total avail¬
able supply that unless they are given something other than low
going to be any such thing
becoming eligible for transfer to
general account.
the
other dicta-
tors whose form of
Vy
income shorts there isn't
curity which has been held therein",,
more
than nine months without
present
Ambassador
an
to Stalin and
many
refunding
.
of the
l
there would s<ill not bs enough to go around, if the Treasury is
going
Whether the Amer¬
bearing on the question of
diplomatic recognition.
!
"The United States policy has
never
demanded that foreign
governments conform to Amer¬
ican political principles before
we will establish
diplomatic re¬
to sell all of their bonds to the commercial banks,
were
,■
"(3) No security may be ac¬
quired in the account at any time
when the account contains any se¬
no
by the retirement of the higher coupon marketable
issue in this refunding.
Stop-gap and temporary measures by
the authorities may be sufficient to keep prices of longer eligibles
within the limits of a stable market, but this will not work too long
unless the supply of higher income bank obligations,
preferably
marketable ones, is increased.
...
Ambassador to Madrid.
an
people approve the policies
Spanish Government or not, has
has been reduced
.
reason
no
ican
.
.
ing portion of such debit; and
in the world
why we should
grant full diplomatic recognition to Spain and
not
By JOHN T. CHIPPENDALE, JR.
The
account
months
eligible to be
without
treated
becoming
as
issued
cate
and
stockholders
to
emptive rules under that section.
expiring within 90 days of issu¬
ance
and such special subscrip¬
tions
the
shall
account
would be
subject if it
eral account except
*
subject to
which it
New Orleans Bond Club
were a gen¬
Holds Annual Field Jay
be
conditions
same
to
that—". ; f
"(1) Each such acquisition shall
be
treated
separately in the ac¬
count, and prior to initiating the
transaction the
tain
creditor shall ob¬
deposit of cash in the
a
ac¬
count such that the cash
deposited
plus-the maximum loan.value of
the
or
securities
so
exceeds the
giving effect to
acquired
subscription price,
a maximum loan
so acquired
of
75%
as
sonable
of
their
current
market
determined by any rea¬
method;
V
"(2) The creditor shall not per¬
any
withdrawal of cash or
securities from the account so long
mit
as
there is
account,
a
debit balance in the
except
that
debit connected with
when
the
given
ac¬
quisition of securities in the
ac¬
a
count has become equal
than the maximum
such
securities
as
to
or
less
of
—
The
Orleans will
New
field
annual
their
hold
.LA.
;ORLEANS,
Club
day
on
May 30 at the Metairie Country
Club.
man
W.
of
announces
Hildebrand, Chair¬
C.
the
equals
value for the securities
value
NEW
Bond
Field
Day
program,
that tickets may be ob¬
tained from Charles Lob.
A feature of
golf
the
tournament.
tree, Steiner,
are
ment-—Louis
and
a
a
.
Mine-
Joseph
Co., is in
Rouse &
charge of this event.
agenda
/
day will be a
Also
horseshoe
on
the
tourna¬
Chairman;
Klien,
swimming meet, of which
George Riviere is Chairman.
Claude
Derbes,
Couturier
and
Derbes, is in charge of the drink
loan value of
committee, and Arthur Keenan is
prescribed for
Treasurer of the Finance Commit¬
subject1 general accounts, such securities
tee..
•
V-
Volume
COMMERCIAL
THE
Number 4804
169
Szymczak Opposes Oold Legislation
gold is
stability.
monetary policies than aid in maintaining economic
proper
Quoting frctn 1947 Annual Report of Federal Deposit Insurance Corporation, in which inadequacy of
■
In
address before the Delaware Bankers Association Conven¬
an
tion at Wilmington, Del.,
the
Board
himself
■
j
on
May 12, M. S. Szymczak, a member of
Federal Reserve System, expressea
opposed to legislation which aims to restore a free market
ana
free cir-<$
jAi;
A- A-VTA1;'.,—1
as
•
bank
-
of the
Governors
of
of
culation
capital is called
-
Federal Reserve banks to acquire government securities, together with interest
Reserve notes paid to the Treasury, constitutes a penalty on sound banking. •
ments, used by
"
would
"It
appear
that
major
objec¬
tive
of
a
dangers would be re¬
duced, but the existence of a free
gold market would cause serious
foregoing
of their
mercial banks
impairment of the functioning o
w e r e
leg-
the
6V2%
assets'
only
and
less
than
the
ization of
21%
of
their
t i
a
on
o n
gold min¬
ing industry in
United
which
with the basic needs of the coun¬
United
been sub¬
try, without the disturbing effects
S.
has
Szymczak
ject
rising
to
costs while the
the
of
speculative
movements oi
cash and
than
States
gold into and out of
try would benefit, of course, only
in case the free market price of
free
gold market.
Demand for
gold for hoarding is not a reason¬
the
gold should rise above the present
able or
satisfactory guide to gen¬
eral monetary policies.
In pe¬
riods of depression, as was the
case
for example in 1933, there
surance
be a strong public demand
gold, the withdrawal of which
from monetary' reserves might call
for restrictive monetary policies,
although policies of monetary ease
are required to combat deflation¬
in
mention
at
It
the
may
outset,
be well to
therefore,
that it is not certain that the
mar¬
ket^ demand for gold would be
adequate
least
price, at
extended period, or
to maintain the ex¬
raise
to
for
ah
the
perhaps even
isting price except
as
official
Moreover,
purchases.
result of
a
as¬
suming that the mining industry
would be benefited, it would seem
questionable policy, considering
tne
welfare of the general econ¬
re¬
capital account to assets from
to 6.6% is almost entirely
the result of a disproportionate
increase in holdings of cash and
which would result from a
serves
may
for
ary pressures.
On
in a period when
the other hand,
prices of. com¬
modities and other earnings
"There are, however, much more
objections
this
to
proposal.
By removing controls
over
gold ownership and gold
"In
period of
a
flation, such
more
serious in¬
develop dur¬
as may
ing or after a war, there may be
trading, the proposed legislation a strong demand for gold as some
would deprive the government of people
lose
confidence in the
a key instrument in the mainte¬
maintenance of official parities of
international
of
nance
stability,
control
monetary
ability
its
namely,
settlements
gold
to
between
relative
currencies
Should
other currencies.
then
gold
to
a
or
change
free
would have bene¬
in such parities, a
occur
this country and
market for gold
and
fited those who had deserted their
foreign countries
thereby to eliminate capri¬
cious and
speculative gold
move¬
obtainec
gold,
but
meanwhile, the
free
tually resulted in a premium mar¬ availability of this gold would
ket for gold in this country, the hinder the financing of the war oi
resulting uncertainty as to the reconstruction on as sound a basis
gold value of the dollar would as possible.
seriously impair the usefulness of
International
the
Monetary Fund
to develop ex¬
mechanism
a
as
country's
and
currency
Also, if the legislation ac¬
ments.
concluded, therefore,
circulation of gold is
"It may be
that
free
more likely to be a hindrance tc
stability, and the effects the adoption of proper monetary
of the legislation would be incon¬
policies than an aid in maintaining
sistent with the efforts of this
stable and prosperous economic
country to promote exchange sta¬ conditions."
bility by participation in the Fund.
By leading to greater international
monetary instability, the proposed
action might have serious adverse
effects upon international trade.
change
Chicago Bond Club
To Hear Emil Schram
In¬
t i
Jos. Stagg
should
be
com¬
dividends and
the
from
sale
society that goes far beyond
the
immediate
gratification
of
bank
stockholders.
Diminished
earnings reduce the amount of
self-generated capital that may be
plowed back into banking. The
static or declining trend of earn¬
ings makes it difficult to obtain
new capital from outside
invest¬
During the same period the 30
companies whose secur¬
ities comprise the Dow-Jones In¬
paid
earnings.
in
1947
and
assets
quoted
value.
growing
vestors
in
6.45%
substantial
at
asset
of
the
degree that is disturbing,
and larger in¬
stitutional funds under competent
Mez¬
zanine Floor, of the La Salle Hotel
ize
value
monetary
the
their
of
national
currencies, and thus might retard
economic
recovery
in countries
this
where
concern
is
a
matter
of
vital
to the United States.
mand
for
from
countries
gold
uncertainties
may
be
where
De¬
expected
political
prevail "and
where
the value of local currencies is in
be held in the Illinois Room,
on
Monday, May 23. at 12:15 p.m.
What
Emil
Schram,
York
New
President of the
Exchange. His
Stock
will be: "Taxation With
Reference to Equity Markets."
subject
Association
The
of
Stock
Ex¬
change Firms is having a meeting
in Chicago on this date. Harold E.
Goodbody, President of the Or¬
The use of dollar ex¬
change in foreign countries to ganization and its Board of Gov¬
purchase gold would reduce the ernors will attend the Bond Club
ability of those countries to pur¬ meeting. In the afternoon Stock
question.
chase
goods from us and
tend to increase the
needed
'would
thus
demands for foreign aid under
Economic
"While
to
countries
the
United
benefited
gold
Cooperation
in
if the
States
market
this country
the present
efit would
need
which
the
program.
sell gold
would be
price for
rose-above
official price, the ben¬
bear
no
relation to the
and, in general, the countries
which would benefit the most
are
Brokers
tion
Associates,
with
other
in
coopera¬
Salle
La
Street
organizations, are conducting - a
meeting at 3:00 p.m. at the Chi¬
cago Stock Exchange where Mr.
Schram and Mr. Goodbody will
make
a
dress
special, off the record, ad¬
the securities industry.
Guests
for., the
luncheon
a
Co., Inc.
has
Wiltberger of Blyth &
which thereupon
reserves
the
dominant
wholesale
lose all
A
ket.
for
influence
the
in
government
bank
is
which
rates
not
able
properly
crease
mar¬
to
reflect
supply and demand of
funds. Why should we commit our
capital in an industry which is
always subject to price control,
government competition, and the
tions
of
substantial
por¬
of its assets?"
Character of As.„.*s
The
alleged
disparity
between
the increase in capital accounts of
insured
banks and
the growth
of
*A report given by Dr. Lawrence
Spring
nomic
Meeting
Council
Bankers
of
the
of
American
the
Association, French Lick
Springs, Ind., April 26, 1949.
"'
Eco¬
"
-.AAA
.
'
'.AA
a.AAvrrf
•
period
banks.
The
assessments
1947
were
one-third
the
of
index
74.9
No
that
insured
to
the
152.1,
Losses
the
is
assessments
In
to
student believes
this decline was the result
competent
natural
to be,
market
government policy.
During the
riod
forces.
on
and
gone
creased
war
and postwar pe¬
up.
from
Income taxes in¬
1941
$50 million in
$302 million in 1947. Salaries
and wages;. increased from $514
million no $947 million.
In 1941
salaries and wages accounted for
to
ft'T'Ml .intj;;!
rf'.r
-x
FDIC
and
deposit insurance
amounted to
expenses
one-seventh of
1%
of deposit in¬
Here
assessments.
surance
insurance
business
is
an
which
in
the
premium is equal to 700 times the
annual
loss.
Private
enterprise
'could
hardly do
In
worse.
total
1947
v
^
of the
FDIC including the administrative
expenses and losses were covered
times
The
expenses
by assessments.
income of
the
FDIC, aside
from assessments in 1947, amount¬
riod
losses
1933-47
million.
the
entire
amounting
pe¬
$26.8
to
at the end
of
fund
of
accumulated
than
more
total deposit in¬
for
The FDIC
had
1948
This should
million.
$43.3
a
$1.1 billion.
This cov¬
ered all the losses since organiza¬
tion
of
FDIC
the
Ac¬
times.
41
cording to the FDIC total losses
borne by depositors in commercial
banks closed because of financial
difficulties
during the
to
1865
entire
pe¬
amounted
1940
to
$2,230 million.
The FDIC already has on hand
an
accumulated fund equal ap¬
proximately to half the total losses
sustained
in this
period. ; of v 75
FDIC is further as¬
statute of power to bor¬
billion from the Federal
The
years.
sured by
$3
row
in
Government
emergency.
an
aggregate of accumu¬
fund and borrowing power
the
gives the
FDIC an established
capacity to meet losses equal to
twice the total of losses incurred
during three-quarters of a century
checkered American financial
of
history, including wars, inflations,
depressions, booms and extended
financial
and monetary
experi¬
mentation.
This would seem adequate pro¬
vision
for
anything within the
possible limits of actuarial
probability.
widest
itself
estimate
place
"During
AjA
of Risk
Estimate
FDIC
What
the other hand bank costs
of
losses
actual
total
1947
losses
lated
rates
Risk
and
relation
risk?
USBLS
an
'dis¬
dividend
banks.
What
Thus
The
dominant determinant of this de¬
cline in the rate received for bank
services has been and continues
of
paid to the
roughly equal
bursements to those who own' the
the
1934-47
charged customers
by banks in principal cities de¬
clined from 3.45% to 2.22% and
the average yield on government
securities from 3.18% to 1.95%.
have
at
to
attention?
secular declin¬
is the
ing' power of the dollar declined
40%. During the same period the
average
ask
risk and the
sterilization
growth
in¬
of 103%. The general buy¬
from
rose
the
of
money
calls
FDIG
the
During
earning power.
The rates
which banks charge are subject to
the
the
the
equities"
"capital
ing trend of money rates. These
constitute the price which banks
receive for the service they sell
immobilize large frac¬
to
retarded
first
The
their
are
fee of $3.50.
Reservations may be made with
S.
which
business is no
an investor.
Government
Federal
The
power
to
cordially invited at
Alfred
banking
savings
banks
and
approximately to 1%
capital funds of all
riod
Capital Growth
on
has
those
of
develop¬
will lead.
Brakes
tions of bank assets in the form of
speaker will be:
Guest
"The
can
ments
;
,
capital to risk As¬
allegedly necessary.
be no doubt of the goal
are
toward which these twin
longer attractive for
maintain
authorities to
confidence in, and stabil¬
would
-
which
There
professional management are re¬
ducing
or
liquidating
entirely
their position in bank stocks.
In¬
quiry has brought forth this an¬
A--
government in estab¬
those ratios of
sets
individuals
CHICAGO,' ILL. — A luncheon
of the Bond Club of Chicago will
eign
insured
to
net profits after
commercial and
compared to
by
assess¬
total
be
lished banks in order to maintain
a
swer:
under
the
of
insured
of
mutual
surance
capital
to maintain capital mar¬
trade in (gold
present
circumstances
impair the ability of for¬
"Moreover,;- free
were
million
taxes
to
government to borrowers. The
second will be the investment of
assessments
These
$114 million in 1947.
equal to 13.1% of the
ed
the
adequate levels.
gins at
the
growing needs of American busi¬
This inability to serve will
two consequences as imme¬
diate as they are clear. The first
will be the provision of credit by
capital which the FDIC implies is
necessary
provide
to
banks
FDIC
ness.
in¬
and
stocks
of
have
measures
indifference
of
ability
1948.
in attracting the added
difficulty
To
They
20
■
promoting
ments totaled
Stagnant capital will impair the
discounts
This
bank
to
ors.
banks with highly
find
their
stocks
Well-managed
liquid
62.1%
Dividends
out
of market val¬
amounted to 5.25%
structure of Ameri¬
can
industrial
Average
a
in
weighed.
Actual
cities—car¬
threat to the banking sys¬
tem and the
stock
of
be
FDIC in
ries
of
56.3%
added
insignificant. Dividends dur¬
1947 amounted to 3.3% of
astute
burden
must
of
confined to the great
ing
capital account.
the
the
amounted
system
policy
labor income.
$870
diminishing appeal of bank
stocks to investors—by no means
earnings, $3,414 million, to capital
account. The additions "to capital
their
in¬
of
declining rates of return for bank¬
ing service and rising costs that
The
only 42.7 % of their earnings
dustrial
,
It is against this background
such strength.
During the 10-year period 193847 insured commercial banks paid
from
rising
than the institutions
which compose that system. Only
adequate earnings permitting ac¬
crual of capital and attraction of
new
equity money can assure
pleted.
ue
a
margin of safety
ing
The Rest of the Story
of
!
;
relative
and
crease
service of clients and the
of the public, no group
or agency can have a greater con¬
cern for the strength of the bank¬
million while total assets
increased b.y $121,655 million."
account
47.8%.
absolute
welfare
$4,624
were
1947
The
proper
all insured banks increased by
out
.
which bank
capital provides for risk assets.
In terms of direct interest, the
to note that the ratio of
capital to assets on June 30, 1934
was
14.3%. During the interven¬
ing period "total capital accounts
context
real deterioration in
the
Lawrence
FDIC
The
securities.
not reflect
o n
1947.
The
IF does
government
Oor-
p o r a
in
this kind of price rise.
14.3%
Federal
Deposit
assets
generally to
rise,
omy, to encourage a shift of pro¬ there may be a shift toward such
ductive resources of this and other
assets;
demand for . gold would
countries into gold production to tend to be small and a free gold
provide gold for hoarding.
market would not act to dampen
fundamental
An¬
nual Report of
tending
are
the
says
in
government
The decline in the ratio
of
goes on
official price.
monetairy
the
in personnel costs has been
due in pait to a tight labor mar¬
ket, in part to a rise in the cost
of living and in part to deliberate
surance.
obligations,"
price of its product
has been fixed. The mining indus¬
Of
represented loans covered by Fed¬
eral Government guarantee or in¬
Government
States,
states
unueu
assets.
these
in
42.3% of total operating expenses,
$121,655 million asset increase in
this period, $85,036 million con¬
sisted of government securities or
cash
items.
Another $5
billion
other
assets
tne
M.
gold in official hands in
permits tnose
agencies to operate in accordance
me
the
crease
assets,
the period 1934-47
character of the in¬
during
ignores
of their
gold is to help
1
/
-
capital equities of banks remains a serious problem. Nearly 4,000
capital accounts, when examined in 1947, amounting to less than 5%
assets; 54 had less than 21//2 %. At the close of 1947, total capital accounts of all com-
total
s
<
''The smallness of the
government agencies respon¬
sible
for
monetary and credi'.
nolicies.
At present,, the central¬
i
Federal
on
insured banks had
the
proposed
serious problem, Dr. Lawrence points out large holdings of U. S. Government
a
obligations by banks provide sufficient margin of safety which bank capital provides far risk assets.
Lays inability to increase bank capital to low bank earnings and criticizes FDIC ratios measuring extent
of its risks,. Claims its assessments on banks are excessive, and contends higher bank reserve require-
*
not those most in need of financia
gold. Accord¬ assistance by the United States.
ing to the Fed-'
"If the price of gold did not gt ■
eral
Reserve to a
premium, but stayed i'irmlj
member:
at the official level, some of the
AvA-A,;. A
Vice-President, Empire Trust Coippany, New York City
;
.
21
Serious Problem
a
■A'; By JOSEPH STAGG LAWRENCE*
likely to be hindrance to adoption of
more
(2177)
Adequate Bank Capital—Not
Federal Reserve Governor tells Delaware Bankers Association free i
circulation of
CHRONICLE
FINANCIAL
&
does
the
FDIC
upon the risk?
the examination made
in 1947 examiners found that less
than
1%
the
assets of insured
of the
commercial
banks
standards
set
were
for
vestments."—Annual
(Continued
below
bank
in¬
Report
of
on page
32)
22
THE
(2178)
COMMERCIAL
FINANCIAL
&
;
CHRONICLE
Thursday, May 19, 1949
McCabe Upholds Broader Fed. Reserve Powers
Chairman of Federal Reserve Board tells Senate Banking and Cur¬
Utility Securities
of
;
Utilities
Middle South
controls, greater "elbow
a new
sub-holding
just being
company
further description may be of interest.
The stock is currently traded over-counter "when distributed" at
set up, a
15 V2.
The company will own the common stocks of the fol¬
ments
/
using
ALMNO,
initials of the operating
first
the
and
of
quests
In
company
powers.
testi¬
his
Chair¬
McCabe
mony,
million cash in the Middle South system. It now
likely that the amount will be increased to $18.5 million.
Assuming that the additional money is capitalized at a price around
17, this would mean issuance of an additional 500,000 shares, bringing
the total to 4,900,000. However, the exact number of shares will be
worked out in conferences between Electric Power & Light and the
gerate the role
SEC and it is assumed that a
from
4
'
■■■71
'■/
Net Income after Preferred Div.
and Minority Interest
Percent
—(000's Omitted i —'
1949
*2,622
—
and
expenses
holding
33
1,5-34
14
tary
deduction
"After
of
taxes
800
—
$8,621
$1.76
$7,024
23%
'$1.43
23%
•
Arkansas Power & Light operates under a rate for¬
whereby the Commission permits the company to earn 6% on
the rate base (approximately original cost). The company's earnings
last year were affected by a sharp increase in depreciation accruals
resulting from an order of the State Commission. Hence the Com¬
mission permitted them to take $1,089,000 out of earnings reserve
(previously set up out of earnings, considered surplus under the rate
formula) ana reinstate this as revenues. This amount, after adjust¬
ment for Federal income taxes, would amount to- about .14 cents a
it
Middle South stock.
However, there are several reasons why-
apparently be disregarded: (1) Arkansas earnings this year are
can
running comfortably above last year's (January net income was up
27%, February 12% and March 1%).
(2) The company has a very
good summer-load because of air conditioning, water-pumping for
the
to
make
year
had
reserve
a
fields, cotton-ginning, etc., and this year's load is expected
a favorable showing.
(3) New Orleans Public Service last
rice
special charge which is presumably nonrecurring—$600,000
civic improvements. It is understood that this reflected
for some special maintenance work. ,
a
for
reserve
"take down" as parent
company earnings about $1.20 or $1.25, which would be ample to
sustain .the proposed $1.10 dividend. Considering the fact that with
minor exceptions the Middle South companies produce electricity by
burning natural gas, and are protected by contracts running about
eight to nine years (after which prices for gas will increase rather
sharply) the system enjoys a good advantage over coal-burning com¬
panies, similar to that enjoyed by Central & South West, Southwest¬
ern
Public Service anct some other southern companies. In view of
It
estimated
is
that
Middle
South
seasoned,
"integrated" holding company equities.
should sell in line with other
Following
are some
comparisons:
Price
Indie.
Approx.
Price
Div.
imate
Recent
Previous
In-
Earns.
About
Rate
Yield
Period
Period
crease
Ratio
Share Earnings
and that
effort
Utils..
South
44
Central & South West
12
England El. Sys.
New England G. & E.
TWhen
!:8.8
3
9.8
1.25
11
8.7
1.18
5
1.20
20
1.76
*1.43
5.7
4.49
4.18
0.80
6.7
1.39
0.80
8.0
1.23
0.80
6.7
1.44
12
"Estimated.
23
::7.1
10
New
=
*1.10
*2.50
tl5V2
s
we
have made
take
into
fact
to
and
relevant
veniences
:
8.0:
8.3
distributed:
It
incon¬
or
those
on
}
.
satisfaction
take
from the fact that the many
of the
country
are
foundation
sub¬
require¬
and
^
all
can
every
circumstance,
imposed
_
earnest
an
account
regulations
to
Final Payment
Interest
CHICAGO, ILL.—D. Dean McCormick, partner of Kebbon, McCormick & Co., becomes a director
of
Glass
Inc., Waterville,
Fibers,
Ohio, to succeed his late partner,
Richard A. Kebbon.
mick
is
a
past
Mr. McCor-
Governor
of
the
Investment Bankers Association of
America
and
Exchange and
the
a
Chicago
Stock
past President of
The Bond Club of
Chicago.
on
Panama
Coupons of 1943
National
of
New
York,
as
fiscal agent, is
notifying holders of Republic of
Panama
35-year
5%
external
secured sinking fund gold bonds,
series A, due May -15, 1963 that
The
there
is
City
available
at
Bank
the
bank
account of in¬
terest represented by the May 15,
1943 coupon and partial payment
on
account of the Nov. 15," 1943
final
payment
coupons.
on
Distribution
will
made at the office of the bank.
be
a
had the unanimous
-
...
approval of the
-...
was prepared and
submitted nearly four months ago,
which inflationary-
four months in
and
govern¬
have
situation
economic
the
gen¬
has changed in many- re¬
spects. In view of these develop¬
ments
I come here
today with
erally
changed ^recommenda¬
-We now feel that we will
somewhat
tions.
have adequate powers
on
a
more
than
now
riod ; immediately
se¬
ever
•
ahead
plicable to all insured commercial
banks.
*
our
credit
the
Reserve
essential to an
is
room
such
Federal
the
as
the
condition.
At
time, we must recognize
existing banking strength
same
that our
is in.part
the product of national
economic
and
day
financial
develop¬
since the mid-thirties.
ments
commercial
our
To¬
with
banks,
conditions
in
nomic
this
in
country
of high-level eco¬
interest
the
To carry out that
stability.
We must take into account
how much latitude exists to move
either direction
in
tion
that
near
future.
spective,
ample
for
investments in government secur¬
the
ities
limited.
tional
excep¬
liquidity.
capital
yet at
to
an
unprecedented
Their
result
a
accounts, while not
desired level in relation
a
deposit
growth
since
prewar
"Not
only
banks
but
as
do
Federal
unit
strength,
many
unusual
possess
the
our
Reserve
System,
result of the Banking Act of
a
discount rate
open
gree
to
assist
member
during
a
Our
powers
in
either of the
operations in the
market to exert the same de¬
of influence that they did
thev
or
To
war.
extent
an
hitherto not
on
to
contemplated, we are
greater reliance
requirements as a de¬
place
reserve
fense
against inflationary trends.
We are at the moment, however,
very
close
the
to
of
limit
that
power.
"We
1935, is in far better position than
before
needs
our
trend.
count On use
cannot
forced
the
are
direction, however, are
long as we have the
huge Federal debt to support we
large part a steady plowing back
of earnings.
before
of
powers
System
So
before
over
are
the
other
50% greater than
war,
representing in
years,
present
the
for
in this per¬
Viewed
Federal 'Reserve
the
the posi¬
from
correct
seems
downward
as
to
and
private
enterprise
re¬
pointed out that the mone¬
tary authorities should at all times
be in
position to carry out their
traditional
function; of exerting
effective restraint upon excessive
credit expansion in an inflation¬
a
period and conversely of eas¬
ing credit conditions in a time of
deflationary pressures.
He asked
be
if
present
we
do want
reduced
further
But.
concept
System
have
all
the
underlying
Reserve
to
at
deal
.
is
that
it
Congress
should
times residual power
with changing
flexibly
situations, not that it should come
Congress whenever an emer¬
gency
at the
exists.
backward
Looking
I feel it would
have been better for the economy
if • we
had-, been
in
a
position
situation,
applicable
The
to
President
all
insured
asked
banks.
that the
au¬
thority for the regulation of con¬
sumer
instalment
tinued in
credit
order to exert
be
a
con-
becomes the potential basis
multiple credit expansion., ; J
"Of course, the Federal Reserve
is
not
always
be
may
involved.
balance of
a
There-
buyers and
sellers in the market and orderly
conditions may exist without Feci-.
eral Reserve participation.
But if
there
at
sellers than buyers
are more
time, the Federal Reserve
any
must enter the market.
makes
It thereby
available
-reserves
the
to
banking system regard 1 ess of
whether such reserves are needed
for
the
If
stability of the economy/
money
supply (deposits
is already ample
the
plus currency)
vices
for
the goods
it
which
changed,
the
and
ser¬
be
ex¬
can
further
increase
serves
mainly
serves
inflationary
to
exert
ini¬
The
pressures.
on
re¬
tiative in all such operations rests
with the market and not with the
Federal
tem
Reserve.
Thus the
cannot/.always
Sys¬
the
control
availability of bank reserves. -It
accordingly be equipped to
vary the required amount of re¬
should
neutralize the in¬
to
serves
so
direct
effects
as
its
of
government
security transactions.
"I
;
come
to
now
,
most
our
con¬
troversial request.
The nature of
problem compels us to plead
the
that
the
authority
supplemental
in
respect
applicable to all insured
cial
Federal
the
Failure
System.
such
than
rather
banks,
members of
banks
will
to
made
be
reserves
commer¬
only
to
Reserve
to include all
seriously impair
the effectiveness of national mone¬
tary policy in a critical period.
It
will work to the detriment of our
whole
time
banking
when
the
structure
at
a
situation calls for
consistency and uniformity in na¬
tional monetary policy.
No cate¬
gory of com m e r c i a 1 banking
should be exempt to that call.
"We are not suggesting that the
riods
commercial
insured
the
carry
reserves
same
as
In normal pe¬
they would be unaffected by
We are proposing
that to the extent supple¬
this legislation.
only
mental
be
or
increased
may
reserves
required under the provisions
of this Act the percentage
would be the
amounts
for both
same
mem¬
ber and nonmember insured com¬
banks.
mercial
Under
maximum
an
our
pro¬
at the very
mean
increase over exist¬
ing State requirements of no more
on demand deposits and
than 4%
1
%%
on
"With
time deposits.
debt, it
unrealistic to
have no means of steadying or
supporting the market.
We have
would
that
huge
a
be
public
wholly
in
means
the
Federal
Open
,
authority to the Board
authority should not be confined
to member banks, but should be
re¬
cheated
a
to
earlier
provide
bank
so
then
of
Federal posal this would
to restrain consumer in¬
continuing
stalment credit expansion and to
to require
banks
to
hold supplemental re¬ increase reserve requirements.
serves up to the limit we had re¬
/ "You
understand, I am sure,
quested'in August, 10%; against that the ability of the Federal Re¬
demand deposits and 4% against serve System to influence credit
time deposits.- He stated that this developments is alWays subject to
that
in
reserve
banks
the powers in case an emergency
situation should arise.
The basic
Report to the
the
the member banks.
trends continue.
dent
increase
an
and
before you, therefore,
quires encouragements rather than
Congress last January the Presi¬
of
nonmember
you
restraints.
his Economic
billion.'4
security winch is
this
$130
billion is
the Federal Reserve
to maintain
come
ask
what wf
banks,
and
through
them
all regard as the minimum operating
banks.
Its greater experience en¬ leeway that is needed in view of
hances
its
ability to meet the our responsibilities.
We, do not
credit needs of a time when sur¬ plan to uses those powers now.
In fact, reserve requirements may
pluses rather than scarcities pre¬
ever
invest-1
performing cen¬ through bank credit expansion
Congress the basis of the new bank
System
has made the System -responsible
for
the
maintenance
of
sound
about 50% of their total loans and
largely acquired
of war finance, enjoy
se¬
any,
by
is
of
dent
an
part
serves
billion
Non bank public
additional $70
hold
bought
a
$60
tral. banking. functions.
great deal of flation.
a
this
for
curities.
ors
in relation to
"Elbow
institution
history. The bankers
deserve
pressures,
about
government
Whenever
abated
abruptly
nave;
pressures
hold
marketable
there
f ' "That report
banks credit
ary
D. Dean McGorraick Dir.
most careful and
of the situation
with the Board and the requests
after
responsibility we must always' be
themselves, as a result of their in a position to operate flexibly,
voluntary efforts to restrict loans counteracting trends as they set
in the face of strong inflationary in," either toward inflation or de¬
"In
American Gas & Elec.
now
.
economy.
these
re¬
made
for the pe^
if the
Congress will extend the two temporarily granted authorities voted
by the special session last August
that we used the powers which and
make
the
authority to in¬
Congress entrusted to us flexibly, crease reserve requirements ap¬
vail
Recent
Middle
are
emerging.
the
last year of upsurge especially, it
exerted
some
restraining influ¬
ence.
We think we may fairly say
may
growth potential it would seem that the stock, when
the
which
is fair to say, however, that in
cure
of Josephthal & Co. has pointed out in that
in
period
we
I
before in
interest.
mula
on
McCabe
B.
ments..
company's study, earnings reports of the subsidiaries for the calendar
1948 contain some special items which might be of a nonrecur¬
share
played
the
ject
year
ring character.
has
"We
minority
Truslow Hyde
20%
$7,824
800
and
policy
including the hardships
company
Amount per share (4,900,000 shares)
As
*2,292
1,441
$9,421
estimated
14
1,918
_
Total
Deduct
22%
1,789
New Orleans Public Service
Mississippi Power & Light
Louisiana Power & Light
Gain
1948
$2,527
$3,092
Light-
Arkansas Power &
exag¬
mone¬
credit
t
for
not
do
to
which
fhomas
-
the 12 months ended
March 31' (the estimated expenses and taxes of the holding company
are, of course, subject to adjustment):
earnings
market
greatly
complicated the problems faced by
exhaustive survey
Board.
-
"We
wish
price will be fixed which will not dilute
system
/
the
on
President
The
serve
only $10
the
bond
banks
influence
izing
Federal Re¬
appears
are
ment
Further^
a
broadening
man
Following
orderly conditions in the
Chairman! of the Board of Governors of the adjust the
supply of money and
before the Senate Banking and credit to the needs of a
stable,
Currency Committee on May, 11 to support a continuation of Federal
high-employment
economy.
At
Reserve supplemental credit controls granted by the last Congress
the present time our commercial
stated;
earnings.
Defends price support of gov¬
reserve require-
System, appeared
Reserve
Capitalization of Middle South will consist only of common stock,
and it was originally proposed to issue 4,400,000 shares.
However,
this was based on the assumption that Electric Power & Light would
the
on
itself.
the System in adapting policies to
names.
invest
carried
are
Government
"As members of this Committee
all insured commercial banks.
on
that
the
realize, the existence of our huge
Vpublic debt and- the need to assure
per-
Thomas B. McCabe,
Federal
lowing companies: Arkansas Power & Light, Louisiana Power &
Light, Mississippi Power & Light and New Orleans Public Service
(there is a minority interest of about 5% in the latter). Before the
title "Middle South" was selected the proposed company was nick¬
named
institution
an
bonds, and asks for authority to impose
The dissolution plan of Electric Power
Since Middle South is
is essential to
room
forming central bank functions.")
ernment
& Light was discussed in
this column last week. The stocks of United Gas and Middle South
Utilities will be distributed to stockholders when the plan is consum¬
within
Committee, despite easing of credit situation and relaxation
rency
By OWEN ELY
around
many
activities
Public
mated.
In
part
they reflect the
different types of financial
ours.
limitations, even when our resid¬
ual V authorities
give
us
much
Market Committee.
could be
one
ket
of
Without it no
a
of the rates that
or
vail."
sure
'
ready mar¬
might pre-,
;;
support of his requests for
continued
control
of
consumer
In
credit, Mr. McCabe argued:
"As
you
.
know,
associated
this type of
particularly
greater elbow room than we have
credit
at
with the sale of what are known
present.:. In
limitations
arise
large
out
part li:these
of
the
com¬
plex organization of finance in a
stabil-. highly developed country such as
as
is
consumer
durable
goods,
in¬
cluding automobiles, refrigerators,
radio and television: sets,, washing
-
Volume
169
machines,
articles
much
furniture
which
and
have
of
part
a
sections
our
of
the
cause
latituae
time
in
can
buyer
exercise
so
of
quantitative controls
as
Also
much
both the selection
and
Committee
credit
Bank
related
directly or indi¬
rectly to their ownership is con¬
sequently extremely volatile.
"Appropriate
In
can
helpful
during times when more
purchasing power serves only to
bid up prices.
In periods when
production and demand approach
statement
a
of
on
New
|
of
text
field
credit,
of
lows:
more
Board has done twice recently
asked
to
its
authority,
present
the Board will have no hesi¬
and
in
tancy
suspending
all of the
tions
The
any
part or
regulation should condi¬
make such
testify
Joint
because
to
me
87 to
ex¬
tend
the
au¬
the
Board of Gov¬
is
that
at hand to exercise re¬
straint when necessary to main¬
the
war
convincing.
the
of
ernors
practice,
sumer "instalment credit was re¬
vived, is too brief to be entirely
thority of the
power be
on
think
do. not
draw
must
fair test, and because
the experience of the past year,
since thq power of the Federal
Reserve System to control con¬
Resolu¬
tion
I
now
are
you
I
years were a
on
action desirable.
thing
important
have
"You
which
Here
theory than
on
instalment
consumer
with
balance, such regulation can be
relaxed
considerably.
This the
in
of
"I
Allan
Re¬
Sproul
the
made
permanent.
-
however,
•the
that
mine
con¬
review
sional
ministrative
scribed
should say,
The
at
FEoyd Allen Dept.
development,
about exten¬
am
-
T.
Cass
With
will
associated
become
Floyd A. Allen & Co., Inc.,
favor of the second.
sion of
economic
of the
large volume of current income
the " administration of To the repayment of old debts,
could
powers by the Fed¬
dangerously
reduce
cur¬
eral
Reserve
System.
By
this rently- available consumer pur¬
means a pervasive influence may
chasing power. I do not wish to
be brought to bear on our econ¬
be
understood
as
condemning
consumer
instalment credit; it is
omy,
without
intrusion
upon
specific transactions between in¬ a necessary part of our financial
dividuals, which is likely to be the ^machinery. But it operates in an
consequence
of
more
detailed area where special restraint may
physical controls, and which ^ould be necessary. In a sense, it is mar¬
spell the end of democratic capi¬ ginal
credit
in
a
particularly
talism as we have known it.
volatile part of our economy, and
processes
fixed
prices, changes in reserve
requirements are pretty futile as
an
anti-inflationary weapon, and
;
credit
broad
650 South Grand Avenue, as
of
ager
the Trading
June 1.
Man¬
Department
Mr. Cass was formerly
trading manager for Gross, Rogers
& Co.
Prior thereto he was with
Morton Seidel & Co. and Quincy
Cass Associates.
System
Have
it
this
Heeling to
the
"When
ago,
IBA
was
was
Federal
Reserve
established
35 years
best
could
Special Forums
exercised
controls
our
powers
to
by
lend
funds,
reserve
•
of America
meeting May
38 to 21 at The Greenbrier, White
will
Association
hold
136th
its
Sulphur Springs, West Virginia,
v
In addition to the customary
in¬
national IBA
committees, a Merchandising For¬
um, under the leadership of Mil¬
terim
ton
reports
Trost
S.
by
Stein
of
Bros.
&
Louisville, will be a fea¬
the Spring Meeting, ac¬
cording to Hal H. Dewar of Dewar,
Robertson & Pancoast, San An¬
tonio, President of the Associa¬
Boyce,
ture
tion.
banks
raise
clude:,-,-,..
•
•
;v .;
in¬
.-v' -.V
of
or
to
the
or
the
were
the
instruments of ..credit
tion.
They still
now
use
in
of
withhold
from the
country,
and
price of
lower
accommodation
are,
to
our
principal
administra¬
although
we
market operations
open
securities and, at
times, changes in reserve require¬
ments,
more
largely than dis¬
government
counts
our
of
Discussion leaders will
be
reason
or
.
Bankers
;
and re-discounts, to make
policies effective.
how¬
ever, that such quantitative credit
controls need to be supplemented
by qualitative credit controls in
certain areas. A specific example
is the experience of the decade
"Experience has taught
us,
measure
some
of control
over
it is
desirable.
generally believed that
influence
brought to bear through overall
quantitative credit controls. Such
CHICAGO, ILL.—The Board of
Governors
of
the
Investment
it seems to me,
b§ exercised in
which is consistent with our
"Fortunately,
of
the
twenties.
Laird, Rissell & Meeds, New York
tion-. of
City; died
credit in that
on May
8.
w,--
several
We
then
billion-
afea, at
a
time when
I
better
as
flationary weapon.
"On
balance, I
favor
of
T
continuance
the
supplementing
for
believe
of
require¬
First,
reasons.
if
the
power
for
the
Federal
System to
use,
clumsy
serve
the
respect to
reserve
three
that
one
clumsier
In
use.
think
other
is
I
a
Re¬
even
an
Congress
I do
not
present
re¬
words,
reduction
a
it is
for the
power
in
out
come
present authority with
ments
anti-de¬
an
in
gold.
banking
deposit banking system,
a
decreasing reliance
gold, much of the need for
requirements
and
reserve
economizing in
the
by commercial
In these
circumstances there may well be
a balance of advantage in higher,
reserve requirements, as a means
of reducing the dangerous expan¬
sibility and, at times, destructive
contractability of a money supply
consequent
provision of
banks
based
on
money
has
disappeared.
low
too
in
ratios
reserve
commercial banks.
There
of
be
may
great an element of leverage
present system to be left
our
at the
disposal of 14,000 banks.'
"This
ment,
is
however.
long-term improve¬
a
not
device,
short-term
suggests a
a
It
general
overhauling of the present anti-.
quated system of assessing re¬
serves, not an immediate
credit
control program.
"My suggestion, therefore,
be that you continue the
would
present powers of the Federal Re¬
System,
serve
S.
contemlated in
as
1775, leaving it to administra-,
action
tive
to
bring about what¬
reductions
ever
quirements
reserve
situation
credit
and
in
re-,
business
present
the
seems
to
re-,
quire. Such a course can do no
present harm, as I see it, may have
some
future
usefulness,
and
should fit into the longer range
of
consideration
the
problem
of
requirements,
which
I
have advocated.
The latter, I urge
reserve
most
strongly. I think it is high
time
that
shifted the basis of
we
classification from type of
reserve
city to type
particularly
deposit. This is
if we are now
of
so,
requirements
should
be
brought about by Congressional
going to bring within the appara¬
governmental sys¬
tem, and which is administratively
refusal to extend this authority. It
quirements, thousands of insured
should
nonmember banks. It would be too
practical. The terms of the control
can
be made clear qnough
and
appropriate, by administrative
precise
enough to do the job,
interfering too much as
buyer and seller, and
without trespassing upon individ¬
taken
without
this argument
that
a
control
way
economic
can
and
serve
determinations
ual
to
as
to
who
is
who isn't. The
concern of
such regulation is the
aggregate volume of credit in use
get credit
and
in this field, as related to the gen¬
eral state of our economy, not the
credit worthiness of the individual
buyer
or
borrower
nor
the trade
practices of the individual
or
seller
creditor.
"I
have
cited
two
specific ex¬
rate, open
operations,
and " even
changes in reserve requirements^—
brought
30, of
would fall.
reason
occasions when
when
should
June
"My second
are
about,
action
such
before
ac¬
be
course,
is that there
bad
to
which
the Federal
distinguished
from short-term or cyclical flucuations. Such a long-term trend
might be a renewed large inflow
of gold to this country, such as
occurred during the thirties when
that you
in this
excess
lars.
of the banks
reserves
up
remember that, in
1941, in order to try to
this situation, the
meet
were
to several billion dol¬
You may
January,
as
Board of
Governors of the Federal Reserve
System,
the
Federal
Advisory
Council, and the Presidents of the
Federal
Reserve
Banks, jointly
urged that statutory reserve re¬
quirements for demand deposits
be increased to 26% (central re¬
serve cities), 20%
(reserve cities)
and 14% (country banks) and 6%
for
time
further
deposits; and that they
urged that the Federal
Open- Market
powered
to
quirements
double
mittedly
Committee be
increase
to
these
not
more
the
situation
member
several
banks
billion
do
dollars
the
System
portfolio
could be sold to offset
flowi
banks:
adopt it.
applicable to
you
not merely to mem¬
bers of the Federal Reserve Sys¬
banks,
tem, if it is to be capable of hav¬
ing its maximum effect, if it is to
fair
be
which
banks
the
to
are
members of the
is
System, and if it
protect the System against
to
unwarranted withdrawals from its
voluntary membership. Whenever
action is taken under this author¬
ity,
you
be sure that it is in
may
terms of the national situation and
national
all
That
needs.
insured
banks
that
means
should
feel its
restraints, when restraint is neces¬
sary,
and should have the en¬
of
its
relaxation,
couragement
when relaxation is in order. That
that
means
its
use
whatever
temporary
of earnings and profits
sacrifices
may
entail,
should
be
by all of the banks, and by
whole
national community,
are
action
taken.
excess
which
gold inBut it is not inconceivable
a
made
be
should
such
which
reserves, and we do have large
holdings of government securities
in
legislation if
than
Ad¬
which
^not have
of
It
insured
borne
existed then does not exist now—
the
as
Sys¬
going to in¬
are
nonmember
clude
re¬
reserve
percentages.
em¬
least
at
Reserve
was
assume
long-term trend
outdated
was
as
established 35"years ago.
"When 1 make this statement, I
tem
requirements may be an
appropriate method of combatting
a
reserve re¬
perpetuate for long, with
a
reserve
classification
them,
increase in
an
nationally fixed
tus of
soon
reserve
driven
amples of the need for qualitative
market
be
If
tion.
between
found
dollars of
much
not
to
credit controls to supplement our
quantitative control powers. There
Columbus;George
W.
Davis, that even a vigorous use of gen¬ is a further general argument for
Davis, Skaggs & Co., San Fran¬ eral instruments of credit ^control these powers, which may be more
cisco; Robert A. Magowan, Mer¬ might not prevent excessive ex¬ persuasive than either of the other
rill
Lynch,
Pierce,
Fenner
& pansion of credit in particular two, at least to those who rebel
areas,
and
that this expansion against all special controls. Our
Beane, New York; Reginald W.
might be dangerous to the whole general control powers have been
Pressprich Jr., R. W. Pressprich
economy. That experience led to
greatly weakened in recent years,
&
Co., New York; Norman P. those provisions of the Securities by the emergence of a tremendous
and Exchange Act which gave the
public debt,
and the
obstacle
Smith,
Merrill
Lynch,
Pierce,
Board of Governors of the Fed¬
which that has placed in the way
Fenner & Beane, New York; Ed¬
eral
Reserve
System power to of a vigorous use of our general
ward H. York, Jr., Drexel & Co.,
regulate margin requirements on control powers. 1 am not going to
Philadelphia.
v
-■
security loans. I do not think you argue here the case for our sup¬
Major Forum topics are: Sales¬ would want to revoke that power. port of the government security
At the present moment, I believe
market. I think that support has
manship, Advertising, and New
we can all be thankful that there
had the approval of the Congress
Methods and New Sales Ideas.
has not been unrestrained specu¬
and the country. Otherwise you
lation
; in
securities during the would have done something about
>
Clinton T. Revere Dies
postwar years, and that we do not it. But it has interfered seriously,
during the recent past, with the
face the possibility of the liquida¬
■x' Clinton; T. Revere, partner, - in
use
of the
discount
I Ewing T. Boles, the Ohio Co.,
con¬
inflationary tendencies. sumer instalment credit. Person¬
question of whether con- i It cannot increase production, but ally, I believe that as a means of
trol of consumer instalment credit it can contribute to a spiral of I combatting short-run or cyclical
sftould be extended, is part of ;'a
price and wage increases. And in inflationary or deflationary pres¬
much broader question, namely,
a,; period
such as we are now sures, increases or decreases in
what you expect of credit control, going through, a swollen volume reserve requirements are, at best,
as
a
consumer
instalment
credit, pretty clumsy for effective and
whole, in terms of its con¬ of
tribution to economic stability at which has to be liquidated, might
equitable use. At worst, or so long
high levels of production and em¬ well accentuate deflationary ten¬ as the Federal Reserve System
ployment. I take it as established dencies. With some slackening of continues to bear responsibility
American policy that a principal
business and some reduction of
for
support of the government
means of government intervention
employment, the diversion of a security market at something like
the
of
central
with
low
centuate
country "is
on
to control
powers
"The
in
Robert T. Cass
our
inflow
modern
a
upon
two
the handicap of undesir¬
reaction^ by those controlled,
to the possibility of early expira¬
tion of the authority.
"When I come to S. 1775, re¬
lating to reserve requirements, I
must
repeat what I said about
this legislation when it was being
considered last year. I am not so
I
substantial
and
able
as
am
system operating in a highly de¬
have fixed is, I
the minimum to per¬
clear about it
be
can
Reserve
could
veloped
you
administrative
mit
of
I
this
With
pre¬
a
limit
Federal
and
ad¬
new
a
the
of
inclined to believe
be a progressive
step in our monetary-banking or—
ganization,
especially
if
there
should continue to be a persistent
System.
Congres¬
a
such
power,
time.
which
years
of
banks
requirements
the
by
that
generally accepted view, and
p[ can see advantages in
those
varied
be
not
commercial
the
which
recognize,
may
reasons
country, and of the limits within
credit be
I
be
of
credit,
System to control such
,
continu¬
this authority. I
again
something I said at your
"
I would prefer, in
that
the
authority
to the Federal Reserve
granted
funda-
more
the
not
of
,
taking the long view, for an in¬
crease in the reserve requirements
instrument.
an
some
ad¬
are
and
control
a
toward
hearings last August.
'There
may
well
in the
legislation, is such
this
bias
repeat
economic system.
instalment
Of
time,
of
ance
policy is to be
feasible,
our
believe
sumer
"Finally, I have
without
"I think it is
generally admitted,
howdver, that instability in our
serve
System
tain sound credit conditions."
national economy may well be in¬
to exercise consumer credit con- creased
by our ability and propentrols until June 30, 1951, and on
sj^y
purchase consumer duraS. 1775 to provide supplemental uie
goods on credit. In times of
reserve
requirements for all in- ,maximum production and high
sured commercial banks. I am m
.employment, such as 1948, an unfavor of the first of these pro- restrained
expansion of consumer
LOS ANGELES, CAL.—Robert
posals and, with qualifications, m instalment credit can and will acFederal
ministratively
repugnant to
future
some
mental
shall need to have the
those supplemental in¬
struments of control which
at
23
similar need might arise.
principle,
"Another specific example is in
the
Sprout's
concerned.
a
al-
are
ready in the ascendant.
■
The
tendencies
deflationary
|
credit
that,
we
of
terms
by the
Congress.
Mr.
Reserve
controls on instalment credit and on
up
last
help
reserve
requirement
set
possible,
in favor of continuing the
expressed himself
York,
if effective
Senate Banking and Currency
presented to the
May 11, Allan Sproul, President of the Federal
statement fol¬
respect
Senate
tells
are
temporary and supplementary
Dams
regulation of in¬
be especially
credit
York
New
required by Federal Reserve Board.
favors changing cash reserve requirements by administrative
rather than by Congressional action.
well
his purchase, sales are
subject to wide fluctuation.
The
•
of
Rank
Reserve
Banking and Currency Committee experience proves qualitative as
Be¬
of
stalment
Federal
of
President
large
economy depend
prospective
(2179)
are the ordinary means of
quantitative credit control—and
it may do so again. If the scope
of action open to the Federal Re¬
serve
System is to be narrowed
by public debt considerations, and
very
their production and sale.
these articles
CHRONICLE
FINANCIAL
&
Sproul Backs Instalment Credit Controls
so
American
our
living that
COMMERCIAL
which
similar
become
standard of
on
THE
Number 4804
the
the beneficiaries of the
If the insured
non-
member banks are now to be per¬
mitted
to
continue
share
small
in
to
avoid
national
this
credit
policy, I would let the legislation
lapse, and await the outcome of
the more fundamental study of
requirements
suggested."
reserve
have
which
I
-
24
COMMERCIAL
THE
(2180)
&
FINANCIAL
CHRONICLE
Thursday, May 19, 1949
I according to the May 9 Bulletin of
Under this proposed plan
j the Office of the Comptroller of
will
tne
News About Banks
.
Pescatello
has
Notable
been
recent acquisi¬
among
coins
1949
tions
of the FLst Na.ional Bank of New
Britain, which omit the previous
reference to the King as Emperor
was
foimerly Viceresident
r
and
are
The
! nvest m e n t
assembles
museum
Central
special
traveling
exhibits and regular
hibits
.
It
is
learned
Bulletin
of
ex¬
The
Ensworth
Cincinnati, O.
various school and college groups,
and
Cincinnati,
Mr., Pescatello
lo
Invest¬
wrs
Officer
ment
Assistant
nd
t-v
Charles
„,_r
New
of
).
Ya k
+'or
the
vc
*
Directors
of
Thach
were
the
of
Board
National
City
appointed Assis¬
tant Comptroller. Mr. Pinkus was
formerly
Assistant
an
Cashier,
arid Mr. Thach has been Chief In¬
spector of National City's Foreign
Branches.
A.
elected to
has
Stretch
the
Board
been
of Trustees
of the Title Guarantee and Trust
Company,
it
New York,
was
an¬
nounced on May 17 by Barnard
TOWnsend, President of the bank.
*
Trust
Company,
Ave-
has been promoted to Assist¬
Milner
and
ago'
Company
Trust
turers
was
Secretary in
Manufac¬
to
came
15 years
appointed Assistant
1946.
Ninety (90) years ago, on May
18, the Union Dime Savings Bank
for
its
75.000
specimens'of
riidney
spanning
almost
5,000
ye&rs, from the ring money of
anfcient Egypt to 1949
notes of
th€ new Republic of Burma, the
Cltgse
National
Bank
Collection
of Moneys of the World
May 13
marked its 20th anniversary as a
public exhim'f at 45 Cedar Street,
New York City,
on
small
building at the corner
Canal and Varick Streets.
a
of
went
cents
long
a
way
in
those days, and even would open
a
savings account at Union Dime.
Perhaps that was one reason for
the bank's being known then as
the "Children's Bank."
It
of the first year
has
visitors
attracted
opened
to
the
since
public
some
it
the
1926
$100,000,000 mark
in deposits was passed, and now—
90 years after the bank opened
for business — deposits aggregate
$232,000,000, and the number of
depositors has grown to more than
143,000.
Dime
rate of 2% per year.
May
r
The
col1 ec ion
was
The Dry Dock
13,
begun; pri¬
vately in 1880 by the well-known
Savings Institute,
New York, at a
meeting of direc¬
tors, held on May 17, elected Wil¬
liam B. Given, Jr. President and
Director
American
the
of
Shoe Co., a Trustee. Mr. Thurman
Lee, President of the Dry Dock
1928.
Institute,
Zerbe
was
until his retirement in
he
was
succeeded
the curator
1939, when
by Vernon
makes
exhibit
■
modern and historical
and
ancient,
coins, notes
checks, odd and curious
mon¬
eys, and a great variety of
com¬
director
of
Brooklyn,
Jr., President of
Savings
Bank,
announced
Y.,
N.
Nw
*
si:
*
1
Roosevelt
the
on
May 16 the election of William J.
Evans
Trustee.
as a
modity
moneys,
such as wood¬
pecker scalps and tiger claws.'
thfe Pine Tree
the Home ! National
Bank
of
Brockton, Mass., it is
learned from the May 9 issue of
Massachusetts;
the
FugioU Cent,
first coin authorized by the United
States; "Pieces of Eight" of Span¬
Main
renown;
the wooden
ish
a
capital of
$50,000 went into voluntary liqui¬
dation effective May 2 iand .was
the
Virginia,
Rich¬
May 16 announced
on
appointment
of
Rowland
A.
by
Office
of the
Bulletin
Richard C. Huelsman, Controller
the Central National Bank of
of
Vice-President
a
the
of
bank, ac¬
cording to the New York "Times"
of May 16.
*
*
*
land,
of
Reserve
Chairman
directors
of
Bank
announced
the
of
the
Cleve¬
of
election
Charles L. Austin/Executive VicePresident of the Jones & Laughlin
Steel
Corp., Pittsburgh, Pa., to the
board of directors of the bank.
Mr.
Austin
was
►
the unanimous
choice of the larger banks of the
Fourth Federal Reserve District
to fill the
unexpired term ending
Dec. 31, 1951, of the late Lawrence
Federal Reserve Bank.
who
Mr.
Lund,
Vice-President
was
Treasurer
and
the
of
Westinghouse
Electric Corp., died March 14.
i',-
4:
*
;
.
■■
..*
Mich.; the celebrated 1804 silver
dollar; a -copy of Henry Ford's
check
for
one
cent;
a
check
for
$225,000,000 issued by the Metro¬
politan Life irisi'ranee Co. for the
puixhase of U. S. Treasury bonds
in 1943, largest check ever drawn
on
the
Chase National
Bank, and
the 100 quintillion pengo inflation
note of
Hungary issued in 1946.
May 13
National
pany,
K.
a
s$t
' 1
if ;
Daly
of
the
Bank
of
De
Soto, 111., to
increase
capital stock from $15,000 to
The Auditor said that the
bank was organized Dec. 21, 1920.
The increase, he said, was voted
by the stockholders and represents
a capital stock dividend from
ac¬
cumulated earnings.
$25,000.
' 4s
"
of
Ward
are
George
Schultz
Vice-President of the
Detroit, Mich.,
was
^
as
a
City Bank,
announced pn
Joseph F.
\
by
President.
and
Trust
Com¬
sj:
*
The National Bank
board
Crocker
San
lar
Verhelle,
of
for
capital
and technique
c a n
First
of
of
the
Bank
of
Francisco, Calif., at its regu¬
monthly meeting held
on
May
12, approved the calling of a spe¬
meeting of stockholders for
Thursday,
has been
Manager
to be Gen¬
1949,
adopting an
June
9,
;
;
<
International
Chambei
of
Accord¬
Mr.
favorable 'climate' for such in¬
tries.
,
of
all
a
no mere financial ex¬
pedients will, in the view of the
private business community, stim¬
ulate any large or sustained flow
of private capital between coun¬
backward
areas.
outlined
York,
vestment,
of
opment
of New
Maffry
August
.
.
.
"Under conditions which
discus-
prevail
private investor
against arbi¬
foreign investment and
trary acts of government and not
nomic
development in business, the reverse. The private business
circles, the whole emphasis is on community recognizes the indis¬
the creation of a favorable 'cli¬
pensable - role of government in
of
mate'
for
ment—
the
of
private
of eco¬
private foreign
invest¬
'climate' which will at¬
a
equity capital—venture
ital.
This
favorable
cap¬
'climate'
for
private
foreign
investment
in¬
volves among other things relief
from discriminatory treatment of
foreign investments.
It involves
relief from the threat of
seizure
confiscation
or
arbitrary
private
of
investments without adequate and
effective
volves
compensation.
relief
in¬
It
burdensome
from
taxation, particularly double tax¬
ation of foreign investments.
It
involves assurances
regarding the
transfer
of earnings, if any, and
the orderly repatriation of capital,
if desired.
Such a favorable 'cli¬
mate'
for
ment
can
private foreign invest¬
created, as I have al¬
either
through
bilateral
agreement,
agreements between
capital-im¬
porting
and
capital-exporting
countries
side
who needs protection
these
through
unilateral
by countries seeking out¬
or
in
assistance
technical
der-developed
the
knowledge
form
of
capital.
and
"Because of
tude of
vate
some
che unfriendly atti¬
countries toward
pri¬
investment, the private busi¬
community
ness
that this
time
ous
is
is
disposed
not
to
to
a
for
Code
of Fair
Foreign
Invest¬
development
could
be
pushed forward much more rap¬
idly under present circumstances
by
bilateral
or
reference
unilateral
to
Of the world,
the
"By
ment
same token, govern¬
and credits must be
loans
regarded at best as temporary and
marginal
measures
which
are
likely to play a declining role in
economic
development
in
the
'
future.
"The
;
private
,
business
commu¬
nity Submits also that if there is
private en¬
reliance primarily on
terprise
the
and
related
assistance
private
problem
investment,
of technical
will
largely solve it¬
self, at least insofar as industrial
technology is concerned, because,
is well known,
private invest¬
ment brings in its train the most
up-to-date
and
scientific
knowledge
applied technology."
auspici¬
an
It is inclined to think that
economic
areas
accomplished effectively,
all, only by private, enter¬
prise and private investment. If
for no other reason, this is be¬
cause
governments do not have
the resources of capital or tech¬
nical knowledge to carry out a
broad-scale program, whereas pri¬
vate capital does.
at
or
to
multilateral
seek
how¬
believes,
be
can
as
:•
It
matters.
that the further development
of both the developed and the un¬
ever,
be
indicated,
action
it is the
today,
problem
Acquire NYSE Membership
.
Transfer of the New York Stock
Exchange membership of James F.
Durand
will
change
lin
to
be
will
McLaughlin
the Ex¬
May 26. Mr. McLaugh¬
John
R.
considered
on
continue
as
by
a
action.
unilateral
ac¬
partner in
Neuberger & Berman, New York
_
directors
National
the
a
devel¬
the
in
i
for the
amend¬
Pittsburgh, Pa., with a capital purpose of
$250,000, was voluntarily liqui¬ ment to the Articles of Associa¬
dated effective April 29, and y/^s, tion,
whereby the -capital stock
absorbed by
the Commonwealth •will be.split 4-for-l. Par value of
Trust Company of Pittsburgh, Pa., the present
stock is now $100.
of
i
With
M
cial
of America
appointed
who
General
for the past two years,
eral Manager.
Gen¬
elected
"As I say, the emphasis in the
private business community is oil
a
favorable 'climate' for private
foreign investment. There is much
less: emphasis, I believe, on the
various financial expedients which
have been put forward for stim¬
ulating private international in¬
vestment, because unless there is
Amer-
of
use
ments.
12
Assistant
Company
President
Truman
,
The
on
Philadelphia, Pa.
S;S
in
'
elected
was
Irving Trust
new
Albon, Sr., President, and Ar¬
agreement
thur Albon, Cashier.
'y
Treatment
'F'.WNVv,:*
NYN'vN"7
May
Frost,
Sydney
an
was
board
Capital investment Abroad
N.
Election
The
spokesman for
a
multilateral
Benjamin
O.
Cooper announced approval had
been granted to the Albon State
Ajc,
director of Tradesmens
Bank
"bold
ready
SH';;:..
Auditor
State
meeting
tract
George C. Brainard,
board
as
the
of
program"
sions
Federal
special
menting and
financing the
the
June 1.
the
an¬
general policy
for
i m p 1 e-
"In
'
Edwin
President
operations division, effective
Comptroller of the Currency.
nickel of Blaine. Wash.; the buck¬
skin "One Buck" of Enterprise,
Appearing
ing
to
Maffry:
of
will
$4
Enman,
as
Commerce before the Economic and Employment Commission of the
United Nations at Lake Success on May 12, August Maffry, Vice-
think
Bank,
Whitman, Mass., with
absorbed
of
Officers of the bank
National
Whitman
Among the thousands of items
on display are the Biblical "trib¬
ute penny" and "widow's mite";
shilling of colonial
Boashall, President
Bank
mond, Va.,
the
a
L.
Manager in 1945,
President.
C.
on
H.
.
Radford of Atlanta, Ga., as VicePresident in charge of the bank's
if
if
The
C.
its
J;r
Adam Sneider,
includes
Given
Mr.
sixteenth
the bank.
Brown.
'The
that
said
the
L.
(Secre-
iaiy-Manager, Baltimore Clearing
House, Baltimore, Md.); Assistant
Secretary, William B. Elliott (As¬
sistant Manager, Baltimore Clear¬
ing House, Baltimore, Md.).
Brake
numismatic, Farran Zerbe, and had
grbwn to 40,000 items when the
Chase acquired it from him in
Mr.
retary, Matthias F. Reese
K. Lund, a class B director of the
*
*
was
1929.
Bank, Balti¬
Md.); Treasurer, Charles R.
Arnold
(Cashier,
Birnie
Trust
Company, Taneytown, Md.); Sec¬
Cleveland, Ohio, has been made
"
In
National
more,
the bank boasted
$201,000.
#
220,000
dent, W. R. Huey (President, First
Bank, Chestertown, Md.);
/ice-President, Harvey E. Emmart, Vice - President - Cashier,
The
the
board.
1
.
National
of
of
of the
who succeeded Mr. Burns
August Maffry, Vice-President of Irving Trust Company, as spokesman for International Chamber of
Commerce, stresses "favorable
political climate" as key to implementation of President Truman's
i "bold new program." Scores unfriendly attitude of some coun;
tries to foreign private investment and urges bilateral accords assuring American capital freedom to carry on legitimate activities without maze of artificial regulations, v
City May
,,
Thomas
stock
$14
which
annum,
new
from
Outlines Basis for
>
At the end
During these 90 years the Union
has weathered periods of
Among the largest and most destruction and depression — our
comprehensive displays of its kind, own Civil War, two World Wars,
and several financial panics.
It
the
collection
trday
represents
nearly every political and geo¬ has paid dividends regularly each
graphic subdivision of the world, year—and at the board meeting
and nearly every medium of ex¬ on May 18 the trustees declared
change emDloyed bv mankind in a dividend for this period at the
history.
4".
\
'
concluding session on
May 10, the convention elected the
ollowing 1949-50 officers: Presi¬
business
increased
per
Notice
its
Baltimore
be
basis.
nual
capital of
Association in Atlantic
City, opened its door
in "Old New York"
York
New
in
3,074 depositors, with deposits of
With
$16
place the
of the Maryland Bankers
/ention
At
ant Vice-President.
Ten
David
to
rate
f
9-10.
at 386 Fourth
office
Mr.
tJhhk cf New York, held May 17,
Alexander E. Pinkus and Girault
T.
eral
bankparticipated in the 53rd con-
As
James
York, announced that Philip
Milner, who is in charge of the
nue,
*
The
man
More than 400 Maryland
New
oank's
meeting of
of
President, will recommend to the
board of directors that the divi¬
April 30 and was ab¬
First National Bank
*
(.
Harvey D. Gibson, President of
arid
currently working on a
book on rhodern economic prob¬
lems which will be published soon.
effective
Assistant
as
*
Ylanufacturers
H.
a
Chandler
#
"Chronicle" and other publications
is
■•'y*
and
Treasurer
City. He
ar-
_
Trust
Secretary, at its Brussels office.
has written
numerous
:J;
if
Company
6f
New York announces the appoint¬
ment of Fernand L. G. Demol 3s
Assistant
Carnegie
club
speakers.: for
if
Guaranty
the
At
a
Bank
""
'
voluntarily liquidated
was
and educational groups.
Treasurer of
.
9
the
of
National
of Erie, Pa.
for
provides
par
,
sorbed by The
Frier to going
■
May
Office
Waterford, Pa., with
$25,000,
Company,
Pescatello
the
from
the
correspondent banks,
offers tours of the collection for
Trust
$25
dend
rency.
Jomptroller of the Currency that
India.
of
Officer of the
*
of
Great
of
mSde Investment Advisory Officer
Michael
Bank
capital stock
effective
May 2 from $150,000 to $200,000
by sale of new stock, according
to the May 9 Bulletin of the Office
of the Comptroller of the Cur¬
CAPITALIZATIONS
He
National
common
Bankers
and
ETC.
REVISED
Ybirk City.
i? V->
to
•
First
Barnesboro, Pa., has increased its
NEW BRANCHES
Michael
4^
iji' ,/.>■:$
The
CONSOLIDATIONS
NEW OFFICERS,
::
Currency.
t
the stock and proxies will be mailed to the
value 'stockholders shortly.
The capital of the bank will re¬
per
share.
There are presently
outstanding 60,000 shares of $100 main unchanged at $6,000,000.
4:
if
4s
par
value
capital stock
which
when
At a meeting of the board of
split will become 240,000
shares with a par value of $25 directors of The Bank of Nova
per share.
Scotia, Toronto, Canada, on May
If this plan is approved by the
10, H. D. Burns, President since
shareholders,
W.
W.
Crocker, Oct. 30, 1945, was elected Chair¬
be reduced
tion, I should like to mention in
passing
a
Constituent
This
1949.
was
in
of
in
India
Assembly
statement
intended to
among
on
the
April 7,
b,y
Nehru
inspire confidence
potential foreign investors
investment
possibilities
in
India and I dare say the statement
will
pose.
go
:
City.
'
"
•
statement made by the
Minister
Prime
far to achieve that
v-
pur¬
Theodore Ludlum in Boston
BOSTON, MASS.—Theodore T.
Ludlum
State
has
opened offices
Street to
curities
engage
business.
at 53
in the se¬
That Mr. Lud¬
lum would form his own firm was
previously
reported
in the
"Fi¬
nancial Chronicle" of April 28.
.
Volume
169
Number 4804
THE
Louisville Broker Opposes Banks
;
&
COMMERCIAL
FINANCIAL
Selling loeal Socialism—The American Pattern
Mousing Authority Bonds
Director of Economic Research, Chamber of
Spence Bill which proposes to implement Administration's
"pink" variety of socialism and a drive toward controlled econ¬
omy. Lays happenings in Washington to attack on our economic system and recounts socialistic trends in
recent legislation.
Concludes struggle against movement is not lost and urges as off sets: (1) keep your
house in order; (2) support sound fiscal and monetary policy; (2) step-up the educational process;
"Fair Deal" Program.
to have their own customers buy these securities from
pressure
them
Appearing
they did before crash.
as
May 13 at a hearing of the House Banking and
Currency Committee on Sec. 502 of the Housing Bill, Thomas Graham,
General Manager of the Bankers Bond Co., Inc. of Louisville, Ky.
•
on
few had
sell the Hous¬
that
port of the banks.
Authority
"Ol
bonds.
"I f
M r.
said,
Graham
not
do
the
500
the
of
I
in
avail
end,"
Thomas
is
"Just
possible
that
there
might be two, but I doubt if there
are any."
Representative
Patman
(D.,
Texas) interrupted to cite that a
statement
filed
in
the
names
of the First National Bank of New
York; J. P. Morgan & Co. In¬
corporated, New York; First Na¬
tional
Bank, Boston; the Califor¬
nia Brnk, Los Angeles, and the
First National Bank, the Harris
Trust and Savings Bank and the
Northern Trust Co., all of Chicago.
"It
has
listed
about
25
or
banks
30
supporting the amend¬
ment, Representative Patman re¬
as
marked.
Mr. Graham also said that while
majority
large
a
dealers
are
commercial
deal
and
in
to allowing
to underwrite
opposed
banks
bonds of local
hous¬
understood
he
authorities,
ing
investment
of
and
in
Graham
as
one
of these banks.
if it is
not know
a
pay
thorized
prices,
until
just
I
year.
Camille Gutt,
ment in
has had
sary.
In this bill of some 40 pages, we
find,
way."
or
.
.
mately
".
African
ernment
"As
Gov¬
result
a
is
gold.
of our discussions
of
semi-
has
his
been
previous occa¬
sions, the pol¬
icy of the In¬
Camille
Gutt
sales
of gold in this form from becom¬
ing a means of feeding the de¬
mand for gold for hoarding pur¬
prevent
and thus diminishing the
production of newly mined gold
which finds its way into monetary
reserves.
The Fund is also con¬
cerned about the fact that an in¬
poses
amount of
gold in pre¬
that
of' countries
trying to prevent the illicit
of gold into their terri¬
import
tories.
ate
avoid
such
export
articles
device solely for
which
kets
Africa
South
for
the
in
of
feeding the
Fund
discussions
have
.with
all
its
achieving
the
the
be
policy
formed
referred .to,
while
at
the
same
permitting the South African
mining industry to have
a
to
members."
Thl
Financial
with offices
Street
curities
W.
shortage of any ma¬
.
practicable
will, within
a
effective, and
and
reasonable period
"... in his opinion
.
".
.
.
in his discretion
y,
.
.
mines
I.
to
at
engage
business.
606
South
in the
Officers
Hollingsworth,
se¬
.
(used
-
unless it is determined by
.
(used twice)
.
.
where the President deter¬
...
",
.
.
.
.
(the President), shall make
adjustments for such relevant fac¬
tors
as
he may
.
.
...
.
.
are
President;
relative
shrunk
in
Due
agricultural
to
of
array
surpluses,
Federal Reserve Bank Conference
urer.
V-"-
neapolis, Minn., April 23,
.
of the 9th
District Bankers, Min¬
1949.
•
it
Does
ably,
in
not
Prob¬
socialism?
mean
but
only
the
is
try
the
short-run.'
-
labor
important
movement in the world that is not
Private
socialistic.
is
property
deeply entrenched and respected.
The labor leaders are for private
property. They have some reser¬
about turning everything
over to Washington.
vation
this
Yet,
mean that
their political
not
does
leaders
and
believe
in
market
free
a
economy.
A
Market
Free
What is
It
is
Economy
and
free market economy?
a
is
indi¬
the
which
under
one
vidual
within his means
free,
to become self-em¬
job-maker or a jobThis provides much free¬
ability,
ployed,
a
seeker.
dom
choice.
of
is
It
one
under
which the instrument's of produc¬
tion
privately owned by mil¬
are
lions
individuals.
of
which
under
mately
the
one
is
It
consumer
and
governs
duction. It is
directs
onc>
ulti¬
pro-1
under which the
expectation of profit—self-gain—•
directs both the worker and capi¬
tal. It is
one
under which scarcity
in
itself
reflects
which
in
turn
prices,
rising
additional
lures
and resources into the
government pro¬
interven¬
themselves from believers in a free
into believers in
partially controlled economy.
Today, capitalism
of
backlog
is living on
and beliefs
more.s
built up in an early and
backlogs
not replenished,
are
must
all
Like
environment.
different
this one
out in time.
run
the
march of technology, and the shift
of population into the great urban
universal
centers
have
franchise,
fostered
the
rise of
translates
output
itself
per
curs
one
only
once every
two
or
three
hundred years.
richer
likely to
"labor"
true
a
the
at
into
standard
the
for
example, in
people.
and local levels.
state
will
trend
but
experience
Wholesale prices,
1930 were at the
1840, 90 years earlier; but mean¬
time, average wages increased by
700%.
Labor
unions were
few
and
No
relatively weak in that period.
one
in
ment
planned for this improve¬
the standard of living.
But this rise in real income for
all groups is
the end product of
short-lived
setbacks.
must learn to live with
learn to adapt our¬
must
and
our
thinking and
our
; l This list taken from "The Drive for
rnntrolled Economy
Chamber
ington,
of
a
free, dynamic, progressive society.
Under this system, we have some
4 million
separate business estab-'
lishments, outside
of
and
most
of
agriculture,
anxious
them
each
of
them
survive
to
anxious
to
When added to the 6 mil¬
separate agricultural enter¬
grow.
lion
have some 10 million
business centers where
ideas, new methods and new
products may be tried. We have
prises,
we
separate
10 million centers of initiative and
enterprise.
inconceivable
is
It
other
system
via Pale Pink Bills,
Commerce
D.G^-1949,
17
of
U.S.A., Wash¬
pages.
effort could
system.
that
such
stagnate
a
for
that
for organizing
our
stop this trend. Indeed, it is likely
to be accelerated.
We
higher
living for
level, according to the offi¬
cial price index, as they were in
oc¬
Organized labor is likely to be a
dominant political force from now
on.
There is nothing in sight to
If so, we
of
a
same
man
This
greater-
ever
new
government. If
not in name, it will be so in fact.
This is true of the Federal gov¬
ernment and is likely to be largely
have
antitrust
manhour and
all
the
through
effective
with
legislation, the march "■ of science
and
new
technology inevitably
and
a
government
and
grams
importance.
Schmidt, before
Carter, Vice-President, and
Swan, Secretary and Treas¬
G.
agriculture remains, to
a degree, a fortress of individual¬
ism and petty capitalism, it has
selves
"Address by Dr.
D. H.
E.
While
it.
.
any
are
guide.
coupled
revalidated.
deem to be of
general applicability
lands
economy.
casional
the President
shall, so far
practicable, ascertain and give
..
due consideration
Chronicle)
.
other
progressive element
areas
where wages are best and.
In this environ¬
profit anticipations are strongest,
ment, both the institutions and
the
ethics
of
capitalism found thereby overcoming scarcities. 1't
is a system under which, when
firm root and were continually
our
From now on, we are
1
•
President
the
as
...
economy,
our
in
edents
manpower
the dynamic
.
re¬
LOS
ANGELES, CAL.—W. I.
Hollingsworth
&
Co.
has
been
Hill
a
facility is affecting ad¬
".
W. I. Hollingsworth Co.
Special
They were its
leaders.
They were
intellectual
The
twice)
view
values set the standard for
community.
of the great trans¬
formations of history, such as oc¬
to
"The Fund will, of course, con¬
to keep this whole matter
•
(used twice)
or
.
tinue
taken
.
appropri¬
.
.
mar¬
premium gold sales under
the
political power of the urban
masses.
Our
society is passing
".
agreement with the Fund on
of
;;
na¬
practicable-and appropriate ...
which in his opinion will
^
limit.
of
(used four
.
.
a
wage-workers.
versely or threatening ...
".
to the extent that he deems
a
desires
of
moral
that
terial
to
becoming
.
"Whenever the President deter¬
gold
order
.
he may deem
as
mines that
v.'
place in a very cordial atmosphere
and I have been impressed by the
evident desire of the South Afri¬
can
Government
to
reach
an
methods
in
.
.
determines
become
have
In
the
early days, the outlook, values
and customs of capitalists, busi¬
ness proprietors
and farmers set
the tone of the political life of
the country unchallenged. Their
.
to the extent that the Pres¬
.
.
safeguards will also be
adopted in the case of the manu¬
articles
tion
a
.
of
times)
"Certain
facture
judgment
the
.
.
ident
of genuine man¬
v
To¬
self-employment.
We
earners.
a
.
will reserve
ufacture.
from
income
national
the
of
market economy
.
that the demand
is lor the purpose
mium markets serves to aggravate
"Our
not satisfied
are
economy.
shifting to the urban
As recently as 1850, over
tions has transformed the farmers
President
the
strengthen
will not
if pree-'
which
changes
ahead,
greatly accel¬
is rapidly
is
"laboristic"
a
one-half
the
in
.
.
".
right to decline permission for
export in any case in which they
to
difficulties
and
four times)
very
economy
is
masses.
President
(used seven times)
".
if the President finds
the
make
to
the
Monetary
creasing
business
the
on
terna t i o n a 1
is
authorities
own
to
vast
.
.
.
.
",
purchase for this purpose. More¬
over, the South African Govern¬
ment will keep a careful watch
made clear on
Fund
finds
achieve the
the President deems nec¬
as
.
procurement
help
to
essary . i . (used
"W henever
gold has the prior permission of
processed gold.
Federal
necessary
"..
gold is sold only to manufacturers
for purposes of genuine manufac¬
ture and that the importer of the
secure
.
quantity goals
semi-fabricated
that
to
questions
relating to the
.
that
mines
business
marily to dis¬
cuss
.
"Whenever the President deter¬
certain safeguards will be adopted
pri¬
the President deems nec¬
as
essary
semi-fabricated
in
such terms and condi¬
on
.
...
tions
which he
to Cape¬
legitimate
the
in
President
the
whenever
.
.
(used three times)
Fund, made the following state¬
share
of
Our
being transformed from a capital¬
in
.
determines that it is necessary...
Executive
Managing Director and Chairman of the
South
the
gold
.
President) finds
.
.
he shall determine approxi¬
the
invitation
time
of some objective
standard, words like these:
with respect to which (the
instead
rule
Capetown, S. A., on May 11 following conferences
since May 2 with South African officials. "I came
at
town
.
things
if the Presi¬
done only
(the bureaus) finds it neces¬
dent
am
relating to sale of semi-processed metal to manufacturers.
are
these
All
retailing.
to be
new
some
fundamental changes in the years'
ment,
revolution
becomes
change
erated.
came
even
Approves Limited Sale of So. African Gold
Board of the International Monetary
when
go
are
means
spokesmen, in and out of govern¬
Shifting
Is
into ordinary private busi¬
including not just manufac¬ day, four out of every five gain¬
fully-occupied people are wage
turing but also wholesaling and
to
Managing Director of International Monetary Fund explains attitude
the
may
to private businesses
1
labor
Power
Power
.
Gutt
As
It
.
ness,
".
sale
business.
steel
the
year
society?
our
istic
and to state and local government,
little tired of getting pushed
a
around that
increases
kind of business—nor
money
.
.
the
and
year,
Evolution
Government may go into
loan
They will try
au¬
finding. The
a
next
It
this
to
What is behind these trends of
lower
to
price
delay
to
just
I
offer
prices,
board makes
a
almost any
in New York at a
$50,000 a
of
fix
to
Federal
.
salary
after.
He is
for free market forces.
the
the next week
again
itself. is
bill
the
shelved this Spring.
govern¬
the
when
die
not
means
wide discretionary
authority
and
power
to sub¬
stitute their ideas and opinions
not, but I think it is. I think
people are entitled to know
why these various persons, after
they get to be Assistant Secre¬
tary or Secfetary, should turn up
or
give
President
ment bureaus)
that "it amazes
me
to see every key job in the
Terasury filled up with these Wall
Street bankers, and they just kind
Of ferry back and forth.
One
time they are Assistant Secretary
of the Treasury and next they are
do
would
(which
Schmidt
E. P.
Dr.
mar¬
economy.
the
stated
President of
free
a
ket
It
know
we
the
Will
structure
The labor movement in this coun¬
Mussolini.
Spence
Bill
pass?
Probably not, but even, if killed,
it will rise again and again . . .
because the people behind it will
what
his
of
it, these are the same type of wide
barn doors which were available
and
to Hitler and
Representa¬
that:
course
as
Probably
they did before the crash."
Mr.
ary
ted,
em en
in the
purely discretion¬
as
economic
situation.
neces¬
would, destroy
they would then be pres¬
suring their own customers to buy
these securities from them, just
testimony
1
p
The Insur¬
Is it the Welfare State?
deems
these quotations from the
bill strikingly suggest.1 While the
President probably doesn't know
R.
fully im-
could
this up,
as
Presidency is
Spence
(H.
he
sary . . ."
Thus the power centered
way,
2756),if passed
they brought pressure
as
our
Bill
the investment brokers to back
on
the
of
favor
contained
amendment
with
..when
We're
The
But that is when
agreeing
needs and strivings of people.
on
State, or®—
but where to?
banks
tive Muller (D., N. Y.)
Graham
these
It
did
I
on
that "the banks will use any
of
pressure
to gain their
kind
of
privilege
n g
bonds.
it
(4) keep watch
over-all Planned Economy?
an
ance
what?
always like to do something."
Mr. Graham stated in his testi¬
mony
uncierwrit-
i
going Socialist? Is it
use
in New
would
be just as
not appear before
big
this committee.
some
themselves
if
well
Kentucky
would
these
that
York
be¬
banks
sup¬
the banks will
course,
of
two
lieve that any
of
in
out
any
be
to
were
passed,"
come
kind of pressure," he added.
"As a matter of fact, I was ad¬
vised by two Louisville bankers
who
have
correspondence with
this
amendment
"I
a
a
Many people are still confused as to the meaning of Nov. 2. Since the 81st Congress
has opened, to this confusion has been added uneasiness and apprehension. Is the country
and
ing
Intimates it is
•
and
sharply criticized the proposal to allow commercial banks to underwrite>
: j,-
Commerce of the U. S. A.
Dr. Schmidt analyzes provisions of the
ville, Ky., tells House Banking and Currency Committee banks will
use
j. /r'-'"'' -'
By EMERSON P. SCHMIDT*
;
Thomas Graham, Manager of The Bankers Bond Co., Inc., of Louis¬
-
25
(2181)
CHRONICLE
ever
any
hu¬
outproduce
It is inconceivable
system could ever
length
any
of time,
given a favorable political climate.
Furthermore, under such a sys¬
tem there is a greater diffusion
and
any
dispersal of
power
than under
other system.
Yet,
Why is
why is it
it in the
under
process
attack?
of de-
struction? What, incidentally, does
this prospective destruction mean
(Continued
on page
28)
26
THE
(2182)
COMMERCIAL
FINANCIAL
&
CHRONICLE
Honest
Broken Government Promises
(Continued from page 18) .1.,
pended, Great Britain still was in
need of help.
The
Bretton
Woods
agreement
of the
To blame all of these situations
two
our
on
is
wars
putting the
cart before the horse. What caused
Who
the two wars?
was
in charge
of
cost of their
going to lead
out
us
to insure peace and
would not prevent a rabble-rouser
our
from
harmony with
neighbors to the south.
Our
neighbors to the south have never
quarrelled more violently.
The China Aid Plan
China
from
the
to
was
Eastern
save
hordes.
The
Farm
a
look
in
direction.
is
It
said
that
another
when
Houdini
product and the
died, he left the world
understanding that if he
spirit
he would on a specified
been gone
con¬
course
is
ernment
an
not
We
world,
a
plan is
for
a
must in the program
a
peaceful world,
Finally,
v
a
such
Pact, and
we
once
have the Atlantic
again we are being
key
world's
I
i
to
the
solution
not
am
the
contending these plans
without value.
were
of
problems,
As
a
matter
of fact, they may have made a
partial contribution to the solution
occasions
or
back to
come
communicate with certain friends.
each
On
assured and reassured that this is
the
occasion
occasions
these
of
his
have
friends
gathered awaiting
his message, but to no avail. One
might conclude he found no spiri¬
tual world from which he, the
great magician and spiritualist,
could
communicate.
But
a
short
time ago I am sure he must have
come back to earth. I know of no
else who could have devised
one
the world's problems.
I am
contending it was wrong to tell
our
people they were sure-fire
the
pay
the farmers more and sell to
cure-alls. These
the
consumer
of
assurances
cannot
be justified with the statement
we
had to propagandize and oversell
the people to enable the govern¬
ment to put these plans into ef¬
fect. Any program that cannot be
honestly placed before the people
so that they
may evaluate it on
facts should be rejected.
Time
for
Government
to
Be
Careful of Promises
Little
wonder, then, our people
becoming progressively du¬
are
bious.
It is time for our govern¬
ment to be careful in its promises
and to be more concerned with
the fulfillment of
less
it wishes to
the
un¬
faith
of
people in their government
completely shattered.
our
We
have
today
in
our
nation
millions of patriotic, thrifty people
who have invested their savings
in
government bonds.
Now,
was
there any promise made to these
people when they invested? There
certainly was. The people had a
right to expect a sound fiscal
policy from our government so
that at the maturity of the bonds
they would be repaid in dollars
as nearly-like
purchasing power
as the dollars they invested.
But
will they? What is their situation
today?
Have they not been in¬
of
at
This
less.
is
an
economic feat worthy of only his
wizardry.
The
announcement
stated
the
would give the consumer a
I'm
wondering whether
didn't spell "break" incor¬
rectly. The. added taxes he pays
will surely prove a brake on his
initiative.
What is the promise
plan
break.
they
implied in this program? The im¬
plication is very clear that it is
a magician's plan that is not going
duction
the
most
powerful
ment in the world
govern¬
must resort to
this sort of chicanery in trying to
help the farmer?
Why deceive
anyone? Why not the truth? The
truth may not get votes but it will
get respect,
government
and respect for our
is more important
than all of the votes
a
ever
cast.
discussion of whether
not a farmer should get a sub¬
sidy.
It is a question of being
frank; of how, if you give it to
him, you intend to do it and who
will pay for it.
or
A
frank statement would be
as
"We
taxes
tween
lower
market
ket
is the government honest when it
be
of
such
a
double-talk
policy
to
or
is it
keep
a
lot
people's
minds off their plight? How can
the government expect its people
to have faith in government credit
when everything it does tends to
destroy that faith? Isn't it time
the
government
gave
serious
thought to keeping its promises?
propose
than you are now receiving.
You will sell your product at the
thepurchasing power of the dollar?
In plain, understandable language,
pursues
and
This
of
where
that
competitive
a
known.
False promises
and do weaken nations.
written
We
if
on
help
on
corirpetitive
The
had
they
free
•
They wished to escape class,
prejudice and class limitations of\
opportunity.
It is a tragic com¬
ment
or
enterprise
to
hardy pioneers that they are plan-,
ning or acquiescing in a form of
being promised security government
their forefathers-
are
risked their lives to escape.
est break-even
thus
and
making
point in
people
them
have
We
secure.
nation
this
the
not
to
incentive
great.
made
that
why
And
before
put
our
of a representative form of
government.
tage
nation
have they
lar
Men
de¬
but
.what he
the
near
from
the
money
may
do
you
to pay
know
come around
in
future and collect money
to
give someone else a
check, so we better be prepared
and keep it in the bank."
us
am
not
saying
there
should
port.
I
am
saying, if it is to be,
and above
be honest, open
board in our promises.
us
who
How
can the government prom¬
cradle-to-the-grave security
when it knows the only teal se¬
ises
of
cannot
an
out
of
trouble
than
you
by
plans?
is
It
will
make
and
very
tear
simple.
down
the
It
and a courageous fight
promises are fulfilled
is important, you will be contrib¬
uting greatly to the struggle of
your fellow men and your.nation..
Somewhere, somehow, there must
whole
nation
of
it has the
credit of
stored
a
that
halt
broken
to
false
and
promises unless we are to return
thrifty industrious people into the
world's largest group of mendi¬
cants.
It will survive only so long
as
see
be
in
nation
representative form
mockery. It will
a
promise by performance.
If
will clearly understand that
insistence on a respect for a
to
of government a
a
You analyze your
kept.
promise
earn."
And what is the effect of all these
time
are
accounts to evaluate the sincerity
you
more
good as*his bond. You
engaged in the field of
charged with the re¬
are
sponsibility of seeing that promn.
curity is that which people earn?
It was Lincoln', who said, "You
keep
live by prom¬
as
are
credit
ise
transform
I
word is
they make will be garnered by
spending
and women
ises—promises that are performed.The highest mark of civilized man"
is to have it said of him that his
the government.
'
Europe, had better take hteed
we lose that priceless heri-:
of
when
now
decided
have
in¬
more
reached
Our
government, already at the high¬
point of any nation
in world's history, now owing a;
debt twice the size of all of that;
forth the extra effort—that added
Southern farmer
How
the descendants of these,
on
na¬
does the government intend to pay
for this?
By taxing its people
banking he had to
get
check.
away
they
opportunity at.
limited
best.
couldn'i
capitalistic
from
They wanted to get
but
from the cradle to the grave.
By
whom?
By the government. How
you
this
a;
it
from the old countries where
tions.
I
know he doesn't
make anything.
He just collects
things.
He collected taxes some¬
and.
knew
opportunity, fullest freedom, most
real security and highest standard'
of
living the world has
ever
rely
do, "Mary, you better put this in
the bank and keep it there.
Let's
don't use it.
It comes from Uncle
Sam
They
hardships andlong and tedious hours of labor,
lonesomeness, sickness- and dis¬
As he opened
did what little
country.
meant sacrifice and
a
ton.
strike out for
to
nation that gave man the greatest
are
more
to the dark ages.
<
Despite what some people tell
have today many states-*'
you, we
an
people who have gone men who are keenly aware of the
long crisis we face. They are states^
men equal to the best in our his¬
as competitive free enterprise will
port
one
group,
other groups .continue to supply the fuel to tory. They are men who have kepf
equally affected by inflationary stoke the socialistic boiler.
In their promises faithfully and who
forces should not be subsidized. either
have
continually
insisted their}
case, the experiment may
How about giving the bond holder
be of short duration, but the con¬ government do so. We should up¬
a
hold them and strengthen theit
check to make his interest a
sequences may last a century.
hands.
legitimate interest and not an arti¬
The whole objective of the
ficial return?
Why not give the world is peace. Much has been
Credit
executives have never
I should be frank in
saying that
why, if you sup¬
I see no reason
price.
the set
price,
The difference be¬
price and the mar¬
assuming
it
is
lower
than the price we guarantee, will
paid to
drawn
United
the
directly by a check
on
the
Treasury of tlue
States.
The Treasury of
you
United
money
annuitant
industrious
before
us
to rely upon, or so
States will get the
to pay by taxing all of the
extra check to bring
an
dodged facts. Above all else, they
If a problem
people must be realistic.
power of his dollar when he in¬ that everything we are doing is in
is a difficult one, they recognize
vested
his hard-earned
money? the interest of peace.
We sin¬ it for what it is and proceed cau¬
How about a subsidy for white
cerely believe it to be so.
But tiously and constructively towards
his
receipts
up
collar workers
In
to the purchasing
or
underpaid school
fact, if you wish to
all the way in a socialistic regi¬
mentation,
why
not
subsidize
go
In the end that may
be the most effective way of de¬
everybody?
flating the socialistic balloon.
It
is
said and written about it.
We
have
have
we
promised
said
our
anything
to
its solution.
our
They know the great
potentialities of
people about the fact that if peace
came tomorrow, it would
not be
without its problems?
If over¬
realize
faced
each
that
we
many
occasion
our
nation.
have in
They
the
past
crises
we
and that op
have met these
night we could have a peaceful
world, everybody would welcome situations and moved on to furtherit.
It would be a Lord's blessing. progress. However, they also real-*
But temporarily, there would be ize that in these situations people
interesting to note that if
not
afraid- of
the
facts.
exceedingly successful quite a readjustment and it would were
and have through thrift not be easy to go through.
It Knowing the facts, they were
That is why I
and industry grown to be a big would
be so worth while that stirred to action.
farmer, you are out of luck. Your Heaven knows everybody hones it feel justified in presenting the
scheme of life doesn't fit into the comes because no suffering is too matter as I do.
socialistic philosophy.
Your great for a real peace. But when
You, too, in your own daily
father and your grandfather prob¬ you eliminate your armament ex¬ work can be a statesman, for re-r
ably told you that one of the great penditures and your big Federal •member, you as a group havei
things about this country was budget for your world-aid pro¬ next to the government, the great-*
there was no end to what you could grams, you would have a read¬ est responsibility of any group, in
accomplish if you applied your¬ justment that would bring about the United States to see that prom¬
self.
Have the
However, we are sorry— some unemployment and quite a ises are lived up to.
times have changed—new era, you bit of hardship.
These sufferings courage to measure up to your
know—and don't
you
dare tell would be temporary and well task. A promise made good is like
your child or grandchild he can worth while; but if they should a prayer—it strengthens the soul
by hard work get ahead and ac¬ come, then over the longer-range of men and restores faith in man-*
It is and will.. always. be
complish most anything. Tut-tut period of time the nation would kind.
—you
tell him Uncle Sam will really move forward on a sound the hub of the whoeh of ciyilizar
you are an
farmer
people—you, the working men and
women, the pension people and
everybody having a taxable in¬
come will have to pay a part of
the money we give you. We can't
It has
made
a
similar implied get it from the rich alone be¬
promise to every holder of a life cause there aren't enough of them.
insurance contract, every bank de¬ We can't get it from the middle
positor and all other groups.
Is class alone because they haven't
it to continue its deceitful,.camou¬ enough to pay it. We will really
care
flaged program of soothing its in the end get none of it from take
of
him—he; needn't
creditors with a socialistic lullaby business concerns because, if they worry except to be sure he gets
score?
pay it, they have to .add it to the his
place in the beggar's line.
pioneer
cided not to do so?
Because the
check for not planting, cot¬
it and looked ; government will take the cream
it over, he said to his wife who of their crop and every added dol¬
got
It took great cour¬
for them
age
promises of a socialistic govern¬
ment aren't worth= the paper they
irreligious
plan, but it occurred in our own
life time.
trolled nation.
presumed to be
opportunity in a'i
They could see
militarily con¬
free
can
planting
livestock.
a
by are important.
in the days, you
when we were de¬
a
of
is not only used consist¬
ently to prime the socialistic
pump, but it is a necessity to keep
it pumping.
The promises we live
was
recall,
stroying crops
can't imagine
teachers?
follows:
more
further
not
the
effect
a
knew
•
This isn't
of their savings? Is the
government keeping its promise
when it spends and spends, and
to
will
for
the
They
economy.
regimented state.
economy
a
let
ing
taxes
check
That
cooperate much
will avoid much so¬
Our forefathers chafed under
today.
of
worth
will
we
the limitations of
course
reminiscent
were
well
ease.
But they had the courage
partially fulfilled by taking away to attempt it and they made world;
the fruits of capitalism.
The pro¬ history in the establishment of a
given
anything. Such a promise is false.
Now, frankly, isn't it too bad
flated out of half of the purchas¬
and
first
his
cotton.
time
was
is
we
bar¬
cial unrest.
times and
Of
is
it
a
present
our
people know these
our
they
to
the promises of socialism are often
collect
to cost the farmer or the consumer
to guarantee you
a certain price for your farm
prod¬
uct.
This price will be slightly
power
of the
me
new
ioned in the early thirties.
It is an interesting thing
give it to
not be some measure of farm sup¬
that
its pledges
see
proposed farm plan. Surely it
a magician extraordinary to
takes
This reminds
Southern cotton farmer
facts,
yes—
different
are
this
era
If
better and
enjoying in 1929.
That new era,
however, became rather old-fash¬
you."
have
that
of
all
new
that
economy
managed
living in
are
conditions
so we
to
Yes,
however, is such
compared
while.
rugged body and he
a
Don't you know that?
producer;
a
administrator,
taxes and we propose
from other groups and
and
hundred years
a
independence."
but Abe had
it is
don't
have any money of our own.
All
we
have is what we collect by
just
with
Plan
about
could take it.
know the gov¬
you
found in the great beyond a
Eastern
gain
and
get it out of the country.
old nation by the throat.
It is now suggested we
Far
people at the same time there is a
price for peace that must be paid?
That price,
It will be paid and he would be old-fashioned in
sthis era.
He also said, "You can¬
number of ways.
When
anyone
buys a suitcase, he will not build character and courage
pay part of it.
If you commute by taking away a man's initiative
Today communists have that fine
an
"You
any
"Of
Support Programs
take
us
that
will pay it.
sumer
in
taking hold.
Let
said
once
cannot help the poor by destroy¬
ing the rich,'f but Old Abe has
government when the two wars
Who were the ones to your job each day, you will be
monetary confusion. It has done developed?
nothing of the kind. The Inter¬ responsible for the plans and pro¬ paying a part of it. If your wife
national Monetary Fund was to grams? Who permitted Hitler, for buys a piece of jewelry, she will
he the real savior of the world. instance, to get organized?
You will pay a
Who pay part of it.
The world is in confusion still. permitted Mussolini to get a head part of it when you buy the neces¬
In fact, it will work
start?
Who rescued Stalin when sities of life.
The Marshall Plan was
widely
proclaimed as the last act to in¬ ne was all but liquidated? What into the price of everything you
sure
a
peaceful and cooperative Were the programs that made for buy one way or another.
unrest?
You will find, whether
"Now to get this check from
world.
We are more worried to¬
day than we were at the close of you like it or not, that most of your government, you will have
the responsibility for the condi¬ to agree how much to
the war.
plant, what
tions that gave
The United Nations at last was
these people a to plant, when and what to sell
the answer to a world in distress. nearing and enabled them to put and you will have to farm as you
Thus far, aside from its settlement rorth their irreligious philosophy are told."
of
minor misunderstandings,
In addition, if you looked ahead
its and brutal plans for conflict', rests
principal use has been the estab¬ on the Administration in charge and wanted to be honest in your
lishment of a world broadcasting of governments which failed to statement, you would add: "If you
system in which the communists keep their promises to their own should grow more than the mar¬
can
expand their philosophies to people, by failing to act in time, ket will buy, although we are not
the millions of the world's down¬ or to the people of the enemy, saying
so,
we
will under these
trodden and underprivileged.
by failing to see that any program conditions try" and get up some
The Good Neighbor policy was they directed for these countries global plan to distribute it and
was
Abe
Thursday, May 19, .1949
-
basis.
we
Isn't
promise
it
more
honest when
peace by
programs-we
have,
.
tion
and
the
Gateway
of
Peace.
the various It is in keeping with alt .the-j-eto tell- our ligioas precepts God has given usi.
,
Volume
169
COMMERCIAL
THE
Number 4804
-
&
Inflation and Postwar Profits
Britain's Slake in U.S. Deflation
By WILLIAM J.
By PAUL EINZIG
Dr.
develop into disas¬
trous
slump is disturbing Britain, and, there is grave concern
whether Britain's .economy could be isolated from it. Says it may
result in Labor Government's reluctant revaluation of sterling and
relaxation of prevailing austerity policy.
.
,
Einzig reports fear American deflation
Chicago industrialist, deploring myth of high corporate profits, asserts inflated dollars earned and re¬
tained by American corporations are not adequate to finance normal improvement of productive facili¬
ties, and impedes technological advances. Cites statistical evidence on inadequate corporate earnings,
,
v
movement
fears of
the
by
a
im¬
prices of
to
when
.
the-fall of Am¬
offset it.
This
to
how¬
ever, the feel¬
ing ; of relief
is, would Britain be in a position
to isolate her economy if deflation
in the United States went too far?
gave
It is true,
progress,
Sir Stafford Cripps him¬
self would be in favor of a mod¬
way
gradually
t
uneasiness.
concern
grave
prices
continued
o
erate
U
of
degree
The
deflation.
it
a
tive
influence
for
either
the
long-term
tal goods
dustries.
In¬
it
adds
up
that the trend
portunity for exhorting British in¬
dustries to cut down their profits
ful
affect
untavoraoly
the British ex¬
might
and
Dr.
Paul
Einzig
prices.
reach
should deflation
But
stage that would neces¬
a
it would be¬
port
sitate cuts in wages
tive power of American industries
and through reducing the absorb¬
politically and industrially
impracticable in existing condi¬
tions of Socialist rule and full
d ri ve,
through increasing the competi¬
ing
capacity
of
and
American
force
pel
pro¬
in
us
the
direction
which
William J. Kelly
and
employment.
unable
be
then
to
resist
special
affect
accept
new
drifted
risk, to
conscious
an
Nor
this
is
There
all.
is
now
pressure
even
,
true
ernment
able
was
to
check
the
slump in 1933, it would be all the
easier to check it now with the aid
of
those
devices.
Nevertheless,
there would then be an
Autumn Budget for that purpose,
though
even
chasing
the
is ruled out by all but
Communist
and
crypto-Commu^
hist "wishful thinkers," in many
Stafford
British
quarters it is* feared that
prices, once started,
the decline of
would proceed
is
necessary
much further than
advantageous. It
or
a
Budget it
would be possible to release pur¬
while the possibility of a complete
collapse
without
utmost
Sir
cases
that
would resort to
to the weapon of
devaluation. He would only resort
to
it
when
termination
all
of
(b) that
has
caused
paper
profits on inventory values;
(c) that has created more paper
profits from underdepreciation of
fixed
reluctance
Cripp s
this weapon, or
power of American dollars;
It would be with
power.
a
timely
American
defla¬
hopes of
tion have been abandoned.
:
and
assets,
resulting
in
many
in under-costing of products
failure
ment-cost
to
value
recover
of
replace¬
capital
con¬
sumed;
(d)
paid
So when in
that has caused taxes to be
these paper profits; and
on
(e) that has brought to serious
questioning the mechanics and
conventions of accounting practice
and corporate financial reporting.
the
April 1947 it opened
second phase
to
the fog,
clear
ness
world, and practically all of
profession. If you
bear in mind that 82% of
the accounting
will
of
of
American
—
sibly
capital consumed.
level
.
in the absence of E. R. P. and re¬
armament the United States Gov¬
paper
public affairs with the your customers told us through a
of profits and savings survey we made that they give
corporations in the orders to you and other capital
postwar period.
The true story goods manufacturers only when
needed to be expressed so that na¬ they have plenty of cash in the
tional policy might be based on till, and not otherwise, you will
fact and not on fiction.
So, as understand why we believed it
part of our work in the public most important to expose thor¬
interest, we decided to take on oughly the effects of underdepre¬
the research job ourselves, and in ciation on true profits.
To that
dents
in favor of checking and
reversing the movement. The back.
growing apprehension over here
You will also recall that a year
question is, would this be possible,
on account of the possibility of a
if deflation in the United States ago, and two years
ago, led by
world-wide large scale deflation.
continued?
labor spokesmen seeking second
And in some quarters it is even
and third round wage increases,
There is reason to believe that
feared that the American deflation
the British Government is envis¬ we heard that profits were exor¬
a few minutes I want to give you
plight develop into a disastrous
bitant, that wages could be raised a preview of some of the illumi¬
slump.
The United
States has aging the development of such a
situation. It would then have to without increasing prices, indeed nating facts that this extraordi¬
come to be regarded in Europe
take measures to isolate the Brit¬ that; prices might even be sub¬
nary MAPI study nails down.
as the one remaining
stronghold
ish
economic
trend
from
the stantially reduced, and that cor¬
I may add here that the new
of economic stability and prosper¬
American economic trend.
This porate taxes should be drastically
pamphlet, which will be entitled
ity on which theh restoration of
could be achieved partly by hiked. What the labor leaders left
"Inflation and Postwar Profits,"
stability and prosperity in Europe
a
devaluation
of
sterling
and out, certain political leaders put is
assured
of
an
exceptionally
must rest. The possibility of a rep¬
in and the same tune goes on and
etition of the experience of the partly by a relaxation of the pre¬
wide audience in every important
on.
5
policy of austerity. At
'thirties is now feared to threaten vailing
group in the United States.
In¬
Unfortunately it must be ad¬
this foundation stone of European present Sir Stafford Cripps cer¬
deed we are hopeful it may be the
tainly does not envisage a devalu¬ mitted that American business it¬ basic instrument—not necessarily
reconstruction.
ation. He really means what he self is guilty of unwittingly add¬
the sole instrument, but the basic
Among Communists and their says in this respect. But, should ing noise to this attack on profits.
instrument
that will lead our
Left-wing Socialist sympathisers the fall of American prices con¬ Month after month during 1948
policy makers to avoid mistakes
the
symptoms of deflation are tinue beyond a certain point, it is quarterly reports emphasized rec¬
in national policy which if made
greeted with undisguised satisfac¬ conceivable that he might recon¬ ord profits, and day after day this
would swell the rolls of the unem¬
tion. They now claim that these sider his attitude. Indeed one of Spring we have read and heard
ployed with alarming rapidity.
symptoms foreshadow the eco¬ the arguments against an early annual reports telling of new
Now before I list the highlights
nomic
collapse of the Western devaluation of sterling is pre¬ profit levels.
to which I have referred, let us
jPowers which has been freely cisely the possibility of a situation
Now, we should be proud, and
forecast
by Communist
propa¬ arising in which the devaluation I am sure we are proud, that look back at what has been going
ganda during recent years. Even weapon could be used more bene- new profit highs can be attained on in this general area during the
few years. This
allthose Communists who, like Pro¬
ficiajly than it could now. Under in the operation of the American past attack on businessspecific, was
profits
fessor Eugen Varga, of Moscow conditions
prevailing in Britain system of private enterprise. They out
launched Dec. 11, 1946, when the
refused until recently to endorse a devaluation would lead to a rise augur well for the future living
such
prophesies, are now in¬ in British prices. Should the fall standards of all the people of CIO-Nathan report was issued. In
clined to change their attitude, of American prices continue, how¬ this country and of other coun¬ that report, under the title "A
under the influence of the reports ever, it might become possible to tries as well.
But with respect to National Wage Policy of 1947," the
of the
progress of deflation
in devalue without causing a rise in profits reported in terms of Amer¬ CIO made four major claims: (1)
the United States.
British prices, solely in order to ican dollars we have had, post¬ that corporate profits had become
avoid
a
corresponding fall
of war, a very special situation which fantastically excessive; (2) that
Apart from Communists and
British prices. Premature devalu¬ has had only a fraction qf the they were responsible for a rise
Left-wing
Socialists,
however,
in the cost of living which eroded
ation would lead to a rise in prices study
it
merits.
This
special
there are very few people in Bri¬
followed by a painful process of situation has been inadequately the purchasing power of wages;
tain-who really expect a collapse
deflation. It would of course be pointed up in corporation reports,
(3)
that the
excessive profits
comparable
with that of 1933.
industrial
collapse
it has been weakly dealt with by threatened
British experts realize that the preferable to wait, and not to de¬
from lack of consumer purchasing
value until it could be done in a our business organizations, it has
United States today has much bet¬
power, and (4) that the high level
ter weapons to resist a slump than way as to avoid both a rise and been ignored by labor organiza¬
of profits would permit industry
a deflation.
tions, it has been misunderstood
they had during the 'thirties.
In
Should American deflation af¬ by many -legislative leaders and to absorb wage increases averag¬
addition to the New Deal devices
British
business,
whether policymaking bodies, and it has ing 25%, without price increases,
which existed then and exist now, fect
and still have left enough to yield
there is now the Marshall Plan through its material influence or not been comprehensively treated
a
return on net worth equal to
psychological influ¬ by the press.
with the aid of which exports through its
The-special situation to which I that of the prewar period 1936-39.
the
British
Government
could be maintained. And there ence,
Of course, this was utter nonsense,
js also the
rearmament drive might conceivably seek to main¬ refer is, of course, the price in¬
but it is unwise to laugh off a
which
could
maintain
employ¬ tain full employment by the re¬ flation that—
(a) has changed the purchasing document, however fallacious, that
ment. It is felt that, since even lease of purchasing power. Pos¬
*.
distinguish
to
industry
profit from real profit, to differen¬
tiate between historical book costs
and the current dollar value of
urgent need to acquaint
American businessmen and stu¬
of
France, h a ve
during the past several
decades, namely, down that road
to technological stagnation which
I discussed with you some months
Government
industry
was
American
Thus MAPI has been
Eng-
1 and
The
of
of
of its campaign
MAPI found it
undertake new plans,
to equip necessary to take on for debate
and
re-equip their plants and not a labor organization alone, but
properties.
many representatives of the busi¬
ex¬
to
seriously
ability
businesses to
to a bale¬
erted
could
this
in
inherent
future
the
come
would
other markets.
tialities
understanding on the part
itself which in turn
due to failure on the part of
quate
industries. Other poten¬
situation
deed
confused
abruptly slow down the capi¬
and
of
capital
goods
indus-
the
Government never misses an op¬
now
or
prospects
this
concerning price, infla¬
tion is a positive threat—which
if not removed from the path of
American business will hit first
thinking
the
immediate
in
Inherent
construc¬
feared
is
employment.
<3>-
system. Nor is
possibility is-viewed with
in many quarters
in London. The question that is
asked more and more frequently
erican
peacetime production under high
equipment replace¬
previous period of
Along with speculation on the 1949 business outlook, nothing is more discussed in the
and becau.se Britain hoped to benefit
United States today and seems as little understood as the level of business profits. Much of
and rearmament would be unable this
discussion, unfortunately, is not intended to be complimentary to the private enterprise
goods.
and
As
world-wide inflation,
lower
ported
costs, have been lower in relation to
in London. At its initial stages the down¬
with relief, because it removed the
welcomed
was
profits, when corrected for higher inventory and
national income and sales than in any
and contends postwar corporate
United States
LONDON, ENGLAND.—The fall of prices in the
ward
Products Institute
may
ment
;v.
KELLY*
President, Machinery and Allied
.
is causing growing concern
27
(2183)
CHRONICLE
FINANCIAL
in April
end, therefore, we issued
pioneering study, "De¬
preciation Policy and the Postwar
Price Level."
Copies of it were
so eagerly sought by leading mem¬
bers of the business and profes¬
sional worlds that a second print¬
1947
our
was made, arid finally a third
printing was required in January,
1949. The influence of. that study
ing
has
been
beyond
most
our
san¬
guine expectations. Since its re¬
lease the issue of under-depreciawhat
an
to
due
tion
do
to
price
and
inflation
it has become
about
busi¬
executives but of the account¬
active interest not only of
ness
ing profession as well. While the
battle
for
realistic depreciation
and full recovery
of the purchas¬
ing-power-value of consumer cap¬
ital is by no means won—it is in¬
deed in its early stages—it has
aroused so much thought and dis¬
that it promises sooner or
constructive result;
cussion
later
a
It goes
without saying that nat¬
Institute is
with the main¬
tenance
of a dynamic economy
through the expansion and im¬
provement of our industrial facil¬
ities.
Nothing, in our judgment,
would more gravely impair this
the Machinery
urally
deeply concerned
process
ardize
in the long run, or jeop¬
seriously the main¬
more
of
tenance
economic
high-level
activity in the immediate future,
than an attempt to reduce, by ad¬
ditional taxation or otherwise, a
volume of business
subnormal
by
profits already
reasonable
any
standard
attempt
would
Such
of comparison.
curtail
incentive for new risk
and
the
funds
an
the
both
investment
for fi¬
available
nancing it. Neither can be pru¬
promises to be supported by mil¬ dently curtailed.
polls. Rather
This reasoning made inevitable
it is simple wisdom to deal with
our
third weapon in the warfare
it with alertness and thoroughness.
of education, namely, our forth¬
did
by
lions of voters at the
You will remember we
so
coming study, "Inflation and Post¬
issuing the MAPI analysis of the
war
Profits."
In it we measure
Nathan report on Dec. 19, eight
the overstatement of postwar cor¬
days after its release by
CIO.
porate profits from the use of his¬
Many of you used the documenta¬
torical or book costs, rather than
tion in that analysis in your 1947
current or replacement costs, not
wage negotiations.
So influential
did that MAPI
bulletin become simply for fixed assets, but for
that
6,000
of a weekly
for copies of it.
readers
newsletter asked
fixed
bined.
assets
To
and
be
inventory
more
com¬
specific,
we
for
comparative purposes, the profits
Spiral might get out of control,
of earlier years, by charging re¬
on
profits continued — but the
Richard A. Kerbon Dead
and 'that; its psychological effect
placement cost for all physical as¬
*An address by Mr. Kelly at the analysis did mighty well in battle.
on American consumers and pro¬
sets used up in production. These
Richard A. Kebbon, partner in
47th Spring Meeting of the Na¬ That the defenders of profits did
ducers might assume such propor¬
recomputed profits are then comKebbon, McCormiek & Co., Chi¬ tional Tool Builders Association, not gain ground more rapidly is
tions that even the employment
due in no small degree to inade¬
(Continued on page 30)
>
Chicago, 111., May 12, 1949.
cago, died on May J.
v-•
provided by New Deal, E. R. P.
is
feared
-that
the
deflationary
-
Note, though, that the MAPI reply
to CIO won no wars—for the war
recompute postwar profits and,
28
COMMERCIAL
THE
(2184)
creased.
(Continued from- first page)
Whether
taxation
penditures thus envisaged,
for
that
t
is
purpose,
sufficient
to
the
meet
ex¬
the debt is to be increased
or
usually
subject
a
"advanced" opinions differ, but for the
about
which
most part this
phase of the matter is regarded by these Keynesian fol¬
>
lowers
-
of
as
secondary importance.."
Standing Pat
..
The President
pat"
the
at
moment
,
is
said
,
boom of the sort
a
on
But
must of
we
movement
likely to breed its
course
this appears
as
the Chief Executive
effect of this
Thus,
it
so
.....
have
to
us
come
fully in the past, but
forward with
good
some
time, sets forth the President's program
a
our
by
very
regards these matters in these words:
as
the
world has
ever seen.
"If the government continues
so
directions at
many
sequences to
of action.
we
is
upon
".
.
addition
In
.
in its
not social
we
back to
so
far
as
;
,
there
as
more
than the two billion
we
our
economy
and will,
we
perpetuate
a
can
politics
".
of the CED
are
were
handed
and influence
advocacy of really sound
hill-billyism
carrying these same fallacies
imbedding them still deeper in the nerve
structures of the rank and file; have created a situation in
which considerable political
courage is required for any ac¬
sound stand in these matters.
So
much pure economic nonsense has become household words
today, that he who preaches common sense is at the outset
these
a
very
matters
reached if
we
severe
have
are
to
handicap. But somehow, sometime,
to
be
faced;, and correct decisions
escaoe
totalitarianism.
;
..bnt.
rfdilu,.
I
What
one
and forms the con¬
the
entire nation.
s
inconspicuous
thousand
the
key intellectuals out of
national
body politic and the
nation
will, within
have
completely
a
as
Just cut these
plexion.
The
a few
changed
circulation
years,
com¬
of
an
author's book is unimportant (not
for him,
of course, nor for his
publisher),
depends
the
on
and
2,000
but
of its
has made
which
teachers
3,000
on
alters the
national
being
journalists
of
essence
number
importance
book
a
impression
an
effectiveness
the
on
social
readers;
its
for
not
our,
appreciably and enduringly
more
4
-4v-
belts
of
MacLeish
sys¬
•
high moral and economic
rationale
has
been
evolved
to
the way for this revolution.
What,
'
Within
the
ten
and
;
mean?
generation,
dozen
a
have
leveling
•-
this
does
past
or
weapons
The
y
then,
been
at
powerful
for
forged
socializing
incomes.
important of
most
these, of
is the progressive income
This tax, based on the so-
called
"ability
that
means
to
theory",
pay.
long
so
Brown has
as
income left after taxes than
more
could
."
.
of
incomes.
all
Checks
on
cians vote themselves
some
.
self-reliance
individual
and
ridiculed
been
tent
attack.
seemed
and
The
under
have
persis¬
depression
The
ever bigger
"expense" accounts. We
tax-free
have
just given the President, of
the United States another $50,000
annual
income,
salary in¬
It will be just a matter
crease.
policy-makers will
bounty
Then,
this
is
attack
re-enforced
the
clergy,
spread to
check
them.
the
on
leveling of income will evaporate.
The
corporation
income
tax
larger toll from
a
progressively the bigger corporate income than
articulate from the smaller. After $50,000 of
was
by
highly
minorities
vocal
government
to it that
see
natural
likewise takes
and
a
of time until the key
this
all
from
free
in addition to
taxes,
give validity to these
to
attacks.
drawn
from
annual net income all
corporations
sociologists, the pay 38% but the smaller incomes
political scientists and most re¬ begin at a lower figure and only
cently, the economists. The poli¬ gradually work up to 38 cents out
ticians soon took up the scent.
of
every
dollar? There is con¬
If
the
you
the
is so widespread, stant
pressure
for an
"excess"
then, perhaps our profits tax to "soak the rich" al¬
is bad and does though the poorer citizen is just
survival.
This is too as likely to own a few shares in a
attack
say,
may
economic system
not merit
facile a conclusion.
The intellec¬
profitable corporation as in one
by training and which is less profitable.
occupation. 'They gain acceptance
and
Social Security
recognition frequently only
by being "agin" something, by
Employees, generally, pay 1% of
having
"better"
and
"superior" the payroll to finance social se¬
tuals
critics
are
established—and it must give way
the
to
It
is
American people have never
held
•.■
•
.
i
,
.
•,
'
)
:
:■ i
,"
:[■*'■!
■/'"
*
"
■
..
' .'7 ;'•
;
•
•:
:1
predict, however,
get the society en¬
for by the in¬
pounce upon,
criticize it, and destroy it by dis¬
solving
cism,
through
the
gether.
the
cement,
cause
They
is
that
mystique,
will
their
this—be¬
do
occupational
pay-dirt—unless
by
that
time
authority will have taken
authoritarian
those in
them in hand, as all
systems
have
intellectuals
had
in
have
to
their
take
hand.
daily
we
press,
Almost
taken from Moscow
papers';: of
accounts
in
our
news¬
how the Soviet biolo¬
gists, the physicists, the poets, the
composers,
economists
into
line."
week
the
dramatists
"are
A
by week
few
and
being brought
are liquidated
so as
to set
an
ap¬
propriate example to others show¬
ing
any
dencies.
undue individualistic ten¬
Every dictator and over¬
planner knows that when the
is
tends to
inevitably it
sapped in a corroding
sapped,be
proposed, will absorb from 20%
to
23%
as
for
ly
of payroll.
security
social
To
is
spreading income
over
ting
a
the
ex¬
some
a
device
even¬
more
period of time—collect-
premiums
during
em¬
ployment and paying out benefits
when hazard hits.
criti¬ fit formulas
perpetual
which might otherwise hold it to¬
faith
the
to
we
tellectuals, they will
all
of
safe
as
tent,
visioned and hoped
nine-tenths
cent
the untried, and the
./
that when
and
per
new,
unproven.
novel which is read by two
million housewives.
Ninety-nine
V.
•v
by
decades, now, begin¬
ning with professors of English
and the literary crowd, our eco¬
nomic system has been under con¬
stant attack.
This literary output
was reflected through Hollywood,
through
the
schools
and
the
churches. Private property, profits
a
I ::oY
.-■?
.
For
than
cr.
I
A
destined
authoritarian
an
.
of
it is overpowering.
A., .filWEvdiiiO
-»t
among
professors, writers and
think, write, preach, is
on
by
three
hundred
The process is as
still further and
a
suc¬
thousand teachers, journalists, and
ministers
to
the
130 000,000
.suasive economic fallacies, followed by President Truman's
politician to take
and
character.
and
sciousness
power
among
so
bishops
inclined to follow this lead
bolder in their
screen,
Within
.
.
Americans,
any event
among
stu¬
monthly al¬
regularly remitted by
is
thousand
fiscal management and
policy. We must, of course, concede
that a decade or more of President Roosevelt and his
per-
back-platform
and
writers
ever
tone
Bold Men Needed
in
newspapers,
every society, be
democratic, there is a
relatively small group of intel¬
lectuals who give that society its
it
certainly hope, always
activity and thus
only wish those in places of
who(
of
staffs
.
We repudiate
boom.
,
administrative
appear
parents, there is rela¬
tively fifty times more totalitarian ideas. They take a rationalistic
curity while employers pay 3%
lunacy (particularly of the Stalin¬ view of all things. All
values, all to 6% or more, depending on how
ist type) than among the povertyinstitutions and all ways of doing you figure it — covering work¬
stricken Okies, the needleworkers
must
be
constantly questioned. men's compensation, old age and
or unemployed
miners
."
The old and the established is sus¬
unemployment compensation.
A
Again he states:
pect simply because it is old and full blown social security program
remain so) than it would to stimulate
under
than in
well-to-do
through to completion if we are ever
of really sound footing. Again,
concerned, right now is as good a time
will be to get at this task.
stage
lowance
any sort
are
ever
Archibald
of
statistical
editorial
the
on
cessful
activity, the
approaching or resembling it can be made permanent by fiscal profligacy.
At this time, as at any other
time, it will in the long run
if not in the short run, do much more toward
discouraging private enterprise (which, after all, is the main
notion
tive
so
serious
A
dents whose generous
we
force in
in
probably more
Europe.
of
should do at the peak of feverish
that prosperity or anything
as
We
prevalent among
intellectuals—in
college teachers, among the stars
taken and carried
v
America
that
so intimated or
suggested by this Committee, we are
certain, could be pared from the budget—and should be.
We are certain in our own
minds, moreover, that some¬
thing of the sort sooner or later will have to be under¬
now
expressions of econom¬
underdogs, but
well-fed
find the chief weakness of the CED
modesty. A great deal
to get
are
distressed
rather
or
.
Bolshevism)
especially
(and
fast and in
this danger zone."
part,
our
transmission
the
being the
lengers,
metropolitan
Tor
educated
been
educational apparatus. In de¬
our
ess
to
problem child of modern civiliza¬
tion, the intellectual has also be¬
come one of its outstanding chal¬
diseases
private economic effort and individual freedom
or near
tem.
tion
rather
to expand so
degree,
in
will suffer damaging con¬
we
John Dewey in their
by
greatly for the ac¬ fending themselves, the opponents
revolution that
The committee feels there is much evidence that checkup would
certainly disclose
in
are
once,
of
our
society, as ini°f his books.
Though its mass
this equalization are being made
William S. Schlamm, may be relatively insignificant,
in his important book, "The Sec¬ the catalytic agent will basically less and less effectual by the sim¬
ond War of Independence," states: Tilter the larger chemical proc¬ ple device of having the politi¬
ically
;
in
end
least
hands, but all Americans have, in
and tivized
pain
that the
of foreign relief, reconstruction and military aid the
gram
book
a
international position with the most extensive
pro¬ ion, all brands of totalitarianism
new
to
him, simply because the thoughts
tax.
this great pedagogue have ac-
unemployed,
indebted
farmers
"It is undertaking the greatest peacetime
preparedness and underpaid toilers. Contrary
program our country has ever known. And it is recognizing to the
general consensus of opin¬
its
system
a
directives, which
of
for it is simply untrue
disintegration of democ¬
"It [the Administration] is
racy is the result of merely eco¬
pushing its domestic pro¬
nomic dislocations.
It is simply
grams for social and economic betterment—in social insur¬
untrue that Nazism, Bolshevism,
ance, education, resource
development, agriculture and the and Fascism are the predestined
;like—well beyond their previous high water marks.
reply to the appeal of hungry,
well
program
society.
any
But such, of course, is far from the fact. The Committee
Economic Development, with whose deliverances we
have not always been able to
to
incomes;
well-coordinated
displace the free market as the
guide to our economic activities,
Black, Brown still has further
us.
But its roots go deeper. Tney scarcely have found a more su¬ ability to pay more taxes. The
conclusion
of
this
tax
perficial argument than to point logical
are found in our educational sys¬
to the relatively small circulation philosophy is the final equaliza¬
tem and in the role of the in-
for
seems
to further socialize
on
(2) -A
nomic Reports.
Intellectual
the
1930's account
celerated
tellectual
which
of
Unquestionably,
Off the Mark
counsel at this
are
in the
is
This is found in the various Eco¬
suffering of the depression of the
this in order to keep the nation "prosperous."
agree
is
pave
some
Role
The
depart from sound principles of fiscal management
by scares of a business depression, or by those smooth
apologists for Keynesian nonsense who would enormously unbalance the Federal budget at such a time as
for
-we
sown
What
to
freely that no such basic
to be getting under way in any
in
security
Indeed,
have
we
course,
the unthinking perhaps, Presipermitting himself to be persuaded
to
:
world?
Washington,
decades.
hap¬
pening in Washington? Basically,
things: (1) A powerful drive
admit
survival?
appears to
dent Truman is not
national
our
in
two
(Continued from page 25)
for
tomorrow.
two
past
Socialism—The American Pattern
hostile
Kerenskys of today
liquidated by their suc¬
reaping what
stand;
by the Chief Executive is to
give the impression in some quarters that in insisting upon
higher taxes and adding nothing to his earlier expenditure
schedules, he is clinging to a rather conservative position
in which he insists
upon a balanced budget, or rather a
budget which gives hope of a surplus for reduction of debt.
The
be
Today
as
implying a stubborn refusal to rec¬ influential
political quarter.
ognize changes which have taken place during the past half
year, particularly during the past three or four months.
One net
lapses.
cessors
destruction.
own
world, then the leader goes, as go
he
must, and the experiment col-t
will
readjustment before the time arrived when what we
should have to worry about would be a real "boom"—
"standing
his campaign speeches and his annual messages.
There are those, of course, who interpret this
position of
stand at
courageous
a
politically quixotic. It would be quite
feasible, in cur view, to return to fiscal sanity at the
present time without precipitating any serious or pro¬
longed depression. If such a return were accompanied
by convincing assurance that private enterprise was
being freed of the unnecessary burdens of controls and
other interferences (including government competition)
'imposed since March 4, 1933, no one, in our judgment,
would need fear more than a relatively brief period of
.
be
to
do not believe
we
Thursday, May 19, 1949
this time would be
"
.
CHRONICLE
FINANCIAL
However,
As We See It
(wv'
&
are
But, the bene¬
generally loaded
in favor of the low income
Nearly
social
all
group.
security
pro¬
of
the
more productive, more efficient or
more
fortunate people
to 'those
less favorably disposed.
The pro¬
posed expansion of social security
suggests that this method of lev-,
eling income may be still in its
infancy.
We have-covered only
part of the distance between the
grams
also
have
the
income
transferring
effect
from
womb and the tomb.
Driving Down the Interest Rate
Thrift
were
and
savings
formerly
rewarded by annual interest
earnings of about
5%.
premiums
the
terest
earned
Insurance
same
in¬
accumulation.
Today, interest rates have been
cut
in
half
by
means
called monetary and
of what is
fiscal policy,
jVolume 169
a
subject
subtle,
croachments
little complicated and
a
something
little more.
but
study a
THE
Number 4804
should
we
Estate
unions. Ex¬
of collective
bargaining to include numerous
fringe
and
other
benefits
is
another attempt to get for Tabor
tending
by
the
the
areas
earning
of capital and sav¬
power
This transfers
a
greater por¬
tion of the earnings of capital to
low-income groups.
FINANCIAL
"euthanasia
This
"functionless investor."
the
was
erudite way of
an
saying that
point in paying
there is really no
anybody to save—adequate capital
should and could be made avail¬
without
able
having to
his
about
for it.
pay
he had
While
seemingly
anyone
own
misgivings
some
brilliance
on
this
point, his followers adhere rigidly
to policies designed to make bor¬
rowing, cheaper even though the
policy reflects itself in a steady
dilution of the money supply and
a steady deterioration in the value
the
of
dollar.
Perhaps
Keynes,
and
especially his followers, did
not notice that driving dowri the
interest
rate
also
creates
a
new
problem (or should we say, op¬
portunity?) for the government, in
the form of
old-age depen¬
more
dence, now that, with artificially
low interact rates, the capacity of
the individual to save for his old
is made
age
This
low
more
difficult!
interest
rate
policy
puts the government in competi¬
tion
with
all
private
lenders,
forcing down interest rates all
around—a leveling process affect¬
ing everyone.
There is a growing conviction
among thoughtful
people, how¬
ever, that a society of personal
and political freedom and a free
enterprise market economy are
integral parts of each other. And
it is just beginning to dawn on
these same people that
a free
money market—one in which the
interest rate performs its historic
functions of determining where to
invest, and governing the demand
and supply of capital—is also an
integral part of the free society.
spending and lend¬
ing for housing, for agriculture,
for
and
other
innumerable
pur¬
all tied in with this fur¬
ther effort of leveling incomes.
poses are
The Labor Movement
If
one
examines the President's
economic
reports and programs
submitted to the Congress as well
the
several
reports of the
Council of Economic Advisers, one
as
discerns
clear-cut
policy
of
utilizing the labor movement to
cut down the earnings from job; making to the benefit of the job¬
holder. While things are said on
"all sides of this complicated issue,
again
talk of
a
(sometimes
much discussion
wage
increases
with the limitation
While
economists
part
and
leveling incomes has support,
lifetime the govern¬
your
get when rigor mortis
your executors begin
what's left.
can
There
"rich"
the
v
slice
of
every
a
people's income
or
ways
at least every
four years? Why
should the politician not lend his
hand
to
from
the
this
business
limited
of
capita
per
in¬
thus
states
earlier
for
Federal grants,
years
the
pay
as
blind
and de¬
pendent children, were based on
some uniform or
equal-matching
aged, the
Today it is rare for a
Federal grant-in-aid bill to be
introduced in Congress without a
so-called
variable
grant-in-aid,
the amount of the grant varying
inversely with the per capita in¬
come
among the different states
The pending bill to put the Fed¬
eral
government back into the
principle.
relief
direct
the
vise
blind
same
business,
and to re¬
for
program
children
and
the
adopts
aged,
the
pulling the teeth of Taft-Hartley
the
to
labor
strive
larger
come.
unions
more
slice
of
are
encouraged
aggressively for a
the
national
The employers are
in¬
deprived
of their natural resistance to en¬
need
LOS
and
of
prominent for the past 20
in the security business, as
These
weapons
income-leveling
but
the
relief
to
a
and to trans¬
income
to
farm
"orange and blue"
allotment
program
ferring
more
groups,
the
food
stamp
adopted.
committed to
were
the doctrine of the
Later, this same set of ideas was
commonly referred to as "equality
of
opportunity." We felt that if
every child were educated, and
there were no legal or other arti¬
ficial
all
discriminations,
have
this
should
each
whatever
the
equal
be
he
function
would
start. Then
we
entitled
could
of
to
earn.
keep
It
was
to
government
create conditions favorable to this
equal start.
In
1862,
Act,
passed the Home¬
for example, under
which any citizen (or even a resi¬
dent alien intending citizenship)
stead
could
we
carve
out for himself
a
160-
homestead, a place to get a
start, a place where he could be
acre
himself and
in
his
his
make
own
living
own
In
way.
1890,
means
we
and the ability,
busi¬
;L;.v.V-.V-v*' '
ber, Jackson
& Curtis, 626
S.
goes
would
tergents.
this
revive
program.
equal
have an inter¬
American brand
Will
it
bring
it
does
or
a
us
mean
our
doom?*
First, a reactionary nostalgia
harking back to the good old days
opportunity,
equal,
start, and preventing monopoly.
The battle against inequalities, it
is said, now needs additional de¬
an
this
opens
could decide that all persons with
less than
much annual income
so
employment.
What
(1)
can
Keep
order.
for
you
us.
get so many stamps en¬
titling them to so much free goods.
out of World War I until 1927. The
hold
the
which
rent
control
has
on
American
people today sug¬
gests that this method of redis¬
tributing income is likely to be
difficult to remove even though
all the evidence shows that it ac¬
centuates
the
desire
and diminishes the
Of
housing
especially
in
the
of extending
construction,
face
for
supply of new
the
threat
rent controls to new construction.
"
Public Housing
and again it is argued
private effort cannot provide
adequate housing for the lowest
income
group.
The government
that
must
come
to the rescue,
and the
government must tax the people
with
more
income
low-income
new
housing.
groups
so
can
that
live
the
in
profits
ness
It
stream.
and
your
affairs
legitimate
and
your
all
criticism
is
re¬
moved.
authoritarian system.
an
(3) Step - up
process.
Don't
educational
the
become
can
promptly income to others and
helps keep the economic machine
rolling.
George
resident
rest,
Robert D. Diehl
1 :■/;
Partner.
Diehl
Mr.
has
by-
For¬
broad background of
a
with
ence
leading
experi¬
investment
banking firms in Los Angeles and
He has been active in
Cleveland.
Associations
Traders
the
cities
is
and
renewed term
as
a
Traders
National
both
of
serving
presently
a
member of the
of
Committee
Municipal Bondwomen
To Hold Spring Meeting
The
Club
of
Municipal
Bondwomen's
New York will hold its
ing in the interests of all groups
which
are
companies to elect capable
women
to their Boards of Directors.
basis
that
so
in
house
own
individual
then
was
her
support through
in¬ foundations or otherwise the proj¬
comes
above
the
consumption ects and the people whose aims
levels are spent more slowly than or whose
Rent Control
policies and actions will
wage, social security, and similar
Rent
control is a device for
destroy our way of life.
types of income. The worker and
transferring income froin people
(4) Deepen your own under¬
social security beneficiary spend
who supply housing to people who
their incomes promptly, thereby standing of how our economy has
don't. New York State did not
functioned during our history and
returning the money to the income
abolish the rent control growing
what it takes to keep it function¬
would
change,
announced
ly created considerable interest in
strong efforts to urge large
do?
Conduct yourself
business
Although this into
rests on tenuous ground, let's take
a look at it.
It is said that busi¬
Ex¬
A modern, Spring luncheon meeting at the
Wall Street
Club on Thursday,
technological
culture,
9,
at
12:30
p.m.
Guest
such as ours, must make political June
speaker at the luncheon will be
and economic changes.
Mrs. Wilma Soss, Founder
and
A reactionary resists all change.
President
of
the
Federation
of
A radical would tear things up
Women Shareholders in American
by the roots.
A conservative is
Business, Inc., and her subject
one who believes there is some
will be "Today's Woman in Fi¬
thing worth conserving. We need
nance."
intelligent and enlightened con¬
Mrs. Soss is a well-known pub¬
servatism capable of reading the
lic relations counselor and pio¬
signs of the times right and mak¬
neer
newspaper woman.
In .her
ing useful adjustments, but capable
capacity as President of the Fed¬
of sticking to essential first prin¬
eration of Women Shareholders in
ciples.
Given proper information American
Business, Mrs. Soss has
and
direction, the majority of
made great strides in convincing
Americans will still support sound
large industrial companies that
principles and most of them be¬ their annual stockholders meet¬
lieve that we have plenty that is
ings be held in cities where the
worth conserving.
While time is
majority of stockholders reside,
running out, the struggle, is not rather than in remote
places as
lost and many good years may be
heretofore;
She has more-5 recent¬
(2)
far-reaching
of
Stock
dynamic,
Support sound fiscal and
The economic sanction placed monetary policy so as to remove
avenues for the further redistri¬
behind
this
drive
toward
the the necessary elbow-room which
bution
of
income
and
greater
equalization of income runs in the over-all planners must have
equalization. The law, or more terms of boom-bust
problem and in order to convert our society
likely the administrative bureau, full
Clearly,
St.,
ers
is itself un-American.
ahead for all of
far beyond these earlier ideas
of
The
the equivalent of good
socialism.
life,
b
the New York
you
pretation of the
better
Spring
m e m
the NASD.
-rr
Our present program, of course,
stamps
cash
to those
who got them. A bill
recently introduced in Congress
were
extra
desire, the
the opportunity to set up in
ness for themselves.
Well, there
An¬
Web¬
Paine,
weapons
Conclusion
of
equal start.
to give any
depression, with
the
During
education. We*
designed to prevent monopoly and
and all, who had the
Food Allotment
view both
Early in
history we supported univer¬
sal, compulsory common school
our
Los
geles office of
.
the feudal caste system.
the
Trading ' Dep a r t ment in
capable of further sharpening
are
man¬
Corporate
potent
them,
years
of
age r
process
or more
plenty
are
ANGELES, CALIF.—Ap¬
of Robert D. Diehl,
pointment
they don't get themselves publi¬
cized very well.
A's
of
equally, good
There
passed the Sherman Antitrust act,
variable grant idea.
justify the upward wage thrust. U Again
By building up the labor move¬
through Wagner Acts and
point to* the socialization
taking
number
Paine, Webber Firm
who would develop some stopping
two years
other
Robert Diehl Joins
,
the
hospital construction costs of the
people in the "poor" states. In
generally
ment
would
counterarguments
within the state, the bigger
often utilized to
so
logician
themselves
slice going to those states where
incomes are lowest. The people in
in support of the
bust which is
the
as
or
say,
a
rationale has been found.
Those
10
29
:'.-r
by
which income is being equalized.
This makes a pattern that is
hard for the politician to resist.
Why should the voters not vote
have
you
wage
average
on
comes
pressure
.v
nomic process.
over
to the different states is based in
that deficiency of mass pur¬
chasing power is not the causejaut
the result of depressions, much
is generated in Washing¬
unorthodox
and generally unaccepted "underconsumption" theory of boom-
highl>
a
to look
hospital
construction
law, the amount of Federal grants
agree
ton
of
sets in
ment
the
In
"where they will not cause price
■increases").
.
rationale,
and handing it over to the more and intensifying.
For the most
numerous
B's, • even though pri¬ part they are relatively new.
law bars any vately he would not take a tire
Taken together they- constitute
worker from a job unless he can off A's car or lift a
pumpkin from a formidable battery—a powerful
find an employer who is willing his
engine with ten cylinders. Adda
garden.
to pay at least 75 cents, $1, or
It is not
hard to find some few more cylinders and enlarge
whatever the fixed hourly rate moral
justification and perhaps the bore and stroke of each—then
may be. Whenever the minimum
historical precedents for such a we will have a different America.
is raised, all the wage rates above
Whether the fuel and lubricants
program.
the minimum also receive an up¬
Throughout our Anglo-Saxon to keep the engine going will dry
ward thrust to maintain the his¬
history and traditions, there has up, remains to be seen, but the
torical differentials of the wage
always run a pronounced equali- experience of other lands that
structure. Minimum wage law has
tarian strain. The Declaration of have tried this same type of ex¬
become a device for hoisting the
Independence emphasizes that we periment for some decades sug¬
whole general wage level. Here
gests that it is easier and more
are all created equal. The Con¬
is another way of passing money
stitution prohibits class distinction popular to redistribute wealth and
from one group to another.
based
on
hereditary or other income than it is to add to the
titles. We reacted strongly against total supply.
Federal Variable Grants-In-Aid
and again there is much
a deficiency of purchasing
power. There is
of
encouraging
facile
technical and interdependent' eco¬
Minimum Wage Legislation
Minimum
was
Government
too
get
(2135)
X .'■■•
Nevertheless, both on moral and
economic grounds, the drive foi
during
.
Keynes spoke frequently of the
of the
rentier" and
;
CHRONICLE
Inheritance Taxes
and
What the government can't
In
the past, periods of pros¬
perity and especially war periods
a
larger and larger slice of the
always entailed rising
interest
national pie. By reducing the pre¬
rates to help check excessive de¬
rogatives of management and en¬
mand
for
borrowings
and
to
stimulate the supply of savings. larging labors' voice in manage¬
ment, the earnings of investors
World War II was financed with
are steadily reduced. As investors
a constant and low or falling in-i
become more skeptical of future
terest rate.
This was indeed a
earnings and the security of in¬
stupendous and far-reaching
vestment, the way is paved for
achievement.
"government going into business"
Lord Keynes was the father of
because,
it
is
alleged,
private
the
engineered, artificially low capital won't come forth.
interest rate which
reduces the
ings.
&
COMMERCIAL
committed to freedom
PhiEa. Securities
Ass'n Field
Day
PHILADELPHIA, PA. — The
Annual Field Day of the Phila¬
delphia Securities Association will
be held
Friday, May 27, 1949,
Paul W.
Bodine, of Drexel & Co.,
President
of
nounced.
The
Association,
an¬
outing will be held
Aronomink
the
at
the
Golf
Club,
Aronomink, Pa.
Burr Eastwood Now With
First California Company
(Special
SAN
to
The
Financial
Chronicle)
FRANCISCO,
and economic progress.
CALIF.—
Burr Eastwood, Jr., has become
sensitivity and
Savings, whether earned by a
connected with the First Califor¬
feeling for the needs and striv¬
business or an individual, tend to
nia
Company, 300 Montgomery
lie around in "stagnant pools" in ings, both psychological and eco¬
Mr. Eastwood was fort
the banks or the treasuries of an nomic, of people so as to find Street.
ways and means of attaining these
insurance company for a time.
merly with Franklin Wulff & Co.
So
(5)
it is
argued.
When the business
is dim, these funds are
outlook
Deepen
your
needs back home and
in the com¬
munity.
These
help to take
thereby deepening de¬
the pressure off Washington and
pression. So, if we are to assure
help to perpetuate our freedom
full employment, full purchasing
and economic progress.
power
and full production, we
hoarded,
should shave
and
a
This
off the big
has
sup¬
port among some economists.
But
(Special
SAN
to
The
Financial
Chronicle)
CALIF.—
FRANCISCO,
nearly all, if not all, would agree
that business depressions are
caused and influenced by far more
Louis Nicoud, Jr. has been added
complicated factors and that this
New- York
simple
a
James D. Kent With
Dewar &
(Special
SAN
JL Barth & Co. Adds
some
is altogether too
and Conrad, Bruce & Co.
may
to
Company
The
Financial
Chronicle)
incomes
good slice of profits.
argument
steps
view, a
to the staff of J. Barth &
California Street,
and
Stock Exchanges.
Co., 482
members of the
Francisco
San
;
:
"
D.
DIEGO, CALIF.
Kent
has
become
—
James
associated
with Dewar & Co., First National
Bank
Building.
formerly
and
win.
with
Mr.
Kent
was
Buckley Brothers
Walston, Hoffman & Good¬
30
COMMERCIAL
THE
(2186)
FINANCIAL
&
CHRONICLE
Thursdays May 19; 1949
—i
—
How to Revive the Stock Market
Inflation and Postwar Profits
the corrected
pared with profits as now re¬
ported to disclose the overstate¬
ment in the present figures. The
late
results
national
this
of
comparison are
little less than astounding. Let me
the
summarize
for
study
you
'
(1) In the first section of the
study we deliberately set aside the
fact that earnings are understated.
We
of
comparison
1910 to
in billions of dollars, in per¬
simply present
a
corporate profits from
1948
of
centage
national
income,
and
in percentage of sales.
profits
have been, indeed, unprecedented.
When they are related, however,
dollar
the
which
on
volume
they
business
of
earned, the
were
illusion of abnormality disappears
completely, and recent profits
are
shown
have
been
below
average of full peacetime pros¬
perity in the past.
The average
of 10 representative good years,
prior to World War II and back
to 1910, is found to run about 9%
of the
measure
a
sav¬
income
being
shown
is
that
impression,
contrary to popular
recent
savings have
been
com¬
paratively low.
1946 is shown to
oe
but slightly larger than 1940,
and, except for 1940, lower than
any
year since
1913 except for
1918 and the depression '30s. Even
1947 and 1948 show as well below
for
3.5%
of
average
the
years.
prewar
prosperous
10
So
again, when these corrected sav¬
or retained earnings are re¬
lated to a contemporary volume
of business
their unprecedented
ings
magnitude turns out to be another
myth.
(6) The study tests next whether
available,
now
American business
can
criticism
that
ter
that attack.
and
■
.
now
coun¬
turn; back
■/;'
.
that
fact
had
been
taxes
as¬
paid on true profits,
corporations would
have
less
and
paid
bil¬
in taxes—$8
lion less in taxes
on
the fictitious
The effec¬
corporate tax rate on corrected
profits of $19 billions.
tive
taxable income has exceeded 50%
(3)
avoid
further
any
dorsement of the
.
obviously
Businessmen
should
en¬
proposition that
of
corporate
overstatement
the
profits
is
the
On
dam.
the
contrary, historical
water
now
cost
accounting
does
not
for
catch
soon
placement costing.
over
fixed assets
up with re¬
It will lag for
and even decades after sta¬
years
bilization
of
the
price level has
At the present time the
occurred.
savings, postwar,
replacement cost of corporate net
were high in
relation to net ex¬ fixed assets is above historical
penditures
for new plant
and costs by about $60 billion. Were
equipment.
the price level to remain about
Again
the
conclusion is in¬ where it now is, corporate depre¬
of national
income and
6% of
escapable that true postwar net ciation
charges would fall short
sales.
Not one
of the postwar
corporate savings have been rel¬ of
replacement costs by $60 bil¬
years 1946-48 made the average.
atively low. For the three post¬ lions before the existing facilities
(2) The study turns next to the war
years
1946
to
1948 they which were purchased at lower
much more striking picture when
amount to only one-third of net
price
levels
are
entirely
ex¬
the
overstatement
of
profits is
capital
formation
(expenditures hausted. And this means that at.
eliminated.
Here
profits
have for new
plant and equipment),
been
recomputed,
charging re¬ and this compares with an aver¬ present tax rates this continuing
underdepreciation
w o u I d
cost
placement costs -for the inventory
age ratio of ]57 % for five good American
corporations
in
the
and fixed assets
consumed, and
years of the 20's, or an average of
neighborhood of $24 billion addi¬
the profits for earlier periods sim¬
net
corporate
72 %
for ten
good years extending
ilarly recomputed for comparative
farther back.
purposes.
When
the
replacement
cost
of
the physical assets used up in pro¬
duction is charged against current
profits, the reckoning of profits
is materially and in some cases
drastically revised.
The change
for the three postwar years 194648
is
particularly conspicuous.
Another .section of the re¬
(7)
tional in Federal and state income
port explodes the illusion that we
have witnessed an unprecedented
behooves
It
taxes.
for its
management,
sake, and for the sake
of its relations with stockholders,
own
withholding of earnings by corpo¬
employees and the public, to give
this subject first attention.
The
corrected
of profits
of accepting finan¬
cial statements in dollar terms at
rate management.
basis
On
percentage
the
distributed
in
a
86% in 1946, 62%
was
1947 and 56%
in 1948, an aver¬
consequences
face value,
and of continued mis¬
understanding of the effect of in¬
the three years. flation on profits, prices, costs and
overstated profits for these three This compares with an average of capital formation cut across our
61 % for the ten prosperous pre¬ entire economy and are of prime
years were 8.3% of national in¬
war years.
importance
in
influencing
the
■; ;
fcome, true profits are found to be
economic
health
of
the capital
(8)
Inflation and Net Worth:
only
5.1%.
Where
before
the
Where
before
correction
sales,
on
the
correction
the
profits were 5.4% of
the correct comparative
age
of 68%
basis they are only 3.3%. Not only
as
national
basis, the 10-year average of
earlier
perous
years was
pros¬
8.9% of
study
pro¬
ceeds to relate profits to net worth
do these
figures show a reduction
of well over one-third, but the
relation between postwar profits
and those of earlier years of full
peacetime prosperity is also dras¬
tically affected. On a comparable
for
Under this heading the
they
were
previously related to
income
and
to
corporate
sales.
shown
is
these
that
of 5.5% for
average
profits
prewar pros¬
perous
Not
decidedly below the average, 1947
close to it, and
1948 moderately
the
even
best of the postwar
anywhere
near
these
figures.
(3) The
to
study
the
then
conversion
replacement
a
years.
The
year
1946 was
explores
of
profits
basis and
cost
gives the extent of the corrective
changes.
t This
showing
discloses
at
a
(9) The final
section of the
study answers the question: "What
does the picture look like in con¬
dollars?"
stant
If
war
the
myth of abnormal post¬
profits needs still another re¬
glance the extraordinary margin
by which replacement costs have
exceeded
the
costs
actually
buff, here it is: True profits
charged during the three postwar
1948
Profits
years.
basis
cost
are
on
a
replacement
actually
lower
by
$19 billion.
For one of
1946, the overstatement
profits was almost 100%. It is
of more than passing interest that
of the $19 billion overstatement of
60%,
or
the years,
of
profits, $13 billion reflected undercosting of inventory and $6 bil¬
lions undercosting of fixed assets
consumed in
production.
(4) Next
retained
corporate
earnings are shown, comparing
profits as overstated with true or
corrected profits.
•.
*
The
transformation
of
ture
retained
in
the
corporate
pic¬
earn¬
ings (not corporate savings) when
corrected
profits are shown is a
striking one. Savings in the 194648 period reported on the over¬
stated basis as $30 billion shrink
$19 billion down to only $11 bil¬
Taking the three years as
lions.
whole, all but this $11 billions
the
so-called
"savings" are
found actually to have been ab¬
sorbed simplv in maintaining each
a
of
year
the volume
of the physical
assets with which corporations be¬
gan
the
year.
ex¬
pressed in constant
age
the
dollars aver¬
1946 to
than for the period 1926 to
the grass
cream
this
partly
ingenuity. We have
because
our
system,
so than now, en¬
developed creative
talent, and partly because other
nations did not, and some of their
greatest
scientists
came
here,
where they could find more free¬
formerly more
couraged
and
dom and incentive.
Technological advancement
(5)
is
born
but
it
of
It is
try.
science
be
must
a
brainchild
of production
into
roots of America.
Today we have in America
of the world's scientific
(4)
lower for the period
1928, notwithstanding an increase
of about 80% in the physical vol¬
corporate
MAPI study filter down
new
the
for
need
and inventive
below it.
further
which present wage,
price and tax proposals are .based,
will disappear, and we will have
a more constructive recognition of
on
savings,
are
no more
than normal for a and for beneficial change in the
conditions
now
hampering the
period of prosperity. The average
market
for
risk capital, if ;and
for
the three
postwar years is
when the facts put forth in this
5.4% of net worth, as against an
It
national income and 5.8% of sales.
years comes
goods industries. Gross misunder¬
standings,
and
reared
invention
by indus¬
long way from the
of
a
scientist
in¬
or
in the interval.
the best of the ventor to the practical products
postwar years, the figure is only and services which make a high
modestly above the level of 20 standard of living.
years earlier, and is below that of
(6) It is clear from the histori¬
1929.
Confirming the direct evi¬ cal record of this and other in¬
ume
for
Even
dence
1948,
other
in
sections
of
the
study, it is clear that postwar
profits actually have lagged well
behind the growth of the economy.
dustrialized
countries
that
con¬
tinued technological advancement
is
the world's
stitute
7%
Americans
area.
primary
requirement
for
weeks. The study
number of possibilities
use
by thoughtful
two
a
effective
(7)
We stand on the threshold
greatest era of
^
.
•
.
catch
must
of
telephones, 80% of the world's
automobiles, 35% of the world's
railroads.
We have $24 billion in
gold.
We produce 60% of the
world's wheat; 60.% of its cotton;
as
clothing or food. ^ Words such
"yields," "ratio" or phiases as
"the stock is selling at a 22.25%
discount
from
its
quick
assets
value"
or
50% of its copper; 50% of its pig
iron.
We have -36% of the world's
able
banking resources.
Our purchas¬
ing power as individuals is
greater than the total purchasing
stood by
obligations.
is
for the
Such scien¬
used and under¬
insiders, is "abracadabra"
general public, especially
newcomers.
(5) Better relationship between
management
and
stockholders:
Better recognition of stockholders
stock
The
public.
-
natural wealth and creative power
involve
the
for
all the people of Europe
the people of Asia.
Such
all
the
to
tific vocabulary,
power of
or
"the burden of proof is
are not understand¬
the bulls"
on
by management is necessary. Div¬
idends ought to be proportionate
to be the
barometer of the economic condi¬
to
tion of
ting only about 40%
market
supposed
essarily
have
weather"
especially
"good
predict
to
during
o'
period
a
.
.
Stockholders
are
get¬
.
The huge
boom,'
business
"a
or
profits.
of reported
earnings against 70% in the past
but living costs have gone up.
country. This barometer
—the stock market—does not nec¬
a
are
ers
majority of stock
own¬
interested in income
more
in
than
speculative
transition and of economic uncer¬
advantages
tainties.
trading for profit possibilities.
The
barometer, how¬
country like ours must
never
be suspected of being an
instrument out of order. Why has
the American investor, the busi¬
in
ever;
Voting power ..of management
special fees, exorbitant sala¬
ries, bonuses and pensions ought
to be restricted. The same japplies
with regards to the voting of opr
tions to purchase shares at low
prices. Shareholder meetings
a
working
and the
ness man
for
man so
little confidence in the future of
his great country, as indicated by
the desolate status of the stock
which
market
been
has
for years, or
on
should
drifting
tant
Americans
that
they
believe in their own
great financial
of life, th e
it
American "know-how" dominates
world
are
nations
The
earth.
the
watching
us,
to
of
conditions,
fears
are
our
registered
ometer—the
hones
socialism."
and
by the bar¬
Al¬
clear, easily understandable and
convincing as in U. S. A., but in no
country of the world are the methods
to attract wider-spread
participation and to en¬
courage
speculation-trading
in
stocks.
Furthermore, the great
business,
of corporate
public
as
task has to be
successfully under¬
sons
the
—
acquiring stocks,
There
shudder.
having
ations
only
corpor¬
are
common
.1 have class A and
with or without par
value, then there are rights and
warrants, preferred stocks, such as
"First *• Preferred." "Second Prestocks,
receive "the satisfaction of invest¬
ment
financing so diversified
in the U.S.A. The enormous va¬
riety of the capital structures of
corporations makes untrained per-
taken to convince millions of sav¬
that they, by
against
(6) Simplicity needed in cor¬
porate financing methods: In no
country of the world is the madern
method of
bookkeeping so
though there is nothing basically
wrong
with
the stock market,
something must be done to revive
ers
and
it to each other
economic democracy
communisrp
an
bulwark
and
market.
stock
management
owe
owners
develop
as
them hoping for our success, while
some desire our failure.
Our eco¬
nomic
can
"corporate
stock
the
of
most
small dis¬
stockholder, is taking place. Or
as
Justice Ferdinand Pecora put
and
power.
The American way
at
where large at¬
be accommodated.
but
Only lately a more cooperative
spirit on the part of management
toward the "forgotten man," the
ought to give proof to the world
economic
held
be
not
places,
tendances
what is everybody
fearful of in America?
some
class B, some
pride, the feeling of
the extra income."
people, those in the low¬
er income brackets, who describe; ferred" designated as A and B for
corporation owners as "big busi¬ prior
claims.
Then
there
gre
ness men,"
"bankers" or "society Bonds, Mortgage. Bonds, open- and
narticipation,
The olain
oeople" of every community will
that all "Main
Street" leads to "Wall Street," the
"much abused financial mother of
the richest and most progressive
nation on the face of the earth."
ture
Guaranteed
ness,
system of free enterprise.
though
This
charge,
Some Corrective
be secured
by:
"the
by
corporations.
of
!
(1) Tax
relief: reducing the
capital gains tax and shortening
or eliminating the holding period,
(3) Brokerage
fees
should be
possible in order
bigger turnover in trans- i
of what can be the
kept as low as
technological advancement, sus¬
employment and improve¬
to get a
the customer who
He finally concludes
is for the un¬
more or less a sort
science, which he considers
a
company
mind
himself unfit to study.
The stock market—a
the
;
,
•
Conclusions
•
of
needs
himself.
trained
could
,
of experts and
facts" is unable to get them
that each
Measures
Greater demand for stocks
army
an
analysts is at work studying each
company from
all angles, ready
and willing to give advice free of
system will become stronger the
more people share in the owner¬
ship of American
where he himself feels "lost?
of understanding. Al¬
lack
for
buy and sell
private property in an organized
market is a priceless privilege." A
wonderful act has to be done for
our
Convertible
Bonds,
Adjustment Bonds, etc. This mul¬
tiplicity of capitalization methods
is for the average man a wilder¬
Indeed, it is the "Market Place of
the Nation."
Then they may real¬
ize "that freedom to
bonds. Deben¬
Bonds,
Bonds, Income and
close-end mortgage
better understand
,
days or
suggests
;•
Advertisements
the eyelikqannouncements of sales
of the world's popula¬
for
higher living standards. It is the correcting the present double tax¬
ation on dividends.
>
v
source of more goods and services,
These are the principal conclu¬ and of more jobs at higher pay so •-.-(2) Life
insurance companies
sions of the
new
MAPI study, that the goods and services of a should get permission to invest a
copies of which will reach your higher living standard can be ac¬ part of their huge surplus in high-;
desk
soon—within the next ten quired and enjoyed.
grade common stocks.
•
r:"
a
6)
page
facts.
con¬
We have 60% of the world's
tion.
American
sessed
(Continued from
will,
it
if
There is food for thought in
(2)
the
conclusion
The
study
for
used
this purpose.
the
to
to
corporate
contemporary volume of business,
the
In dollar volume postwar
to
ings figures
in
this way:
proceeds to re¬
The study
(5)
(Continued from page 27)
barometer
country's economic
condi¬
deplorable status.
Turnover
in stocks is
at a
record
low ebb. - The foregoing
tions—is
in
a-
suggestions are merely six princi¬
pal points of an evolution that
would change the present state of
affairs. Many more improvements
could easily, be mentioned... Ne\y
venture capital is urgently .need¬
ed.
"Wall Street" under the lead¬
actions.
Premiums
for traders
all ought to be taken under consider- i ership of the New York Stock Ex¬
ation by refunding part of the change is on a crusade to persuade
you today, I will point these out history. If we achieve our destiny
millions of people to invest a^part
quickly.
it will not be as a result of build¬ commissions in ease buying and
of their savings in stocks of the
(1) Had
American
corporate ing myths and spinning illusions. selling of the same security is ef-;
fected : within: a
certain
short great industries of their country.
business shown its true profit of It will be because our economic
These people declined
up until
r' -- -r
•
•:
studies are thoroughgoing, objec¬ period..,
businessmen throughout the coun¬
try,
In concluding my time with
tained
ment
in
living
standards
in
$32 billions rather than $51 bil¬
lions it did show for the postwar tive, and precise.
If we ever thus
period it would have saved itself' find the facts, and translate them
no
end of criticism and attack. into national policy^ our oppor¬
With
the
findings
of
the
MAPI
tunities
are
unlimited.
N: ' '
now-to have anything to do with
(4) New methods for salesman-1
stocks for :"lack .of familiarity"
ship of securities and advertising:'
with them;
There has been and
Utmost simplicity ^must be;i ob- >
still is a great general ignorance
served when telling or writing the
.
Volume
COMMERCIAL
THE:
4804
Number
169
most
important,; development
financial
and minds by simplify¬
ing their methods, language and
approaches totally, or these people
will
custom¬
Many of the "newcomers" do
to mind risking even
.
not
their
become
never
ers.
most of the trusts
of
attendance
enormous
by
proved
is
which
the
de¬
capital, as
usually in¬
tenting themselves- with furnish¬
new capital to those industries
in which they are already share¬
the ing
race¬
but they want to "under¬
courses,
are
vesting in a relatively small num¬
ber. of leading companies,
con¬
seem
losses,
unsatisfied
leave
would
mand for new venture
declining
but
holders,
issues of
take
to
stand what it is all about" in order
over
:t0 be able to form their own judg¬
they have not already sponsored..
Such effects would, therefore, be
ment in their decisions.
They want
deplorable
simplicity. If we do not
our appeal.to them, we
content if they, at best,
.utmost
firms
succeed in
the
daily increasing
the
merely join
'number of stockholders of Invest¬
stock
and the future
of private financing of American
industry.
Wall Street ought to
Companies, if only for
that they (the new¬
comers) do not want to have any¬
reason
one
it would lead to "freezing
as
regular
general
ment, Trust
the
brokerage
the
for
company
any
market busi¬
ness.It would hurt the country's
be
must
new.
economy
combat these facts and continue as
thing to do with the management a militant crusader for venture
of their own portfolios.
capital.
This
is
Wall
Street's
These considerations might ex-,
greatest task.
It may be Wall
'plain the fact that, according to a
Street's last chance to preserve a
'statement of; the SEC, the Open
End Investment Funds are "the free enterprise system.
more
earn
by
Now there is
no
producing more.
cheap labor and
i,
try? Do they hold any promise of
expanding security, of expand¬
an
ing earnings, of expanding oppor¬
tunity for 1,300,000 employees—
or anyone else?
'
Let's look:
*
prise. It cost the American people
little
more
than $2,000,000
a
*a
conclusions
own
it—except
paid 51%
mile under
i government operation and shippers paid 80% more per ton mile.
During
World
War
II
the
more
passenger
per
*
*
American
*
try
let
didn't
again. We
people
tionalization
na-
the
*
railroads
;thev
themselves
run
did
job.
magnificent
a
—
and
In-
*
of
stead
out $2,000,000 a day to operate the roads,
the American peolpe took in $2,500,000 a day in the form of taxes
;
;
having
to
pay
'
mained
at
slightly.
re¬
'
the
gard and provide the drive neces¬
sary
to build a dynamic social
It
been
has
is
no
In
good.
that
argued
will
absenteeism
fall
and
was
pro¬
has
the
clearly
argument
the opposite
fact,
well be true. Miners who al¬
ways imagined that nationaliza¬
tion was somehow going to make
them
captains
of industry are
finding after about two years of
nationalization that they merely
work
for
the
different
a
ernment,
Gazette"
of
bosg—gov¬
good. "The Railway
common
4]/2
about
remarks:
London
million
regret
has
worked
own
shares in
a
locomotive
young man. I
number of British
a
friends in the British Isles. I have
than
a
passing interest
the old
and
zest
but
a
come
feeling
over
they felt for the
fray is gone."
The
idea
tionalized
become
boards
a
are
of
tending
date, nationalization in Eng¬
applied to the Bank
Cable and Wireless
men
working
I
see
Enterprise
no
American
that
evidence of
Is Not
on
-
-
reason,
on
the basis of
England, for any
employee
to
believe
in
nationalization
can
have
a
good and beneficial effect for him.
In
me
min¬
railways
no
Trial
ing; transport—meaning
fact, the assumption
stronger than ever
seems
that
to
na¬
the
rail¬
against
It is their secur¬
ened.
4.
A
approach
competitive
to
railroad services.
Railroads
today forced to
perform services and maintain fa¬
are
cilities which cut deeply into
their
earnings—into the pie which the
employees must also consider his.
..
V Let's . look at nationalization
through the eyes of the worker.
the
to come out of
earnings after taxes amounting to
the
Railroads
We
of
reconsideration
a
things
to do—take every
do
to
kind of freight
offered, for example^
Four-Point
Is
Program
Suggested
has
money
required
are
other carrier is required
no
All
this
of
thinking.
19th
is
century
We need 20th century
thinking.
Furthermore, depreciation rates
unrealistic.
We are in a fast-
There
a
are
improvements
great many other
which are called
employees and 1,900,000 investors
of, railroads
penalized.
When
Now, how do we proceed?
Any program, it seems to me,
be taken care
to
are
be
as
all know, came out
we
century public opinion.
I believe it is time to start some
of
not
:
•
19th
It's Essential to Have
century thinking.
regulators
Railroad
Return
he
can
begins to get a monopoly,
be
certain, he's
going
to
get regulation with it.
Market Is Most Competitive in
History
the
But
railroads
as
century
idea
out-of-date
as
no
longer have
a
transporta¬
tion monopoly—far from it.
were
never
in
a more
market than they are
In
of
the
Pullman cars of that pe¬
The railroads of this coun¬
fancy
riod.
try
is
19th
the middle
They
competitive
today.
of the great
de¬
industry suddenly grew up. Since
the war, the number of
"class one" interstate trucking en¬
terprises in this country has more
before
pipelines and
The total volume of
business done last year by all the
competitors of the railroads was
over $4% billion.
waterways,
air transport.
There is
no
nopoly today.
the
reverse
transportation mo¬
As
a
is true.
adequate return.
railroad
employees
If
matter of fact,
are
to be earned and paid out
risk-capital so that risk-capital
has got
will flow to the railroads and
them
become
stronger—for
the
employee, the share¬
Money has got to be earned
substantial amounts can
that
so
re-invested
be
and
in
who
modernization
cost-cutting methods.
big pumpkins and squashes at the
county fair—evidence of good cul¬
2.
transportation policy
fair
1,300,000 'railroad
ers—if
clearly
There is
no
doubt that our pres¬
policy in this
"loaded" against the
railroads. That's part of the 19th
transportation
country
is
century thinking.
Railroads get
paid less for hauling 94% of the
mail of this country than planes
do for
carrying 6%.
we
can
employees—
security hold¬
a plan
work out
the
in
and
long-term
of these
interests
short-term
groups.
3.
We begin to
develop
our case
with
employees, shareholders and
all who have a stake in the rail¬
road industry.
4.
We
agree
upon
a
plan and
to substitute a 20th cen¬
proceed
tury attitude toward the
railroad
for the 19th century
thinking which restricts railroad
managements is so many ways,
and
to release railroading from
some
of the
shackles which
hold
back its development.
Can
we
do all these things?
Why not?
story of the
girl to marry
You remember the
Scot who asked his
him.
She
said:
"Yes,
Sandy."
silence she asked:
"Aren't you going to say any¬
thing more, Sandy?" He replied:
"No—I think I've said too much
After
to all.
ent
that we can count
support and help of
agree
full
backed by 1,900,000
It's the little shriveled-
pumpkins that should alarm us.
Nobody shows off the shriveledup pumpkins.
A
We
the
on
up
3.
in the railroad
stake
a
us.
That's industry
to low transportation
rates.
Earning a good return is
evidence of health.
It's like the
way
tivation.
have
It involves me and you
help
holder, the shipper and everyone
else.
the
involving
problem
thinking of large groups of people
to
greater
security, greater
earnings and greater opportunity,
they—like
everyone
else—have
got to help fight for a higher re¬
turn for their companies.
Money
good of the
the problem is
prob¬
We agree that
and all of
have
to
1.
industry.
An
the
pression of the '30s, the trucking
inland
2.
at¬
were
Adequate
involves these elements:
long
a
already."
I think
perhaps I have said too
much already.
But I can't
help feeling that we
living at
in the railroad field are
time
when the materials for a
We all know the tax story.
The
Today regulation
is actually railroads, like most every other great achievement lie all about
us_a
great achievement
based
preventing railroads from achiev¬ business, pay their taxes' in ac-;
ing their full efficiency in a icordance with Federal, State and upon the strong, successful, tested
At .the same time, it is quite, highly
competitive
market
by .local, government, levies « on all .method of free men getting to¬
.A, ...
evident thatlarge s, numbers { of. .making them pay to run while i their facilities.
The total tax bill gether for the good of all.
waterways; electricity; gas. tionalization is essentially for the
and steel are next on the ! desperate—and cannot
be justi¬
list, but the legislation has not yet fied except in'desperation. It is a
form of receivership.
been put through..
and
Iron,
roads,
Socialism, after all, is on trial,
than doubled. Total revenues have
not private eterprise—and there
gone from $700,000,000 in 1939 to
is no good evidence that it is bet¬
more than $2,500,000,000 today.
ter for anyone, while there are
In addition, American railroads
still many reasons to distrust its
face the stiff competition of buses,
long-range effects.
Company,' civil aviation; coal
:
op¬
portunity for them, I believe the
to
strong, good effect.
experience
land has been
of Engalnd the
loaded
We often for—in the interests of employees
ing the railroads of this country— moving atomic world.
about de-regulating them.
have 30 or 40-year depreciation and investors.
Many of these im¬
If we can show the 1,300,000 em¬ rates in a 10 or 15-year world.
provements can be obtained—per¬
That's
19th century thinking,
ployees and 1,900,000 investors of
haps promptly—with the help of
too.
U. S. railroads that de-regulation
1,300,000 railroad employees
is the road
to greater security,
If the best interests of 1,300,000 backed up by 1,900,000 investors.
anyone
that political govern¬
groups
Private
in
this whole subject.
To
against
loaded
is
employees.
ity which is threatened. It is their
opportunity for advancement and
increased earnings which is weak¬
are
people against a transportation
monopoly. In a democracy when
I think
railroads, and I have a good many
more
policy
railroads
road
theory of depreciation based on
original cost.
Actually,
the
$4,000 box-car
costs considerably more because
tempting to defend the American
a
British
in
shops when I was
need
can't be done.
It
box-cars.
ripe to talk about de-nationaliz-
of
of nationali¬ having
its supporters,
ought to'take
by competitors.
point is that a transporta¬
The
tion
about 38%.
them
has
tionalization shows
'J';
look at what
is happening in England.
I was born in Scotland and I
we
facilities used
goals
of
greater security,
earnings and opportunity for all
associated with the railroads, and
about
nationalization, the time may be
I think instead of talking
20th
Nationalization has not been a
entirely' different direction
can
be moving in a different disaster as some expected it to be.
direction if we keep everlastingly But the damning fact is that na¬
zation
of time.
have lost their former gusto for
the day's work. They plod along
or
the idea
by the railroads is devoted to the
construction and maintenance of
lem—a
with
an
■
We find therefore
the tax money paid
of
some
help anyone.
noticed
•
■
that
first and foremost a human
have
we
each for his own department or
think we in
division—whereas old-style boards
have passed the
of directors worked together for
peak
demand
for
government
the most part.
,'.Z
ownership and may be moving in
Because
going
period
the
this country may
at it.
only modest rental or
ice
to
turij
matter of fact, I
a
carriers pay
franchise fees.
earnings are taken away from an
enterprise, they are not there to
a
great achievement which has not
been lost on the American people.
As
tax bur¬
by com¬
must
we
day—in favor of private
ing boards will act more success¬
—- iand
in favor of the
fully in the public interest is also
American people.
not getting much support.
Na¬
It
is
a
remarkable story
of
dollars
high
shouldered
not
are
American people are today fully
higher prepared to accept such a course.
grades in the commission's serv¬
Regulation of American rail¬
"When
'operation
■
a
a
community,Yor greater earnings and greater
the
or
or even to run
successfully over
system,
concern
may
frustration
The difference between govern¬
ment operation and private op¬
;
eration
But the socialistic
short-sighted.
conscientiously
Day in World War II
*
*
Proportionately
dens
petitive air, water and other sur¬
face carriers.
They are, in the
main, operating with municipal,
county, State or Federal facilities
that are paid for by taxes.
The
gov¬
worker, under socialism, will feet
a
great spirtual release — that
levels and
that quite a number of occupants
advanced only of
responsible posts appear to
Private Operation Saved $4,500,000
A
these—
are
pre-war
fares
passenger
:
Freight rates
railroads.
from
through
system has yet shown no evidence
that it can do as well in this re¬
day—to run the railroads during ductivity rise.
the two years of the first World
Nationalization
'War. This was true in spite of
demonstrated that
-the fact that passengers
Should Pay Their
Way
our
Disproved
My.
railroads. It proved to be a very
'poor substitute for private enter¬
•-
Carriers
,
of
nationalization
tried
country
go
1948
in
billion dollars.
over a
They are services and facilities
tives, backed by 1,900,000 security which the public does not want—
ernment
It is by no means cer¬ holders, could greatly strengthen as evidenced by its failure to use
;
They are services and fa¬
tain they will get
it that way their industry and advance their them.
own
interests by helping toward cilities which others can provide
either.
■om page 19)
better—and will provide when the
It seems to me all the evidence such goals as these—
Has it fulfilled his hopes? Has it
1. A realistic system of depre¬ railroads are permitted to with¬
points one why.
The free enter¬
led to better things? Is there any
draw them.
prise system is vigorous, dynamic, ciation for railroads.
good expectation that it will lead constructive and can do more for
Railroads are barred from good
I believe the current system is
to better things?
v
employees than any other. It has entirely
inadequate.
Railroads competitive practices common to
created' a tremendous productive are being asked to buy $4,000 box¬ every other carrier—things like
Socialistic Arguments Are
force.
It
has
sometime
been cars out of depreciation on 2,000 quantity rates for shipping.
During World War I. we in this
v
to
railroads
31
De-Regulated!j
(Continued
.
had
nation's
well
Other
"through the wringer" of nation¬ better, faster, lower-cost service
alization
because
they couldn't for the customer?
I think 1,300,000 employees of
compete.
They haven't got the
and their representa¬
money and they have no way of railroads,
getting
,
have
industries
the
the
was
be driven by
'
Let Railroads I
of
railroad competition
to improve their own services ano
facilities?
Regulation of the rail¬
v It is my own feeling, of course,
that only our dynamic enterpris¬ roads is often not serving the bes
interests of the public—it is actu¬
ing system can achieve the great
goals the American people are ally working against them.
I need not tell you what a stim¬
setting.
It is my own conviction
that nationalization and regula¬ ulating effect progressive de¬
tion: lack the living spark.
They regulation of railroads might have
will never get the results they not
only in this country, but
promise.
They lack creative throughout the world. For Amer¬
ica to turn away from regulation
force.
would be a tremendous stimulant
Which Is Better System for
to freedom-loving people every¬
Employees?
where.
It would be a reaffirma¬
The industries of England have tion of the American belief in the
nationalization today because they individual if we were to start dedid not keep their private enter¬ socializing our railroads.
prise house in order.
They did
These Are Ways to Reach Our
not provide machines to increase
Goals
the productivity of the worker.
What are some of the steps by
They turned to cheap labor in¬
stead of helping the worker to which we can begin to approach
profit system to the achieve¬
ment of additional objectives,
our
.
eyes, ears
(2187)
CHRONICLE
people believe that our own sys¬ wearing leg irons. If the railroads
tem needs to progress, which, I are not permitted to operate at top
believe, is exactly what it is doing. efficiency, how can we expect
We are now being asked to gear' other forms of transportation tc
in
history in the last, 50
not
know
and understand any¬ years."
A failure of the "crusade"
thing about these subjects, terms, would not only diminish greatly
financial and brokerage methods. the number of brokerage firms, or
Stock brokers must find a "way would make, them selling agents
investment ■ trusts,
but
of all round simplicity" to attract for ,the
prevailing about stocks and corporationsi but these, "newcomers" do
FINANCIAL
&
a
32
COMMERCIAL
THE
(2188)
Our Economic Position Exceptionally
(Continued from first page)
credible, in our present-day view,
is the fact that such
tion
of
the
brokers'
banks.
from
At
small por¬
a
loans
came
the
height of
stock market speculation in 1929,
:
three-fourths
some
tributable
to
it
of
was
at¬
lenders—in¬
other
dividuals, business corporations,
tradiing companies, and investment
trusts.
...
The shaky foundations of the
speculative structure of 1929 were
revealed.
soon
can
Looking back,
we
that speculation was more
see
decisive
than
single
in impairing the economic
factor
other
any
synthetics affords un¬
limited possibilities for new prodducts.
Developments
in
home
construction and home equipment
offer
tremendous
opportunities
for
Position
Exceptionally
Strong
j
Today,, in contrast, our position
exceptionally strong; and we
is :
look
to
confidence
the
of
future
with the
experience
in
our
ability to maintain that strength.
Speculation has been virtually ab¬
sent during our years of postwar
prosperity.
Each
the
of
markets.
new consumer
efficient farm
tilizers
More
machinery is being
developed constantly and
new fer¬
chemicals. for
and
coming
farm
the market.
Up to now, our factories have
been so busy supplying the goods
are
on
which could be most quickly pro¬
in
duced,
order
fill
to
.accumu¬
lated demands, that they have not
had
opportunity
an
to
re-gear
machinery to the manufac¬
new
products.
With the
buyers' markets,
producers are beginning to
the new processes available
of
ture
can
importance.
their
health of the nation.
Economic
in
growing
The field of
use
-
is
loys
recessions
in
our
use
opportunities
The
them.
to
are
discoveries
and
The
enormous.
industrial developments of recent
provide
years
new
a
springboard for
a
of progress.
era
When I spoke to you
last
City
at Atlantic
reviewed our
I
year,
our
'the most striking element of con¬
^
trast with
:
:
factor; today which is
in almost equally sharp contrast
to the past, is the gradual process
of
the
postwar adjustments to
normal
competitive
conditions.
Business recessions in the
past
"were
largely unforeseen. They
owed their severity to a simultaneous
readjustment of many
have
problems
by the Treasury since the
istence of
a
large volume of issues
maturing each
sible
But the very ex¬
has made pos¬
flexible debt policy. Dur¬
a
the
two
year
which
in
years
we
had Federal budget surpluses, we
were able to select for retirement
those
portions
retirement
the
make
the
of maturing debt,
of which would
contribution
maximum
in
stabilizing the economy. During
the past year, although we have
not had- a budget surplus, we have
able
been
nonetheless
of maturing marketable
the proceeds of the
portions
from
issues
sale of nonmarketable debt issues.
Due to the
change in the budget
this past
picture
year,
we
have
not been able'to continue the deht
reduction
lined
that
program
to you at
I
out¬
last annual
meeting.
The total
amount of
debt
outstanding has been re¬
duced by only $750 million since
last year. During this period, however, we have continued to widen
the
distribution
of
the
public
your
There has been
debt.
increase
an
debt
management
opera¬
of
over
of
government securities held by
$2 billion in the amount
nonbank investors.
increase of
maintaining confidence in the
ties held
about
$1V2
billion in
the amount of
credit of the United States by pro¬
government securi¬
by individuals.' Most of'
this increase has been in holdings:
moting stable financial conditions
a
situation
moved to
this
1947,
vent the prices of government se¬
adjustment in the Spring
of
Summer
and
1948.
Others,
such as rayon and crude petro¬
leum, have more recently fallen
into line.
curities
has
ation
I have just
the
and
readjustments
place in the
economy—are
only two of the
many elements of strength injpur
present situation.
which
gradual
have
taken
falling
been
the beginning
pre¬
sharply
by
Since
reversed.
of the
year, govern¬
ment securities have been sold by
Federal
the
Reserve
in
to
order
government
bond
prices
going up too sharply.
need of flexibility is im¬
keep
factors which
The
from
we
open-market purchases. The situ¬
'
cited—the absence of speculation
from
The
portant in public finances, as it is
in
private finance. The fiscal
problems
changed
of
the
nation
have
greatly from period to
have the problems of
private enterprise. The fiscal tools
Consumer Buying Supported by of
one
period
have
generally
High Incomes
proved unsuited to a subsequent
It is
extremely reassuring* to period.
mote that consumer buying, for
I have just said that our most
example, is being supported by
continuing high income levels and
by a backlog of savings which has
reached an all-time high. Personal
;
of this year—
incomes in March
the
at
latest figure
an
little
available—were
annual rate of $214 billion, a
below the all-time peak of
last
December, but well above the
a year ago.
Liquid assets
of individuals—which is just an¬
other name for stored-up purchaslevel of
power—amount to $200 billion at the present time.
I could cite more statistics. But
ing
.
v
all point
1
in one direction: There
are
powerful
factors
in
our
present situation making for stability and progress on a highincome, high-employment level.
And
there
evidences other
are
than statistics.
;
.
-
period,
are
as
important
postwar
to do
objective during the
period
has
been
to
of the United States, One hundred
and
fifty years ago the main fi¬
nancial problem of the newly born
nation was to establish that credit.
savings banks is
almost as
as that of the na¬
tion—the first savings bank was
The
history
of
long
established in 1816—and in many
respects, the problems of your in¬
stitutions
have
paralleled
the
fiscal
problems of your country.
attempting to build up
confidence in your newly found¬
ed institutions at nearly the same
You were
time
that
same
the
nation
the
faced
problem.
We have been able in our recent
poli¬
debt operations to keep our
the
struc¬
ture of the debt has been
adapt¬
flexible
because
techniques, and new types equip¬
ment.
classes.
the
new
discoveries
wartime
materials,
—
atomic
revolutionize
within
use
new
wartime
One
alone
products based on
a
new
manufacturing
—
could
economic
life
relatively few years. The
of light
metals and their al¬
•
of
short-term
.
debt, with the
cessity of refunding
lion
some
ne¬
$50 bil¬
of. maturing government se¬
curities each year,
has been
continuation
successful
the
to
Let
savings have
at the figures for
of liquid assets held
by individuals. In 1948, it is esti¬
mated that total holdings of liquid
assets held by individuals rose by
approximately 1 billion dollars,
and at the end of the year stood
at an all-time high.
other types
When
the
into
look
we
one
actual
savings operations which went to
make up
this total, and carry the
figures back over the three-year
period following the end of the
war,
:
develop¬
interesting
some
ments become apparent,
/
Holdings of government securi¬
ties
by individuals rose nearly
4V2%.
But individuals increased
share
their
loan
and
in savings
by about
holdings
associations
48%, the largest gain of any type
of savings.
Their deposits in mu¬
tual savings banks increased 20%,
Savings accounts in commercial
banks were up 18%.
Postal sav¬
ings accounts showed an increase
of nearly 14%. Checking accounts
of individuals gained 11%.
Of the
of
forms
various
savings record which I Have
citing is one which I know is
familiar to all of you
here. In my
however, its significance
hardly be overemphasized. I
can
Americans
look
us
The
been
belief,
Liquid Assets of Public Growing
liquid
assets,
are
saving for the
They have confidence in
future.
what the future will bring—for
themselves, and for their children.
The
more
mutual, savings, banks,': With
than 19 million depositors,
have
been' a powerful factor in
molding the thrift, habits of the
nation.
The savings drives of the
war years, as well as those
since,
benefited immeasurably
have
from
the
backlog
has
which
of
long
guardian of
as a trusted
people's savings.
history
the
will
good
from
come
your
.
-
In
closing, I should like to
thank you, in particular, for the
constructive assistance
times
whic|i you
the government at all
during the 18 years since
your
conference
have given
last
assembled
I have wel-,
interest in fiscal af¬
here in Washington.
corned
your
since
fairs
I
came
to
the
Treas¬
and have found your advice
value.
Your, rec¬
ury
of inestimable
during these years is ample
will continue to
bulwark of financial strength
ord
evidence that you
be
a
in the nation now and in the gen¬
erations ahead.
Adequate Bank Capital—
Not
a
The
FDIC
This is misleading for two rea¬
Our
saving
bond
program,
after year, has been carrying
the most extensive campaign
savings that has ever been
year
on
for
known.
bond advertising
reaches into every city and vil¬
Savings
lage. It searches out remote farms.
It goes into homes and factories.
It is in the newspapers and maga¬
zines,
on
the radio, and on tele¬
vision.
must have been
You
I
struck,
as
have
been, by the interesting
and persuasive angles which have
been used to present the case for
savings.
Regular
savings
have
been urged to provide for the fu¬
ture.
That is the theme of all the
advertisements, and the carefully
chosen keynote of the advertising
campaigns. And, all of the adver¬
tising is freely contributed.
Our
It
compares
banks
and
other
tutions carry on.
financial
insti¬
Your group re¬
film short "as
part of a program to improve pub¬
lic understanding of the function
a
savings bank in its
nity" which is entitled,
'Achievement'."
our
an
savings
I
bond
commu¬
" 'A'
believe
program
for
that
rates
"A" for "Achievement" in pro¬
moting thrift.
smaller
The
total,
As I told you last year, it does
seem to me that we are sell¬
other
believe
savings
that
the
expense
institutions.
Treasury's
I
con¬
tinued campaign during the years
since
of
latter,
a
much
is the measure of
risk and not the former.
failure
The
FDIC
the
of
ratio to rise is
great increase in de¬
to the
posits during the war with most
the increase occurring in de¬
of
posits in excess of $5,000.
repayment in
1947 of $139.3 million of capital
stock subscribed by the Federal
due to the
Reserve
FDIC
a
Banks
at
the
time
of
organization together with
repayment of $47.4 million, part
of
original
FDIC
capital,
sub¬
by
the
United States
Treasury.
Had this capital been
left in the FDIC the ratio of cap¬
ital funds to total deposits of in¬
sured
banks
would
have
been
scribed
0.77% instead of 0.65%.
decline in the deposits
banks
With the
of insured
which has occurred during
1948 and the
payment of another
year's assessments, this ratio is
now
higher than it has been at
any time since the establishment
the
five
argument of "limited val¬
idity is the allegation that busi¬
ness
failures during
the period
since the formation of the FDIC
normal, that the
period 1934-47 does not provide a
true test of the risks to
which the
banking system is exposed over a
longer period of time. Citing the
compilation of Dun & Bradstreet,
end
of
the
war
has
o£ brought far greater gains in all
rate of failure among
terprises prior to
business
1934
business
all
which
was
under
circumstances
favorable
enterprises
The
extraordin¬
have
operated.
arily
low
business
of
rate
and
bank failures of recent years can¬
expected to continue in¬
In the past, severe
business depressions and
crises
have come swiftly and without
much warning.
Estimates of fu¬
ture disbursements or loss by the
be
not
cannot,
therefore,
the experience of
Corporation
the past
upon
few years."
Although
plies
some
this statement im¬
skepticism of the. fu¬
outlook
ture
as
three-quarters of a century, it is
nevertheless
proper
to explore
other methods of maintaining that
annual increment in the capital of
the FDIC which the management
Corporation deems desir¬
\ '
\
|
of that
able.
,
Blocked Assets of Member Banks
12
Federal Reserve Banks
owned in* toto by the member
banks.
The
stock
85 to 110 per year per
10,000 con¬
the average of the annual
rates during the 68-year period,
1866-1933, was 99 per 10,000 con¬
latter
Banks
have paid
of the
an
in
Federal Re¬
amount equal to
3% of their own capital.
On this
paid-in capital they have quad¬
ruple liability while their return
is limited to 6% of the amount
actually
eral
paid in.
Reserve
These 12 Fed¬
Banks
have
been
profitable, particularly during the
last two
years.
This is largely
due
to
Reserve
ary
en¬
from
painted by other
government agencies assume that
it has merit. If the actuarial evi¬
dence of the past must be dis¬
carded on the ground that futurerisks are greater than those which
have been incurred in the last
for the
Depressions
Crises"
have been below
and prosperity and the
recovery
serve
A final
in¬
years, is attributable chiefly
the
prevailing conditions of
are
and
■
num¬
auguration of deposit insurance,
and
especially during the past
The
of the FDIC.
"Severe Business
small
ber of bank failures since the
be based
The failure of the ratio to rise is
further
..
remarkably
"The
definitely.
cap¬
ital-bank deposits
due
eraged 40 per year per 10,000 con¬
cerns.
"
■'
the FDIC states that "The normal
not
of
deposits
total
motional campaigns, which savings
a
capital
advertising
complements,
rather than detracts from, the pro¬
of
FDIC
insured
banks instead of total of insured
with
been
to
only 0.65%.
the annual rate has never
higher than 70, and has av¬
in 1934,
table
a
showing that its capital and sur¬
1934 amounted to 0.73%
of total deposits in insured banks,
whereas in 1947 it amounted to
deposits.
thrift.
presents
plus in
flexible debt policy.
But
our
savings bond
cam¬
paigns not only sell savings bonds,
they sell something else which is
of direct
and
important signif¬
icance to you,
That is the habit
of
insured
banks, the first line of protection
against losses, was more than 6.5
times these substandard assets.
of
a
The capital of
FDIC 1947.
sons.
taining
Serious Problem
(Continued from page 21)
public debt management pro¬
gram.
It is an important tool
which we have for use in main¬
our
ing savings bonds at the
-
The existence of a large volume
development
energy
our
in
able to flexibility. This
sav¬
to expect
ended.
war
But other types of
done even better.
bonds, and we have had;
selling job to achieve this
a
cently released
is not ac¬
cidental.
To a large extent it is
the result of forethought—the re¬
sult of planning government is¬
sues to meet the present and fu¬
ture needs of the various investor
developing
Sales of
reason
success.
maintain confidence in the credit
cies
only at the beginning
of
our
peacetime
growth.
We
have made a start only toward
We
after the
had.
of savings
stable economy.
It has been our aim to keep our
and
radios,
ed their
we
the
to nonbank investors has been an
tions in the past year have been
a continuation of our program of
When I spoke to you last year I
policies flexible so as to be in a
But the situation is different position to deal rapidly with the asked your cooperation in the Se¬
now.
changes in the financial picture. curity Loan Drive—a savings bond
Adjustments to a more normal The desirability of such flexibility selling effort which we were un¬
Now, I
competitive economy have actual¬ has been forcibly demonstrated in dertaking at that time.
ly been going on since the very the year that has elapsed since should like to ask for your con¬
close of the war. Many have been your last annhal conference. Dur¬ tinued cooperation in the Savings
practically completed. Some lux¬ ing the early part of the last half Bonds Opportunity Drive which
ury industries were
affected in of 1948 there were large market will start next Monday. Our sav¬
1946.
Machine tools, auto tires, sales of government securities. In ings bond program is important
and others followed in
Textiles, shoes, auto trucks,
furniture, household equipment,
and various other'industries start¬
realized.
been
ter than
only currency holdings
in
hands of individuals" fell off.
government securities from bank
phases of the economy.
'
individual
otherwise
ings bonds have been much bet¬
retire
to
principal sources of
funds for effecting the switch of
Flexibility in Debt Management
Our
Strong
war.
Thursday, May 19, 1949
major
categories
of
savings
than
would
management
end of the
ing
CHRONICLE
One of the
economy.
previous periods.
A second
debt
faced
return to normal
public debt management opera¬
business history has been featured tions during the postwar period to
by heavy liquidation of specula- show you how our fiscal and
:five accounts;, and the absence of monetary policies were directed
this feature today is, to my. mind, toward achieving stability in the
.
the
FINANCIAL
&
the fact that
the
Federal
Board, under discretion¬
statutory authority, has frozen
portions of member
substantial
bank assets in the form of reserves
against deposits.
,
cerns;
During the 14 years since
the beginning of deposit insurance
cerns.
The member bank reserves the
Federal
12
Reserve
Banks
have
invested in government securities,
thus depriving the member banks
1
Volume
169
of any return
posits
THE
these blocked dethe member banks
nevertheless
first established
was
These
ratios
credit control.
have
since
These
lost
all
when
was
Federal
passed,
$20
Reserve
required
to
re¬
in
actually
are
high.
as
Act
reserves
deposits
than twice
more
Of the
billion
in member bank re¬
held by the 12 Federal Re¬
serves
Banks
serve
at
the
end
of
than half represents
more
1948
tons,
an
tification
in
y...Income
sound
banking
the-
Blocked Assets
on
banks
become
instruments
wholly
have
own
for
imple¬
menting^"modern"doctrines
economic control at
equal
to
earnings
According to the FDIC
160%
in
1947.
sterlized
the
invested
of
to
at
ceding week, 148,303,000 kwh.
or
in
this
rate,
paid
the
U.
S.
Treasury
$166,690,356 as "interest on out¬
standing Federal Reserve notes."
What this amounts to
is
special
a
discriminatory tax upon the mem¬
ber banks of the Federal Reserve
It constitutes a penalty
membership in the system, a
penalty
which
has
no
demon¬
strable relation to sound banking.
Nothing in the discussions pre¬
ceding passage of the Federal Re¬
Act
serve
in
or
ever
Congressional de.-
contemplated
the
bitrary deflection of Federal
Federal
Reserve
April, 1947 through
strained
16
of
The
Re¬
earnings
into
the
This was achieved by
Treasury.
the
ar¬
Bank
serve
AUTO
Board
position
Federal
of
SUCCESSIVE
instrument
most of
WEEK
OUTPUT
LAST WEEK
BY
1
>
CONTINUED TO BE
DISPUTES
LABOR
nishes
ventilating
windows,
to
Studebaker, Kaiser-Frazer
well
as
Hudson,
to
instrument
Last
panels
primary
products.
showed
There
of
the
Interest
discriminatory
a
tax
Federal Reserve Board would
broad discretionary
that
manner
the
would
banking
system and
pose it to socialization.
Justice
if
use
authority
a
blouses,
also
this
would
be
week
"interest
on
the
Federal
Deposit Insurance
Corporation in lieu of
assessments
Such
on
an
any
insured
further
banks.
arrangement
would
permit the banks to increase
earnings, raise the ratio
capital to risk assets, improve
the appeal of bank
vestors
and
of
new
sale
stocks to
promote
bank
successful
equity
smallness of the capital equities of
banks" jeopardizes the safety of
It
deposits.
would
insure
operation of
•
the
continued
banks under pri¬
management.
It would re¬
vate
our
the suspicion of a calculated
move
conspiracy designed to undermine
banking
our
mote
its
structure
and
pro¬
in
member
minimum
reserve
banksj-'effective
requirements
May Si"
year
Manufacturing, construction
for
most
of
the
week's
commercial
and
decline.
In
the
trades,
retailing failures
Atlantic, East North Central
Pacific States
and
re¬
while New England and the West South Central
Region had the only sharp increases in casualties, reporting twice as
many as in the previous week.
Considerably more failures occurred
a
year ago
FOOD
PRICE
Inc.,
in all
areas
INDEX
except the Mountain District.
TURNS
DOWNWARD
of
remained
volume
approximately
FOLLOWING
The wholesale food price index, compiled by Dun &
Bradstreet,
moved slightly lower last week following the mild advance
a week
ago.
The May 10 figure at $5.68, compared with
week previous, and renresented
comparative 1948 index of $6.93.
a
COMMODITY PRICE INDEX DEVELOPS LOWER TREND
IN PAST WEEK
Bradstreet, Inc., moved
week
and closed
commodity price index, compiled by Dun &
in
a
rather
slightly lower than
narrow
a
week
tered 248.04
on
the
range
ago.
on May
10, compared with 248.54
corresponding date of last year.
on
during the past
The index regis¬
quantities of meat.
wheat contract recovered
a
and closed with
tightening in that delivery.
a
moderate
Cash wheat
net
was
gain,
rather
year
South
corn
market
was
under
over a
some
wide
pressure
area
with
of the belt.
prices in both
the futures and cash markets
reflecting slight declines for the period.
corn from the country were
comparatively light while the
movement into the government loan was said to be
increasing. Corn
Receipts of
planting and preparations
were
housewares
and
was
country in the period, ended
estimated to be from
on
Wednesday
above to 3%
1%
below that
ago
and
by
the
Pacific
Coast down
1
to down
5 and
Northwest up 1
*
Many merchants evinced
in
the
week.
The
dollar
increased
volume
of
interest
wholesale
in
seasonal
orders
rose
was
goods
slightly,
moderately below that of the corresponding week a year
ago.
The number of buyers attending many wholesale markets rose
moderately in the week and was noticeably above that of the com¬
parable week in 1943.
Department store sales
on
a
country-wide basis,
taken from
as
Federal Reserve Board's index for the week
ended May 7, 1949,
increased by 1% from the like
period of last year and compared
with a decrease of 4% in the
preceding week.
For the four weeks
ended May 7, 1949, sales
registered a decrease from the correspond¬
ing period
a year ago,
Retail
trade
stimulus from the
in
and for the year to date
New
warmer
York
the
past
a
decline of 3%.
received
week
weather which tended
demand for
summer merchandise.
sales again dropped below that of
some
to increase the
However, dollar volume
one
year
of
ago.
According to the Federal Reserve Board's index, department store
New York City for the
weekly period to May 7, 1949, de¬
clined by 4% from the same
period last year.
In the preceding
week a decrease of 8% was
registered below the similar week of
1948.
For the four weeks ended
May 7, 1949, a decrease of 5%
sales in
was
reported under that of last year and for the year to date volume
decreased by 5%.
G. E.
Opens in Miami Beach
Hoffman & Goodwin
MIAMI
I.
reported well under way in
many
BEACH, FLA.—Francis
Co., members of the
York Stock
Exchange, have
duPont &
New
rains
furniture
more
to down 3.
re¬
dull
Moderate government buying of cash wheat was a
supporting
factor at times. The outlook for the winter wheat
crop continued
generous
slightly
Francis I. duPont Co.
with price trends mixed.
favorable, aided by
bought
May 3, and 284.82*
Movements in leading grain markets were
irregular with volume
of trading below that of a week
ago.
After early
weakness, the May
flecting
high level the past
with that of the cor¬
a
even
the corresponding levels of
following percentages:
New England un¬
changed to down 4, East, Midwest and Southwest down 2 to
up 2,
drop of 18.0% below the
The index represents the sum total of the
price per pound of 31
foods in general use.
The daily wholesale
steady at
popular.
the
RISE A WEEK AGO
a
by many
apparel
summer
year ago.
recorded
$5.71
purchased
were
Interest in men's
Regional estimates varied from
but
ported declines,
than
a
a
accounted
dipped while wholesaling increased slightly.
The Middle
accessories
gifts.
slightly.
Retail volume for the
increased
service
other
Among the best-selling home items in many areas were bedding,
upholstered chairs, small tables and floor coverings. The retail vol¬
of china, gift ware, cutlery and kitchenware increased
slightly.
The demand for refrigerators rose
moderately. Hardware, decorating
materials and garden supplies were in
large demand.
when 81
ago
$5,000
•
temperatures
as
ume
slightly to 38 from 35, doubling the number in the similar week
1948.
The
socialization.
1 Editor's Note:
The Federal
Reserve
Board announced April ZS a slight reduc¬
tion
a
under
last
week last year.
1948.
Housewives continued to purchase sub¬
Smoked meats, beef and pork products
The supplies of fresh fruit and vegetables increased
in many sections
during the week.
Interest in candy and. fancy
baked goods rose moderately.
stantial
in
in¬
issues.
It would thus remove the grounds
for FDIC apprehension that "The
bank
losses
for apparel
responding week in
were
declined to 133
cap¬
ital out of
of
with
and
volume
of
casualties
demand
noticeably
rose
unit
of last week
served
outstanding
were paid
seven
the
Small
the
food
with
corresponding week of 1939.
occurred.
apparel
for Mother's Day
weeks, but exceeded the 100 and 98 which
comparable weeks of 1948 and 1947.
Failures re¬
mained far below the prewar level with a total of 321
reported in the
MILD
better
Federal Reserve notes"
to
and industrial failures continued to decline in the
ending May 12, falling to 171 from 193 in the preceding week
Dun & Bradstreet, Inc., reports*
This was the smallest number of
more
in
than in the previous week.
Commercial
Failures involving liabilities of $5,000 or
from 158 last week, but were
higher than
rise
slightly below that of the similar
summer
slippers
increased
Retail
week
weaken
predis¬
in
moderate
a
was
Shoppers
in¬
im¬
was
climbed in many areas and women's cotton
dresses, lightweight suits,
short-length coats andt sportswear increased
demand.
Hosiery,
1,892,000 in the
Canadian production to date is 'estimated
92,000 units, compared with 95,000 last year.
%
in
a
Lead
comparable week
week, but it
like period of last year.
in
pound, marking
high of 23 V2 cents.
slightly below that of
a year ago with most shoppers
continuing to
largely upon the moderate-priced goods, states Dun 80
Bradstreet, Inc., in its current survey of trade.
the
week's
casualties
related
a
concentrate
Production of cars and trucks in the U. S. for the
year to date is
estimated by Ward's at 2,169,000 units, compared with
occurred
and
cents
Stimulated by warm weather and
by special promotions, shop¬
increased their purchases in the period ended cn Wednesday
of last week.
Total retail dollar volume was
as
BUSINESS FAILURES LOWER FOR SECOND
CONSECUTIVE
WEEK
18
cents from the postwar
pers
output consisted of 89,534 cars and 20,374 trucks
built in the United States and 4,190 cars and
2,465 trucks in Canada.
at
metals
V2-cent to
cut
was
AND WHOLESALE TRADE FAVORED LAST WEEK BY
WARM WEATHER BUT CONTINUES BELOW 1948 VOLUME
and 127,255 in
year ago
'
further drop of 1 cent and zinc V2 -cent in the week.
a
consumers
a
'
reduc¬
fabricated
new
RETAIL
trim
Chevrolet,
Copper
total decline of 5V2
V
-
metal
'
■
ADVERSELY
and
and
the belt.
Prices for nonferrous metals continued to
sag with
tions announced in both
Chrysler, it added.
The total compares with 83,275 units
the like week of 1941.
Act.
never
for
its
in
from reports of new foreign allocations
last-minute rush to enter cotton into the gov¬
Total repossessions for the season were
807,100 bales, leaving 4,364,500 bales under CCC loan as of April 28.
Crop reports indicated excessive rainfall delayed planting throughout
2.8%
details
Section
Reserve
of the Act
country's banks. Cer¬
they never believed the
tainly
a
amounted to 5,171,600 bales.
decrease of 115,905 cars,
a
This week's prospects were
considerably brightened by set¬
tlement of the Motor Products Corp.
dispute, which cut 8,500 units
from Chrysler's output last
week, Ward's said. This supplier fur¬
the
upon
comparative
..
.
Volume of sales reported in the ten
spot markets fell to 95,400
bales, from 111,900 the previous week, but were more than double
the 41,200 reported in the
corresponding week a year ago.
Loan
entries from the 1948 crop
during the week ended April 28 rose to
61,800 bales, from 35,900 the previous week; repossessions fell slightly
to 51,200 bales.
Total loan entries for the season through April 28
to 130,113 (revised) units in the week
preceding, due to continued
strikes, "Ward's Automotive Reports" states.
in
tended that the statute would be¬
an
v.
ernment loan.
Production of cars and trucks in the United States and
Canada
for the past week declined to an estimated
116,563 units, compared
special and
a
construction
the
authors
come
showed
Firmness stemmed
System.
for
bates
livestock
of
developed irregular day-to-day trends but values
of the period were
slightly higher than a week ago.
by the ECA and
prewar year.
V
the
Federal
1948
was stronger at the
week-end,
statistical position.
Lard prices
classes
■
at the end
higher than the figure re¬
ported for the week ended May 15, 1948 and
640,993,000 kwh. in
excess of the output
reported for the corresponding period two years
billion
curious coincidence that
Reserve Banks in
a
12
all
,.
distributed by the electric light
and power
industry for the week ended May 14, was estimated at
5,256,976,000 kwh., according to the Edison Electric Institute. This
represented a decrease of 26,616,000 kwh. below
output in the pre¬
AFFECTED
av¬
operating earnings in 1947.
It is
Coffee
improving
but
;
-
,
trading restricted
Cotton markets
The amount of electrical
energy
member
$10
corresponding week in 1948 and
13.1% below the similar period in 1947.
ELECTRIC OUTPUT FALLS FOR 15th
member banks would have had an
addition of $160 million to their
the
steadily
a
downward
steadiness.
Loadings of revenue freight for the week ended
May 7, 1949,
totaled 768,337 cars, according to the Association
of American Rail¬
This was a decrease of 17,107
cars, or 2.2% below the pre¬
ceding week.
It represented a decrease of 111,950
cars, or 12.7%
below the
Assuming
assets
amounting
were
turned
roads.
on
erage rate of income on securities
held by insured commercial banks
banks
reflecting
and
ago
demand
.
,
The domestic flour market continued slow with
CARLOADINGS DECLINE IN LATEST WEEK
BELOW PREVIOUS
WEEK AND LIKE PERIODS OF
1948-1947
of
cost to the
a
the
not less than $10 billion of assets.
these
year
manufacturer
,
to current and nearby needs.
month ago,
a
1,719,600 tons, or 95% of the old
capacity one
1,281,210 tons for the average week in
1940, highest
ago.
Thus the institutions which the
member
was
Africa.
ar¬
ory.i
owners
98.4%
or
and
or
bitrary isolation of member bank
earning assets which finds no jus¬
■
.
slow
vand large spot offerings, coupled with sizable arrivals from West
.
the
relation
.
Depressing influences included
This week's operating rate is
equivalent to 1,762,400 tons of
steel ingots and
castings for the entire industry, compared to
1,773,500 tons a week ago, 1,814,000
con¬
banks
are
definitely
liquid today than they were
more
Industry
The American Iron and Steel Institute
announced this week
the operating rate of steel
companies having 94% of the
steel-making capacity of the industry will be
95.6% of capacity
for the week beginning May
16, 1949, as against
96.2% in the
preceding week, or a decline of 0.6%.
tact with their orthodox function.
Although
33
Oats displayed considerable
steadiness with prices rising
slightly, aided by good demand for the heavy varieties.
'•
Cocoa showed further
weakness, with spot prices down IV2 cents
per pound during the week.
;■
•
that
prevailed
minimum liquidity was abandoned
in favor of its use as an instru¬
serves
(2189)
sections.
(Continued from page 5)
<
\
the current steel
rate, they are on the probable outcome of
labor
negotiations and the outlook for steel business
the last half of this
year, concludes "The Iron Age."
until Aug. 15, 1936. At that
point
the
established
character
of
a
bank reserve as an assurance of
ment of
CHRONICLE
on
respectively 7, 10, and 13%. On
time deposits required
reserves
3%.
FINANCIAL
.
reserve
requirements for country, reserve
city and central reserve city were
were
&
The State of Trade and
service.
When the Federal Reserve Sys¬
i
tem
COMMERCIAL
on
which
must
Number 4804
opened
a
branch
office
at
Avenue, under the man¬
agement of Benjamin Richards.
Mr. Richards was formerly Miami
with
manager
which
he
for Bache
had
been
&
(Special
SAN
to
The
Financial
Chronicle)
V.¬
DIEGO, CALIF.—Glen E.
Gilpin has become associated with
2809
Collins
Beach
Gilpin With Walston,
Co.
Walston,
625
Mr.
formerly assistant
San,
Diego
associ¬
ated for many years.
Sam Williams is also connected
with the new branch.
Hoffman
Broadway.
Brothers
with
ner
and
Merrill
& Beane
&
Goodwin,
Gilpin
manager
office
prior
of
was
of the
Buckley
thereto
was
Lynch, Pierce, Fen-
■
COMMERCIAL
THE
(2190)
34
employment
than
to,
main¬
tain margins—particularly since
the effect on profits in many in-<
dustries
is
about
the
same
in
maintain
The
Readjustment of Business
If
(Continued from page 2)
building starts.
is
there
substantial
a
it will be be¬
fall in incomes origi¬
awards and in new
these expenditures,
Waiting for prices to fall became
cause
I do not believe that a sub¬
stantial drop in expenditures on
housing or on industrial plant and
equipment is likely in the imme¬
conditions.
more,
of individuals and enter¬
number
a
prises who wait for prices to fall,
the more rapidly prices are likely
to
fall and the greater will be
the number of persons who post¬
diate future.
too
conditions.
buying are
Consequently, decisions
postponing
of
tages
more
limited.
result
is to
be
that
noted
condition of
economy?
Are there many
weak spots, so that the economy is
not in a good condition to resist
means
the
in
What
future.
near
is
willingness
the
is be¬
has
is
this.
One
and
is
more
two
ways
other
of
the
ing limited by large increases in
Bringing out new and more at¬
expenditures by local and state tractive goods cannot ordinarily
contraction easily becomes cumu¬
governments and by the national be done overnight. Changes in
lative?
government.
In
1948
the con¬ goods take time, and need to be
On the whole, the economy is
sumption of goods by government tested out before the new goods
in a remarkably strong position.
will be $7 billion or $8 billion
are offered
to customers. Never¬
There are four reasons for this
more than last year and the total
conclusion.
One is that debts are
theless, much can probably be
expenditures of government will done to bring out new and im¬
low in relation to incomes.
Con¬
grow by even larger amounts. The proved models in the near future
sumer indebtedness, for example,
rise in spending by governments because
many firms have antici¬
is about 8% of personal incomes
has not been sufficient to prevent
pated for several years an early
after taxes, and mortgage indebtsome contraction of the economy.
end to the postwar boom. Conse¬
ness is low in relation to incomes,
Residential mortgage debt, for ex¬ Nevertheless, it has been an im¬ quently, they have been quietly
portant limiting influence. All of preparing new models and new
ample, is about 25% of personal
these considerations lead to the
incomes after taxes as compared
products to put on the market as
the
contraction soon as sales need to be stimu¬
conclusion that
with
contraction
with
35%
in
result
the
1939.
The
will not be long or deep.
slightly larger than,, their liquid
assets; in 1948 liquid assets of ind i v i d u a 1 s and unincorporated
businesses
were
What
times their debts.
In the second
demand
consider
what
The
to
deposits.
made
policy
increases
and
demand
deposits; in
In the third
place, inventories are low in rela¬
tion to sales—partly because of
the skill of managements in learn¬
1948, about 3.6 times.
ing how to operate with small in¬
ventories.
Finally, the backlog
which
of. demand
during the
accumulated
has by
war
no
means
been
completely eliminated. The
age
at which cars are
scrapped is about .12.5 years. In
midyear 1948 there were 5.2 mil¬
average
lion
passenger
over
12.5
years
of age and 2.6 million
were
within
one
cars
year
of this age. Fur¬
thermore, the scrappage of cars in
1948 was only about half of nor¬
mal.
ress
Finally, only limited
has also been made in
prog¬
catch¬
the accumulated
mand for housing.
>.
ing
on
up
de¬
long is the period of ad¬
justment likely to last and how
it
is
likely to
be?
Is
it
that the contraction of
might be fairly severe
possible
business
and to
us first
government
recommendation
government
is
negative.
The
in
President
for
taxes
has
increases
which the
These
asked.
would
govern¬
make the
to
produce
a
tax
sur¬
of cash receipts over cash
expenditures. During a period of
contraction such a surplus would
aggravate the drop in the de¬
plus
mand for goods. The fact that the
and fairly prolonged?
This would
happen if there were a substantial
drop in expenditures for durable
this effect could be
stances
teracted by
public
or
debt
coun¬
paying off part of the
held by individuals
commercial
banks
—
thus
in¬
creasing the volume of funds avail¬
able
investment.
for
investment
when
however, and
need only very
outside
At
a
time
contracting,
when enterprises
is
limited
funds,
amounts
of
repayment
way
of getting the
cash
surplus
The
back
President
taxes
creased
This
has
would
asked
on
reduce
available
funds
government's
in circulation.
for
corporations.
corporate
the
for
expenditure
plant and equipment. To
on
in¬
some
this effect might be offset
extent
goods, housing, or plant by
corporations increasing the
and equipment.
For example, if amount of money obtained from
expenditures by business on plant the outside. This offset, however,
and equipment, which were near¬
would be quite incomplete. One
ly $19 billion in 1948, were to tax increase, however, is neces¬
drop by a little more than one- sary — that is, the increase in
third to about $12 billion
(the taxes for the old age insurance
level
of 1946),
there would be and annuity scheme. A regularly
(other things being equal) an ad¬ scheduled increase in this tax is
ditional drop in expenditures for due next January. It should not
consumer
goods (because of un¬ be postponed. Any possible defla¬
employment in the capital goods tionary effect can be offset by
industries), and the gross national liberalizing the old age pensions
product might decline by perhaps —a badly needed and long-over¬
twice the fall in expenditures on
due step.
.
plant and equipment.
the
be
not
do
The
believe, however, that
drop in business is likely to
deep or prolonged.
I
either
know
when
seded
of
no
contraction
by
of
way
will
expansion.
be
on
may
state with
confidence, I think, that
the postponement of the purchase
of
non-durable
consumer
goods
important
cause
traction
over
an
or
semi-durable
will not be an
for business con¬
extended period.
lending
•
borrowing.
and
The
greater availability of credit will
have
super¬
government has already
steps to encourage
several
taken
predicting
One
main
In
omy.
reliance
a
lion
and
36
a
the
limited
demand
modities,
which
are
immediate
for
thpse
effect
com¬
such
as
automobiles,
in strong demand to¬
day. Eventually easier credit will
have
a
more
general effect—that
is, when the demand for goods
begins to pick up, easier credit
will permit it to
pick up faster.
shifting
from
wartime produc¬
peacetime
production,
the country by
tion
the
houses,
and
new
The very fact that deci¬
have been postponed
its
of
employment.
do
an
prices
of
new
and to discard more old ones.
concerns
cutting
do
like
not
prices.
It
is
however, that the prices
which were appropriate when in¬
dividuals were willing to spend
$1.21 on consumer goods for every
plain,
increase
of $1 in incomes are
not
when
individuals
expenditures for con¬
goods by only 68 cents for
appropriate
raise their
sumer
dollar increase in incomes.
Many managers will argue that
every
they
cannot
afford
to
reduce
prices—that their margins are too
small. It is true that margins in
many
industries
are
small
advantage
the
have
the
temporarily stimulate
ponement of buying?
because lower prices of
for example, encourage
people to buy more new things
of
relative to prices the same
reducing prices relative
wages? Would not wage in¬
and
in
managements should not decide
'against reducing prices without
taking into account the cost of not
reducing them. If prices are not
cut, buying will drop and, as it
drops, profits will also fall. On
the other haM, if prices are re¬
duced,
volume
will
be
partly
maintained, but margins will be
cut—unless efficiency increases.
purchases of goods and thus their
standard of living by 5% over last
year?
Francis Gallaudei With
this
Jones B. Shannon & Go.
Wages will rise somewhat
in some industries, but wage
under
present condi¬
tions will not be particularly ef¬
fective in sustaining the demand
year
increases
for
In other words,
goods.
rais¬
ing wages relative to prices is not
reducing
to
equivalent
relative
to
prices
There are two
wages.
It is
be
in profits would be less.
plain, however, that it would
sacrifice margins to
better to
Chronicle)
Financial
r
with
Jones
the past was
Co.,
&
Shannon
B.
Mr. Gallaudet in
Buhl Building.
an-
officer of Mc¬
Donald, Moore & Hayes, Inc.
the purchas¬ Grimm & Co. to Admit
cash and bank
William T. Baker to Firm
deposits which men hold. Con¬
Grimm & Co., 44 Wall Street,
sequently, as I have pointed out,
they encourage people to convert New York City, members of the
part of these holdings into goods. New York Stock Exchange, will
admit William T. Baker, a memiMore important, price cuts, as I
have also pointed out, make new ber of the Exchange, to general
goods
cheaper relative to old partnership, and Alice P. Baird to
goods, and thus encourage people limited partnership on June 1.
Mr. Baker has recently been ac¬
to replace old goods with new.
tive as an individual floor broker.
I have emphasized that competi¬
On May 31, Lester Talbot, mem¬
tion between new goods and old
goods is one of the most impor¬ ber of the Stock Exchange, will
retire from partnership in Grimm
tant kinds of competition in the
cuts increase
price
ing power of the
& Co.
economy.
Any rise in wages relative to
prices (or drop in prices relative
to wages) has some tendency to
cause employers to drop the less
profitable parts of their lines and
some
of
their
less
efficient
workers.
crease
under
Hence,
will reduce the incomes of
business concerns. This
will mean
will have less to
that enterprises
spend, and the drop in business
spending
will
be
accentuated.
Consequently,
wage
increases
may
fail to increase total spend¬
ing and may reduce it.
The
cause
tendency for price cuts to
employers to drop the less
spend
the drop
to The
(Special
DETROIT, MICH.—Francis C.
Gallaudet has become associated
important differences. One is that
and
sacrificing margins and doing a
better job of maintaining volume.
No one knows under which policy
* '
post¬
between
(1) maintaining prices
sacrificing volume or
(2)
its
and
products
its
salesmanship to induce the people
of the country to increase their
profitable parts of their lines or
their less efficient workers or to
Business, therefore, has a choice
good enough job of
a
improving
American
Can
year.
business do
present
conditions, wage increases at the
best will not produce much rise
years.
In fact, when corporate in consumer spending and they
profits
are
properly
computed, may produce no rise at all. Fur¬
margins per dollar of sales are thermore, if wages are increasing
than
efficiency,
the in¬
only about 4.4 cents. Nevertheless, faster
that,
when
costs
are
properly
computed, margins have not in¬
creased
during
the
last
three
last
sessed
force than it posr
labor
efficient
comparison with price cuts that
they do not arouse the expecta¬
tion
of
lower prices - and thus
clothing,
idea
to
as
creases
expenditures
sumer
wages
goods,
Business
An increase in conr
of 5% over
last year will
make it possible
for the country to maintain full
employment for a larger and more
the problem.
prices and thus enable workers
to buy more goods. Is not raising
kinds of semi-durable
many
relation
in
incomes
sumer
ability to maintain a high level
Cannot business
equally good job in 1949?
Half of the job is seeing clearly
the nature and the magnitude of
bring about a rise in
the purchases of consumer goods
is to raise wages. Wage increases,
say the
unions, will raise con¬
houses
to
business surprised
VII
thing
in
Back
1946, when industry was
Some of the unions believe that
mil¬
insurmountable.
1945 and
*
to
are
means
will pick up.
business
of
in
bank
cash,
that sooner or later demand
means
an
well supplied with
deposits, and other
liquid assets, and indebtedness is
small. The principal obstacles in
the way of a
rise in consumer
buying are (1) that consumers,
have satisfied a large part of theit*
most urgent needs and
(2) that
many persons are disposed to wait
for the quality of goods to im¬
prove and for prices to drop. Cer¬
tainly these obstacles are by no
people
its
of
spend¬
and employment? I
do not know. Certainly conditions
are favorable. As I have indicated,
nature, cannot go on indefi¬
nitely.
the, econ¬
country which has 34
automobiles
million
the
because
buying,
•
.
production
at¬
be
■
•
stimulate
ing sufficiently to produce
early
and
vigorous upturn
sions to buy
kinds of competition in
the
vm
business
Can
After all,, postpone¬
it.
to
of
ment
very
stimulating
cars
was
consumer
I
tached
not
should
importance
obviously
taking
away
from the people more than it was have much to do with the rate at
which people discard Old cars and
giving back to them in the form
The prices of new
of expenditures would tend to re¬ old houses.
duce the incomes throughout the goods affect the demand for all
economy.
Under
some
circum¬ kinds of durable goods and even
government
uncer¬
ing. There is no way of entirely
avoiding this effect, but too much
sales,
however,
will have to be price cuts. Price
cuts have two advantages. One is
that they increase the purchasing
power of the cash and bank de¬
posits which men hold. Conse¬
quently, they encourage people to
convert
part of these holdings
into goods. More important, price
cuts
make
new
goods cheaper
relative
to
old goods,
and thus
encourage people to replace old
goods for new. Competition be¬
tween new goods and old goods
is
one
of
the
most
important
the public debt is not an effective
How
severe
the
about
should, refuse
ment
of
IV
■
the
principal
be
about 5.9 times personal holdings
cash
limit
might do.
In 1939 expen¬
ditures for consumer goods were
of
by govern¬
to
of
hasten
place, the rate of spending is low
in relation to holdings of cash and
done
business
the contraction
the upturn? Let
depth
two and one-half
be
can
or
introduce
cuts
under present condi¬
preferable to wage in¬
method of stimulating
business.—
the way to
The
ment
price
tainties into the economy and in¬
duce some postponement of buy¬
lated.
in
of
the present reluctance
it not a mistake to cut
Do not price cuts aggra¬
vate rather than cure the present
difficulties of business? It is true
ratio of
liquid assets is also low.
In 1939 the debts, both short-term
and long-term, of individuals and
unincorporated
businesses were
up
prices?
that
are
cuts
is
day,
cuts
tions
is
:
and equipment
Consequently,
minimum.
creases as a
people and enterprises to spend
is partly created by the expecta¬
tion that prices in the near future
will be lower than they are to¬
that
debts to
its
account
When
effect of price
the
to cut his expen¬
plant
on
a
price
to
the ability of managements
Since
to buy.
of doing
goods,
is by reducing prices.
to
good volume of orders
a
inclined
less
ditures
maintain prices.
by bringing out new
attractive
is
sacrificing volume in order to
to
con¬
one
getting
efficiency, one sees
price cuts are far preferable
that
confronting
task
plain. "It
stimulating
Business
Finally,
contraction of the economy
The
business
a
larger demand some time
a
the
traction?
of
length
and
more
of
step
to
business do to reduce
can
severity
for
upon
VI
the
position
efficiency from
organization.
taken
allowing 40% of the cost of new
plant
and
equipment
to
be
charged off in the first year after
purchase.
man¬
a
advantageous
an
ask
government of England—namely,
drop in buying which results from
a
decision
to
postpone
simply
What is the general
in
position to lay off workers. Fur¬
thermore, the employer who is
which has cut prices is
agement
equipment by adopting a de¬
vice
employed by the Socialist
to
Furthermore,
either case.
and
deferring purchases by
than six, nine, or twelve
It
steps which the govern¬
might take would be to
stimulate expenditures on plant
in
months.
im¬
useful
ment
postpone buying usually do not
to
III
still
are
great. Furthermore, the advan¬
buying.
At
the
present
time, waiting for prices to fall
has probably become the most im¬
portant single element in business
pone
needs*
The
most
the
of
mediate
nating from other causes. Further¬
major determinant of business
The < greater
the
a
of
One
iri
drop
employment
sacrifice
19, 1949
Thursday, May
CHRONICLE
FINANCIAL
&
ment
less
is
plant
on
limited
by
and
equip¬
the tendency
bring about a
volume of sales,
and the employer who is selling
more
physical units because he
has reduced prices is
not in a
of
price
larger
cuts
physical
to
Hexter & Co. Formed
Financial
to The
(Specie.!
&
ter
at
to
engage
securities
in the
Officers are Richard K.
business.
tin J. Weil, Secretary.
Mar¬
Richard K.
formerly with C. B.
was
Abbett & Co.
brey &
N.
President; \ Carlyn
Hexter,
Hexter, Vice-President, and
Hexter
l
been formed with
8943 Wilshire Boule¬
has
Co.
offices
vard
Chronicle)
CAL.—Hex¬
BEVERLY HILLS,
and Carter H.
Cor-
In the past he was
of Investment Fund Dis¬
Co.
President
tributors of Los
Angeles.;
Hamilton Keller Is
With
1
Paine, Webber Firm
(Special to The
Financial
LOS ANGELES,
ilton
C.
Keller
ciated with
son
&
Street.
was
Inc.
Chronicle)
CALIF.—Ham¬
has become asso¬
Paine, Webber, Jack¬
Curtis,
626
South Spring
Mr. Keller for many years
with
Wagenseller
&
Durst,
Volume
169
Number
THE
4804
(Continued from page 4)
"
planning to share in
the profits of American industry.
For
the
man
who
wonders
cessful
work
work
much
average man
take a peek at this type of
operation, find out how the Social
you
units of sale
the
Security plan .works,
Mrs.
Brown, or Mr.
higher
than the
who goes out just for
to
Jones,
think
whoever
and
else you can
if you can't render a serv¬
see
ice.
see
Because it is in service that
•
will find successful selling.
you
Advice
to
Now, getting
what
the
older
men
on
to
do
can
to
little gad¬
one
get here to
be very successful in
closing of substantial orders,
the
and also
on
average orders. You
know, in Keystone we have about
51,000 people who use these funds
—more
in
to-day than at
history—and
Keystone
is
time
average Vin
high, higher
the
rather
you
can
use
any
than the industry in
general, more7
than $3,000 per person.- And one
little time; you have to be a little
patient.
more
the
in
lady
lady
tor
You probably heard
doctor and the
of
story
the
the
community, and the
talking about the doc¬
was
and
said, "What do
you think of him?" and she said,
"You
know, he takes so much
time
with
me
that
you
would
think I was his only
patient, and
yet he is the most successful doc¬
someone
in .the
tor
community."
Gentle¬
I
he
months,
of,
prospect
calling on
man told him
a
and in
the
prospect,
that he had made about
dollars in the
always
been
who
a man
difficult
as
know
this
across
came
about
was
as
different approaches to in¬
a
three
or
million
a
market, that he had
successful with se¬
curities; that he went to the Su¬
Court of the United States
preme
time
the
at
in
case
the
of
Standard
studied
1912 and
oil
Oil
sub¬
sidiaries, and he bought oil stocks,
and'
time
that
from
this
to
he
spent his money buying more oil
securities,
the last thing in
going to do was
and
the world he
was
take the advice of a broker.
than
more
even
that,
he
And
wasn't
this will take you a little going to pay 8% to buy any trust.
•V: Welly that
salesman, as every
time, probably three or four
of the reasons; I think! that
salesman
in Keystone is, was
Key■calls, but your job will be done
Stone has been successful is that
trained .to
leave a constructive
intelligently, it will be done well.;
we have a constructive
suggestion
And there is one more thing suggestion, regardless of the bar¬
to offer to about every prospect
that is very important with refer-; rage that came about in opposi¬
we contact...
'
tion. And here is the turning point
ence to the planning of this type
Now, if you think of what you
oP-the $100,000 order in this case
| of program, which I ana going to f r o
can do with
the
man
who
said
he
money, you will find
use in reference to another piece
that you can do about four
wouldn't buy, one simple question:
things. of
literature that I have found t6„
"Mr.-rBrown,. I don't think I can
First, you can put money to work be
very effective in the planning
for reserves, second for
help.you. As a matter of fact, I
income, of this
type Of sale, and it involves
third for income and
don't- think my firm could help
growth, and one
thing Harold Danser referred
fourth for growth, or
you make.a million dollars, and if
appreciation,
to, and the thing that every insure
or speculation.
we could, I- wouldn't be here sell¬
When you call on
ance
company talks about, and;
a prospect, it is
ing you, or trying to sell you. But
important to find
(2191)
And
280
this
man—and
can't do it—this
what
out
he
wants.
And
the
makes
has
he
prefers to
participate in.
It may be income.
If it is, don't
try to sell him. Try to educate
him, try to assist him. And if you
just turn
find
classes
this page, you
over
there
for: income
of
securities
wili
certain
available;
point out to him the diversifica¬
tion
possible in those different
classes. If it is income and
growth,
fine.
If it is
growth,
some
classes.
more
is reserves, here is
here
And
are
if
it
class known
a
as
B-l, B for
bonds, and
quality, where he can
aside a portion of his funds
for
Government
bonds
and
good corporation bonds.
1
set
in
pretty
is service.
The
his
closing business.
\
Planning Investment Program
]
Now. there is
other thing I
After you have
one
would like to add.
like
to
And
if
back to
go
when
prospect
down.
the
it
is
see
market
is
Monday
and the
a
would like to ask you just one
question, and the question is this:
Do you think your wife and familyknow
much about securities
as
and
raining,
type of presentation does three
things. It causes a man to sell
intelligently at the start in such
a
way
talk
to
as
three points.
on
is, going
to go
his
with
client
First, the market
second, it
still,
third
.up;
going
to
stand
going to go down.
"And
I
is
it
want
you to know, Mr. Brown, that re¬
gardless of what happens to the
market, I am going to come back
to see you every three months as
matter
a
of
service just to check
account."
est?"
Do
you
when
know
to
'
-
he
And
"What
said,
do
you
by that?" Well, the salesman
the story and the man
mean
him
told
said, "Draw
about it
up
interview
the
come
Then he
more."
back.
He
little later and the
and
told
came
back
of
end
two
So at the
hours the
three
or
wanted
man
to know more about it.
client at
the time, said, "You know, it in¬
client,
prospective
the
vestment
program, the investor
gets a check every month in the
year. And if the market is up, the
salesman
Then the
to the
came
clincher, and he said, "Why don't
buy
$100,000 of Keystone
Funds today, and save about $25,you
taxes?" And the
000 in
said,
man
salesman goes to see him and sug¬
gests one move, if the market is
that out?" And
the salesman said, "Well, if you
down—and
were
there is
"How do you work
to
We
down,- using the Dow Jones indus¬
have been talking about plans and
methods up here. We have three
trial average—he calls on him at
this level, and if the market is
specific, tangible tools
standing still,
will be about
out
what
the
wants,
»then the next thing to
try to find
man
out is what securities he has.
or
to obtain the final result.
the second
methods
We have
thing, to which I will
refer
as
block
a
capital sheet,
and again you have a
repetition
of the four points that I talked
about
(1)
with
or
reference
to
And
they
all
are
capitalized
up
here.
.
.
Take the man's list of securities
and
in
put the different securities
the different classes.
If you
don't
do
any
reason
know
yourselves and
you
would
we
render.
for
like
to
a
the
man
So
holds.
list of securities, what
Then you come to the third one.
Raving known what he wants
what he
to him
has, then
on
ment
his
program,
name
with
a
plan,
and
with
year.
a
you
come
and
back
the third visit and you
point out to him
and
list
in
a
planned invest¬
personalized, with
with
of
your
securities
this
a
name,
in
particular
check every month
in the
-
market
on
it
is
it has been for
as
matter
of
on
A
second
about
a
to
look
at
this
service
sale
point, take
presentation'here,
"Investment Program for
These Times." It will cause
you
to
an
back to
go
see
prospect
will find the
your
regularly, and you
by-product of this call, this
ice
call,
will
and
of such
nature
a
serv¬
that
utes more,.! believe
it
off, as Harold Danser
every other successful sales¬
pay
closed.
was
tell
could
I
others
that
or
in that
only
point,—not
but
not, that
And the turning
it
you
instance
dozens of
principle,—
with a man; try
to find out his problem. And that
is where learning the words as
on
as
the music
salesman
was
And he suggested
the man took a
in.
comes
That
alert enough to turn
was
thing,
$100,000 order
in
tax
point reminds
me
of
successful salesmen
on*
company
shares in
have in mind one
investment
this
man
area.
I
who* is
about
50, who took time out to
study :the investment
company
field, study its growth and devel¬
opment, and who decided to work
on our particular
phase of the in¬
dustry/ namely Keystone.
He decided that he wasn't
to
go
beyond
one
hour's
distance of his home.
that he
was
moder¬
consid¬
going
driving
He decided
going to service those
ful
salesman
who
tax information and tax assist¬
ance
to be
a
security
the
twin sister to
selling.
He
success¬
told
me
he came in
$4,500 order, that he got it
through tax assistance, very sim¬
other, day, when
with
a
ple tax assistance. He said he had
280 accounts, and 80%
of them
were
obtained by rendering some
kind of tax assistance.
~
And
does
is
trustee
was
man
of
a
probably 125 to
churches and religious organ¬
130
that
izations
he
Then
went
service.
their
use
and
bank
the
to
told the banker about it.
certain
a
known
as
the
Dow Jones industrial
average, and
that reflects the performance and
price
the
of
tive
security
And
he
goes
and
to
another
issues
to
on
representa¬
the day.
of
another
point,
point
until
he
makes sure that the prospect with
whom he is talking understands
other
from that one
radiation
in
words,
there
account
I
and
you
architect,
used
The
use.
looking
was
at
the
and
such words
other
day, I
by an
report
a
architect
had
as
encumbrance,
easement, saddle, and all the other
terms they use in building a home.
Well,
idea
I
but
mean,
much to
of
have
what
of
of
the things
don't mean as
painted picture
Ithey
me
approximate
an
some
as
a
home, and contentment, and
independence. We have to paint
the picture in terms of what the
a
other
do,
man
understands, and if
have
we
learned
fundamentals
I
of
don't want
we
of
one
the
salesmanship.
to
take
any
more
of
Take Care of Existing Accounts
was
your time, except to mention
two other things, one for the man
who is having a little
difficulty in
getting
who
like
started
and
asisstance.
I
would
would
to
course, in 12
suggested to
or
13 lessons, and in each one of
salesmen that before they go out
those lessons, which will not take
looking for new accounts, that
yqu too long to read, you will
they take a look at the ones they
find
some
of
the
suggestions I
have on the books at the present
I
And
directions.
different
five
about
have
always
time, because if they are sold well
serviced well, they are the
best
additional
for
ones
gible
a
little
specific.
and
tan¬
more
Some
ature, because they
been
regularly,
of
my
successful.
a
this liter¬
they have
example, in
use
and
For
have
say
a
have
taken into
consideration
here, plus certain others.
A.
prospect who is a doc¬
tor, we use this little folder here,
Kingston Ghegan
With Edwin L. Tatro
friends here know about this liter¬
ature
we
business.
Now, in the Keystone setup we
try to make these ; conversations
that I talk about
that
you
and
A.
Kingston
Tatro
p
a
Ghegan
associated
come
n
has
with
Edwin
be¬
L.
Com-
5
y,
0
Broadway,
NewYork,
City, as man¬
showing that 400 doctors already
about $3
million worth of ager
of
the
Keystone. If we are talking to a insurance
woman, we show that some 25,000
stock departwomen use this service and they
ment.
Mr.
own
about $85,000,000 worth of
Keystone Funds. If we are talking
own
with
a
ticle
we use a little ar¬
dentist wrote about
dentist,
that
a
securities,
of which I have
here, this type of thing written by
a copy
dentist for dentists in
zine called "Oral
talking to
ciary, wd have
are
trustees
a
maga¬
Hygiene." If we
trustee or fidu¬
list of some 1,700
a
a
fiduciaries
and
that
use
the service.
Ghegan
formerly
was
man¬
the
of
ager
bank
and
in¬
surance
de¬
partment
for
Dreyfus & Co.
and
prior
thereto
was
with
Kalb,
Voorhis
&
A.
Co.
and
Kingston Ghegan
Schafer, Mil¬
ler & CO.
:■'
Selling in Terms of Education and
specifically,
type of
it
this
man
two
things. Once an in¬
vestor buys a particular fund, he
sends out the arithmetic about his
taxes and the line
on
which to
re¬
port the taxes to the investor. And
gentlemen, this
must be sold, but
company
sold
is
in
terms
of
education
service, of making the other
alert, of making him selfthe
to
suggestions
CONCORD, N. H.—F. W. Home
&
have
little bit about the little
talking
man.
a
You
know, the little man, as well as
big man, doesn't necessarily
the
understand
you
and I
refer to
average,
all
use
Dow
in this business.
We
but ask the mechanic
of
obtained
recently
terminology
the Dow Jones industrial
some
have
the
the
Jones
know
industrial
to
&
Financial
Co.
has
Chronicle)
CAL.—N.
been
P.
formed
in the securities busi¬
are N. Peter Rath¬
engage
Officers
ness.
von,
President;
H.
H.
Rathvon,
Vice-President, and Norman Free¬
man, Secretary and Treasurer.
or
who
what
King Merritt Adds
(Special
the
R.
other
Chamber
does!
larger
with offices at 1041 North Formosa
is.
You and I do, the average inves¬
tor or does, but are we sure the
man
to The
ANGELES,
Rathvon
substantial moneys
they
if
investors
removed
and
new
N. P. Rathvon & Co.
(Special
LOS
been
to
be associated with the firm.
the average man on the street can
we
offices
quarters at 18 School Street, an¬
nounce that Lewis C. Shaw will
understand the terms.
Now,
recently
which
Co.,
their
which you have to offer. And you
have to make this so simple that
ask
all
With F. W. Home & Co.
Service
I repeat to you,
responsive
-
is
another
ers
Now, if I may, I would like to
give you two or three examples of
the
church, and he pointed out to him
man
That
thought
he
85% tax exemption
an
that Keystone has
result
Keystone.
ately successful, and who
knows.
Case of Successful Salesman
that
and
the
corporation
the
ration, and the man looked at the
problem and bought some bonds
on that principle. He learned later
that conversation his way, and the
was
Here
is
rule
same
don't try to argue
well
books.
there
or
man
for dividends received by a corpo¬
a
$9,500."
And at the end of about 20 min¬
him
service,
what is going on.
so-called
called
the
case
the
on
So, gentlemen, I would suggest
you that if you want to use
serv¬
you come to the second point and
have
to
when
while, he calls
a
post him
We assist you
planning out his account.
you
as
man
how, it is part of the
ice that
in
that
little
just
that
(2) income, (3) in¬
growth, (4) growth.
and
indicate
some
money;
reserves,
come
to
guide
a
accounts
purchased it.
talking to
terests me."
in this type of presenta¬
tion, in the so-called planned in¬
Now.
die, the inheritance tax in
your bracket, in the top $100,000,
would be about $35,000, whereas
if you gave the pnoney away to
your
family today, the gift tax
found
his
on
example of
an
chair and talk
a
little
a
short
cut
him to
a
buy
market
yardstick
every single point.
who has
sold a business man the principle
Make Your Terminology
of a check every month in the
Understandable!
year.
After the man had pur¬
I think, and I think
your speak¬
chased that check every month in
ers here on other occasions have
the year, the salesman said, "Well,
Mr. So-and-So, I understand that (Drought this out, that it is very
important to make sure that the
you
are
treasurer of this plant.
new
prospect as well as the old
You know, in the investment com¬
understands the terminology that
pany shares, you can use a profit-
is
In
do?
you
the
as
think they would
and sell oil
market is down and the news is
stocks as well as you do?
Or do
bad, that is the time he doesn't
you think this
idea of a check
want to go back and wishes he
every month, not for you but for
were in some other business. This
your family, would
be of inter¬
morning,
your
gadget, called the
Security Selector, to be very bene¬
ficial in establishing business and
I
security salesman
average
not
We have
found this little
of
most
sharing plan."
you
point, show him this little gadget,
the things you can do with
money,
and ask him which he
other thing I would
one
like to talk about, and that is with
reference
to
the
salesman
who
that
the
security
There is
that to him, and
look at it, and
that
if
over
them
men,
difficulty in getting to the
does
has
accounts, and he obtained 80%
through that tax ap¬
of
i
have
sales¬
all
man
proach.
more
•
35
One
of
then, thereafter, he services him
the
most
successful
by just giving him an ordinary tax salesmen I know never takes any¬
card, the routine information. And thing for granted. If he goes into
if he can, without posing as a tax a shop and the man
is using a
expert, he assists the investor in rule, he tells him that that rule is
making out the account. If any the measuring unit that he uses
real problem comes up, he doesn't to obtain 12
inches, or whatever
touch it with a 10-foot pole; his other purpose he has the
rule for.
Then he brings into
purpose is to assist the investor.
play that in
men
And he
so
This takes
And
prospect.
two
start.
many
so
securities,
of
types
terest your prospect.
little bit
help, I have found
different
many
Older Men
a
that
scope
it for
was kind of rough going.
It
always rough going when you
is
this type of report.
The interesting
or
thing is that
of, 'Keystone itself is so varied in its
go
CHRONICLE
and it
of selling securities.
rendering a service on
purpose
are
the
to
person
tried
this report,
You
FINANCIAL
&
people regularly. He decided that
every time he made a sale, he was
going to deliver the securities in
who
salesmen
this—have
are
this—suc¬
on
security
on
that
t
where to go, I would suggest that
who
Men
additional
COMMERCIAL
LOS
average
to
Linch
with
The
Financial
Chronicle)
ANGELES, CALIF.—Dick
has
King
of
become
Merritt
&
Commerce
affiliated
Co.,
Inc.,
Building.
36
THE,
(2192)
General
Comments
,:
:
■
/
by
We
has
sufficiently familiar with the wording of the Maloney
It has been our impression that the trou¬
the interpretation of the "intent and meaning of
7'77'7.;77.:.'777 7.7'■•'7 7'77/^
;■
&7 §
■
v^7'
any
■
small
upstate
could formulate
SEC
or
new york
keeping for all members alike
or
a
We
town
simplied system of book¬
at least the small dealer
so
as
cancelled
to
from
statute
we
fear
in
Washington
the better it will
else in the country, is
of high wages
by larger com¬
run
'
1
I
a
'
1
,
utica, n. y.
'
motivated to join NASD on the premise that it was to be
was
organization for Security Dealers, not a new "Police
the style of decent, honest members.
protective
Force" to further cramp
competition and in some cases the newspaper quotations,
impossible to even approach 5%. What other business bases a
the cost of material—business always adds all overhead and
other costs to cost of material and then adds margin of profit. We
are compelled to absorb all overhead and even a great many /taxes,
social security, and contributions out of the 5%.
which is regulated as to amount of
business
obeys
of
either
wants
Act,
no
in
commission
rates
since
the
enactment
of
the
happened to the
7-777.
business.
Maloney
profits should be taken away from the Federal Government and
placed in the hands of the individual states. Certainly the State of
Connecticut, through the Securities Division of its Banking Depart¬
ment; has done an excellent job of governing the unlisted investment
business-in Connecticut.
hartford, conn.
No honest investment firm need fear any of the bug-a-boos you
do
is too much to charge in some cases;
think 5%
not
ought not be in it.
attempt to highlight in this questionnaire.
philadelphia, pa.
baltimore, md.
It
We
that the NASD spends most of its time as a police or
seems
regulatory organization, whereas, it should spend the greatest amount
:of its time, energy and money promoting the interests of the industry
and its members through advertising, study of mutual problems and
are
regularly
their examiners, and have to make frequent reports.
imposition on Member Firms of addi¬
not therefore favor the
We do
need
have
to
itself with the elimination of increased taxes,
elimination of double taxation of dividends, excessive regulation of
the securities business, reduction of capital gains taxes, the failure
of the securities business to attract young men, and other problems
which are strangling the business.
it should
information
7
is
It
[NASD3 is
an unnecessary
providence, r. i.
the investment business over 35
years—first as a salesman—then as a member of a substantial firm
(partner) and now as a sole proprietor and he feels that there is
altogether too much regulation and unnecessary detail and expense
involved. Policing is not necessary to the extent is is developing.*
expense.*
providence, r. i.
boston, mass.
"protect" the industry from abuse by
autocratic than the SEC. It might be
of some value if it would work for the inclusion of good quality un¬
small new jersey town
listed securities with listed securities for credit purposes and matters
I think the NASD should devote its full energies to secure to ot that sort. Instead it seems to interest itself primarily in enforcing
its members a part of the commissions on big board and curb busi¬
the 7-day delivery clause which seems to me of doubtful value.
ness, placed by members with Stock or Curb Exchange members.
We believe the SEC could do the
least one-third of
should be at
That
Such
Exchange member.
a
The NASD was created to
job better.*
,
7777'
new york city
the commission charged by the
situation would result in NASD members
NASD is
(over-the-counter dealers) going after listed business. It would pre¬
vent them or some of them from being tempted to talk a customer
out of buying a listed security, and talking him into buying an
unlisted security instead.
aim
the
Box in
wholly in favor of the right of the NASD to make such
regulations governing its members tending to prevent
frauds and other practices that may reflect on the honest conduct
you."
NASD and SEC, one can
NASD
The
is
a
service or repre¬
parasitic body—dues without
sentation—the hell with it.*
new york
Any restrictions on the freedom of markets has an unfavorable
on the economy of the country.
Keep up the battle
effect
affect
your
against the
spread.
understood
your
attitude.
city
Should
it would
always worked
think
advertising income because you have
interests of the house trying to operate on a narrow
7:; "/ -7.-:
"'7'
'
7777
.
We would
not
be
members
were
Question No.
examine
our
shouldn't
an
regulatory body
No.
4—An
unfair
and
inaccurate
question.
Why
industry regulate itself?
philadelphia, pa.
Do not approve
vestor; and in so doing they pro¬
an essential condition for the
vide
stimulation
of NASD.*
philadelphia, pa.
•every
other business can go to 100%? Is this the American way *of
is it the intention of the men behind the Washington Iron
Or
Curtain to put the
capitalistic system
on
fhink
answered
some
No.
1
the
reverse
,:
i
Commented anonymously.
reached
a
point where a concession was given to anybody who looked
to see this practice resumed.*
honest. I should dislike very much
side Yes "with variations."
I
mass
equity
in-
basic
The
principles
of
dis¬
closure and fairness embodied in
have
laws
our
become
accepted
of the working code of
companies and people with whom
we deal.
Criticism continues; and
part
as
it
of
we
it is made in
a
welcome, because
good faith attempt
improve our service to the in¬
to
and to
vestor
the
economy.
Commission Is EquityConscious
First,
one
thing should be clear.
respect to the generality of
companies with which we deal, we
do not pass on the merits of pro¬
posed financing, we do not tell
companies what they can sell, or
investors what they should buy.
Only in certain limited fields are
we charged by law with responsi¬
bility for passing on proposed fi¬
nancing plans. Our record in the
field
of
public
utility holding
companies and their subsidiaries
should dispel any notion that the
Commission is either unaware of
or
indifferent to the problems
of
We have for 14
years been laboring
mightily to
increase the equity base of utility
equity financing.
under which
debt
and
the electric
utility industry groaned
we began our work in the
gas
when
field.
Private Placement
,
heard
regulations have dis¬
couraged
issuers
from
seeking
access to public markets and have
forced them to finance through
by the private placement of
securities
with
insurance
companies and other institutions.
simple answer to this charge
is to point out that last year over
$6 billions of corporate securities
were offered to the public under
registration statements filed with
the SEC and Subject to SEC juris¬
diction.
7/ 7'7 Vy7'7.'vy77
Against Big Stick
:I see no possibility of repeal of the Maloney
should work from within for improvement. What
to
in
us
case
the
Maloney
Act
were
repealed?
--
(Continued
on page
37)7
400
separate
deemed
company
our
re¬
quirements fair and. simple enough
to comply with, and did so suc¬
cessfully.. In only two cases did
we
find it necessary to proceed
toward the issuance of an order
preventing/ the financing
from
because of willful
and omissions in
misstatements
Act, so believe we
information given about
would the SEC do
pany.
The whole matter
of the
requires careful thought—Am afraid of the Gestapo! *
r
Over
managements
taking, place
new york city
control should be placed upon the habitually "wide profit"
nir
*
on
large buyers, especially of municipal bonds. In order
to meet competition all houses were forced to fall in line. In the
course of time many buyers of five and ten bond lots claimed a con¬
cession
as
"large buyers" or "steady customers" and it finally
the rocks.*
small pennsylvania town
I
of
vestment.
.
Question No. 5—In my judgment the one good result which the
has accomplished is the discontinuance of granting discounts
to non-dealers. Before the NASD it was common practice to grant a
concession to
Why should the investment firms be limited to 5% profit when
life?
"/'■'new york city
NASD
increase in overhead.*
regulation.
The aim of
is to protect the in¬
laws
The
3—We are willing to have any
records and books.
Question
it not for the restrictions im¬
members but an unnecessary
of
their
philadelphia, pa.
posed, for certainly we gain nothing as
ad¬
bring
to
impede business, inter¬
management, or to bring
regulation for the mere
these
debt
against this outfit and the SEC.*
new york city
philadelphia, pa.
have
laws
Their purpose
is that SEC
newark, n. j.
Never
the
SEC
One of the charges I have
new york city
and
business.
of
by the
to
not
of
appreciate the
the early Christian martyrs, kneeling before the Royal
arena chanting, "Hail Caesar, we who are about to die,
And brother I ain't kiddin.*
7/7/7. 'J
After all these years of
are
of brokerage
.
and Mass
companies and to reduce the load
salue
rules
superfluous. Not needed.*
new york city
feelings of
newark, n.j.
We
It has become more
the SEC.
com¬
,
Investments
the
is
It
With
concern
boston, mass.
•
about
'
Investor Protection
tional clerical work, and feel that we should be
The sender of this has been in
he
the
effective system
an
panies.
exempted from NASD
examination. However, we do believe that non-member firms should
their solutions, and effective action in Washington. It should work be
policed either by questionnaire or spot check. Our answer to ques¬
towards cooperation amongst all the branches of the securities busi¬ tions Nos. 2 and 3 should be interpreted in the light of the above.
ness,
about
for the dessemination of adequate
much
members of the New York Stock Exchange, are
examined by
know
in which he invests or
competently advised about
about
the
company.
In
either
case, whether he gets his knowl¬
edge from available sources or is
to
be
competently advised, we
sake
in
other cases it is too much and, in still others not enough. We do not
think that the NASD has justified its existence. Its annual charges (
to us far outweigh any advantages we have received. Its compulsion
"you must join us or we will see to it that you share in no new underwritings" is unfair and stupid. Its assumed authority "has gone to
its head." Much of the dishonesty which has come to light in this
"Investment Industry" might have been avoided if more care had
been exercised by the states in the granting of licenses to new houses
and new salesmen. There are too many engaged in this businss who
We
to
reasonable
practice;
fere with
philadelphia, pa.
We, therefore, feel that the Maloney Act should be abolished. "The
responsibility of establishing a fixed ceiling of commission rates and
the
or
transacts
be
to
about
consideration whatsoever has been given to dealers of unlisted
securities whose costs of operation have doubled in the last ten years.
broker
he
fair
about these results.
I believe the NASD is the best thing that ever
Although the Stock Exchange firms have been granted several
de¬
company
ministered
increases
are
feel-reason-
the
whom
limitations
profit which can be made.*
PITTSBURGH, PA.
NEW HAVEN, CONN.
needed.
prices
to
that
with
dealer
Just don't like idea of being only industry in the country
quate.
wants
certain
ably
truthful
columbus, ohio.
Generally speaking we believe a 5% profit on a "riskless transaction" is ample. However, there are instances where 5% is inade¬
on
He
ences.
the fact that he could not tolerate this
further.*
any
Due to
profit
books
is
markets, free of
manipulative influ¬
artificial and
of the Directors of the NASD resigned,
union which, in years (especially)
union members during inflation and is
unconstitutional monopoly/5
is
because
who lives in Syracuse, due to
hartford, conn.
it
Message"
one
petitors—cuts profits of its
an
the
We understand that
tries.
situation
a
signing this "Personal
More
termined in open
be for all concerned, not only securities dealers but all small indus¬
boston, mass.
The NASD is
not
are
it.
be assured that his
,
repercussion of our opinion. It's about like doing business in Russia.
In our opinion, the NASD is an organization brimming over with
communistic principles and ideas. The sooner the "Maloney Act" is
make record keeping easier.
and salaries for everyone
'
-
doubt
-
First of all the investor ,i wants to
rochester, n. y.
for which I have to pay for in annual dues.
The NASD
»
I
be justified, but
may
form is bad, whether by government or private
upstate new york town
I do not object to the 5% as much as all the other useless red tape
:
among our
in
discourage and prevent fraud
price fixing in
stimulate
an
interest
middle group investors
equity securities?
' 7 *'v...;
;
to
sary
,
providence, r. i.
Measures to
purpose,
association.
small
(Continued from page 9)
in
been
Equity
Stagnation
Market
not
are
the Act.
worthy
any
SEC and the
!
Act to express our opinion.
not already
covered by the authorized functions and processes of the SEC.
serves
Thursday, May 19, 1949
providence, r. i.
ble
newark, n. j.
I don't think that NASD
CHRONICLE
dealer, but exceptions should be made for inactive issues and those
extremely low-priced bracket.
;\
(Continued from page 3)
'
FINANCIAL
in the
Dealers Anent NASD
.'
&
COMMERCIAL
in the
the com¬
Our tradition is against use
big stick. We have found
ordinary case that informal
conference and education
are,.eft
Volume
•
.
THE
Number 4804
'•
"
fective
.
169
•
.
.V
•
-
.
of
means
•
•
•
•
•
getting
to
.
&
FINANCIAL
CHRONICLE
(2193)
37
los angeles, calif.
the
[investor full and truthful infQr-
.
COMMERCIAL
>■
matign and at the same time not
interfering with financing.
;
General
Comments
by
Have not answered
beneficial to
some
questions 5 and 6
as we feel NASD may be
limiting activities of SEC.*
extent in
.
infer
:To
.
that
the
Dealers Aneht NASD
than
more
$2V2
billions of corporate secur¬
ities, which were placed privately
in the same period, were sold in
that
feared
lic
the
of pub¬
assume that
consequences
disclosure,
the
is to
insurance
companies
and
others who took these issues
-
foolhardy enough to risk
were
afraid to disclose the facts.
for
■■
Other
the
development of
-private f placements
adequately
explain them.
I have indicated
these reasons in commenting on
|
:
^
I
believe
NEW YORK CITY
the
public should be protected. Perhaps brokers and
dealers could more frequently show the commission charged where
the transaction is actually one where the security is not held by the
dealer for any length of time.
*
'
j
.
and the necessity of institutions to
• find investment outlets for their
.
.
We feel the
j
accumulations of funds.
I
have
often
that
heard
*fact that
securities markets
our
!
in economic activities and profits,
j
We are accused on the ground
that
have
we
discouraged
specu¬
lation, and that it is the speculator
who provides both the initial de¬
mand for equities and the pos¬
sibility
of
continuous
and
active
markets in equity securities.
First
,
■
-
.
NEW YORK CITY
cratic body.
real demo¬
NEW YORK CITY
the
various
States
able
SEC, NASD,
to
wonder
a
Blue
and
that
the
Sky
Commissions
securities
business
in
or
industry performs/ and this has become almost
Our laws leave
it to
seattle, wash.
an unmixed blessing, but they
industry. Would not want to do away
with it. Of course, T dislike the reports and examinations, but they
must have some way of checking members so I guess we will have
to put up with them.
This is the price we have to pay to keep the
crooks and unscrupulous dealers in this business in line.*
a
lot of good for our
the
im¬
possibility. The socialization of our country would be complete if
government was the source of these equity monies. Perhaps this is
the intent. I want to take this opportunity to congratulate your
organization on its efforts to bring attention to some of these abuses
our
of power
an
committed by the SEC and NASD.*
'
*
.
We believe
will
and
not
buy
and
vote
his
to
the
To
securities
provides
j
SEC'
j
which
-
purchases.
assume
a
risks
individual
risk, the
basis
the
taken.
To the
extent
lation
means
is
upon
be
can
Commission does
i
get data to the investor. To the
extent
that
anyone
thinks
of
|
speculation as
garnished with a sprinkling of
manipulation, he is right in think¬
ing that the SEC discourages it.
Under
i
laws fraud and
our
ipulation
these laws
j
are
are
based
NEW YORK CITY
on
And
the theory
not
•
.
.
•
need fraud
:
•
-;:,v :
,
...
and
-
.
V-':;
' \
there's
was
rife. We consider
Recently
cism to
we have heard
effect that the
com¬
try to analyze this crit¬
I
would
the
law
icism
like
consideration
!
received
tive conditions in financing.
One
of the great problems we faced
setting about to administer this
law
|
was
the traditional
affinity of
utility systems with affili¬
many
ated
whom
banking houses,
some
of
actually controlled the fi¬
nancial
affairs
of
the
|
with
as
a
waste
would
collapse,
the
as
NEW YORK CITY
particular
banking
particular* banking
houses,
houses
re¬
par¬
ticular distribution groups, and as
themselves banking houses
to
respect each others'
spheres of influence. After admin¬
istering the statute for several
years on a hit-or-miss basis the
among
Commission adopted a rule, com¬
monly known as Rule U-50, re-
f
quiring competitive bidding in the
sale of securities of holding com¬
panies, and their subsidiaries un¬
der SEC
regulation. The rule pro¬
vides for exemptions so that com¬
petitive bidding would not be re¬
quired whenever conditions make
tt'sensible ^b 'bermit firiahcing by
(Continue
on
page
38)
reason
no
approach a 5% profit,
object to it as a matter of principle. We are inherently
to the how 15-year old trend toward totalitarian principles
we
opposed
sired by
FDR and his ilk.*
NEW YORK CITY
new york city
Almost
impossible for small firms to exist after paying salesmen
The Maloney Act should be repealed. I am not opposed to a
particularly in duller markets. Think rule voluntary organization of Security Dealers established for the pur¬
can be amended so "reasonable
relationship to market" can be better
pose of creating uniform practices. I think such an organization,^
defined. Think, hwever, industry should be regulated under Martin
highly desirable. I want to compliment you for your aggressive and
and
Act
all overhead
or
.
.
.
similar one, but any act should work two ways.
a
sound work in our
behalf.
NEW YORK CITY
Thank
you
for the fine work
you
are
new york city
doing in bringing these
things out.*
The
NASD
fluous. The
in the
does
SEC
interests
nothing at all for
does
a
us.
Its functions
are
both
money
super¬
and manpower.
have
should
NASD
The
excellent work.
I
personally
see
no
the
reason
for
the
government connections and
,
NEW YORK CITY
firm has had not
no
solely
interests of its members. Rules should conform to
sound business principles. The NASD should consider as itsl principal
business the promotion and public understanding of the securities
industry, listed and unlisted. P. S. — I compliment you on your
the
represent
better job. The NASD should be abolished
of economy of
:
<
-
>
'
■
new york city
continuance
of
NASD.
Our
slightest help because of that organization.
NEW YORK CITY
Unconstitutional.*
We
believe
that
the NASD
should confine
its activities
to the
the public with the merits of investing. It
should not embark on boondoggling projects in order to dispose of the
members dues and thus justify higher rates of assessment of its
business
of acquainting
members.*
NEW YORK CITY
The
5%
rule
adopted in 1943 when operating costs were
This means about a 2%%
mark-up comparatively today. Because the larger buyer no longer
is in the market on account of taxes, concentration must be made
on the small investor and in most
instances, when small amounts are
involved, these transactions are made at a loss.
new york city
was
about one-half of what they are today.
We have been members of the NASD since its inception and
never
did
us a
they
bit of good. Dues are just money wasted.*
new york city
I
specialize in not over one dozen situations where I carry
sub¬
These companies i am in constant touch with and i
cannot subscribe to the idea of having my competitors, who
Personally I think the bitter opposition of your writer of the may sit on various committees of the NASD, dictate to me their ideas
articles against NASD ought to have the support of every man in the of fair practice about situations they know absolutely nothing about.
stantial positions;:
NEW YORK CITY
for one,
investment business who is not directly or indirectly
benefiting
as well—if they are frank.
from
the NASD—and of the beneficiaries
new york city
spread" yardstick is sometimes too little
merchandising of certain types of securities. We do, how¬
ever, realize the difficulty of enforcing restrictions where abuse might
We feel that the
PHOENIX, ARIZ.
Believe you are wasting your time and ours. We have become
very tired of having our mails cluttered up with reprints of your
diatribe editorials. Who appointed ycu dragon slayer?*
t
"5%
to permit
be involved.
new y ork city
SAN DIEGO, CALIF.
Some
supervision of the over-the-counter industry is necessary,
not believe the NASD is the answer. Membership is prac¬
My yes vote in most cases is because I believe'the good results but we do
outweigh the evils involved. I am a Republican and dislike too much tically compulsory, which is wrong. As a whole, the individual mem¬
regulation in our business; however there is still room for much im¬ bers receive little benefit out of the amount they pay NASD in dues
provement.
~
tended
|
If SEC influence could be removed from NASD,
why the latter couldn't serve the purpose. We
the NASD is making progress; that they are doing a much
securities industry.
5% fiasco, while we find that we very seldom
Salaries, expenses, taxes, together with devaluation of the dollar,
makes the (5%) spread insufficient.
no
spected their affiliations with
-
pay
systems.
stretch of the imagination
could it be said that, in the old
days, competition prevailed in the
marketing of utility securities. Is¬
suers
respected their affiliations
By
we
think
pursuant
by issuing
companies for their securities and
upon the maintenance of competi¬
in
that
better job. And, we wouldn't be surprised if your pounding away
at the entire matter is bearing fruit, although we seriously doubt
whether such an admission would be forthcoming. With regard to the
to
point out
to which
we
regulate the financial affairs
of public utility holding company
systems
requires that we pass
upon the
reasonableness of the
that
dues
spawn of the New Deal
smaller dealers would soon follow suit.
criti¬
bidding
Before I
the
NEW YORK CITY
requirements of
the Securities and Exchange Com¬
mission have tended to impair the
market for equity securities.
petitive
I
the
< ■
resign, this little
Competitive Bidding
j
different business.
question No. 5, it doesn't make any difference. The rule is
We are in favor of a self-regulating body within ther
Re
dictators)
sound basis.
.
a
of money. I believe that if some of the leading underwriters were to
manipulation
on a
V,
.
profit better go into
unenforceable.
that the American economy does
to maintain itself
i
man¬
punishable.
com¬
to dealers.*
Any dealer that is trying to do an honest job and is
attitude.
This organization is the result of the Roosevelt Era of "Regula¬
tion" when the mania
(for red tape and the creation of little
dish of trading
a
expense
seattle, wash.
not satisfied with the 5%
that specu¬
I.
>
■.
seattle, wash.
blind
buying, the
what it can to
•'
"approve of the NASD" period.
how
that speculation
extent
willingness to
-.
Frankly, I tl]ink you have been making an ass of yourself on your
5% argument, lf 'you were in the field and saw the benefits to the
to determine for himself what he
will
•.
IBA and NASD could be
functions of the
the
bined, thereby reducing the
your
We don't
the investor
much of his assets he should de¬
'
seattle, wash.
industry that have accrued as a result of NASD, ycu would change
NEW YORK CITY
speculation.
encourage
with
do not believe the NASD is
been
has
of &11 the SEC does not discour¬
age,
bank and insurance stocks, with banks on the same basis as
dealers.*
member
at all. In my humble opinion, the raising of risk
capital is perhaps the most important economic function
venture
which
is
as
We object to dealers trading securities, such
function
or
it
Re: Question No. 5.
have done
a
Lets act like Americans, not Russians.
Between
portland, ore.
■
We
Maloney Act should be amended to make the NASD
the
fail to reflect the amazing increase
new york city
nothing but a hold-up organization made
to create jobs at the expense of Wall Street houses. What good it is
doing is beyond us! If we must have a union lets have one for the
good of the Street. Sorry I can't sign my name because of previous
fights with the NASD who are out for my hide.*
Commission is responsible for the
j
.
feeling re the "5% mark-up" rule is that in most instances a
5% mark-up is excessive for a dealer to charge for what is, in a
majority of instances, merely an agency transaction executed as a
principal. However, in other instances when extensive research has
been made, a bona fide position taken, and a real sales effort has
been made we feel that a 5% mark-up may be too small.
The
circumstances surrounding each transaction should govern.
NASD is
the growth of institutional assets
I
•
los angeles, calif.
Our
(Continued from page 36 )
^
,
money
the company did not dare to get
from the public because it was
-reasons
;
issuers
because
manner.
r
and assessments every
SMALL CALIFORNIA TOWN
We feel quite
new york city
these questions and regard the NASD
The NASD uses the "5% spread"- yardstick as a fair margin of
unfortunately dominated by elements
profit for dealers in securites but the same dealers when selling
not working for the good of the public.
Investment Trust issues are compelled by the NASD to charge not
as a
sort of NAM
strongly
year.*
or
on
trade union
SAN FRANCISCO, CALIF.
less than the
hood of
Keep
up
the good work.
OAKLAND, CALIF.
Keep
up
Mark-up is matter for each firm to decide on each transaction.
Commented anonymously.
public offering price which is usually in the neighbor¬
load. The 5% group are on a spot for exceeding the
9%
yardstick and the 9%
9% load.
the good work.
LOS ANGELES, CALIF.
*
a
These
are
group are
on a
new york
Some
cra'.;
.v
vouj.
>
protection must be given to issuers that their securities
won't be kicked around.*
*
spot if they take less than the
facts and not double talk.
Commented Anonymously.
.
r.
-lou*■.
-v'r.'V
' r-." -r
..
38
THE
(2194)
This is in turn reflected
curs.
in certain stocks whose action
Tomorrow's
of
dullness
order of the day.
stop at Sy2. It still
that of the
and can be counted looks good, so hold on.
on to
give a better than aver¬
More next Thursday.
age
performance once the
•—Walter Whyte.
market itself passes its initial
precedes
It is this latter group
hurdle.
that needs close
Participation
If
watching.
well the chances
the rest of the market will fol¬
moves
If it slackens,
low suit.
lends
market that
completely
and
of action
cons
article
time
noth¬
f
In
may
other
.
few
paragraphs back
that
come
the
in
I
be-
trends
relatively unimportant
absence of timing.
I
we can get that down
want to correct that.
then all the rest—trends, ma¬
Trends
always important though
translated into profits
must be accompanied by the
are
jor, minor and secondary, be¬
come relatively unimportant.
be
to
going to give you any
application of the time factor.
an
uptrend many stocks
at once show you the way.
First of all I don't know of selling at 100 are relatively
cheap. In a downtrend. the
any, and if I did I doubt if my
same stocks even though sell¬
passing it on wholesale would
enhance its value. Timing, I ing at 50 may be relatively
hard and fast rule which will
which
on
discovered,
the
con¬
to
swers
all of
are
in evidence daily
stock tape and transfactors
a
recent
magazine
the
bemoaned
which
article
Boston
were
the
on
bargain counter but nobody
was buying them.
because
people who see the
things on the tape inter¬
pret them differently.
*
A
*
*
be
some
fall
factors
these
slots
into
such ridiculous
of
ease
more
in
seen
cent
with
pertinent applica-i
timing can
of trend and
tion
this
column's
recommendation to
re¬
buy
Cooper Bessemer at 28 and
that tim¬
followed it with advice to sell
ing becomes almost automatic. between 3(T and 38. Here was
This is generally true of mar¬
a stock that acted better than
kets with large public followthe market, though in itself
ings. When this is absent the was hardly important enough
indicators frequently become
to move the market one way
confusing except for short pe or another. Had there been
riods. For example a market
enough stocks like it, how¬
average will indicate resis¬
ever, the assumption could've
tance at a certain predeter¬
been made that the
entire
mined point. Stocks forming
market was headed up almost
similar patterns to the aver¬
at once. Well, we know that
ages will indicate the same wasn't so.
Of course Cooper
thing. When, as and if, the Bessemer
subsequently had a
market overcomes this resis¬
piece of news, a stock divi¬
tance a general advance ocdend, which to me, inciden¬
tally, is seldom bullish, and I
immediately
lowered
my
1
at 36
Schwabacher & Co.
Members
New
San
York
Stock
Francisco
(Associate)
Exchange
COrtlandt 7-4150
.
New York 5, N.
Y.
Teletype NY 1-928
Private Wires to Principal Offices
,
San
Francisco—Santa
Barbara
Monterey—Oakland—Sacramento
j
Fresnc—Santa
Rosa
'•
Corp.-Harris, Hall Group.
by The
Harris,
(Inc.), offered publicly
May 18 800,000 shares of common
stock, $25
par
California
Edison Co.
composed
East
the
of
value, of Southern
The group,
this
ripple.
Inability to do it
itself
sufficient
a
was
reason
to
get rid of the stock. As a mat¬
ter of fact you might well ap¬
ply a thought on any stock:
Would you buy it back after
you
sold it?
If the
answer
is
that competitive
statement
secur¬
declines
in
securities
the market; price of
during the
seasoning
process.
But.
concerned,
sufficient
as
•
•
,
far
as
the Commission is
statistical analysis is
no
to the par¬
as an answer
bidding tends to result in initial
ticular problems in the particular
cases
not be
going
therefore
are
into
new
equity
wary
issues
that
come
before it
derwriters
for
will
wish
go through market seasoning.
A
variety of suggestions has been
with bankers; or
made; the most radical has been
bidding be flatly
eliminated with respect to the is-f
that competitive
of
suance
used
ferred stocks.
Even
if
the
stock
sale
to
tely
$254,800,000
riod
1946-1951.
factual
the
premise
of
the
enjoy
may.
rise
ket
during
seasoning
the
We must,
process.
far
as
we
as
balance all the equitable in¬
terests concerned after the price
I
not wish to leave the im¬
do
estimates
pe¬
not a
the
ulation.
about
problem of government reg¬
There
this
$129,000,000
raised
will
have
tion of any rule in the face of a
demonstrable impairment in the
ability
utility
of
companies to
capital. Whatever
face
in
scaling bids in order to avoid the
dangers of over-pricing the argu¬
the
this
are
is
"over-pricing"?
many views about
as
there
not thus far
strated any
of
financing.
principal generating plant
under construction is at Re-
dondo
been
has
It
Beach, in which two gen¬
erating units of 67,000 kw. capac¬
ity each are scheduled for com¬
financial community.
To an un¬
derwriter whose mechanisms are
ticipate
in
earnest
pricing is caused by
have been,
a
wish
late
crement
that
price in¬
any
transforms
of-the-window
an
out-
distribution into
a
selling job. To the financial analyst
demon¬
need for change in the
mechanics of competitive bidding.
segments of the
are
underwriters
have
ments
what
as
raise necessary
geared to rapid distribution over¬
completion
upon
Commission
problems
total
during
Of
the
that
that the pricing of securities
competitive bidding is in the
main a problem of the bidders and
me
in
000,000 will be raised through the
now
it
that
,
can,
termine the price; we pass on it
when it is arrived at.
It seems to
sale of securities of which approx¬
The
order
doubtful pride of seeing the mar¬
has been fixed.
But
this
in
relations
its willingness to
underpriced issue come out
this argument were well-founded
it does not follow that over-pric¬
$177,-
been
traditional
respect
see an
would continue blind administra¬
finance, in part,
construction pro¬
gram which will cost approxima¬
imately
and pre¬
common
rapid distributions; or the
a particular management
of
established by the Commission. It
is the parties to the deal who de¬
company's
company
utility
to
on
proceeds of
be
free,
un¬
risk-
of
assurance
distributed after competitive bid¬
underwriters
Coast, offered the stock
price of $32.25 per share.
the
can¬
66
the West
a
We
swayed by the desire of
pression
pleasure to
this forum.
that
of the
some
par¬
is my
can
we
It
trans¬
good ideas that
and undoubtedly will
be expressed, into effective action.
will
That
never
is made to
happen unless it
happen.
We in govern¬
over-pricing is the excess in cost
pletion in late 1949 to supplement above currently available yields of
two similar units completed dur¬ equal amount and quality. As far
ing March and April, 1948. The as issuers are concerned in general
and financial communities to pro¬
construction program also
vide
includes
hydroelectric plant on the
new
San
Joaquin
River with
an
the
capacity of about 84,000 kw.
around $19,000,000 and to
completed in 1951.
to
higher the price the better the
ment cannot do the whole job.
is up to
It
the industrial, commercial
the impetus and the skill.
•
ulti¬
mate
Certain Aspects of the
Bond Market
cost
Giving effect to this financing,
company will have outstand¬
ing $203,000,000 of funded debt;
(Continued from page 6)
2,613,429 shares of senior preferred
cline in 1949, compared with 1948, that
bond issues, whether sokl
stock; 2,449,506 shares of convert¬
in new plant and equipment re¬ publicly or privately, are being
ible preference stock and 3,986,328
placed in the hands of institutions
shares of, common
stock.
Divi¬ quirements on the part of 172 im¬
and accounts which are limited by
dends on the common stock have portant* companies,; A more, com¬
indentures or by law to- invest¬
been paid in each year since the prehensive survey made by McGraw Hill & Company" indicates ment in only senior securities. The
incorporation of the company in
1909. Recently the board of direc¬ that manufacturing, mining, trans¬ high proportion of new funds be¬
and
utility companies ing raised through debt issues and
tors declared a quarterly dividend portation
the
of 50 cents per common share pay¬
able
July 31,
declaration,
1949. Prior to such
the quarterly rate
since 1942 has been ZlVi cents per
share.
The
supplies electric¬
ity to parts of central and south¬
ern
company
California
with
estimated
an
population of 2,578,000. It operates
23
hydroelectric, four steam and
one
diesel
electric
generating
plants with a total effective ca¬
pacity of 1,117,855 kilowatts.
In
addition, the company has avail¬
able 465,000 kilowatts from' certain
of the electric generating units of
Hoover
River
Dam
on
which
the
Colorado
it operates
of the United
as
connected with Fd-
E.
Mathews
Street. Mr. DeLeuw was
53 State
formerly
Taunton
Trusteed
F
manager
declining scale for several years
Co.,
for
unds, Inc.
(Special
to
Goodbody Staff
The
Financial
CHARLOTTE, N, C.
Maffitt. Jr. is
&
now
Ben C.
with Goodbody
Co., 137 Brevard Court.
-
common
of funds available
investment
stock
is
problem which I can not elab¬
orate on now. However, it should
a
plant and equipment, with the
major part of the decline in the
value
second half of the current year.
financing is undertaken
Prospective contraction in busi¬
investment
ness
will
offset
be
in
in the amount
earnings available for reinvest-;
ment. Compilations of 1948 earn¬
ings reports set forth in the Na¬
part by shrinkage
of
in
respect
prospective
stantial
senior
to
current, and
earnings
scale,
then
equity
and
on
the
a
sub¬
flow
of
securities available for in¬
vestment
further
institutions
by
will
be
curtailed.
In
considering possible rates of
savings accumulated in the fu¬
City Bank of New York's ture,,, the high totals and percent¬
April demonstrate that ages of income saved during the
years'
must
be
moderate decline in sales com¬ war
forgotten.
bined
with, relatively
inflexible These reflect labor wage contrdl
policies pursued by the govern¬
operating costs, produces a sharp
runoff in net earnings. This prob¬ ment during that period, more ef¬
lem would be further aggravated fective price control and curtail¬
for
a
.
if
increased government
spending
should be accompanied by higher
ment
of
production
consumption. :
earnings.
other
hand,
So, if it is assumed that the post-i
made
that
tax
war
rates
on
corporate
inflation has been broken and
will
not
be
resumed,
then
do-t
of
shortage
In
the
there
new
for. civilian
on
the
1948,
point
could
be
actually a
funds 'available
was
for absorption of that year's new
issues.
Computed
dis¬
mestic
money
panding
posable income, not spent for corrsumers' goods and services.' the
requirements for an ex-;
economy imply lower an-"
nual totals for new capital issues
those
witnessed
past several years.
during
the
-
Institutional Buying
The
funds
central fact on the side of
available for investment is
as
United States Department of Com¬
merce
.
at
Chronicle)
—
scarceness
come.
The Securities and Ex¬ be borne in mind that if equity
change Commission has also fore¬ markets should revive to the point
cast a 5% reduction in 1949, as where corporate managements be¬
against 1948, in outlays for new lieve they reflect more truly, fair
than
Joins
the
for
to
letter
with net income of $14,600,765.
ward
will spend 5% less this year than
they did last and that construc¬
tion programs are apt to be on a
agent tional
States.
1949, the company - reported
operating revenues of $97,087,500
ex-dividend
forms but most of them boil down
reaches the point at which
ity holders' confidence In the com¬
pany is impaired by unwarranted
ing is the result Of the procedure
—
market
—
becomes a
issuers
when
it
for
in
For the 12 months ended March
hand, Bristol
have
the
Over-pricing
underwriters
31,
i«s
Complaints about the operation
the competitive bidding rule
tended
recently to center
around the way it works in the is¬
suance
of utility
preferred. and
Common stocks
in other words,
equities. The arguments take many
of
to
deal,;
problem
56
and
Myers bought at 31 with a
stop at 29, got under the 29 Edward E. Mathews Adds
(Special to The Financial Chronicle)
price by a fraction due to an
BOSTON, MASS.
Carl De
ex-dividend date.
In a good
Leuw is now
in
Chicago Board of Trade
14 Wall Street
was
would be absorbed without
Exchange-
Stock
better and that
On the other
Exchanges
New York Curb Exchange
or
sje
Orders Executed oil
Coast
as
Hall & Co.
that.
Securities
Pacific
I suggested selling it
sights.
Pacific Coast
through
over-pricing of equity securities;
presented
are
group, jointly headed
First
Boston
Corp. and
be
same
Sometimes
They
A nationwide investment bank¬
a
that stocks
fact
If conclusions differ it is
lux.
This is one of the an¬
high.
than
rather
competition.
37)
page
ding because they fear to suffer
price declines when the securities
In
many
the
Southern Calif. Edison
Net
commented
ing. If
siders
any
of
negotiation
of
at
*
*
i-.
.'.V
or for that matter any
day, has to do with tim¬
have long ago
those
stocks in dull markets) have ing
major factor dominant
I'm not
necessarily at
with
(Continued from
that investors
present day and recent
(strong
A
The
today,
P.*'.
•
this
those of the author only.]
.
:V\
•
not
coincide
Chronicle.
markets the indicators
provocative read¬ in themselves often been con¬
ing, though to me they are
fruitless because they don't fusing. Swings seldom attain
a full
point in either direction
point to anything that can be and
participation in such mar¬
translated into a profit, at
kets becomes a debilitating
least not in the immediate
and expensive process.
future.
•
do
in
expressed
800,000 Shares offered by First
make
even
views
sji
:|s
reac¬
discussions
Such
tion.
[The
in the immediate future.
interesting market for people
who like to argue the pros
and
are
academic ing of importance will occur
to
a
backs
itself and
fills, the chances are
this one, is an
as
ion
10 with
be limited to minimum.
so
Vv,
■
averages
seems
Thursday, May 19, 1949
you're better off
without it.
You
now
have only one
stock, Newport Industries at
under such conditions should
discussions
CHRONICLE
the
it
A
then
FINANCIAL
often
Whyte
By WALTER WHYTE=
Continued
that
to
"No"
&
averages. There are still
other stocks whose action
Says—
=
forms
con
Markets
Walter
COMMERCIAL
estimates personal savings
$14.9
billion for
1948.
Liquid
savings, however, increased only
a
net $4.9
of $10
billion.
The difference
billion is accounted for pri-
Volume
169
marily by purchases of
It appears that
housing.
the marketing of
$6 billion in new money issues
during 1948 was made possible
largely by the. fact that insurance
companies were able and willing
to sell large amounts of United
States Government securities.
r
Investment Trends
;
We
-
know, of
investment
of
that the
course,
savings
not
does
hold to rigid channels. Real estate
mortgages,
ties
are
bonds,
securi¬
government
municipal
corporate,
and
alternate outlets for many
institutions.
The * total
amount
saved will always be
employment
affected by
income levels.
and
Contractual
savings in the form
of additions to life insurance com¬
contracts are proceeding at
the rate of about $3.5 billion per
pany
in
Moreover,
year.
recent years
personal contracts with insurance
companies
have
supple¬
been
The
savings.
whole
securities
of
contributions
these
in
are
form of group life insurance
the
poli¬
cies but many ipore are indepen¬
dent trust funds set up in the
large trust companies. Gross em¬
ployer contributions for such pur¬
poses, it is estimated, are now ap¬
proaching the rate of $1.5 billion
annually.
The current drafts on
these funds i s still small;
unions
established by the clothing work¬
musicians
ers,
miners
coal
arid
unions
are
some
of
the
known
examples
of
a
movement.
number
A
better
growing
volun¬
of
tary savings channels, other than
mutual
savings banks,
have been
growing. rapidly.
The thrift de¬
partment of commercialbanks,
savings and loan associations and
postal savings are three growing
competitors of the mutual savings
increase
an
security
At
year.
the
does
new
in
government
fiscal
the
trust
about $8.8 billion
year
Scheduled expenditures to
ficiaries
bene¬
getting larger but it
are
should be borne in mind that
em¬
ployees can not save what has al¬
ready been deducted from their
wages
and
employers can not
spend the money paid into the
social security account.
Role
of Mutual
With
Savings Banks
permission, I will
now address myself to the second
topic which I would like to cover
this morning, that is, the part that
mutual savings banks play in our
economy and what
the outlook
seems
to be for mutual savings
banks. The American people have
traditionally been accumulators^
savings funds in one form or an¬
other.
As you know, deposits in
your
mutual
of
savings banks at the end
exceeded
1948
$18
billion,
a
substantial figure even for
days.
This showing is less
very
these
comforting when
viewed com¬
paratively.
I have prepared a
table summarizing the long-term
trends in some of the principal
forms of savings which you can
present
read at your
leisure in the printed
proceedings of this meeting.
The
six forms referred to are deposits
in
mutual
savings banks, esti¬
reasonable that
issues by corporations
appear
money
coverage
billion for the current fiscal year.
time, it appears that the volume
pf funds going into housing has
passed its peak.
' ■
7.
It
of
ending June
30, 1950 compared with about $6
system. Growth in mutual
savings bank deposits is continu¬
ing at an annual rate of about $%
a
the
and for other similar acts call for
bank
billion
beyond
extension
the
proposals for
present social
Labor
exerting strong pres¬
sure
for
further
expansion of
these
programs.
Pension funds
are
is
market
of this discussion.
It is
pertinent to note, however, that
for
part of corpo¬
pension and welfare
funds for their employees. Some
to
of
scope
tributions
rations
problem
the Federal debt in relation to the
funds receipts to
the
accumulations
mated
in 1949 and for some years to come
life
in
in¬
surance
marketed in 1948.
vate savings in savings and loan
associations, credits due depositors
does
course,
This statement,
not
apply to
refunding of bank loans
forms
new
of
the
debt; it applies only to
issues. On the other
money
hand, available., savings, particu¬
larly
seeking
those
investments,
than
of
the
be
of
liquid savings last
two
are
which
possible
be
greater
billion
$4.9
year.
must
ments
issues
reflect
have
investors
on
United
cial
for
such
individual
supply building programs point to
annual issues
exempt
billion
of new
securities approxi¬
exceeding the $3
even
marketed
for
pen¬
have not
I
for
banks
in
the
this
total
figures
combine
case
and
business
funds.
These figures are extremely in¬
teresting. During the decade end¬
ing with 1930, these six forms of
savings increased more than $18
billion.
Mutual
savings
banks
high vbracket in¬
Correspondingly,
.their
lack of appeal to mutual savings
Institutions has been understand¬
able.
Proposals
for
veterans'
bonuses, school, road and water
tax
Government
States
available
with
mating and
totals
and
included time deposits in commer¬
comes.
aggregate
bonds
sion and trust funds.
govern¬
the attraction
had
the
Savings
There
applied
lower than those
even
pri¬
estimated
qualifications personal
to " this
; statement. The first is that capital
spending programs of states and
other political subdivisions point
to a large increase in the amount
of new tax exempt issues. Yields
„
policies,
postal savings system, in¬
dividual holdings of United States
conservative
should
estimate
in
other
or
in
1948.
Bond
accounted for
billion
approximately $4.5
25% of this increase. In
or
the
succeeding decade, that is, the
period from 1930 to 1940, an ag¬
gregate for all six forms rose $21
more. . The mutual savings
banks accounted for only $1.2 bil¬
billipn
lion of the increase
ing the
there
eight
was
a
or
Dur¬
ended
years
further
6%.
1948,
enormous
in¬
in the aggregate accumula¬
tion in these six funds amounting
crease
to
$113
savings
billion, of which mutual
banks contributed about
$7.8 billion or 6.9%.
GROWTH IN SELECTED SAVINGS FUNDS
(Millions of dollars)
u. s.
Bonds
Trust Funds
Postal
Banks
Insurance
Assns:
Savings
$1,741
6,296
: 4,272
$166
13,690
24,663
1,342
2,700
8,669
52,264
47,500
11,000
3,300
47,500
37,369
165,069
1920—
$4,806
9,384
10,618
18,400
1930-
1940-
1948-
$5,488
.
$761
$246
250
COMPARATIVE
,
Pension &
Savings
& Loap
Dec. 31
$13,208
31,549
1,929
CHANGE
1
(Millions of dollars)
u!
v
r
;
Total
L
v-
1930-1940
1940-1948—
i.
Mutual Savings Banks
$18,341
1920-1930
These figures are, of course, ap¬
1930
from
date
to
our
Govern¬
policies have basic¬
ment's fiscal
ally changed the economy of our
pulsory
The introduction of com¬
procedures such as the
various
social
country.
security
is certainly an
programs
important contrib¬
uting factor to the decline in the
rate of growth of mutual savings
banks deposits.
Ground has also
been lost to other forms of pri¬
In 1920, accumula¬
policies of
vate savings.
tions in life insurance
within
the
limits
allowed
and prudent investment
to
increase
deposits.
your
has
by law
judgment,
the rate of return
on
In recent years, it
occurred
to
that
me
mutual
savings banks are notoriously shy
in advertising the services they
render.
In
the
Connecticut,
various
cities
Massachusetts,
of
$4,578
20,715
112,805
1,234
:
7 7,782
Savings Banks
,.
25.0%
6.0
6.9
Advertising more aggressively
appealing for business and
even
using promotional schemes
does not cheapen the mutual sav¬
and
ings bank
bankers
the
handling
large poster outside a
stating the fact that the
bank pays % of 1% semi-annual¬
ly
less able
you
in
conservative
funds
the
of
en¬
and
•
Field
Broadened
A
find
savings
bank
less
trusted to your care.
New York you are too apt to
a
make
or
or
of
Investment Needed
The other method of attracting
business and becoming more com¬
recently, % of 1% petitive is in the investment of
$5.5 billion were only 15% greater
quarterly on deposits.
The ^.life-¬ your deposits. I quite realize you
than the $4.8 billion of deposits
insurance boys, in their promo¬ are
at that time in mutual savings
governed by* regulations as to
tional literature and public adwhat you can invest, in. There is
banks. The corresponding life in*
vertisments, stress the picture of a
surance
increasing public interest in giv¬
figure for 1948 of $47.5
jolly, middle-aged man fishing in
billion was 250% of the total sav¬
ing you the authority to broaden
Florida, acquiring a good suntan
your field of investment.
Recent
ings banks deposits of $18.4 bil¬
and smoking his pipe, all on an
evidence of this is the legislation
lion. In 1940, as nearly as we can
annuity of $200 a month. • The
passed in New York State permittell, approximately $2.7 billion rate of return on
money paid in
was
invested
ting the placing of surplus funds
by individuals in on
your
insurance premiums is
in non-legal corporate securities.
United States Savings Bonds. At
never
stressed. The simple arith¬
If I were an investment officer in
the end of 1948 this figure was
metical principle of interest com¬
a New York mutual savings bank,
$47.5 billion.
The purchase of
pounded quarterly, even at these
instead of buying Aa or Aaa pub¬
Series E Bonds, yielding 3%, has
low rates
of
return, could be
lic
utility bonds yielding from
undoubtedly
been the greatest dressed
up to be quite alluring to
2.80% to 2.90% today, I would take
competition mutual savings banks the average man.
Such success
a good look at
the First Mortgage
have had to meet in the history as
my own firm has had
in its
3%% Bonds of a company such
of the industry. To make matters
field of business has been due
worse,
mutual
savings
banks primarily to the appreciation of as the Interstate Power Company
throughout the country have, on the fact that large fortunes are which you can buy around par.
behalf of the Government, mar¬ gradually being taxed out of ex¬ With the new latitude afforded
me
by the recent legislation, I
keted Series E Bonds to their own istence in this
country, that wealth
depositors directly on their own has been and probably will con¬ might well consider taking on a
banking premises.
This was a tinue to be redistributed for some small block of this issue for yield
necessary
and patriotic service time to come. Our policy has been purposes. My guess is that during
the next 25 or 30 years, interest
rendered by you to our Govern¬
deliberately planned to render the
on
these bonds will be paid as
ment.
It is clear, however, that best and
cheapest service to the
this act of public service is having man in the street who is the new regularly as the interest will be
a
permanent
effect upon your capitalist. If we have a sufficient paid on the First Mortgage Bonds
of the Kansas City Power & Light
business.
/
number
of
these
people doing
>
the
or,
more
-
mutual
The
savings banks of
constitute
a
time
country
tested
their
individuals
for
method
assure
own
security.
to
Corre¬
business with
we
believe
petitive
these
us every
our
will
and
week, then
firm will be
endure
com¬
under
accumulations
of
becomes
a
matter
In trying to
appraise the future, it appears
reasonable that if voluntary and
general
concern.
individual efforts to make pro¬
vision against the contingencies
of life are not adequate, the pro¬
ponents of more compulsory and
centralized efforts will be quick
to
fill the
We
all
gap.
know, of course, there
valid
are
beyond
reasons
control which
has brought
your
about
this state of affairs in the mutual
savings bank industry. The easy
money conditions of the past ten
or twelve years has brought the
rate of return on high grade bonds
down to the point where they are
unattractive
individuals.
investments
as
During
the
for
1920s
is the
along
York,
banks
banks
fact that savings
with
commercial
closed
on
Saturday
are
morning.
"One
of
earliest
recollections is that of being taken
by the hand to a savings bank in
the city in which I was born in
Massachusetts, and having an ac¬
count
opened for me
by my
father.
I was barely able to sign
my own name.
After this first
introduction to the savings bank,
whenever I
my
had any spare
cash I
would
bicycle down to. the bank
Saturday morning to make an
important deposit.
I got to be
quite grown up before I ever real¬
on
ized
of
that there
banks
than
were
other
kinds
pay an aver¬
savings
of
the
It
is
server
easy
such
Each of these boys
in a neighborhood
If
for
as
an
outside
ob¬
I to be critical of
the rate of return
received today
indus¬
trial private
placings with insur¬
companies. Generally speak¬
ing, the yield is much better than
you can get in the open market.
ance
without
Almost
issues
funds
substantial
have
which
exception
these
sinking
the
average
makes
life' of the issue less than fifteen
years,
and the rate of return
from 3 to ZVi
runs
3%%, depending
upon the type of credit involved.
The rapid amortization features of
or
these industrial issues return your
to
money
above the
an
pretty promptly
have secured
you
and, meanwhile,
you
average
rate of
re¬
turn.
If
ket
we
that the bond
not change
agree
levels
mar¬
will
stantially
in
the
sub¬
foreseeable fu¬
going to be heavily taxed to keep
this traditional source of savings
on
assets.
business.
particular
pay
of these
some
ture, then the ingenuity of the
managements of savings banks is
live
1948
total
also
I would
banks. I
Manhattan
to
to conduct their important busi¬
approximately 56% ness affairs.
It is true the bank
During this is
open one evening a week, but
period of decreased return on high that is the time
they are getting
grade investments the expense of
ready for bed. If it is impossible
doing business has increased sub¬ to
change the Saturday morning
stantially. It is evident that the closing law in the State of New
depositor in savings banks has
York, perhaps the banks can open
been caught between diminishing
one or two mornings a week at 8
returns on his deposits and the
o'clock so that children can make
banks'
increased
cost
of
doing a
deposit on the way to school.
of
this.
Island and have three young sons.
happen
has an account
branch of one
age rate of interest running from
of the large savings institutions
4 to 41/2%.
Today the great bulk
in New York City.
These boys
of savings banks deposits bear an
are rapidly losing interest in their
interest rate of 2% or even* less.
savings accounts because they can
It is interesting to note that at
never get into the bank to make a
the
end
of
1931
United
States
deposit. Their school keeps them
Government securities accounted
until half past four each day at
for only 6.4% of the total assets
which time the bank is closed, and
of mutual savings banks.
At the
it
is
closed
Saturday morning
end of 1946 they accounted for
which is the normal time for them
savings banks could
Company.
I am sure you are
thinking of opportunities such as
attention to
changing conditions.
Another point of interest to me,
spondingly, their competitive po¬
sition in the process of savings primarily in the State of New
end
Total
MUTUAL SAVINGS BANKS vs. AGGREGATE OF SIX FUNDS
,
39
proximate figures and
63% of the total assets and at the
U. S. Govt.
Savings
Savings
Life
Mutual
As of
(2195)
"
will be smaller than the $6 billion
of
FINANCIAL .CHRONICLE
&
in a savings, bank. For what they morning, why don't you savings
have been are worth, I would like to make banks get together and have the
gathered from diverse sources. one or two constructive observa¬ law changed and stay open on
They may be slightly inaccurate tions which may be impractical Saturday morning.
in part but they are sufficiently in part, but perhaps they will
It seems to me it is terribly
well be that during the coming accurate for the purpose of dem¬ serve to stimulate your thinking important to conduct well
thought
about the problems in your own out
years, yields on this type of se¬ onstrating a trend. This trend in¬
missionary campaigns among
curity will rise to the point where dicates quite clearly that in the industry.
the children
of the
country to
they are attractive to mutual sav¬ period from 1920 through 1948,
teach them thrift as exemplified
More
Active Effort Needed
ings banks. The rise in yields on mutual savings banks fell way be¬
by
deposits in mutual savings
this type of security has been very hind in getting their pro rata
There are two ways in which banks.
This even might entail
marked from 1945 to date and share of the new savings business the mutual
savings banks of the setting up one receiving teller's
much
sharper than the rise in available.
country can be more active in at¬ window which is only three feet
yields on government and corpo¬
It is fair to say that not only tracting their fair share of new above the ground and not four
rate bonds.
First, a and a half or five feet, so that
have you met increased competi¬ savings accumulations.
more aggressive effort to get new
even
The other qualification involves tion
young children can make
during this period from other
what might be called compulsory kinds of savings
programs,
but business; and the second is to try, their own deposits.
proposals approvals to come be¬
1949
state legislatures ap¬
proximate $3.3 billion. The aver¬
age
yield of such securities in
1948 was about. 2.35%.
It may
fore
mented by rapidly expanding con¬
on
COMMERCIAL
THE
Number 4804
the
State
commercial
not necessary
a
banks
in
the
of New York feel that it is
public
for them to render
service
on
Saturday
I hope that you will
my
remarks this
morning have been entirely criti¬
competitive.
not
cal
feel
that
because
I
don't
intend
them
that way.
—
With
(Special
ST.
Stifel,
to
The
—
Nicolaus"Co~
Financial
LOUIS, MO.
Chronicle)
Edward J.
Jilek, has become affiliated with
Stifel,
Nicolaus &
—
Co.,
Inc.,
314
North Broadway, members of the
Stock Exchange.
Mr.
formerly with the Mis¬
sissippi Valley Trust Co.
St.
Louis
Jilek was
With Samuel & Engler Co.
(Special
to
The ^Financial
COLUMBUS,
Anderson
has
Chronicle)
OHIO—Lloyd
become
with the Samuel' &
C.
associated
Eogler Co., ,16
Street. If e,was formerly ian
officer of Equity Investment Cor¬
poration.
.....
Broad
,
40
THE
(2196)
COMMERCIAL
FINANCIAL
&
CHRONICLE
Thursday, May 19, 1949
Indications of Current Business
The
following statistical tabulations
shown in first column
are
either for the week
or
month ended
Latest
IRON
AMERICAN
Indicated
steel
operations
Previous
Week
INSTITUTE:
STEEL
AND
Week
on
that date,
Ago
,
98.4
95.0
1,762,400
1,773,500
1,814,000
49,749
53,356
45,699
15,101
17,310
9,354
125,428
110,034
159,109
7,783,807
*8,387,927
6,224,487
6,305,681
5,519,938
5,978,551
y,(in short tons)—Month of February—.
Stocks of aluminum—short tons (end of Feb.)
May
May
(bbls.)
.
—.May
Kerosene output
(bbls.)——
May
Gas oil and distillate fuel oil output (bbls,
May
Residual fuel oil output (bbls.)
.
..May
Stocks at refineries, at bulk terminals, in transit and in pipe lines —
Finished and unfinished gasoline (bbls.)
at
May
Kerosene
(bbls.) at
May
7
4,896,750
5,412,750
OF
7
115,172,000
5,273,000
5,067,000
§5,602,000
Total
7
7
17,530.000
17,969,000
17,176,000
1,831,000
1,837,000
2,040,000
§2,144,000
7
7
5,955,000
6,681,000
6,410,000
§7,126,000
7,895,000
8,185,000
7,954,000
§9,242,000
7
19,178,000
118,922,000
17,878,000
§109,313,000
§13,572,000
May
May
7
51,373,000
49,959,000
48,920,000
§35,117,000
7
61,024,000
60,174,000
58,510,000
§51,868,000
WROUGHT
(DEPT.
PRODUCTS
§16,963.000
output—daily average (bbls. of 42 gallons
to stills—daily average
(bbls.)
Crude
oil
Crude
each)
runs
.
Residual
fuel oil
distillate
and
oil
Gas
oil
fuel
(bbls.)
at
at
(bbls.)
4,916,050
COMMERCE)—Month of March:
shipments
Steel
ingots
123,400,000
124,787,000
127,522,000
ASSOCIATION
•
„
AMERICAN
May
May
(number of. cars)
Revenue freight
768.337
785,444
757,784
880,287
621,801
7
7
624,740
606,908
729,781
'
of
CONSTRUCTION
ENGINEERING
—
$158,193,000
$149,236,000
.May 12
$130,991,000
May 12
May 12
57,863.000
73,128,000
51,233,000
74,882,000
78,033.000
83,311,000
81,067,000
68,169,000
-May 12
63,148,000
56,865,000
71.436.000
56,640,000
May 12
construction
$129,266,000
9,980,000
21,168,000
11,875,000
11,529,000
Private construction
Public construction
municipal
and
State
zinc
—_
Federal
Unfilled
BANK
Bituminous
coke
Beehive
STORE
7
7
7
11,200,000
982,000
Not Avail.
*11,560,000
11.280,000
1.132,000
147,000
962,000
151,400
7
333
*286
320
134,600
5,256,976
5,108,673
.-May 12
171
193
184
100
13.705c
3.705c
3.708c
$45.91
$46.13
$46.66
$23.08
$23.58
$40.66
-
'
Export refinery at
(New York)
at
Straits tin
Lead
Lead
(New York) at———
(St. Louis) at
Zinc
(East
St. Louis)
17.750c
at
18.425c
23.175c
103.000c
14.000c
15.000c
15.000c
14.800c
17.3001
12.500c
15.000c
coal
BOND
12.000c
U. S. Government Bonds
May 17
corporate
Average
May 17
—
113.31
118.80
May 17
Aaa
119.00
119.00
112.19
117.40
A
May 17
112.56
112.19
May 17
105.00
105.00
105.00
169.5
169.0
166.9
201.6
199.7
202.3
170.1
170.0
171.0
229.6
221.4
224.7
190.3
192.5
201.1
108.34
108.34
108.16'
May 17
114.08
113.89
May 17
117.40
117.40
117.40
U.
Bonds
Government
S.
corporate-
Average
:
—
■
Aaa
~
"
Aa
A
""
Baa
Railroad
"
-
Group
Utilities Group
Public
Industrials
2.39
3.00
2.70
2.78
3.05
3.45
3.26
2.38
3.00
2.70
2.80
3.05
3.45
3.27
2.96
2.78
2.95
2.78
2.96
<2.78
2.41
3.01
2.76
2.85
3.05
3.37
3.27
2.95
2.82
;
Group
174.4
119.9
116.3
138.9
138.8
130.3
96.1
96.1
93.8
192.5
192.6
175.5
_
140.0
132.2
_
140.4
Housefurnishings
193.8
195.6
194.9
Miscellaneous
154.4
154.1
146.2
287.1
286.1
300.1
(121.0
(120.1
125.2
$15,257
$15,142
16,939
$13,525
15,243
$32,081
16,687
$28,768
16,225
$27,438,926
$27,557,141
$27,780,953
£4,648,000
£22,088,000
£2,544,000
$739,058,115
$675,749,306
587,933,263
567,777,768
79.55
84.02
$776,616,109
618,759,345
79.67
$72,339,986
$65,466,386
$82,163,688
65,417,192
41,900,000
29,754,215
60,724,331
36,600,000
_
_
343.4
343.6
353.2
__
—May 17
—
—
Fuel,
electricity and refrigerators
Gas and electricity
fuels
Other
Ice
_
.
May 14
214.3
147.8
213.7
148.4
May 14
229.7
228.5
234.2
May 14
312.8
May 14
204.3
May 14
224.0
313.7
203.4
221.8
223.1
164.2
187.9
176.0
Grains
315.2
206.0
230.4
222.6
166.9
189.1
183.3
•
Livestock
May 14
Fuels
Miscellaneous
May 14
commodities
Metals
187.4
172.1
May 14
212.8
213.0
213.6
of
April
BRADSTREET,
139.2
142.9
May 14
May 14
and
150.5
137.6
142.9
150.5
139.5
142.9
150.5
COMMISSION
COMMERCE
drugs
203.3
153.1
203.3
155.6
206.9
138.9
221.4
Fertilizers
machinery
All groups
combined
153.1
Railway Employment at middle of
(1935-39 average=100)
...
(DEPT.
INVENTORIES
PAPERBOARD
received
Orders
Production
of
——May
May
PAINT
AND
at
DRUG
—
REPORTER
AVERAGE—100
PRICE
7
7
7
7
173.654
159,449
77
287,725
153.079
161,559
80
188.227
160,923
May
—May
(tons)
78
289,481
260,331
213,822
191,787
16,779
*
of
As
March
Midland
OF
Total
operating
operating
NEW
PRICES
SERIES—U.
DEPT.
S.
OF
Farm
ratio—per
Net
;
Net
railway operating income before charges
income after charges (est.)
S.
GOVT. STATUTORY DEBT LIMITATION
U.
of April
—As
at
All
Textile
Fuel
163.4
146.9
May 10
—May 10
May 10
——May 10
—May 10
138.9
139.1
130.6
130.4
169.3
and foods
products- ——
lighting materials—
and
Building
All
than farm
metal
i
products
materials
other-
-
—
———
—
—
—
168.3
171.6
,
161.8
147.1
'
Livestock
;
T
Meats
7
years
1937 to
3.74583fi per pound.
252,239,912
24,083
75,418
$251,553,319
$251,665,598
$252,315,331
776,684
782,441
832,390
$250,776,635
$250,883,156
$251,482,940
24,223,364
24,116,843
23,517,059
$251,553,319
$251,665,598
$252,315,331
3:995,156
5,766,580
4,612,423
$247,558,163
$245,899,018
$247,702,908
by the
public
gross
guaranteed
debt and
Obligations
not
...
outstanding
subject
212.5
129.2
162.2
148.9
165.4
195.4
total
debt obli¬
public
debt limitation
to
outstanding
Balance face
188.0
-
-
under
UNITED
amount
above
STATES
...
—
of
DEBT
of
April
Net
DIRECT
AND
omitted):
GUARANTEED—(000's
As
General
obligation issuable
authority
GROSS
30
fund
balance
debt
annual
RYE
2.233%
2.235%
rate
interest
PRODUCTION
199.6
198.9
206.1
229.2
PORTING
222.3
186.7
227.3
180.9
263.4
220.4
CULTURE—As
,>■
1940 inclusive and 1946 to 1948 inclusive.
tCorrected figure.
•
- •••:
WINTER
220.4
186.4
•
May 10
Ulncludes 424.000 barrels of foreign crud? runs.
§Not comparable with other periods which are on new
basis of reporting in California.
Principal changes exclude cracking stock from distillate and residual fuel oils.
(The weighted
finished steel composite was revised for the years 1941 to date.
The weights used are based on the average product shipments for
the
251,641,514
22,851
Deduct—Other
150.1
132.4
156.8
195.9
135.8
162.1
May 10
May 10
i.
skins
figure,
251,530,468
,
not owned
obligations
178.2
140.2
132.5
173.5
196.5
131.0
168.1
195.3
May 10
-
*Revised
$275,000,000
2.174%
•
Grains
Hides and
$275.000X)00
Treasury
Computed
Special indexes—
'I
■•••'
-
v $275,000,000
.
Total gross public debt
Guaranteed
163.7
164.2
149.4
129.3
—-
.
and
Metals
155.9
May 10
May 10
—
commodities other
■■■'
be outstanding
may
time
one
any
that
'
omitted):
(000's
30
amount
face
5,000,000
Outstanding—
0
146.5
-'157.6
171.1
155.2
May 10
—May 10
———
——
;
LABOR—
—
products——
cent;.
Taxes
Grand
Foods
March:
of
expenses
Operating
1926=100:
All commodities
(ASSOC.
ROADS
revenues
Total
gations
WHOLESALE
I
RRS.)—Month
AMER.
>-
April..—
Ltd.—Month of
Bank,
DEPT.
GREAT BRITAIN—
ISSUES IN
EARNINGS—CLASS
RR.
16,303
...
(000's omitted)
31
NEW CAPITAL
101
418,994
133.3
132.6
$32,036
;
...
...
Total
131.1
May 13
Feb.
•
MONEY IN CIRCULATION—TREASURY
*
INDEX —1926-36
—
of
dollars):
Durable
v
(tons)
Percentage of activity
Unfilled orders (tons)
OIL.
ASSOCIATION:
SALES
&
COMMERCE)—Month
OF
(millions
Total
NATIONAL
—
Inventories:
155.6
136.1
143.8
May 14
I
materials
196.3
(1935-1939=
INC.
March.:
of
MANUFACTURERS
232.2
May 14
—May 14
materials
Chemicals
Fertilizer
Farm
222.7
163.9
•
May 14
May 14
Textiles
Building
238.2
299.4
258.5
360.2
269.8
242.7
228.6
176.6
215.0
164.2
218.8
144.2
Cotton
_
'
PURCHASES OF COMMODITIES-
&
Index
Sales
Farm products
_
420.5
-May 14
oils
and
Fats
__
..
...
_
INTERSTATE
COMMOD¬
i
Foods
_
...
_
Total
FERTILIZER ASSOCIATION—WHOLESALE
ITY INDEX BY GROUPS—1935-39=100:
NATIONAL
...
_
Nondurable
MOODY'S COMMODITY INDEX.:
204.4
120.1
sweets.
...
CONSUMER
2.38
2.99
2.71
2.78
3.03
3.45
3.26
17
17
17
186.3
206.9
-
155.1.
oils
and
100)—Month
17
17
17
17
May 17
May 17
__
_
May
May
May
May
May
—May
May
,
191.7
:
^
DAILY AVERAGES:
208.5
195.1
DUN
MOODY'S BOND YIELD
179.6
*213.7
fe 209.0
214.5
vegetables
and
116.61
Group
bakery products
Clothing
114.08
Group—Public Utilities Group
———
Industrials
__
and
and
Rent
108.16
113.89
-a—-r-———--
-———---.-r
—
_
174.3
106.39
May 17
'
——
Baa
Railroad
15:
__
159.8
112.19
May 17
March
193.9
116.02
Aa
CITIES
LARGE
IN
247,100
MODERATE
FOR
100—As of
=
•
*434,900
175.5
117.80
117.00
117.40
4,438,000
—
180.1
112.93
113.12
113.12
35,151,000
2,373,000
tons)
——
INDEX
foods
Fruits
101.31
101.64
101.56
101.66
32,800,000
3,722,000
612,200
tons)—
(net
(net
FAMILIES
Sugar
i
lignite
Beverages
DAILY AVERAGES:
PRICES
and
anthracite
(net tons)
_
Fats
MOODY'S
46,703,000
28,984,000
Dairy products
17.500c
14.800c
81,691,000
Meats
94.000c
12.000c
109,691,000
109,937,000
(BUREAU OF MINES)—Month
coke
Cereals
21.500c
103.000c
13.850c
May 11
May 11
May 11
—
——
—
17.925c
103,000c
99,502,000
98,178,000
31,400,000
;
items
21.200c
22.950c
18.200c
$51,213
129,620,000
26,422,000
110,996,000
CONSUMER PRICE
All
•
May 11
May 11
——-May 11
14,280
April:
Beehive
All
at
reiinery
$54,484
101,839,000
138,777,000
(lbs.)
(lbs.)
19.35-1939
Domestic
7,869
13,852
OF MINES)—
(lbs.)
Pennsylvania
QUOTATIONS):
Electrolytic copper—
(BUREAU
$29,064
.?
of March:
INCOME
METAL PRICES (E. & M. J.
8,567
of $):
$54,533
BLACK
COAL OUTPUT
$40.20
$22.75
10
May 10
gross ton)
(per
$32,065
8,453
COM¬
(lbs.)
of
—' May
Pig iron (per gross ton)—
$102,349,000
...
14,533
Bituminous
Finished steel (,per lb.)
$109,735,000
SYSTEM—
DEPT.
OF
of March (millions
stocks
3.211c
;
$99,697,000
RESERVE
thousands)
—
Shipments
IRON AGE COMPOSITE PRICES:
Scrap steel
(in
Producers'
5,342,731
5,283,592
—May 10
INC.
STREET,
71,691
Total
BRAD-
&
79,722
(tons)
GOVERNORS
Retail
Exports
INDUSTRIAL)—DUN
65,713
period
OF
Wholesale
CARBON
.May 14
AND
(COMMERCIAL
FAILURES
43,216
INVENTORIES,
Production
(in 000 kwh.)„
73,915
28,204
of
FEDERAL
April
Month
Electric output
end
at
71,017
50.995
$31,728
orders
of
71,500
78,121
75,941
53,150
(tons)
period
Manufacturing
INSTITUTE:
ELECTRIC
EDISON
(tons
lbs.)
2,000
330
INDEX—FEDERAL RESERVE SYS-
SALES
TEM—1935-39 AVERAGE—100
317
3,284,271
;
of
end
THE
OF
12,732,000
963,000
May
(tons)
DEPARTMENT
V
(tons)-
*317
*2,954,041
Month
lbs.)
MERCE—Month
May
May
May
(tons)
lignite
anthracite
—
grades
INC.
all
DEBITS —BOARD
Month
S. BUREAU OF MINES):
and
coal
Pennsylvania
output,
(tons of
at
BUSINESS
COAL OUTPUT (U.
(tons)—
INSTITUTE,
smelter
2,000
Stocks
Total U. S.
ZINC
317
3,312,515
reporting—
freight transported
Shipments
RECORD:
ASSOCIATION—
carriers
motor
of
1
April:
of
NEWS-
ENGINEERING
steel
steel
March:
of
of
AMERICAN
Slab
CIVIL
and
TRUCKING
Month
Volume
freight loaded (number of cars)
received from connections
Revenue
pounds)
for castings produced
of April
products, including alloy
and stainless (net tons)—Month of March
AMERICAN RAILROADS:
OF
of
STEEL INSTITUTE:
tons)—Month
(net
Shipments of
7
(thousands
AMERICAN IRON AND
Number
.
Ago'
(BUREAU OF MINES)—
Production of primary aluminum in the U. S.
ALUMINUM
Gasoline output
**
Year
Month
ALUMINUM
1,719,600
4,922,050
:
Previous
Month
96.2
INSTITUTE:
PETROLEUM
AMERICAN
of that date)
are as
Ago
95.6
May 22
and castings (net tons)
month available (dates
or
of quotations,
cases
Latest"
Equivalent to—
6teel ingots
in
or,
Year
Month
May 22
capacity)-
of
(percent
Activity
production and other figures for the latest week
cover
been
Tae composite vunder the old method this week would have
-
'V
*•
;
"
WINTER
BOARD
WHEAT
PORTING
of
U.
S.
May
—
DEPT.
BOARD
of
U.
S.
May
OF
—
DEPT.
1
RE¬
frit 4
~
AGRI-
(bushels)
1
1,021,476,000
v
*Revised figure,
(Preliminary figure.
26,388,000
21,552,000
...
CROP
OF
RE¬
AGRI¬
(bushels)
1
PRODUCTION
CULTURE—As
CROP
„V
•
990,098,000
,
Volume
COMMERCIAL
THE
Number 4804
169
FINANCIAL
&
of the shares, disposed past registration under one of the
v
holdings for upward of statutes.
$16,000,000 before the company
One Result of Program
passed a dividend and later re¬
One result of this program if
purchased them for about $7,000,-
there
(Continued from page 12)
private ends. If you are the holder
a security wnich does not fall
within
any
of these
categories
of
public
and
registered
the
under
Securities Act since 193t>, you are
likely
have
to
informa¬
current
tion, but you do not have the
but which has been offered to the
benefit of the proxy and insidertrading provisions. On the other
hand, if you hold a security in an
industrial corporation which has
not
done
any
public financing
since
1936, this whole
might just as
series
statutes
'exist
far
so
except for
as
well
of
not
concerned
are
you
few fraud provisions
a
mind how large the cor¬
—never
poration
how
or
actively
its se¬
curities may be traded.
Dislocation
Be¬
of
result
this
illogical disparity has been a dis¬
location of the old relationship
between the exchanges and the
over-the-counter
market.
For,
just
from
a
wai
ments
top executives
The
remuneration
the
and
usually absent.
was
financial
of
statements
in
were
About
woefully inadequate.
13% of the companies fur¬
nished
no
many
cases
the
and
many
statements
income
more
densed
in
income statement at all,
highly
of
con¬
to be of limited value;
as
they did
cases
some
so
were
not
even
whether there had been
any
earnings
during the year.
Some 20% of the companies fur¬
report
nished
Over
analysis
no
half
surplus.
sneets
materially
de¬
judged by the ac¬
were
when
ficient
of
balance
the
of
standards
One
company listed 95 % of its
assets under the single caption,
"Property, plant and equipment,
including intangibles." In another
"good will" item amounted
to 60% of total stated assets al¬
case a
.
a
number of delistings of se¬
curities
which
were
admittedly
firm does not of itself assure ade¬
as a
would lose
fession.
the
carry.
may
is
It
itself
not be as important a factor
or recommendations
the
making
made
Trade
similar
a
few years ago in
finding
a
longer be said in this country.
no
We
up
the modern corporation
of course, two ways with its thousands and sometimes
the situation—either hundreds of thousands of scattered
down—and I am sure you stockholders. It is a device which
are,
equalize
or
used for
will not be surprised when I say
can
that our studies have persuaded us
stockholders
the former direction.
toward
me
tell you briefly what
mision
learned
in
Let
the Com-
the
studies
which formed the basis of its 1946
be
affairs
given
an
are
their
of
If
good or ill.
informed of the
corporations
and
opportunity to cast their
intelligently,
the
proxy
votes
proxy
device
may
well turn out
I shall refer,
to have been the salvation of our
first, to the lack of available in¬
formation about unregistered com¬
present-day corporate system. On
the other hand, if the proxy in¬
panies; secondly, to the habits of
such
companies:: in
soliciting
strument is
no
check,
disclosure
the
more
than
a
into the
same
heap.. Some follow
than others. But
we naturally must emphasize the
case
of abuse if they occur in
substantial number.- For it is. part
device
in
whole
our
A
in
writer
mist"
on
the London
"Econo¬
when he
Christmas Day in 1937:
put
priee of living in a civilized
securities
listed
of
pany
Act
with
the
longer
no
alternative
blank
a
Investment Com¬
or
are
check
of
faced
giving
disfrachis-
or
themselves
altogether. They
must
be
given prescribed
in¬
formation necessary to an intelli¬
gent
exercise
of
their
voting
rights; they must be given an
opportunity to indicate their
wishes separately with respect to
ing
all matters which will arise at the
meeting; and, so that corporate
meetings will not resemble politi¬
elections
cal
the
in
one-party
given a
reasonable opportunity to present
their own proposals and views to
countries,
they
their fellow
must be
security-holders.
with
this
Contrast
the
proxy
compa¬
affected
by
proposal.
We
traded during
exceeding 5,000
The materials sent out in
Exchange and
in
1944
shares.
were
volume
a
connection with 89% of the annual
said
it well
,
elect
directors.
as
connection
In
with 42% of the annual meetings
the
of
one
the
be
items
stated
was
to
and ratification
management
approval
of all the acts of the
About 95% of the companies
afford
not
their stockholders
opportunity for a "yes" or "no"
on specific items through a
vote
convenient
ballot-type of proxy.
has quite recently come
One case
to
attention in which
our
form
a
of proxy appeared on the back of
the company's dividend check, so
that the stockholder who endorsed
the
a
single company mentioned retary ever lost sleep on that ac¬
whether it had had any material count; for shareholders simply do
transactions
with
insiders,
or not come trooping by battalions.
whether insiders had traded in Contrary to all theatrical canons,
Frequently
to
it
that
know
the
to
of
that
assume
exists.
the
We
etc
cases
of
by insiders which
Commission's
to
the
its
in
fraud
work
have
unregistered securities.
These are the considerations, in
highly
which
form,
condensed
have prompted
proposal that
the various protective features 1
have been talking about be uni¬
formly applied to all companies
our
of certain size and
public interest
regardless of listing on an ex¬
change or
any
other fortuity.
Surely this is true: that the last
persons in the world who should
determination
the
have
whether
requires the
application of these provisions ir
a particular case are the manage¬
ments on whom
the burden of
the
interest
public
It is fair to ask what the impacl
Commission's
the
of
nation's
urally
we
proposal
quantitatively
be
corporate
we
can
believe
the
on
Nat¬
economy.
only estimate, but
are some
3,10(
there
companies with assets of $3,000,000 as well as 300 security-hold¬
shows draw the thinnest
and insider-trading provi¬
Of
the
remaining 1,500
500 are already filing with
proxy
sions.
about
other government
That leaves roughly
Commission.
a
thousand
not
a
companies which de
public reports, anc
file
now
number which
somewhat larger
subject to the proxy and
insider - trading
provisions.
O'
are
not
while corporations may be
avoid death, they canno'
course,
able
to
avoid taxes, and probably 85% of
those thousand companies already
have
certified
financial
state¬
ments,
that
so
great burden on
it would be nc
them to register
with the Commission.
of
Some
these
play
companies
prominent parts in the Americar
Company
Aluminum
scene:
America;
Chemical
Corp.;
Pacific
of
The
Potash
&
Great At¬
Tea
Co.;
American
lantic
enterprise unbridled.
Technicolor, Inc.: American Ooti-
thought that
assume
only
vivid
that
The lawyer
up—and 1
one
lawyer would have
an
imagination—well
a
earned his fee.
Insider
cal
Let
in
connection
companies. As
the
Commission said
ago
in its Tenth Annual Report to
a
few years
Congress: "Prior to the enactment
of
the
Securities
Act,
Exchange
profits from 'sure thing' specula¬
in
stocks
the
was
one
of
the
Co.;
of
their
•
cor¬
manv
instances
of misuse of inside information—
President
of
where
the
ration
and his brother, who
trolled
the company with a
a
Cement
Ideal
Pitts¬
The
Co.;
Co.;
Publishing
Time, Inc.; Remington Arms Co.others I could mention.
of these have
turn now to the insider-
us
&
Crowell-Collier
an
trading
problem
with unregistered
exchange
Some
securities traded on
on
a
so-called
un¬
basis, but without any of
the statutory safeguards I have
been talking about, and the se¬
curities of other companies in the
list are
traded
solely over the
counter.
I have yet to hear r
listed
logical argument for con¬
tinuing to exempt companies o/
this stature from the several stat¬
single
utory safeguards which Congress
has successively found to be es¬
are
attendant
exchange listing. Our pro¬
posal would put the exchanges
upon
over-the-counter
and
market
on
truly competitive basis and each
of
the markets would
be allowed
to
develop "in accordance with its
natural
genius and consistently
with
the
interest,"
public
one
as
the
of
Congressional committees
put it in 1936. Adoption of this
proposal may also remove one of
the
incentives
toward
placements and,
private
result, toward
excessive debt financing with its
rigdifying
as a
effects
econ¬
our
on
Although it is problematical
extent the
registration
omy.
what
to
and
reporting
requirements
now
applicable to public offerings are
responsible for the private place¬
ment
trend, it cannot be demon¬
premium of non¬
strated that the
disclosure
places
ties
which
the
law'
now
avoidance of the securi¬
on
statutes
has
not
been
one
factor in the situation.
Most important of
is
posal
the
an
essential
all, this pro¬
capstone in
whose
structure
statutory
was
effort
an
to
laid 16 years ago
make corporate
democracy an integral part of our
national life.
Political democracy
has
long been .taken for granted
in this country, and social and
labor democracy is rapidly achiev¬
ing almost the same universal
recognition in principle. Corpo¬
rate democracy is no less impor¬
tant an aspect of our national life.
And, just as political democracy
is imperfect to the extent that
any segment of the population is
disfranchised,
it
seems
to me
to
be equally axiomatic that our
enterprise system is vulner¬
free
able to the extent that ..there are
in our corporate
important gaps
democracy.
Bond Club of Buffalo
To Hold Annual Picnic
BUFFALO,
N.
Bond
Y.—The
Club of Buffalo will hold
nual
its
an¬
picnic at the Wanakah Coun¬
try Club on June 10.
Two with Gross,
(Special to The Financial
Rogers
Chronicle)
ANGELES, CALIF.—Tony
D. Bray have
LOS
Garat and James R.
associated
become
with
Gross,
& Co., 458 South Spring
Street, members of the Los An¬
Rogers
Garat
geles Stock Exchange. Mr.
previously
Wykoff & Co.
was
with
Edgerton,
Hulburd, Warren Adds
(Special
to
present provisions; we do not say
they are perfect. Our position is
merely this: that whatever provi¬
the statute
should apply to all compa¬
do
sions
books
appear
on
nies of certain size and with a cer¬
tain
number
of. securityrholders
little regardless of the happenstance of
Financial
Chronicle)
Hulburd, Warren & Chandler, 208
South La Salle Street, members of
Stock
the New York and Chicago
previ¬
ously with Shillinglaw, Bolger &,
Exchange. Mr. Engwis was
cc.
Cruttenden & Co. Adds
to The
(Special
CHICAGO,
Miller is
Co.,
now
members
Miller
Financial
•
of the
Stock
v/as
Chronicle)
ILL. — Anton M.
with Cruttenden; &
South
209
cas/of the various
Chicago
of corporations now
categories
covered by the statutes. One may
criticize
certain
aspects of the
The
CHICAGO, ILL.—Earl M. Engwis has been added to the staff of
sential in the
corpo¬
con¬
the
put
burgh & Lake Erie Railroad Co.:
?>->d
Trading
to
I have indicated, trial
is complicated by con¬
management which
in
contrary by marking an "X" in
particular space! Here is free
who
be
as
foundation
compliance would fall.
automatically executed
a
Today,
a
a
traditional laxity
insider trading,
most
come
that
forced
have
still
abuses
market
have
extent
safe
problem
unless he indicated to the
check
proxy
Christmas.
a
company's stock.
the
respect
think
we
the
the
agencies public
meetings did not even name the reports which are basically com¬
persons whom it was proposed to parable to those required by the
...
the
in
change
with
to
statutes
wpuld
a
best
.
except
securities subject to the Hold¬
or
ing Company
tion
the
ad¬
involved
holders
•
Not
ing.
rules
"Company meeting procedure is
fitting topic for the festival of poration were more or less gen¬
Outwardly, it is a con¬ erally accepted by the financial
society that all of us must con- glomeration of paradoxes whose community as part of the emolu¬
-form to the laws which
result superb unreason best suits the ment for serving as a corporate
from the actions of some, more moment when paper hats are put officer or director notwithstanding
often than not a minority.
on and logic leaves by the chim*
the flagrantly inequitable charac¬
No hall in England could ter of such trading." The Senate
The Commission studied the an¬ ney.
nual
reports of
119 companies possibly contain the 150,000 ordi¬ report on the bill which became
shareholders
of
Imperial the Securities Exchange Act re¬
with assets of at least $3,000,000 nary
ferred to a case—which if said
and 300 or more security-holders. Chemical Industries. But no sec¬
of the
before
ticker
journment of the directors' meet¬
statutory arsenal. Under the proxy
blank
proxies; and, thirdly, to the need makes for
for applying the
insider-trading management and leaves the. door
provisions. It should go without open, as the Commission said in
saying that we do not mean to its 1946 report, "for executive ir¬
throw all unregistered companies responsibility and outright fraud."
better practices
think
We
will
siderations of the restrictions upon
stock
the
over
attention
whole device simply
self-perpetuation, of
report to Congress.
our
they are
probably the single most effective
an
There
rules.
proxy
did
In the proxy field the possibil¬
ity of abuse is self-evident. The
the minds of corporate manage¬ proxy instrument is an essential
to
particularly proud of
are
acts.
Proxy Abuses
device in
can
the course of its since the last meeting, with no
amended specification of the nature of those
the statutory scheme undoubtedly
is an important consideration in
ments.
that
enacted
of the dividend should be sent out
lating to 152 meetings of 76 com¬ ers; this figure excludes banks
O'
panies; comprising all the domes¬ which would be exempted.
tic
companies
with
assets
of these 3,100 some 1,600 are already
$3,000,000 or more whose voting registered with the Commissior
securities have unlisted
trading under one act or another anc
privileges on the New York Curb most of them are subject to the
to
buttress
accountants' standards by
trading,
over-the-counter
rules'apply,
a
pro¬
to
study leading to the
of
the
corporation's investment Companies Act of 1947.
bankers on the question of listing
versus
To the extent that the Commis¬
practice,
a
declared
is
question
present
sion's proxy
board
it
question of exchange listing back
on the
plane on wnich it belongs.
dividend, of insisting that notice
his
speech."
his
whenever
the
unfair
not
proposal were
the desires
as
heard
doing in making it
was
examined the proxy materials re¬
There is still the prob¬
though the effects of the statute
have
j00.
Apparently Judge Gary oi
United States Steel knew what he
pro¬
condition of de¬
if the
they
.
accounting
unwilling or unable to pit their
own
opinions against the insist¬
lem, however, of the deterrent ence of management as to the
effect
of
the
present statutory degree of disclosure—and a com¬
scheme
upon
new
listings.
Al¬ mittee of the British Board of
to
before
voting
in
chairman s
policy
the
of
favor
given
for
Commission's
of
company
no
facilities
the
criticism
a
ulations uniformly applicable to
all companies of certain size and
has yet degree of public ownership. The
seen fit to go to
its shareholders Commission's experience has been
with a delisting proposal on the
that, unless accountants can point
basis of complete disclosure con¬ to
legal requirements of good ac¬
cerning
the rights which they counting standards, they are often
shareholders
special
which would be
as
time required a vote of
listing, and
meeting.
angry
nies
intended
the Commission's accounting reg¬
the Commission for
year
is usually an
Shareholders who
soliciting practices of the
This is not
tified.
In
first
crowded meeting
ments examined had been so cer¬
fession
that
or a reconstruction
really pack the hall;
can
quate information to the investing
public, because 85% of the state¬
motivated, at least in part, by a
desire to avoid these provisions.
the
scheme
cannot attend, however, are
profit-sharing arrange¬
or
surely as water will flow
though the company had a sub¬
hill, trading will flow from
stantial accumulated deficit.
In
a
regulated into an unregulated
still another case dividends on
market.
Why should
corporate
treasury shares were boldly rermanagements list their securities
ported as income.
on stock exchanges and thus volun¬
It is apparent that certification
tarily subject their companies and
by
an
independent
accounting
themselves to the registration and
ally
a
dividend,
passed
a
bonuses
as
Prior to 1944 there were actu¬
Only
heavy loss
economy to peacetime operations.
Information
witn
respect
to
down
reporting requirements, as well as
the proxy rules and the insidertrading provisions?
houses.
a
enforced un¬
der the Securities Exchange Act.
Counter Market
inevitable
transition
the
resulting
changes
important
from
counting
tween Listed and Over-
One
auequate disclosure
no
examined
Relationship
of
of
was
their
of
Legislative Program of Securities
And Exchange Commission
"
41
10%
over
,
(2197)
CHRONICLE
La
Salle
Street,
New. York
Exchanges.
and
Mr.
formerly with Herrick,
Waddell & Reed, Inc.
French & Crawford Adds
(Special
to
The Financial
ATLANTA,
Parker
has
with French &
etta
Street
Chronicle)
GA.—Lawrence
become
C.
associated
Crawford, 22 Mari¬
Building.
42
COMMERCIAL
THE
(2198)
&
in such
kets
Boosting Federal
Expenditures Now
And Later: Byrd
Mandate To Congress
spreads permitted in primary ^issues
and certain other forms of investment were financially more
attractive.
included space
recipient to spell out in detail the reasons why he
or disapproved of the NASD and its policies.
your
support in a campaign to In accordance with the usual procedure, the recipient firm
require that every bill reaching was
afforded the option of either signing or not signing its
the calendar of either house of
return.
With the foregoing as a preliminary, we now pro¬
Congress be accompanied by a
competent estimate of its annual ceed witli an analysis of the replies to the poll.
either favored
ultimate
cost
I know
Government.
recent
con¬
tentions that some programs,
and
ects
are
we
...
with the
all familiar
Federal
the
to
proj¬
policies either cannot or
should not be considered in terms
of cost.
I
In
but
agree,
may
with the
only
to
the proposals would
be far better
promise which
a
And how do
fulfilled.
cannot be
whether
meet
we
know
our
requirements until
know what the requirements
can
we
financial
we
question
vote of the members of
a
reservation that frank rejection of
than the deceit of
indicated
are?
We
also
held
that
a
•
-
.
,
!
|
.
distinctly adverse effect on the market
a
industry
•
.
received
have been carrying ver¬
the CHRONICLE the answers that we have
to this last question.
These should be a clear
guide to
securities
corporations of the country.
our
for the securities of smaller
For the past
batim
the NASD.
the
.
The answers were both illuminating, and
The general trend, with few exceptions,
widespread opinion that the "5% mark-up
philosophy" had
mark-up yardstick."
relatively few cases
a
disturbing.
on the ballot dealt with the "5%
The CHRONICLE has consistently op¬
posed this attempt at price fixing by the Natipnal Association
of Securities Dealers. We maintained that the 5% philosophy
was in fact a rule which should first have been submitted
The first
_
our
country?"
,
and
,
questionnaire we had a place for comments.
One of the questions asked was, "What effect, if any, do , i
you think the NASD's '5% mark-up' rule has on the
j
market for securities of the smaller corporations of, the ' ;
On
for the
(Continued from page 13)
returps to the I
because of inadequate
issues
dealer and because the
(Continued from first page)
.
tionnaire, which is reproduced below, also
Thursday, May 19; 1949
CHRONICLE
FINANCIAL
in
several weeks,
we
legislators.
poll also asked this sweeping question: "Do you
believe that the Maloney Act which made possible the crem¬
ation of NASD should be abolished?" Abolition was favored
was
Our
opposed to this rule and the correctness of our position
is reflected in the official results of the poll which is
presented in the accompanying tabulation. The replies - by over 64% of NASD member returns and by over 79% of
to this question indicated that more than 75% of the
nonmember returns.
returned ballots were opposed to the 5% yardstick.
With these results, can it ever again be convincingly
Among men of reason and common sense, there can no claimed that membership in the NASD is voluntary, when
longer be any doubt that the vast majority of the securities it is clear that a majority of the securities industry, both in
and out of the NASD—a very convincing majority—are:
for inviting industry is opposed to the NASD price fixing.
*
Expenditures in Foreseeable
Future
My fourth reason
attention to these long-term
your
Our next poll question dealt with NASD questionnaires
seeking reports on spreads. This method of inquisition was
the foreseeable opposed by over 74% of the NASD members who voted and
extended pro¬
by over 81 % of the nonmembers answering the ballot.
1.
effect
current and coming
the
on
Federal budgets in
these
As
future.
under way they
momentum which
grams get
of
obligations
the
assume
Here
forces
prospects which confront us now.
And every day we are trying to
more.
These
lows:
the
prospects
(ending July 1, 1949)
$39.5 billion
Expenditures
40.3 billion
Fiscal 1949
Income
___
million
815
Deficit'
Fiscal 1950 (ending
Income _!
Expenditures
Deficit
.
July 1, 1950)
$40.9 billion
44.2 billion
3.2 billion
....
Fiscal 1951 (ending July 1, 1951)
$40.9 billion
Income
Expenditures
■
48.4 billion
_____
billion
7
Deficit
ular
projections of the reg¬
budget.
They do not take
into
account
side
of
These are
,
4.
5.
questionnaires constituted a part of such
one
Opposed to its system of prohibiting discounts to -nonr
_
,
.
repealing the Maloney Act; that is, of wining
NASD. ; .
"
•
out the
overregula¬
...
.
.
Can it be said that members who feel that v/ay
the NASD
compelling the preparation of unnecessary paper work while
at the same time the very organization responsible for such
increase was controlling prices by narrowing the margin on
joined
of their
up
of
results
The
direction to
this
own
poll constitute
the Congress,
about
volition?
mandate,
a
.
j
to abolish price control by
:
I
a
NASDy to wipe out its prying policies and. invasion? :
of privacy through questionnaires and fieJdT examina¬
tions, to erase that trial system which places, in one entity %
the possibility of acting in the multiform capacities of
investigator, prosecutor, judge and jury, to expunge
monopolistic discount practices*—to do all of these by :
repealing the Maloney Act which gave birth to the Na¬
the
spreads.
question, "Do you approve of
;
6. In favor of
were a
On the third
,
Opposed to its trial system.
members of the association.
costly burden upon securities dealers. On
hand, the costs of business were being increased by
tion and
calling !
- g%:j
Opposed to its system of field examinations where there
neither charges nor complaints pending.
are
industry unfettered should be preserved. Overregulation by
administrative bodies has hogtied the securities markets.
for fiscal years
1949, 1950 and 1951 may be sum¬
marized
and
projected as fol¬
These
Opposed to its system of circulating questionnaires
for reports on spreads.
3.
gather
again the CHRONICLE was steadfast in its edi¬
expenditure budgets up and up. torial stand against these prying questionnaires which we
They are responsible in a large said constituted an invasion of privacy.
It was our attitude
measure
for
the
serious
fiscal
that the American tradition of doing business by leaving
terrific
Opposed to its price control policies.
2.
commitments is to show you their
examination
by NASD of the books and records of its members against
whom there are neither charges nor complaints pending?"
more than 76 % of the returns by members and more than
88 % of the returns from nonmembers voted "No."
tional Association of Securities Dealers.
opposition to NASD examination of the books and
members, so-called field examinations, is too
well known to need any elaboration or further comment.
Our
records of its
Such
the public interest by restoring
corporations of
programs, the proposed socialized We have inveighed against this practice.
The claims that the country. It will create, faith in the securities field and
medicine plan, or any other oper¬
no widespread opposition to this practice exists,
that only enable those in it to operate freely, to express their opinions
ations which are handled through
a very limited few "on the fringe"
of the securities field honestly without fear of reprisal.
trust funds outside the budget.
were
the objectors, have been irrevocably shown to be
The figures on the spending
WE CAN ONLY POINT OUT THE DUTY AND THE
these
the
Social
Security
projections are not
appropriation estimates. They are
expenditure estimates. There is a
vast
difference.
Appropriations
are
not necessarily expended in
the
year
in
which
mined
expenditures—not
by
ap¬
propriations—against revenue.
expenditure
conservative
light of the revelation by this poll, the truth
CAN .EARN THE GRATITUDE. OF ALL THE PEOPLE BY
S QUICK RELIEF.
opposition to field examinatidlHi^^13]^1
complaints exist is now firmly established.
when
no
The trial system
Final Poll Results and Text of Ballot
in which the NASD acts in the .ca¬
pacities of investigator, prosecutor, judge and jury also-came
in for quite a flaying.
The member returns showed more
than 85% opposed and the returns of nonmembers showed
more than 91% opposed to this trial system.
For the record, we present now
'
FINAL RESULTS OF NASD POLL
Of the many
f*®^RETURNS FROM NASD MEMBERS I
Total ballots returned
that—
They include no more than a
increase for agricul¬
tural
ent
subsidies under the
formula;
they
do
pres¬
not
con¬
the- Brannan
plan.
They do not contemplate a 70group air force.
They do not
project any general fund ex¬
penditures for socialized med¬
icine.
If vast projects like new
valley authorities are under¬
template
taken, they would be in addi¬
tion.
esti¬
mates will decrease with any sub¬
stantial decline from the high level
of
the
revenue
side
and
yet up to now nothing has been
my
prosperity which prevailed at
Favoring
multiform
No
time
the
of the Joint
President's January
Committee
(Continued
on
on page
Inter-
43)
j
opinion
216
____755
30
or
21.6%
or
75.4%
or
(2) ' Questionnaire for Reports on Spreads:
powers
3,0%
;
:
■
'
can
by
be
a
pursued and get out of hand is best illustrated
recent case wherein it
took
our
Federal Courts to
-
stop the onslaught of the NASI} bent on a punitive expe¬
dition in a matter wherein honest contractual differences
had arisen between private
count
to
a
>
Neither
giving
a
dis¬
92% of the
:_
Complaints
nor
% C
Charges Are Pending:
__207 or 20.7%
__._765 or 76.4%
Opposed
No
non-
member returns.
opinion
—
NASD Txial System:
•(4)
This indefensible rule,
liquidity of markets, causing the relaxing of interest in
secondary markets and often the complete failure of mar-
231 or 23.1%
742 or 74.1%
28 or < 2.8%
Favoring^
nonmember of the association was opposed by
69% of the member returns and by over
Favoring__v__
Opposed __■
No opinion
Examination of Books and Records Where
(3)
parties.
monopolistic in its nature, should
never have been authorized by the Maloney Act nor should
Budget Message was submitted.
You are better judges than I am it have been adopted by the NASD.
The schism it has V,
as to whether we shall maintain
created in the securities field is pathetic and unwarranted.
prosperity at the high average of This rule and "the 5% spread philosophy"-have caused incaL (5)
the 1948 calendar year. If we do
culabie harm to small business by interfering with the
not maintain that level, experts
the
:
Opposed
done about it.
The insolence with which these
1001
|
5% "Yardstick":
(1)
there has been talk of revising this
trial system.
Those in charge of this organization's affairs
know that dissatisfaction with the system is quite general
The rule which forbids an NASD member
The Revenue Side
On
In the NASD proper
the final results of the
polPSfcjd. then 'reproduce the text of the ballot.
mistakes evidencing NASD decadence;-its
estimates as ultra system and method of trial by the local Business District
when
you
realize Conduct Committee is perhaps the worst.
moderate
,
IRNfeATEr- THE JOB RESTS WITH CONGRESS, WHICH
In the
probably will regard these
You
serve
that there is widespread
they are ap¬
proved. Appropriations enacted in
a high revenue year may actually
be spent in- a low-revenue year.
Deficits or surpluses are deter¬
*
untrue.
repealer will
the market for the securities of the smaller
-
Favoring-__!
or
2.9%
^
116 or 11.6%
855 or 85.4%
Opposed.
No opinion—
/
29.
^
Rule Forbidding Discount to
,Favorihg__^—-^_—
Opposed
A -No
"opinion
ji
_ _——__—
L 30 or
3.0%
Non-Members: r •'% ;
__274 or 27.4%
_l1__w691 or 69.0%
—— •• 36 • or
f
Volume
(6)
169;
THE
Number 4804
<
Should Maloney Act Be Repealed?
ij
Favoring
;
y
y,
j___643;
______
or
or
27.4%
84
or
8.4%
Opposed
No opinion
^__
(RETURNS FROM NON-MEMBERS OF NASD)
Total ballots returned--
rial
Revenue
,196
i
t
i/y
(2)
"Yardstick":; vi
Favoring—
Opposed
No opinion
1.
,
a
loss of $5 billion in Federal rev¬
under the
;
23 or 11.7%
152 or 77.6%
21 or 10.7%
.1
;
------
-
—
-
___________
FavoringL—
'
Opposed
No
(3)
or
16
10.2%
81.6%
*8.2%
or
160
^__
or
-j.
I
,
'
,
ment
If
returned to
we
level of pros¬
a
perity which prevailed at the end
of the war—and we did not regard
in
depression
a
would
the
be
20%.( In that event, by
experts' formula. Federal
would
enue
this
13
or
6.6%
7
or
3.6%
NASD Trial System:
$10 billion
projected figures.
180 or 91.8%
9 or 4.6%
y
.
Rule Forbidding Discount to Non-Members:
Favoring
6
or
182
or
8
or
r
^
less
decline in business
a
if
and
year,
a
do
we
not
re¬
recession
from the
peak of in¬
flated prosperity will strike Fed¬
eral finances in fiscal year 1951
which
___:
"Opposed
v No opinion
rev¬
be
begins
from this
fiscal year
shall reach the C.O.D. delivery
July.
we
year
a
And in the
dates
the
on
same
huge military pro¬
duction contracts which
(p)■
then—
the reduction in personal incomes
*
10 or 5.1% trench substantially in Federal
______—173 or 88.3% spending, the first full impact of
__i_
FavoringOpposed
No opinion
gauge
If there is
Are Pending:
No opinion
••
(4)
FavoringOpposed J_,_
sys¬
in the measure¬
of other principal factors.)
as. a
than my
Examination of Books and Records Where
Neither Complaints nor Charges
income
ourselves
20
,
opinion
existing tax
tem, and rates. (They use personal
Questionnaire for Reports on Spreads:
l
calculate
Taxation
a 10% drop in the aggregate
personal incomes would mean
of
enue
(!,)■•; 5%.
\
the
(Continued from page 42)
that
'
:—
=
.
3,1 %
92.8%
4.1%
we
have
authorized; and it is then that we
shall begin paying off heavily on
the new long-term civilian com¬
mitments such as housing, educa¬
tion, nnd heavy construction proj¬
ects.
(6)
Should Maloney Act Be Revealed?
(2199)
43
Boosting Federal Expenditnres Now and Later
64.2%
274
:
CHRONICLE
FINANCIAL
COMMERCIAL. &
As I
it fiscal year
degree necessary is virtually
impossible.
Actually
President submits his
after
the
recommen-.
dations,
again
business.
at
Congress never sees the
budget
people, and the
after it is enacted.
a
whole until
And as we pass
it in relatively
small unrelated
on
as
pieces over a period of six months,
our action is on appropriations —
not expenditures.
years now I have
trying to correct this situa¬
advocating the use of a
single
appropriation bill which
would be capable of translation
into terms of annual expenditures.
I am encouraged this year by in¬
creasing support for this simple
change
in the rules.
But we
haven't got it adopted yet. With
such a single appropriation bill
we could consider the budget as"a
whole and by knowing what it
means in annual expenditures we
could act in the light of revenue
estimates.
As long as this legis¬
lative handicap exists intelligent
reduction in expenditures in any
substantial degree—on programs,
by
projects and policies already au¬
thorized— must originate in the
Executive Branch.
headed
we
for
regimentation
equal to that which the British are
are >
suffering,
if
not
worse.
Our
strength is the strength of the pri¬
vate enterprise system.
Strike it
down and you will shear Samson's
Foster it and
shall
we
con¬
earth—a free nation with capicity
and incentive.
why
major
should
make a
contribution to the requirement
for retrenchment by rejecting new
A nation in which
6% of the world's population can
out-produce the rest of the world
combined. Those who, wilfully or
otherwise,
would
destroy
the
American
enterprise
system,
would
the freedom of
everywhere.
We, alone,
are bearing the standard of free¬
dom today.
Without the light of
our
torch, freedom and progress
will perish in the world.
destroy
people
Frankly,
is
situation we face
critical and will
the
exceedingly
crisis about
a year from
analyze our
pending fiscal situation in detail
come
to
on
a
I
now.
propose
floor
the
this week.
erous
But there is every reason
Congress
pace.
tinue to be the greatest nation on
been
tion
our
going forward
Unless this trend is halted,
locks.
Budget Reform
several
For
activities of
It is still
rapid
a
the
Senate
later
If you would be gen-,
enough to read what I have
to say,
a
of
to
I should be pleased to mail
copy
of the remarks to you at
1951, be¬
home. And, I would be grateful
Favoring ;
:-i
_156 or 79.6% ginning July 1, 1950, will be legislation which would authorize for your comment' and advice.
critical in Federal fiscal affairs;
more and more programs, projects
Opposed
_ ._
22 or 11.2% and
the prospects are bleak and
No opinion
18 or ' 9.2% fraught with grave public conse¬ and policies requiring additional With W. E. Hutton & Co.
expenditures.
quences. With this crisis virtually
(Special to The Financial Chronicle)
COPY OF BALLOT
It is with this situation in mind
upon us there are three courses
PORTLAND, MAINE — Laur¬
A PERSONAL MESSAGE TO THE SECURITIES INDUS, open: The first is drastic reduc¬ that I have taken your time to
discuss the trend toward long- ence H.
Staples has become asso¬
TRY PERTAINING TO THE NATIONAL ASSOCIATION tion in public spending. The sec¬
government
commitments
ond is a substantial increase in term
ciated with W. E. Hutton & Co.,
/
' :
and their effect on the Federal
% •; OF SECURITIES DEALERS, INC.
taxes.
The third is large scale
Bank of Commerce Building.
Mir.
Budget; to suggest that no new
deficit financing.
We are anxious to learn the facts regarding the attitude
was
previously
with
I shrink from the thought of the program should be entitled to con¬ Staples
of the Securities industry toward the activities of the Na¬ third course. -Under current cir¬ sideration by Congress until it is Sides, Morse & Co., Inc.
cumstances
another
peacetime accompanied by a competent esti¬
tional Association of Securities Dealers, Inc., embraced'in
mate of annual and ultimate cost;
sortie into deficit financing would
With Chas. A. Day & Co.
this poll and are therefore mailing this questionnaire to? all shatter public confidence in Fed¬ and explain why sympathetic co¬
(Special to The Financial Chronicle)
operation by the Executive Branch
eral securities at a time when the
dealers and brokers in the United States.
BOSTON, MASS. — Harold W.
debt stands at more than a quar¬ is necessary if we are to reduce
expenditures on programs, proj¬ Stoddart has been added to the
Please answer the queries where indicated either "Yes" ter of a trillion dollars.
ects and policies already author¬
If we can't or won't run this
staff of Chas. A. Day & Co., Inc.,
or "No."
ized.
government on a balanced budget
Washington at Court Street, mem-,
We know that costs on existing
A business reply envelope is enclosed for your con¬ now, I doubt that we shall ever
fcers of the Boston
Stock Ex¬
return to sound financing. To you programs can be cut substantially
venience.
•".'"V •
:
and
me
that means
our
credit and we know that the Federal change.
y
r
see
"
,
-
•
•
7
"
HERBERT D. SEIBERT,
.i..v.
■
Editor and Publisher
would be
destroyed and our sys¬
government doomed.
tem of
What New Taxes Might Do
,1.
Do
approve
you
of the NASD's "5% spread" yardstick
naires calling
.
3. Do
you
books
on
spreads
Do
of examination by NASD of the
records of its members against whom
you
of
approve
acts in
the
trial
all of the
system
wherein
following capacities:
5.
.*■
Do^you
%,%aiv
^
?
6
of
approve
member giving
•
a
the
NASD
discount to
you '
made
believe
■
that
□ Yes.
□ No
forbids
□ No
be
1
7.
□ No
Is your firm a
member of the NASD?
economy
when it is
to
on
tional
$8
in
more
□ Yes
□ no
NAME and ADDRESS OPTIONAL
had permitted,
1.
I would have written
you
a
If time
personal letter..
Do you do a retail business?
□ No
Do yon employ
salesmen?
□ Yes
□ No
Are
primarily
you
Bonds?
,
t
3.
U.
in
S.
Govt,
or
Municipal
Rule has
on
if
■>.-
,
do
you
think the
the market for securities
of the country?
,'v^
any,
□ Yes
□ No
v
Dp you .handle principally lis ted or unlisted securities?.
4* What, effect,
:
dealers
!:u
<
4,-,
COMMENTS
_________
NASD's; "5% Mark-Up"
of thp smaller corporations
:
Federal
payroll we find that one
nine persons in the
entire American labor force is on
of
out
a
every
government payroll.
if
that
the
We know
Executive
Branch
projects, and policies already au¬
even
or
taxes
an
$5 bil¬
without
deal¬
it on incomes above $6,000
yearly, but to do so would be vir¬
thorized
could
be
reduced
full
a
impairment
without
10%
of
a
essential
function.
We
know that the prevailing inclina¬
tion in the Legislative Branch is
single
to enact more and more programs,
projects
and policies involving
to add long-term commitments. We know
to our business progress than any that almost invariably these com¬
other. Confiscate every dollar of mitments are characterized by in¬
every income above $50,000
and creased regimentation and exthe Treasury will receive only $1.7 penditure^. We know that private
enterprise is the foundation stone
billion.
Reduction in Federal expend¬ upon which this nation has built
tual confiscation of
payers
who
can
are
be
a
doing
class of tax¬
more
accomplished — but
a public demand
bureaucracy
nate
on
with
16
the
which
denied by
been
excessive
spending — a bureaucracy which
knows and practices the tricks of
buying off such a demand with
more spending.
Under existing legislative facil¬
ities and procedures any worth¬
while reduction in expenditures
on
existing
Federal
programs,
projects and policies must origi¬
a
raised
□ Yes
to the more than 2 million on the
administrative costs of programs,
for it which cannot be
the printed presentation of this matter.
nearly 300
enough.
addi¬
raise
we
a
itures
excuse
a day is evidence
When State and local
government employees are added
of
declining market.
a
only if there is
P.S.—Please
daily average rate
chose to take the initiative the ad-
shocking blow to our eco¬
nomic system? The President says
ing
a
and taxes
billion
new
never
costs
new
could
Where
is
to put
□ Yes
~
abolished?
substantial tax increase
Business
than it is
lion
which
possible the creation of the NASD should
the
I
sensitive
V
Act
be
cession.
□ Yes
Maloney
the
taxes are
□ Yes
non-member of
a
of the Association?
Do
which
rule
a
business
a
new
would
What
□ No
the
Investigator-prosecutor, judge and jury? i
on
whether
answer.
and
waste
increasing at
already receding? By all the rules
know, new taxes at such a time
may
easily accelerate a minor
business decline into a major re¬
□ No
neither charges nor complaints pending.?
are
NASD
□ Yes
approve
and
there,
4.
its members for reports
transactions?
on
•
oil
the
result of
"f 2, Do you approve of the use by the NASD of question-
-
I ask you
□ Yes
□ No
is permeated with
inefficiency. The fact
that Federal employment has been
Government
years
has
of
Administration
the Executive Branch.
In the
in
ar¬
its
is
freedoms
and
its progress.
It
good system, and in most re¬
spects it is tough and durable.
a
But, we know that it cannot sur¬
vive excessive regimentation;
it
cannot survive excessive taxation;
and
it
cannot
excessive
survive
government competition.
To
is
a
analyze the Federal budget
terrific
simpler.
interest
job.
For,
to
it
those
I wish it were
is
of absorbing
who
have
been
conscious of the trend which, for
some
time, has been developing in
toward greater and
chaic
procedures and confusing more
powerful central govern¬
language which characterize the
action by Congress on fiscal legis¬ ment; toward more all-inclusive
lation, intelligent curtailment to control over the daily lives of our
this
country
With Florida Securities
(Special
ST.
to
The
Financial
Chronicle)
PETERSBURG,
FLA.-
Russell W. Danzer has become af¬
filiated
with
Florida
Securities
Co., Florida National Bank Build¬
ing.
■
44
THE
(2200)
COMMERCIAL
Securities
•
•
American
Consolidated
Fork
Columbia
Brokerage Co., Salt Lake City. For mining development.
American
common
stock (par $25).
June
(parent) plans
of Amer¬
ican at $12 per share. Underwriter—None. The proposed
sale is to conform with SEC order under the Holding
American Telephone & Telegraph Co.
April 21 filed between $393,000,000 to $400,000,000 tenyear 3Vs%
convertible debentures, due June 20, 1959.
Offering-—Offered for subscription by stockholders of
record May 6 at the rate of $100 debenture for each six
March
Power Co.
•
f
Consolidated
Avco
Manufacturing Corp., New York
plan" or
acquisition of
executives under the company's "stock option
the
options assumed
by
the
former
assets
its
of
Manufacturing Corp.
on
upon
company
American
subsidiary,
Central
Bangor (Me.) Hydro-Electric Co.
April 22 tiled 4,840 additional shares ($100 par) 4^4%
preferred stock and 54,304 shares of common stock (par
Offering—The preferred is offered to preferred
$15).
and
11 at rate of
record May
stockholders of
common
each 20
preferred shares held and
preferred for each 80 common shares held at
$98 Va per share. The 54,304 shares of common stock is
One
new
one
for
share
holders of
common
stock at the rate of one,
share for each four shares held at $23 per
share.
Rights
Dealer Manager—Smith, Barney & Co.
Proceeds—For corporate purposes, including capital ex¬
expire May 27.
penditures.
Bowling-Lanes, Inc.
May 11 (letter of notification) 2,500 shares of 6% cumu¬
lative preferred.. Price $100 per snare. No underwriter.
To construct building. Office: Room 300, Marion E. Tay¬
lor Building, 312 South 4th Street, Louisville 2, Ky.
W.
Watson
&
(Conn.)
Co.
Hydraulic Co.
Offering—To
be
offered initially
to
present stockholders on a 1-for-10 basis. Proceeds—To
short-term bank loans. Expected June 6.
reduce
2
in
^
April 27 filed 500,000 shares of common. Price—60 cents
share. Underwriters — Name by amendment. Pro¬
ceeds — For working capital, exploration, development
Turf Club,
Inc., Denver, Colo.
sinking fund debentures,
due Jan. 1, 1965, and 160,000 shares of Class A ($5* par)
common.
Offering—To be offered in units of $100 of
debentures and
10 shares of stock at $150 per
derwriter—Brereton,
Proceeds—To
•
Central
Rice
build and
Fibre
&
Co.,
operate
Products
a
Un¬
unit.
Inc., Denver, Colo.
horse-racing track.
•
Co-op
May 6 (letter of notification) 3,000 shares of non-voting
($5 par). Price, $22 per share. Underwriter—
common
Bosworth, Sullivan &
selling stockholders.
Co.,
Denver,
Colo.
Proceeds to
Cincinnati Gas & Electric Co.
Underwriting—None. Proceeds—To finance
struction
/
/v/./'',V''-it V-!'
May 13 (letter of notification) 300 shares 6% cumulative
preferred stock and 300 shares (no par) common. To be
Key Broadcasting System, Inc., Oyster Bay,
N.
offered
No
con¬
program.
Y.
units
in
of
underwriting.
9
Phoenix, Ariz.
>
Funds, Inc., Boston
shares Keystone Custodian Fund
certificates of participation series BA.; UnderwriterKeystone Co. of Boston. Price, market. Proceeds—For
12. filed
300,000
investment.
,
Lawrence Portland Cement
Co., New York
7,000 shares of common
Underwriter—Hemphill, Noyes & Co.,
New York. Price-—$13.75 per share. Proceeds to estate
of Marion S. Ackerman, deceased.
May
•
(letter of notification)
16
stock
(par $10).
Leeds
Northrup Co., Philadelphia,
&
surance
•
in
Proceeds
to
be
deposited
accordance with the Benefit In¬
of Arizona.
Stock Corporation Act of 1947
Eastern
Cooperatives, Inc., New York
May 16 (letter of notification) 5,000 shares of capital
stock (par $5).
Price, par. No underwriting. Working
capital.
9
Horsemanship,
Elementary
D.
Inc.,
sola b.y
Initial offering
To
be
writing—None.
Liberty Loan Corp., Chicago, III.
9 (letter of notification) 3,600 shares
cumulative
75%
share.
convertible
Underwriter—Sills,
preferred. Price, $15 per
Fairman and Harris, Inc.,
Working capital.
Chicago.
•
Liquid Carbonic Corp., Chicago, Ell.
May 9 (letter of notification) 2,000 shares of common.
Price, market. Underwriter—Walston, Hoffman & Good¬
win, San Francisco. Proceeds to selling stockholders.
Inc., Springfield, Mass.
May 11 (letter of notification) 1,000 shares of claSs B
common (no par) stock.
Price $16 per share. Underwrit¬
ers—'Tifft Brothers and F. S. Moseiey & Co. Proceeds to
Oil
and
Drilling Co.-
(par 5 cents). Price, par. No- underwriter. For
drilling or equipment.
Office: 615 Cooper Building,
Denver, Colo.;;
/
V/'V
stock
Harwill,
May 9
Inc.,
(letter of
Price,
Co., Detroit.
•
Airlines, Inc.
13,496 shares of common
To be offered in exchange to stock¬
holders of Parks Air Lines, Inc., on the basis of one share
of common for 2.4 shares of Parks Air common. Office:
stock
St. Charles,
Mich.
V/:
notification) 3,000 shares of common
Underwriter—Charles E. Bailey &
i
Inc., L.
I. City, N.
--
•
•
Inland
Oil
be
per
^
—
Names
bidding.
writers
York
&
Electric
State
The
—
Wertheim
•
Beane.
&
First
Co.
Boston
and
Gas
•
Proceeds—To
Pine
Kansas
Mining Co.,
Gas
American
to
repay
\
i >■
(letter of notification)
u
Inc.
Mines,
162,400 shares of capital
stock, of which 81,200 shares will be sold publicly at
&
Electric
Power
&
purchase of mining claims. No underwriter. To develop
mining properties.
Office: 1011 South Fremont, Alhambra, Calif.
„
.
Oklahoma
Gas
&
.
,
Electric
Co.
competitive bidding. Probable bidders: Merrill Lynch,
Pierce, Fenner & Beane and White, Weld & Co. (jointly);
Halsey, Stuart & Co. Inc.] Har¬
Securities Corp. (jointly);
Lehman Brothers and Blvth & Co., Inc.
Proceeds—For
construction and payment. of $3,500,000 of short-term
riman Ripley & Co. and Union
bank loans.
Expected June 7.
v.."
of
ttvXvXvXw
(parent) will sell
bidding probable bidders include: Union
\ K.
CO
i
*
de<i
mm.
Corp.,
Huntsville,
Sbo"°"s,oc
*
Ala.
Under¬
Price—
share. Proceeds—For plant facilities, equipment
\86$
<i
i
■-1
pay
Motors
\
(6/7)
May 5 filed $10,000,000 first mortgage bonds, due June 1,
1979. Underwriters—Names-to be determined
through
Co.
Light Co.
$1
share and 81,200 shares will be issued in consiaeration
of the transfer to the corporation of contracts for the
per
Denver,
May 10 filed 5,000,000 shares (30 par) common.
writer—Greenfield, Lax & Co., Inc., New York.
$1 per
I
presently
'
Gold
short-term
Keller
'
Brothers,
$3,000,000 of
discharge
i t v s'
ms?
I'Uii
(5/25);
Lynch, Pierce, Fenner &
'
American
North
May 5
Price, 50c per
Co., New York.
Chicago
>i
Corp.
Lehman
Corp.,
Merrill
construction.
for part of its construction program and
bank loans from Guaranty Trust
Co. of New York and eight Kansas banks.
offices
Proceeds—To
outstanding $4,000,000 of short-term notes and for hew
(25c par)
the First Boston
Corp., (jointly); Merrill Lynch, Pierce, Fenner & Beane
and Kidder Peabody & Co. (jointly); White, Weld & Co.
Proceeds—^ Kansas
Gas will use proceeds of
100,000
Private IVires to all
determined
bidders: W. C.
and Glore, Forgan
The First Boston Corp.;
Jack
shares
be
to
Probable
applied to the discharge of presently outstanding $4,New
Colo. 1
'
May 5 (letter of notification) not to exceed 23,420 shares
($1. par) common stock. To be offered in exchange for
Consolidated Smelting & Metals Corp. stock.
No under¬
writer. Office: Room 507. Boston Building, Denver, Colo.
to
Corp.
cumulative pre¬
May 9 filed 73.333 shares ($25 par) common. Offering—
To be offered stockholders on a l-for-12 basis.
Under¬
share.
Co., Salt Lake City
600,000 shares
Underwriter
competitive
Gas
($100 par)
000,000 of short-term notes and for new construction.
share.
Underwriter—WeberOf the proceeds $35,000 will
be used to validate the option
contract executed by
Aladdin Petroleum Corp., part will be for equipment
and drilling expenses and the balance will go for work¬
ing capital. Office:.521 Felt Building, Salt Lake City,
Millican
16 filed 40,000 shares
stock
&
Electric
State
Langley & Co.; Lehman Brothers
& Co. (jointly); Harriman Ripley & Co.
Y.
(letter of notification)
May 12
•/'/';';/X;■'^fJ
ferred
Working capital, etc.
[Registration statement relating to 480,000 class A shares
at $1
per share became effective April
18, 1949, and
application for withdrawal of same was made May 13.
No shares of the above were sold.—Ed.]
r
Price—$1
Building, 102 East Ninth Street, Kansas City
York
New
May
A
(par 250). Underwriter—Cantor, Fitzgerald & Co.,
York.
par):
6, Mo.
May 17 (letter of notification) 300,000 shares of class
New
($1
Waltower
par.
Hotelevision,
Mid-Continent
May 6 (letter of notification)
,
May 5 (letter of notification) 600,000 shares of common
9
only about 2,614 shares will be offered publicly at $100
per share.
No underwriter. For general working cap¬
through
selling stockholder.
Range
Oil
Corp., Toledo, Ohio
May 12 filed 8,000 shares (no par) common, of. which
& Wallace,
Forbes
Maumee
•
capital stock
(par $10). Price, par. No underwriter. For the print¬
ing and promotion of sales of a book entitled "Ele¬
mentary Horsemanship." Office: Mills Building, 17th &
Pennsylvania Avenue, N. W., Washington, D. C.
May 10 (letter of notification) 439 shares of
Front
•
Securities Corp.; Bl.yth & Co., Inc. and
Cleveland
($10 par)
May
ital.
Washington,
C.
If competitive
Pittsburgh
partici¬
the trustees under the
deed of trust.
price of the employees'
shares will be between $116 and $118 per share, while
the participating shares will be offered at $100.
Under¬
pating shares.
450,000 shares.r Underwriter—Exemption from competi¬
tive bidding is sought in connection with this offering.
San Francisco
Pa.
Price, market. Underwriters—Chas. B. White Co., Hous¬
ton; First Southwest Co. and Rauscher Pierce' & Co.,
Dallas.
Proceeds go to Bennett L. Wooley, a stockholder.
which
Bosto.v
t
with
Association.
operative
•
Philadelphia
unit.
per
facilities.,,
Mar-Tex Realization Corp., Dallas, Texas
April 28 (letter of notification) 35,000 shares of common.
May 16 filed 550,000 shares of common stock (no par)
New York
at $100
of each
share
one
To expand operating
Keystone Custodian
May
Utah.
April 15 filed 249,334 common shares (par $8.50). Offer¬
ing—Offered for subscription by stockholders of record
May 12 in ratio of l-to-9 at $22 per share;: Rights expire
June 3.
Co.,
Insurance
wagon.
May 5 (letter of notification) 25,000 shares of capital
stock (par $1).
Price, par. Underwriter—Arizona Co¬
common.
Co., Inc.
Boston
pany's construction program.
stock
May 5 filed $1,600,000 of 6%
First
Corp., Alex Brown & Sons; John C. Legg & Co. Price—
Expected about $60 a share.
Proceeds—To finance com¬
per
and other purposes.
stockholders of record June
Underwriters—The
ratio.
l-for-6
a
(par $1).
Carnegie Mines Ltd., Montreal, Canada
Centennial
for subscription by
offered
•
(6/6)
April 26 filed 36.000 shares of common stock (par $20).
Underwriters—Smith, Ramsey & Co., Gaynor, Clemence
& Co., Chas. W. Scranton & Co., Hincks Bros. & Co., T.
Bridgeport
Offering—To be
May 18 filed shares of common stock.
•
•
Power Co.
Light &
of Baltimore
new
offered to
Electric
Gas
manufacture a low-priced,
Expected latter part of
to
station
June.
•
Consolidated
•
capital
working
medium-sized
May 18 filed 2,200 employees' shares and 2,200
Engineering
the State Treasurer
Nov. 20, 1946.
Offer¬
Calif.
share of preferred and two
April 22 filed 387,041 shares ($3 par) common stock. The
stock is reserved for issuance to officers and supervisory
per
Corp.
May 9 (letter of notification) 2,000 shares of ($1 par)
common.
Price, $5 per share.
No underwriter.
For
working capital. Office: 620 N. Lake Avenue, Pasadena,
(5/25)
shares of common for each
$45 principal amount of notes. Underwriter—The First
Boston Corp.
Proceeds—To pay $700,000 of temporary
bank loans, to provide $1,000,000 for current general
corporate purposes and for construction.
Inc.
ing expected after June 3.
poses.
10 filed $3,150,000 of interim notes, due Dec. 15,
1951,
Notes are convertible after June 15, 1950, into one
Mines,
Proceeds—To develop mining properties.
York.
panies; for extensions, additions and improvements to
its own telephone plant; and for general corporate pur¬
Arkansas-Missouri
Silver
filed
30
and
•
Caribou
376,250 shares (no par) common stock.
share. An additional 50,000 shares will
be sold to the underwriter at $1 per share for invest¬
ment.
Underwriter—William L. Burton & Co., New
offered
May
of
.group
Price—$2.50
associated companies; for the pur¬
for subscription by such com¬
and
a
Consolidated
shares of capital stock held at par (flat).
Rights expire
20. Underwriting—None. Proceeds—For advances
stock
Underwriting—None, but The First Boston
agreed to use its best efforts to form and
$61,958,000.
June
of
ISSUE
PREVIOUS
security dealers to solicit stock¬
holders' subscriptions for the new shares.
Proceeds—
Will be added to the general funds to be used in con¬
nection with company's 1849 construction program, which
will involve net expenditures
presently estimated at
Company Act which calls for United's sale of American
subsidiary
has
manage
Light stock holdings.
chase
14.
Corp.
Offering—United Light & Railways Co.,
the sale to its stockholders of the 634,667 shares
to
SINCE
Gas
plus additional shares not taken up by 6thers. Price,
by amendment. Subscription rights will expire about
Light & Traction Co.
May 13 filed 034,067 shares of
ADDITIONS
Thursday, May 19, 1949
Registration
System, Inc. (5/24)
May 6 filed 1,345,300 shares common stock.
Offering—
Holders of 13,452,874 shares of common stock of record
May 24 will be given rights to subscribe to the new
shares at the rate of one share for each ten shares held,
City, Utah
May 9 (letter of notification) 400,000 shares of capital
stock.
Price 25 cents per share.
Underwriter—Cromer
•
in
Now
INDICATES
Salt Lake
Mines,
CHRONICLE
FINANCIAL
&
,-roS
Bos
9M
fv
York
CvUc
kpo
'i;l
f;
Volume
COMMERCIAL
THE
Number 4804
169
&
FINANCIAL
CHRONICLE
Sightmaster Corp., New Rochelle, N. Y.
May 9 (letter of notification) 425,940 shares of common/
stock (par 50) and options for 107,562 common shares
(owned by Michael Kaplan and sold for his benefit).
Underwriter—Willis
E.
Burnside, & Co., New .York. *
Price—500 per share. General fund to be used in ex¬
pansion of manufacturing facilities, working capital, etc.
/
May 23, 1949
_.—Common
Raymonds Concrete Pile Co
May 24, 1949
Columbia Gas System Inc
Missouri-Kansas-Texas
Noon
Common
Building, 320 South Main Street, Salt Lake
City, Utah. ' '
" %" _■///';■•;//» ;■
Equip. Trust Ctfs.
1949
May 25,
>
.Interim Notes
Arkansas-Missouri Power Co.__
South
Delaware Lackawanna & Western RR.
New York
U.
June 1,
Public Service
Equip. Trust Ctfs.
Sperry Corp.
Staten Island
;
:
;-
•
Air
RR.
Line
&
A/'*■ 'A;
June
__Bonds
•
Bonds
Bonds
June
•
.Equip. Trust Ctfs.
Pipe Line Co., Newcastle, Wyo.
(letter of notification) 3,000 shares of common.
Plains
May 13
Price, $100
of pipe
Petroleum
Public Service Co. of New Hampshire
a
competitive bidding. New England Public Service Co.
(parent), holder of 58.88% of the outstanding common
cancellation
stock of Public Service' will surrender for
warrants
evidencing
preemptive right to
its
sub¬
scribe for the additional common stock to which it is en¬
titled and will not subscribe to any of the new common
stock.
1,
shares in
of
excess
the-
company's preferred stock will be offered a
similar opportunity to subcribe to the new, unsubscribed
shares.
Proceeds—For construction and repayment of
short-term
bank
&
borrowings.
Probable
amendment.
Underwriters—Names by
Kidder, Peabody
underwriters:
Public Service
Co.
Underwriters
1979.
—
Names
to
be
•
/Public Service Co. of Oklahoma (6/1)
May 9 filed 50,000 shares of ($100 par) cumulative pre¬
Underwriters—Names
to
be
determined
through competitive bidding. Probable bidders include:
Glore, Forgan & Co. and Smith, Barney & Co. (jointly);
Harriman
Ripley & Co.': and Central Republic
Co.
(jointly). Proceeds—To pay the cost of property addi¬
tions and
betterments.
Public
Service
Expected June 1.
Electric
&
Gas
Co.
(6/7)
May 6 filed $75,000,000 first and refunding mortgage
bonds, due June 1, 1979. Underwriters—Names to be
determined by competitive bidding.
Probable bidders:
Morgan Stanley & Co.; Halsey Stuart & Co. Inc.; The
First Boston Corp.; Kuhn, Loeb & Co. and Lehman
Brothers (jointly). Proceeds—To reimburse, in part, the
company for past construction expenditures; and to pay
at maturity $9,475,300 of Hudson County Gas Co. first
mortgage 5% gold bonds/ due Nov. 1, 1949. Bids ex¬
pected to be opened June 7.
•
Puget Sound Seed Co., Inc.
May 10 (letter of notification) 20,000 shares ($1 par)
capital stock. Price, $1.25 per share. No underwriter.
For additional working capital.
Office: 1411 Fourth
Avenue
stock.
stock
June
Edison Corp.
shares
($100
•
to
one new
Proceeds to
Texas
Sunny Hills Ranch, Inc.
pre¬
.
Oil &
-
Newhard, Cook & Co.,
as
underwriters.
Gas
Bros.
&
Hutzler; Lehman Brothers.
Lackawanna
&
Western
*
/
./
/
RR.
.
(5/25)
for bids td
be
re¬
Treasurer, at Room
dated
April 1, 1949, and are to mature $210,000 annually
1, 1950-64. Probable bidders: Halsey, Stuart &
Inc.; Salomon Bros. & Hutzler; Freeman & Co.; The
April
First Boston
Brothers
•
year
,
Corp.; Harriman Ripley & Co. and Lehman
(jointly).
Iowa
May
Power & Light Co.
12 reported company may be in the market this
with $7,500,000 first mortgage bonds and $3,000,000
common
Rys.
Co.
stock, the latter to be sold to United Light &
(parent).
Bidders for bonds may include
Halsey, Stuart & Co. Inc.; Salomon Bros. & Hutzler;
Kidder, Peabody & Co.; Lehman Brothers; Blyth & Co.,
Inc.; W. C. Langley & Co., and Union Securities Corp.
(jointly); The First Boston Corp.; Glore, Forgan & Co.,
and
\
G.
A.
Co.
a
S.
stockholders, in the ratio of
2008, 140 Cedar Street, New York, before noon (EDT)
May 25 for the purchase of $3,150,000 in l-to-15-year
equipment trust certificates.
The certificates will be
Blosser, Chicago; Carr & Co., Detroit, and Lester & Co.,
Proceeds—To build chemical plant and to
replace working capital used for capital additions. [Un¬
U.
common
The company has issued invitations
ceived at the office of J. G.
Enderlin,
Co.
previous registration statement (No. 7637),,which
became effective Sept. 24, 1948, company sold 43.159
shares of 6% cumulative preferred stock for a total of
$97,108 and removed 131,841 shares from registration
March 21, 1949.]
Public Service Co.
market
Delaware
Los Angeles.
der
per-5
be
& Beane and
mon
Trenton Chemical Co., Detroit, Mich.
March 30 filed 131,841 shares 6% cumulative convertible
class B preference
($2 par). ••Underwriters—Straus &
Becker
A;/ /
&
Co.
(jointly); Harriman Ripley &
■.
'
•
.Kansas City Power & Light Co.
May 12 reported company will require additional pub¬
lic financing to complete its construction and expansion
program.
Details not available.
Gas
Corp., Shreveport, La. (5/25)
April 26 (letter of notification) 800,000 shares (100 par)
common. ;Price—37V20 per share.
Underwriter—Stewart
J. Lee & Co., New York. For drilling and equipping five
wells and for working capital.
Virginia Electric & Power Co. (6/6)
May 4 filed $20,000,000 first & refunding mortgage bonds,
due June 1, 1979.
Underwriters—Names to be deter¬
mined through competitive bidding.
Probable bidders:
White, Weld & Co.; Union Securities Corp.; Stone &
Webster Securities Corp.; Halsey, Stuart & Co. Inc.;
Glore, Forgan & Co. and W. C. Langley & Co. (jointly).
Proceeds—For construction.
Bids expected to be opened
6.
working
"/-/•'••••//
,
a
of actual
System, Inc.
May 13 reported company has under consideration the
sale early in September of $11,500,000 debentures. Prob¬
able bidders: Morgan Stanley & Co.; Halsey, Stuart &
Co. Inc.; Merrill Lynch, Pierce, Fenner &
Beane; Salo¬
Co.; Merrill Lynch/Pierce, Fenner & Beane
Rauscher, Pierce & Co.
>
;
and
on
record
according to M. S. Luthringer,
contemplating offering 446,GOO shares of
/Columbia
&
—Beer
$14,625,000
leadership of The First Boston Corp.
ner
'
.
of
adequate
Clinton Industries, Jnc.
May 16 reported company plans sale of 150,000 common
shares at an early date with Merrill Lynch, Pierce Fen¬
underwriter.
/
loan
an
•
^Engineering & Manufacturing Co., Inc.,
build necessary
;
No
as
company,
is
upon
the
Dallas, Texas
April 22 (letter of notification) not more than $100,000
($1 par) common stock. Price, at market. Underwriters
porate
''/• //.
share.
per
-
Depend¬
conditions, it is expected this offer¬
made about the middle of June and will
be underwritten by a group of investment bankers under
Underwriters—Wagenseller & Durst, Inc.,
and Lester & Co.
To buy Antelope Liquid Gas Co.
$15.95
;
share for each five shares outstanding.
ing will
$25 per share.
Price,
soon
stock to
common
series B preferred and 20,000 shares ($1 par) common—
issuable upon conversion of preferred. Price—Preferred
stock.
as
Illinois
the
12
President,
determined
be
refinance bank
basis
Central
May
(6/1-15)
cumulative
par)
Underwriters—Names
*•"
■
ferred.
15.
•
Raymond Concrete Pile Co., New York (5/23)
May 12 (letter of notification) 389 shares of common
(treasury) stock (no par).
Price, market (about $18.75
per share.
Stock will be sold on New York Curb Ex¬
change through Kidder, Peabody & Co.
General cor¬
'
Of the prefer¬
ent
Y.)
' '
•
Caterpillar Tractor Co.
May 17 stockholders, among other thihgs, created an
issue of 350,000 shares of new preferred stock.
Company
is negotiating with a nation-wide investment
banking
syndicate headed by Blyth & Co., Inc., for the public
offering early in June of 250,000 shares of new pre¬
Gas Service, Jhc., Ontario, Calif.
(letter of notification) 4,000 shares ($25 par)
March 31
June
Building, Seattle, Wash.
purposes.
(N.
Brothers
WA///-V/
/■'/
earnings and other conditions permit.
Suburban
determined
for such purposes.
stock.
manent
through competitive bidding. Probable bidders on bonds:
Halsey, Stuart & Co. Inc.; The First Boston Corp.; Har¬
riman Ripley & Co.; Kidder, Peabody & Co.; Otis & Co.
On Preferred: W. C. Langley & Co.; Kidder, Peabody &
Co.; Stone & Webster Securities Corp. and White, Weld
& Co. (jointly); Lehman Brothers; The First Boston
Corp.
Proceeds—To pay off $1,500,000 of short-term
notes and for construction;
Bonds expected June 1 and
ital
series E,
through competitive bidding. Probable bidders: Halsey,
Stuart & Co. Inc. (bonds only); The First Boston Corp.
and Coffin & Burr Inc. (jointly); Kidder, Peabody &
Co. and Blyth & Co. (jointly); Smith, Barney & Co. and
Harriman Ripley & Co. (jointly).
Proceeds—For con¬
struction, including repayment of short-term borrowings
ferred
Island
Lehman
underwriter, Wertheim & Co..
intend to
Texas
common.
Co./and
&
'///'A;/ 'A:;:y*V; A/A/'■
Brooklyn Union Gas Co.
//May 12 Clifford E Paige, Chairman, states that directors
Sunny Hills Mutual Water Co., Fullerton, Calif.
May 11 (letter of notification) 892 shares ($1 par) cap¬
of New Hampshire
May 18 filed $4,000,000 first mortgage bonds,
due
Dallas
Ripley
•
e
Co.; Blyth & Co., Inc.
•
Co..
Harriman
tional
South¬
registered
1979, and 40,000
ferred
Common stockholders will be entitled to
purchase
of their ratable allotment; and holders
Gas
Halsey, Stuart
on increasing
authorized
stock from 1,40C,560 shares to
2.500,000 shares
Company has no plans at present for immediate dis¬
posal of any of the additional common shares. Tradi¬
May 9 filed $2,750,000 of first mortgage bonds, due May
one-for-
eight basis. Unsubscribed shares will be sold to under¬
writers, who also may receive compensation for solicit-,
ing stockholder subscriptions.
The company requests
that the offer and sale of the stock be exempted from
the
being
Staten
(par $10).
May 9 filed 104,804 shares of common stock
be offered to stockholders on
Offering—To
Union
Probable bidders:
common
construction
in
mar¬
•
Bristol-Myers Co.
July 5 stockholders will vote
ex¬
1-for-10
a
'///. ;',
$5,000,000 equip¬
Inc.; Salomon Bros.' & Hutzler; The First Boston
(jointly)//
•
'Sperry Corp., New York (6/1)
May 13 filed $20,000,000 sinking fund debentures, due
June 1, 1969.
Underwriter—Lehman Brothers, Merrill
Lynch, Pierce, Fenner & Beane and Hornblower &
Weeks.
Proceeds—To discharge
bank loans and for
working capital.
April 25 filed 1,150,000 shares ($1 par) common of which,
1,000,000 on behalf of company and 150,000 by New York;
Co., Ltd.
Price—50 cents per share.
Underwriters—
To be named by amendment. -Proceeds—For adminis¬
tration expenses and drilling.
'
on
investment
Co.
Corp.;
18,378 shares will be used by
Southern Union to pay for expenses of merger. Under¬
writer— E. H. Rollins & Sons, Inc.
Toronto Canada
Ltd.,
&
subsidiary, Alabama Gas Corp.
ence
line.
Power
stockholders
Proceeds—For
stock
common
share of Texas Public Service
For construction
share. No underwriter.
per
offered to
RR.
ment trust certificates.
Co.
May 9 filed $3,679,464 of sinking fund debentures, due
July 1, 1964, and 306,622 shares ($1 par) preference stock
under a proposal to merge with Texas Public Service
Co.
Stockholders of the latter company will receive
$12 of debentures and one share of preference for each
27, 1949
Atlantic Coast Line RR.__
Bids
&
ket about June 20 for the sale of about
continua¬
a
(jointly); Harris, Hall & Co. (Inc.),
Ohio
Baltimore
May 18 reported company is expected to be in the
Gas
Underwriter—None.
Southern
Preferred
Staten Island Edison Corp
June
ern's
(6/27)
•
(6/1)
Proceeds—To finance
Natural
Offering—To be
1949
15,
RR.
Halsey, Stuart & Co. Inc.; Salomon Bros. & Hutzler; The First Boston Corp.; Harriman Ripley & Co. and
Co.;
Corp.; Harriman Ripley & Co.; Carl M.
and for additional
Equip. Trust Ctfs.
Southern Ry._—
Southern
basis.
1949
June 8,
Coast Line
ders:
Co., Birmingham, Ala. /
May 13 filed 141,853 shares '($7.50 par) common stock.
7, 1949
Oklahoma Gas & Electric Co
Electric Co.
tion of the company's construction program.
pected to be opened on or about June 1.
Common
Public Service Electric & Gas Co.—.
<
&
Gas
Co. Inc.; The First Boston Corp.; White, Weld &
Shields & Co. (jointly); Kidder, Peabody &
Loeb, Rhoades & Co.
"
June
Indiana
Union Securities
6, 1949
Bridgeport Hydraulic Co.____
Virginia Electric & Power Qo
Atlantic
of
construction
finance
Proceeds—To
Office: 7904 Santa Monica
Calif.
46,
Lehman Brothers
and
c___Equip. Trust Ctfs.
(EDT)__
June
York.
Southern
__Bonds
Edison Corp.__
New
working capital.
Hollywood
May 9 reported company plans the sale about June 27
$8,685,000 equipment trust certificates. Probable bid¬
l-for-4 basis at $7.62% per share.
1., Underwriter—Kidder, Peabody
a
April 29 filed $3,000,000 first mortgage bonds, due June
.1, 1979. Underwriters—Names to be determined through
competitive bidding.
Probable bidders: Halsey, Stuart
Debentures
'/f ,tc•/' ■ June 2, 1949 /A/'/'' /
Seaboard
Noon
—•
Co.,
on
program.
......Preferred
——Bonds
Southern Indiana Gas & Electric Co
v
expire
&
Okla._..__
Co. of
May 13
Rights
1949
Northern Pacific Ry._..—
Boulevard,
^
Electric & Gas Co.
Carolina
record
Common
S. Oil & Gas Corp
tures and for
at
April 11 filed 308,000 shares common stock (par $4.50).
Offering-—Offered for subscription by stockholders of
(EDT)__- ^-;—Equip. Trust Ctfs.
State Electric & Gas Corp
Common
Noon
offered
Youth
Films, Inc., Hollywood, Calif.
May 9 (letter of notification) 500 shares of capital stock.
To be sold privately at $100 per share. No
underwriting.
To defray costs of producing four feature motion
pic¬
September,
were
(EDT)___.
.
•
1948, *99,000 shares of stock (par 250)
$3 per share of which 28,010 shares
sold.
Unsold 70,990 shares split into 425,940 shares and
now being offered;]
^ /- %
«* 4 /
*.
J :/\ - * J
/
[In
RR.
45
Darling
.
NEW ISSUE CALENDAR
(2201)
•
Wasatch Combined Mining & Milling Co.
May 13 (letter of notification) 500,000 shares of capital
stock (par 10c).
Price, par. No underwriter. j T6'"pur¬
chase necessary equipment for the mining of ore, to
•
Missouri-Kansas-Texas
RR.
(5/24)
Company will receive bids up to noon (EDT) May 24
at its office,
St. Louis, for the purchase from it of
$2,550,000 equipment trust certificates, third series, 1949.
The
certificates
are
to
mature
1949, through June 15, 1964.
Stuart
semi-annually Dec. 15,
Probable bidders: Halsey,
&
Co., Inc.; Salomon Bros. & Hutzler; Harris,
&" Co./(Inc.); The First Boston Corp.; Harriman
Ripley & Co. and Lehman Brothers (jointly).
Hall
•
New
England Electric System
stockholders voted to increase common stockj
from 7,500,000 to 8,500,000 shares and to reduce pari
from
$20 to $1.
Expected sufficient stock, to raisej
$6,000,000, will first be offered stockholders.
Probable!
bidders include Merrill Lynch, Pierce, Fenner &
Beane,
May
17
■Kinder, Pegbody & Co, and White, Weld & Co. (jointly);!
Harriman Ripley & Co. and .Goldman, Sachs & Co.
(jointly).
'
/
-
buildings, for exploratory work, and for
capital and development work.
Office: 307
.
;///
(Continued
on page
46)
/
:H:
46
(Continued from page 45)
•
Northern
Pacific
Ry. (6/1)
The company has issued invitations for bids to be re¬
ceived June
for the
1
purchase from it of $6,450,000 in
equipment trust certificates, to be dated June 15, 1949,
and to mature serially June 15, 1950-64. Probable bid¬
ders: Halsey, Stuart & Co. Inc.; Harriman Ripley & Co.
and Lehman Brothers (jointly); The First Boston Corp.;
Lee Higginson Corp.; Harris, Hall & Co. (Inc.); Salomon
Pacific Gas & Electric Co.
May 17 reported company plans the sale in October of
$75,000,000 of bonds. Probable bidders: Halsey, Stuart
& Co. Inc.; Blyth & Co., Inc.; The First Boston Corp.
of common stock to its parent, American Power' &
Light Co.
Probable bidders for bonds: Halsey, Stuart
& Co. Inc.; The First Boston Corp.; Blyth & Co., Inc.;
Kidder, Peabody, & Co. and Smith, Barney & Co.
(jointly); W. C. Langley & Co. and Glore, Forgan & Co.
(jointly); Carl M. Loeb, Rhoades & Co. and E, H. Rollins
& Sons (jointly); Union Securities Corp.; DrexelCo.
and Hemphill, Noyes & Co. (jointly); Lehman Brothers;
000
Owen, Farr, Gallagher & Walton, 15 Broad Street, New
York, up to noon (EDT) June 2. Probable bidders: Hal¬
sey,
man
Stuart & Co. Inc.; Salomon Bros. & Hutzler; Harri¬
Ripley & Co. and Lehman Brothers (jointly); The
First Boston Corp.
•
South
,
Carolina
Power Co.
May 17 reported plans to sell •$4,000,000 of bonds this
year to finance part of its 1949 construction program.
Probable bidders include: The
Thursday, May 19, 1949
CHRONICLE
FINANCIAL
&
Salomon
First Boston Corp.; Hal¬
V
& Hutzler.
Bros.
Blythj
•
Union
Gas
System,
.
Pennsylvania Electric Co.
May 9 reported company is expected to be in the market
for $5,000,000 of bonds and $5,000,000 of preferred stock,
when its parent, Associated Electric Co., has retired all
of
its
indebtedness.
Probable
bidders
for
preferred:
Kuhn, Loeb & Co.; Kidder, Peabody & Co.; Smith, Bar¬
ney & Co.; White, Weld & Co.; W. C. Langley & Co.
For bonds: Halsey, Stuart & Co. Inc.; Harriman Ripley
& Co.; The First Boston Corp.; Equitable Securities Corp.
Rochester Gas & Electric Corp.
new money requirements of the corporation for
May 10
the balance of 1949 amount to $3,500,000, but no defini¬
tive
plans for raising these funds have yet been de¬
veloped. In addition, company's management is con¬
sidering the advisability of carrying out the refunding
of its
series ci
H, and I bonds, amounting to approxi¬
mately $8,000,000.
•
St.
Joseph
May 12
company
Light & Power Co.
plans to sell bonds to the public and
additional
Electric
common stock
to parent, Continental Gas &
Corp., in order to tiannce its 1949-51 construc¬
tion program.
Probable bidders for bonds: Blyth & Co.,
Inc.; Halsey, Stuart & Co. Inc.; Harris, Hall & Co. (Inc.);
White, Weld & Co.; Salomon Bros. & Hutzler.
&
Co.
Inc.; Salomon Bros. & Hutzler; The First Boston ;
Harriman Ripley & Co. and Lehman Brothers;
(jointly); Harris, Hall &. Co. (Inc.).
company to construct and operate the Canadian part of
the pipe line. It is expected, an American corporation J
will be formed to construct andv. operate/ the American
Corp.;
:
end of the line and that
application will be made to the
certificate of necessity.
The
completed line will, it is expected, cost about ;$175,000,000. The financing of the projected line wilTbe handled
by Eastman, Dillon & Co.
|
Southwestern Gas & Electric Co.
®
FPC in due course for
SEC permission to sell com¬
petitively $4,500,000 first mortgage bonds, series C, due
June 1, 1979, and $2,500,000 preferred stock.
Probable I
bidders include: Blyth & Co., Inc., and Stone & Webster
Securities Corp.;
Lehman Brothers; Halsey, Stuart & :
Co, Inc. (bonds); White, Weld & Co.; Harriman Ripley
& Co.; The First Boston Corp.; Glore, Forgan & Co.
and W, C. Langley & Co.
(jointly); Merrill Lynch,
Pierce, Fenner & Beane.
May
Seaboard Air Line RR.
(6/2)
Bids for the purchase of $3,435,000 equipment trust cer¬
tificates series F, dated June 1, 1949, due in 15 equal
annual
and
12
May
company
asked
•
11
Worcester
County Electric Co.
has petitioned the Massachusetts Depart¬
company
.
years,
and bear interest not
out
because
the
of
circular mailing
By JOHN BUTTON
mailed
was
to
.
The
We
a
14,960 Shares of $1.20 cumulative participating preferred stock was
/underwritten by a syndicate headed by William M. Rosenbaum &
Investment
The day of the offering an advertisement appeared in the "Union
News" which is a bi-weekly publication of the General Electric Com¬
Field
Annual Field Day at Sleepy Hol¬
low Country Club, Scarborough,
Springs, W. Va.)
June 21-24,1949 (Canada).
N. Y.
•
of Canada 33rd„annual
the Board' of June 6, 1949 (Chicago, 111.)
pany's Local 255. The evening before this advertisement was run in
Chicago Stock Exchange annual
the union paper, the Berkshire "Evening Eagle" also ran a two-column Governors at the Greenbrier.
now
come
underwriters, included
picture of the head of the loan company,
and concluded by saying "that Berkshire County investors have
had little opportunity to invest in local organizations through new
issues of stock."
tative
of the
a
Mention
was
>'
■!K copy of this
of the circular that
low
it
the
*
>
newspaper story was then reproduced on one side
was sent to the" General Electric employees.
(Be¬
usual
the
information
top half of the page, there
was
printed
a
(Baltimore, Md.)
Traders As¬
sociation
annual
outing at the
Hillendale Country Club.
June
map of the territory
served
by the Federal Loan Company, and a reproduction of the
offering advertisement. At the bottom of the page this legend apr
peared: "If you are interested in further information with regard
to this stock, it may be obtained from Harry B. Johnson, Tifft
(Cincinnati, Ohio)
Municipal Bond Dealers Group
Annual
Spring Party.
Cocktail
party for out of town guests June
6th; outing June 7 at the Kenwood
Country Club.
June 6-7, 1949
Baltimore Security
May 23, 1949
Association
(Chicago, III.)
Stock Exchange
of
Firms' members assemble
on
route
June
(Chicago, 111.)
Chicago luncheon
meeting, Illinois Room of the La
Salle
June 9, 1949
New
York
ciation
(New York City)
Golf
Security
of
Salt Lake
May 26, 1949
Annual
Tournament
at
Outing
the
and
Weston
June
24, 1949 (New York City)
Investment
Association of New
York annual
outing at the West¬
chester County Club, Rye, N. Y.
(New York City)
Municipal Bondwomen's
Club
spring luncheon meeting at 12:30
p.m. at The* Wall Street Club.
~
(Denver, Colo.)
Stock
June 10, 1949
V
(Chicago, 111.)
June
Bond -Club
(Buffalo, K. Y.)
of
Buffalo
-
25, 1949 (Chicago, 111.)
Bond
Traders
Club
of
Chicago
outing at the Nor¬
Hills Country Club.
/ <
June 28,
1949 (Detroit, Mich.) '
Securities Traders Association of
Detroit and Michigan annual sum¬
mer
City.
>
an¬
nual outing at Inverness Country
Club.
•
:
annual summer
Weston, Mass.
June 9, 1949
Exchange
Firms spring meeting in Denver
and
Security Traders Association of
Angeles annual spring party
at the Arrowhead Springs Hotel.
dic
tion at Schwartz Restaurant.
May 24-28, 1949
30th
Golf Club,
Analysts annual meeting and elec¬
Association
(Boston. Mass.)
Boston Securities Traders Asso¬
Society of
:
.
(Los. Angeles,
Los
.
Hotel.
May 24, 1949
1949
8,-1949 (New York City)
Municipal Forum of New York June 24, 1949 (Toledo, Ohio)
Bond Club of Toledo 15th
annual meeting and election.
spring meetings.
May 23, 1949
meeting >at
Lodge, Ontario.
24-26,
f/
.;
Dealers Association
Calif.)
-
"
Bond Club of
* *
required by the Securities and
Exchange Commission on all such mailings. This gave the number
of shares offered, a brief description, price to public, underwriting
discounts, proceeds to company, and the exemption and approval
Or disapproval clause etc.) On the opposite side of the circular, on
was
Minaki
Meeting of
May 20, 1949
to
also made that the Pittsfield represen
selling group was Tifft Brothers, managed by Harry
B. Johnson.
Investment
election.
to Main Street in earnest
The story was headed, "Loan Company Seeks Capital From General
Electric Labor."
The story of the Pittsfield Loan Company was
(presented in the main highlights; its long record in business, how
it had grown, the reason for the additional working capital, the
(Detroit, Mich.)
,
Investment Bankers Association
Spring
;
.
Hay 18-21,1949 (White Sulphur
Co.
1949
ing at Wampanoag Country Club, June 17,11949 (New Jersey)
West Hartford, Conn.
Bond'Club of New Jersey Annuar Field Day at Rock Spring
June 3,1949 (New York City)
Club, West Orange, N. J.
'
;
Bond Club of New York 25th
EVENTS
In
17,
Bond Club of Detroit annual
(Connecticut)
outing at the Grosse lie Golf and
Security Traders Association of
Country Club.
; /...
Connecticut annual summer out¬
COMING
the General Electric
In order to tell you about the circular
we have to reconstruct what
appears to be a well planned campaign.
Recently the Federal Loan Company of Pittsfield, made the
first public offering of its stock in its 22-year history. An issue of
Security Traders As¬
Country'Club,
June 3, 1949
the employees of
Street had
Cleveland
(Cleveland, Ohio)
sociation annual summer party
> at
Kirtland County
June
Company in Pittsfield, Mass.
news item that Wall
June 17, 1949
to find out more if you were interested.
in the shop—the fellow who is
circular that
an
advertisements.
a
directly
working for wages. Burton
M. Strauss of William M. Rosenbaum & Co., 285 Madison
Avenue,
New York, members of the New York Stock
Exchange, has sent us a
man
as
'
Municipal Bond Club of Boston
Annual
Outing at the Concord
ad would stand Country Club, Concord, Mass.
Such
other financial
of
June 17, 1949 (Boston, Mass.)
follow-up told the whole story and where 4°
We would say that it was
good job—paving the way for business and a strong personal
follow-up either over the telephone or by additional mailings.
go
The trend toward selling the smaller investor is continuing.
have just received an interesting campaign designed to go
absence
exceeding $0
Proceeds-would
314%.
indebtedness to banks, incurred to finance
temporarily a portion of the company's construction
program. It is anticipated the sale of the bonds will be
consummated in early July.
-'-'"K'.. ■
In addition, it will sell $3,000,-
ing for business/from this type of investor;
over
be used to pay
Power & Light Co.
reported company plans to sell $7,000,000 of 1
public in order to finance its construction
Securities Salesman's Corner
authority to issue $5,500,000
of first mortgage bonds, to mature in not
to the
expansion program.
a
ment of Public Utilities for
Texas
bonds
"
The
mally offered. (This may have created interest among some other
investors in addition to General Electric employees.) The advertise¬
ment in the labor paper was the right place to go if you were look¬
to the
.
4
•
installments, will be received at office of Willkie,
]
i
V
•
Inc.
J
Loeb,; April 18 stockholders "increased authorized preferred
Rhoades & Co.
'
*
stock (par $100) from 5,000 to 8,000 shares and: author- }
•
Southern Ry.
■'S'm'-v*'" ized common (no par) from 80,000 to 100,000 shards.;
Company proposes to offer 2,000 preferred shares 'in
May 17 stockholders approved the creation of a newi
June to residents of Kansas only.
v
first mortgage on the East St. Louis (Ill.)-New Albany.
;
(Ind.) line, and with approval of the ICC to sell $12,- t
•
Wert Coast Transmission Co., Ltd.
'
474,000 principal amount of bonds in order to refinance ,
May 13 announcement was made of the initiation of a J
the company's St. Louis Division first mortgage 4%
project for the construction of a 1,400 mile 30-inch nat¬
bonds maturing Jan. 1, 1951.
Probable bidders: Morgan
ural gas pipe-line to run from northern part of Prov¬
Stanley & Co.; Halsey, Stuart & Co. Inc.; The First Bos- / ince of
Alberta, Canada, west and then south through
ton Corp.
passes in the Canadian Rockies to Vancouver, B; 0. and
•
Southern Railway
(6/8)
thence
south through" Washington
and- Oregon irito
The company, has issued invitation for bids to be re-•
Northern California.
An act has been passed by the
ceived June 8 for the purchase from it of $7,500,000 in
Senate and House of Commons of the Canadian Parlia¬ H
equipment trust certificates, to mature in 30 equal semi- <
ment and sanctioned by the Governor General creating
annual installments.
Probable bidders: Halsey, Stuart
the West Coast Transmission Co., Ltd., the Canadian
sey, Stuart & Co. Inc.; Harriman Ripley & Co.;
& Co., Inc.; W. C. Langley & Co. and Carl M.
Bros. & Hutzler.
•
COMMERCIAL
THE
(2202)
,
S
party, at the Lochmoor Club,
Pointe Woods, Mich.
V
Grosse
annual
June 28, 1949 (Omaha, Neb.)
Nebraska
investment dealers
Bond'Club spring ; frolic ht the
on
Omaha Country Club, to bb pre¬
price of the stock at $20.00 was one that would have appeal to those lation of officers,
June TO, 1949 (Los Angers, Calif.)
ceded by a cocktail party June 27
Who might have some savings to invest in a local security that was
Bond Club of Los Angeles field
May 27, 1949 (New York City);
at the Ohiaha Athletic Club in
well town, and that offered a 6% return wth the further attraction
Toppers Annual Outing at Rock day and outing at the Bel-Air honor of
of a participating interest in additional earnings of the company.
out-pf-towh gdesta.
'
;,
;}»1
Springs ' Country
Club,
West Country Club. :
There Was also a total gross Spread of $2.40 in the business and it
Sept. 9-U, 1949 (Oregon)
Is'.
Orange, N. J. ■ ■'./>. ,-•/
June 10-12, 1949 (Minneapolis, v
would appear that this was large enough to allow for the expense
Pacific Northwest Group of the
involved in soliciting orders that might average out to be fairly May 27, 1949 (Philadelphia, Pa.)
Minn.)
Investment Bankers Association
Philadelphia Securities Associa¬
Twin City Security Traders As¬
small.
The publicity obtained in the Berkshire "Evening. Eagle"
1949
meeting at the Gearhart
tion
annual- field
day
at the sociation Summer Party at Gull
practically told the highlighted story of the offering in itself, and
Brothers," and
t
gave
the firm's address and telephone number,
that this type of advertising would pay if used
situations such as was the case in this instance. First of all the
It would appear
Eowling League of Bond Trad¬
Club Of Chicago annual din¬
ner at Morrison Hotel, and instal¬
picnic
ers
Club.'
at
the Wanakah
Country
•
.
v
;
the combined
use
of this reprint along
with the original offering an¬
nouncement, when put together in a simple form (using both sides
of the circular) we believe is an original and effective, yet inexpen¬
Club, Aronomink, Lake.
Aronomink Golf
■Pa.
May 30, 1949
"• •'■"//
v
}'/
•
(New Orleans, La.)
June 10, 1949 (New York City)'
Hotel, (jearhart, Oregon., /;
Oct. 5-9> 1949 (Colorado HpHng)s»
•.
Colo.)
r
:.
National Security Traders As-*
Municipal Bond Club of New
Bond Club of New Orleans an¬
mailing. By sending it to the employees of the General Elec¬
York Field Day at Sleepy Hollow 80010:^611* Annual Convention at
Company, there were no doubt quite a few who received it Who nual field day at the Metairie
The Broadmoor Hotel.
Country Club.
/
• v v ,
knew of the Federal Loan Company, .since it was a well established Country Club.
local concern with whom they may have even done business at some
Dec. 4-9, 1949 (Hollywood, Fla.) ^
June 3, 1949 (Chicago, 111.) / •
;VV, June 15,1949 (Minneapolis,Minn.)
time or. other.
Investment Bankers Association
'.V/-... .^
Twin City Bond Club annual
Bond Club of Chicago annual
,
sive
tric
-
..
This
campaign has the following good points to recommend it:
Favorable
publicity was obtained for the
issue before it was for¬
field dav at Knoll wood
Forest. 111.
■
Club, Lake picnic at the White Bear Yacht
'
'
.
Annual Convention at the
wood Beach Hotel.
Holly¬
COMMERCIAL, &
THE
Number 4804
Volume 169
FINANCIAL
CHRONICLE
by a v desire to help spur equity: big offering of 800,000 shares of
new $25 par value common stock
financing, or its equivalent. ; \
Was placed on the market yester¬
Gertairily - the reduction in f;
day, May 18, at $32 Vi per share.
requirements on such;
^ margin
purchases from 50 to 25% should
:
';
for financing
taking, which through its con- '
if version feature, is equivalent,to i
4^
i
equity • financing.,:
•
'V;V|:;';t: f ■ \
Telephone
'
Underwriters
graph' Go's
new ten-year 3Ys%
debentures now have
convertible
been ;trading on a "when issued"
basis for the better part of:a fort¬
ing
night Without arising ahythihg in
the way of real trading enthusi¬
!
ica's
In
fact -dealers
Putting It
*
■*'
more
■{.. He had recited the experience
of Pennsylvania Electric Co. when
it sold 101,000 shares of preferred,
in 1945, to 838 accounts of which
only 84 were in its territory, to
replace about a like , amount of
preferred held by 6700 accounts
in its area. "If it is desirable 4o
Major buyers, of
course, are not
particularly1 interested in the con¬
version privilege, which the de¬
bentures carry (as such) though
they realize that with a good stock
market this privilege could add
handsomely
to
their, markets
ability.
'
home
the
if
and
owned
4 At the moment, keen observ¬
ers
report that there is
no
ap¬
the
course
the
tremendous
undertaking,
to
up
short.
or
of this issue
will
put the
in funds to liquidate
it
can
a
held
note
by
it
could
$395,000,000
run
there-
or
abouts, is probably
of
retarding-
a
influence at the moment.
RALEIGH, N.
Ehringhaus is
Merrill
C.
k
Vice Pres. & Treasurer
CONTAINER
CORPORATION
dend
1949, a regular quarterly divi¬
May 9,
of
10c
Common
of
of
National
the
payable
Corporation,
was -declared on
share
per
Stock
10,
1949
May 20,
i
PITTSBURGH
all
1949.
June
record
The Board of Directors of
the
Container '
to
CONSOLIDATION
HARRY GINSBERG, Treasurer
Newmont Mining
Haughton
Pierce,
Lynch,
302 South
—
Fenner,
•
a
Checks will be mailed.
Dividend No. 83
Charles £. Beachley,
On May 17, 1949, a dividend of SEVENTY FIVE CENTS (75c) per share was declared
on the Capital Stock of NEWMONT MINING
Secretary-Treasurer
May 16, 1949,
CORPORATION; payable June 14, 1949, to
stockholders of record at the close of business
Salisbury Street.
May 27, 1949.
With Leo Schoenbrun
'i v-V U
GUS MRKVICKA,
-*•
:;
Treasurer.
The
Singer Manufacturing
Company
(Special to The Financial Chronicle)
:
LOS
The
ANGELES, CALIF.—Rob¬
e. i. du Pont de Nemours
Sctioen is with Leo Schoen¬
ert L.
& Company
brun. .1373 Westwood Boulevard.
The
COMPANY
RAILROAD
New
A'
dividend
ferred
Stock
Railroad
of
1949.
to
the Pre¬
ScntfVrn
has been declared payable
1949, to stockholders of record at the
busmess
ol
May
1949.
28,
of $4.00 per share on the Ordi¬
Stock has been declared payable June 29,
1949, to stockholders of record at the close
of business May 28,
1949.
A
dividend
J.
of
May
pany's 2%s due in
rently
1961
moving
The -New
l63%,
to
The
issue traded initially
new
101 Vs.
10914 and is
It
have
would
around
now
to
move
July 8, 1949; also $2.50 a share, as the
interim dividend for 1949, on the out¬
standing Common Stock, payable June 14, 1949,
to stockholders of record at the close of business
on
May 23. 1949.
L. duP. COPELAND, Secretary
REEVES BROTHERS, inc.
indicated
yield
of
AtlasCorporation
Company
Dividend
on
record
that a'regu¬
June
dividend
of
share has been declared
on
lar
v
is hereby given
quarterly
mon
:
Stock
of
40^
per
Walter A. Peterson,
Treasurer
May 12, 1949.
AT the meetingAmericanBoard of
of the Woolen
Directors of
Company, held today, the following
were
declared:
THE COLUMBIA
ac¬
GAS
SYSTEM, INC.
BRIGGS & STRATTON
tion halving margin requirements
securities accruing
on
Earning Statements'
"rights,"
for
Months Ended March
HELP
background
markets
offices
Good
and
and
statistical
knowledge
essential.
are
quarterly
(25c)
of
Send par¬
the $4 Cumulative
Preference Stock
Realty & Construction Cq., Inc.
DIVIDEND NOTICE
The
Board
fifteen
of
cents
an
per
(without
less
par
Guaranty
Trust
Company
on
per
Stock
payable
share
this
of
June
25,
of
the close of business June
'
CONNETT,
15,
'
NORMAN TISHMAN,
Treasurer.
per
tax,
Capital
1949, to stockholders of record
at
1949.
F. S.
de¬
Directors
quarterly dividend of
corporation,
New York.
of
2.81
dividend
the
a
cents
dividend
share,
privilege
the capital stock
declared
has
extra
the
on
_
twenty-five
of
and
(15c)
Wisconsin
cent
Directors
dividend
share
per
a
thirty-five cents (35$)
Dividend checks will be mailed by
The
of
Board
clared
June 15, 1949 to stockholders of rec¬
ord Jqne 1,-1949.
Transfer books will not be closed.
89th DIVIDEND
Corporation's
Registration
Statement
for $45,000,000.
principal amount of 3'/^% Debentures Dife
1973, filed with the Securities and Exchange
Commission pursuant to the Securities Act
of 1933, as amended. Upon request, ad¬
dressed to the Corporation at 120 East 41st
Street, New York 17, N. Y., copies of such
earning statements will be mailed to the
Corporation's security holders and to othey interested parties. Such earning statements
are
made generally available to security
holders in accordance with the provisions of
Section
11(a)
of the. Securities Act of
1933, as amended.
".iliST
on
Prior
share
July 1, 1949.
A quarterly dividend of $1.00 per
share on the Common Stock payable
CORPORATION
after the effective date of the
Securities Analyst specializing in
public utilities is wanted by a
prominent non-mernber firm with
facilities.
Twelve
31, 1949
generally, available, to its security holdeqr
corporate and consolidated earning state¬
ments
for the period April 1, 1948 to :
March 31, 1949, such period beginning
ANALYST
nationwide v branch
the
The Columbia Gas System, Inc. has made
WANTED
PUBLIC UTILITY
wire
per
payable June 15, 1949 to stockholders
of record June 1, 1949.
A regular quarterly dividend of
$1.75 per share on the 7% Cumula¬
tive Preferred Stock payable July
15, 1949 to stockholders of record
ramws&SnwnoHl
Spur to Equity Financing?
OA
TISHMAN
regular quarterly dividend of
A
Financial Notice
Reserve
'
IN WOOLENS"
Convertible
moved, in its recent
REEVES, Treasurer
"THE GREATEST NAME
of business May 27, 1949.
$1.00
was
J. E.
May 16, 1949
of such stock of record at the close
dividends
around
Evidently the Federal
Company will not be closed.
<
Corporation,
1949, to holders
business
of
3, 1949. The transfer books
the Com-
Atlas
payable June 20,
close
the
at
of the
Notice
1949, to stockholders of
1,
July
Common Stock
Annual
2.5°%.
Board
NOTICE
quarterly dividend of 25c per
share has been declared, payable
JOSEPH M. O'MAHONEY, Secretary.
in the vicinity of 105 14 to give
an
Railroad
meeting, will be held at the principal office of
the Company, Room 20, Union Depot, in the
City of Albany, N. Y., on Wednesday, May 25,
1949, at 12 o'clock Noon.
r
Stockholders of record at 3 o'clock P. M., on
April 22, 1949, will be entitled to vote at the
meeting.
2.50%.
around
Central
of Election and the transaction of such other
business jas may be lawfully brought before the
about
yield
York
Meeting of the Stockholders of
The New York Central Railroad Company, for
the election of Directors and of three Inspectors
to
-
A
Albany, N. Y., April 16, 1949.
The
yield about 2.61%, and the latter
around
:
stockholders of record at the close of business
NOTICE
!
cur¬
101%,
around
ALEXANDER, Secretary.
Southern California Edison Co.'s
MEETING
the
and
The former is
H.
D.
10,
a.
2%s of 1957.
quar¬
$1.50
DIVIDEND
large way ,if the 3V8S should
w;ork Mown
around .the
yield
levejs now ruling for the com¬
a
1949.
Secretary.
MAHER,
declared
dividend of
second
nary
J.
has
$1.50 per share and an extra
per share payable on
June
14, 1949 to stockholders of record at the close
of business on May 25, 1949.
terly
dividend
on
17,
May
$4.00 per share on
The Alabama G^at.
Company
June 29,
Ciose
N. Y.,
York,
of
NOTICES
GREAT SOUTHERN
ALABAMA
THE
Board of Directors has declared this day
regular quarterly dividends of $1.12)4 a share
on the outstanding Preferred
Stock—$4.50 Series
and 87^ a share on the outstanding Preferred
Stodk—$3.50 Series, both payable July 25, 1949,
Directors
Board of
Wilmington, Delaware: May 16, 1949
DIVIDEND
COMPANY
COAL
meeting held today, declared a quarterly
dividend of 75 cents per share on the Com¬
mon
Stock of the -Company, payable on
June 11, 1949, to shareholders of record
at the close of business on May 27, 1949.
Corporation
connected with
now
New Issues
But the experts figure that in¬
stitutions would be interested in
on
CHARLES C. MOSKOWITZ
bank
a
in
rule, he argued that bet¬
ter deals can be negotiated for
equities. "Certainly if broadening
the equity market is desirable,"
he contended, "competitive bid¬
ding is no help."
Company, payable
will he mailed.
NATIONAL
(Special..to ..The Financial Chronicle)';
need the
Of
size
even
the
June 30, 1949, to stockholders of record at the
of business on June 9, 1949, Checks
par
no
With Merrill Lynch Firm
Declaring that utilities do not
j
preciable position in the deben- i
tures, either long
owned
of
Stock
at
part,"
he declared, "just how do you do
it under competitive bidding?"
(
k
home
quarterly, dividend of 37%c per
on
the outstanding Common
share
close
,
be
a
and increase its general funds.
Tegen,
nearly approach
"investment basis,"
an
may
The Board of Directors lias declared
"ROGER HACKNEY, Treasurer
On
Sale
A., F.
Assn.
Writers
Financial
head of General Public
Utilities Corp., declared flatly that
wihe. seeming lack of interest at
SEC's
the. moment, but they are hope¬
competitive bidding rule
ful that as. the time for delivery > "is no go as to commons and preferreds."
,/
of, '/rights" approaches the is¬
"v-nV
sue
of
shares
RECORDS
MGM
•
stock.
$3,000,000
the Line
on
dividend
share on the Common Stock pay1949, to holders of record
June 10,
today offer¬
are
THEATRES
•
May 18, 1949
May 31, 1949.
value cumulative preferred
easier for private industry."
Giving his views at a recent
forum sponsored by the New York
traders
and
able
PICTURES
MGM
DIVIDEND
The Board, of Directors declared a
•of 40*5 per
con¬
new
LOEWS INCUriPURATED
rporation
*
stockholders
little disappointed by
are a
80,000
company
asm."
alike
Co
ing United Biscuit Co. of Amer¬
A .board .spokesman in explain¬
ing the action, said it aimed to re¬
store preferential credit terms for
securities bought under subscrip¬
tion privileges and "make financ¬
Tele¬
&
$24,800,000
its huge
DIVIDEND NOTICES
Johns-Manville
m
struction program.
,
American
DIVIDEND NOTICES
47
JOHN3MANV1UI
no ducts
approximately
ceeds,
helpful to American Telephone's huge debenture under-
prove
r
The company will use the pro¬
),
(2203)
President
May 18,1949.
value) of the
Corporation, payable June 15, 1949, to stock¬
holders of record June 1,1949.
L. G. REGNER, Secretary
May 17,
1949
.
ticulars
to
cial
Financial
Box
G
518, Commer¬
Chronicle, 25
Park Place, New York 8.
&
THE
COLUMtHA-CAS SYSTEM, INC.
American Cyanamid
by E. D. Bivens, *
:
May 14, 1940. [
Treasure?
.V,
Company
,
•'
/
'
;>
J
;
...
WARD
PREFERRED DIVIDEND
The Board of Directors of
SITUATION WANTED
Ameri¬
Cyanamid Company on May
17, 1949, declared a quarterly divi¬
dend of eighty-seven and one-half
cents (87 Vie) per share on the out¬
standing shares of the Company's
3 Vz % Cumulative Preferred Stock,
Series A, payable July 1, 1949, to
the holders of such stock of record
at the close of business June 3,
can
SALES MANAGER
4
OR
.
WHOLESALE REPRESENTATIVE
COMPANY
BAKING
The Board of Directors has declared the
PREFERRED DIVIDEND—
The
j
regular quarterly dividend of $1.371/2
Preferred
1949.
following dividends:
June
Stock payable July 1,
a
share
on
the
1949 to holders of record
16,1949.
COMMON DIVIDEND
Executive,
25
years
investment
houses, seeks connection.
veloping leads.
Have
from
15
with
established
to
30
built
salesmen.
securities
expedience
with
good
The Board of Directors of
Experience in retailing/ wholesaling, de¬
large
successful
sales
Quadrupled retail sales
organizations
gross
in
firm.
:T
of
Capable
Willing
income
to
has
of
wholesaling
travel.
been
HaVe
over
Mutual
many
$20,000
dealer
for
Shares
Fund
contacts.
past
five
in
territory.
Average
years.
Commercial & Financial Chronicle, 25 Park Place, New
.any
Box
annual
P
519,
Ameri¬
Cyanamid Company on May
17, 1949, declared a quarterly divi¬
dend of thirty-seven and one-half
cents (.ZlVzO per share on the out¬
standing shares of the Common Stock
can
of
one .yepf"
COMMON
-the
1949,
of
Company,
to
payable
July
A
at the
1,
L. T.
TIP-TOP
June 3, 1949.
R. S. KYLE,
share
on
the Common Stock
Melly, Treasurer
WARDS
close of business
York; 8, N. Y.
a
payable July 1, 1949 to holders of record June 16, 1949.
the holders of such stock
record
DIVIDEND—
quarterly dividend of 25 cents
475 Fifth Ave., New York
City
WARDS
TIP-TOP
Secretary
May 17,1949
.
f
i
i
i '
in
/■-
■ifititcxi ar-iu-YWJ-
i;
:ii
di
.
i
_v
48
(2204)
&
COMMERCIAL
THE
FINANCIAL
CHRONICLE
Thursday, May 19,
kicked
it
second
BUSINESS BUZZ
unprecedented
.v.
law
jTjL I Itt/
from the Nation's Capital
JL
of
1/ 11/
this
W
they
the official
to
leadership that such things
take
all
the
/ It is
operate. Instead
positively because the
public announcement of the rev¬
enue estimate for fiscal '50 by the
Congressional Joint Committee on
so
Internal
This estimate is what the boys
have been waiting for. It is the
estimate upon which the Capitol
places
the
What
the
the
reliance.
greatest
Joint
work
staff
committee,
reflecting
headed
by
said in effect
was
Stam,
Colin
standpoint alone
$2.9
of
for
starting
billion
the
July
the
Treasury
1.
year
Revenues,
in
the President estimated in Jan¬
It
by $2.1 billion.
is
the
not
business
of
the
Joint Committee staff to estimate
expenditures
officially, although
they do this unofficially for the
MC's on the Congressional taxing
committees.
Unless
the
scattered
and
undirected
economy
drive
pulsing around in Congress
actually
gets
somewhere, it
is
altogether likely that a deficit,
barring higher taxes, will be en¬
dorsed by the probability of ex¬
penditures higher than Mr. Tru¬
now
is
business
hiked
bill
tax
a
fact
that
of
Congress has been
liberal indeed, and the public has
failed to catch this because of the
attention
given to the defeats ad¬
ministered
to
Mr.
eral
simple
Utopia.;
burdens
tax
will
most
tives.
One
:■
*
the
the
three
tax
#
faces
A-
choice
of
among
unpleasant alterna¬
of
rates.
these
The
is
other
to
is
raise
to
cut
expenditures. The third is to do
nothing about either and
antee the return of
Budgetary
a
deficit.
The
deficit
cash
well
as
the
as
of
excess
outgo,
guar¬
would
be
budgetary, for
cash
intake
over
estimated in the Jan¬
was
All
of
Of
"economizers"
have
got
beyond thinking that by chiseling
away at administrative expendi¬
tures or adopting a magic formula
for saving something like $3 bil¬
lion, the job can be done. Con¬
gress won't save much by cutting
which
the
guessing is most
at
there will be
the
no
moment
is
pre¬
that
boost in tax rates.
For one thing, Congress is now
pretty well satisfied that the vol¬
of business
ume
not
secure
activity ahead is
enough for the risking
of
higher tax
burdens.
If
the
spring upsurge had been strong,
then there might have been a dis¬
position to hike the corporation
income tax rate from around 38%
to 45%. The feeling now is that
administrative
the
time
when
comes
it makes
a
"You're
sight. An average of 5% on such
expenditures won't cut the pros¬
pective deficit by more than onethird by the most optimistic guess.
What
Congress
do to avoid
will
to
have
deficit by cutting
a
expenditures
to
is
cut
the
out
the
which
lions.
Congress
These
itself
do
"permanent"
are
statutory, and only by cut¬
ting out subsidies or beginning
to
cut
out
Congress
subsidies
adding
achieve
is
to
subsidy
even
clients
small
so
an
$3 billion.
economy as
It
the
can
which this year has
—
not
impossible that Con¬
gress will finally view the situa¬
tion so seriously that it will come
to grips with this fundamental of
the budget problem. But before
that happens it will have to sink
in to Congress that it has already
committed
to
the
Federal
outlays than
more
forded
without
flation,
or
Treasury
be
can
confiscation,
af¬
in¬
something equally dire.
*
*
least
to
worse—the
upon
revenues
boost in the rates.
The
problem
Truman's
gress
was
some
$2.1
corporation
the
•
stymied,
however,
Of
you
these
course
side
of
steps
and
to
the
of
will
protect
turn
the
their
What
*
effect
of
the
pears,
of
or
taken
economy.
whether
inciden¬
otherwise, this
program,
Nevertheless,
tally
the
is further
com¬
absence of Mr.
try
to
billion
of
If
Con¬
settle
for
additional
income
taxes,
it
tion
of
far
Board's
of
this
credit
the
of
the
took
opening
appearance
Thomas
B.
to
Federal
two
McCabe
Reserve
Board
unusual
quickly
so
and
the
One
of these
was
in
to
such
call
Congress, or at least those Con¬
gressmen who are charged with
framing banking legislation, were
flexible
be
to
that
trols.
the
in
Board
Board
its
use
views.)
was
of
con¬
hardly
bothered
to
tion of
impressing Congress.
so
conceal
their
inten¬
the
extending
into
serves
authority
of
law
Reed
with
85
Financial
J.
has
H.
Goddard
Staff
Chronicle)
—
Francis
associated
become
Devonshire
&
Co.,
Street,
Inc.,
Boston,
Mass.
With G. A. McDowell & Co.
(Special
to
The
which
the
It
Chronicle)
Financial
the
points
its
re¬
are
voice
for
proposition
in
sees
national
ate
in
have
to
powers
view of
upon
bond pegs
in
long insis¬
power
that
so
inflation
and
the
of
to
it could
view
both
flation,"
its
having
reserves
"meet
that
last
week,
in
and
/filially
at¬
an
de¬
fact
were
House
White
"sold,"
the
was
circum¬
stances would suggest paying at
mosphere in which the key Con¬
concerned
the
least
disposed
than
more
they had been
months to continue the
higher
in
re¬
-
.
(Special
to The
Financial
service
to
X.
associated
become
has
&
Co.,
Building,
Huntington
members
York Stock
of
the
with
Bank
New
Exchange.
Trading Markets:
Ralston Steel Car
^Oregon Portland Cement
Riverside Cement A & B
Spokane Portland Cement
♦Latest
Figures Available
LERNER & CO.
Investment
lip
osition.
Chronicle)
COLUMBUS, OHIO—Joseph S.
more
rigidly maintained.
boost
Banking Committee held hear¬
ings
members of the Detroit Stock Ex¬
monetary
little chance under
voice when the
a
So
subcommittee of the Sen¬
worked
reserve
conventional
such
loans.
has
Board
policy. It
the
Neverthe¬
dead.
was
to get White House backing
a
Mc¬
A.
Building,
Buhl
Co.,
Cecil P.
Geo.
With Vercoe & Co.
that the Board could have
of
&
with
—
on
for
taken
higher
is
change.
Lare
so
These laws expire June 30.
a
four
and
MICH.
re¬
demand
on
Dowell
Vercoe
tence
So
points of
Matthews
granted that
with
the
passing of the infla¬
tionary
boom
the
10
and
4
was
for the
Board
installment
it
DETROIT,
time deposits.
less,
being, and continuing
under
deposits,
years
Subsequently the Senate Bank¬
ing Committee was importuned
to get a move on with legislation
Board to call these additional
percentage
requirements
this
prop¬
10 Post Office
■■■■:
Securities
Square, Boston 9, Mass.
Telephone HUbbard 2-1990
Teletype BS 69
Instead Gov. McCabe publicly
HAnover 2-0050
as
it
now
Teletype—NY 1-971
the
first
Twice
in
Hill, Thompson & Co., Inc.
Firm Trading Markets
FOREIGN SECURITIES
NEW YORK 5
Executive
&
Underwriting Offices
ap¬
All
Issues
70
wall
Tel.
street
WHitehall 4-4540
f-ARL MARES & r.O. INC.
part
one
,
FOREIGN SECURITIES
,
SPECIALISTS
margin requirements on
stocks, nand
The
to
during the
escribed-for installment loans. It
listed
coincide with
own
PROVIDENCE, R. I.
proposition
meant
spokesmen
when
being,
deemed this necessary, 10 addi¬
tional
convinced
into
that
authority
four-stage relaxa¬
campaign.
con¬
to pub¬
proposal
the Board should have
serve
gressmen
month the Board eased the terms
lowered
re¬
with
his circumspection toward
fect of impressing Congress.
■
pi
the
steps
Congress
other
impress
dramatic speed, did have the ef¬
the Board has failed.
The
of
*
has happened
so
control
licly climb off and abandon the
last several weeks is that the Fed¬
eral Reserve Board has made a
affairs—and
In
econ¬
omizing, to their acute political
disadvantage.
"L
*
loan
consumer
L.
Chairman
trols.
were
the
Board-Truman
condition
govern¬
ment's fiscal situation by
and
serves
control law.
the
on
beneficiaries
the
spending
efforts
the
on
Joins J. H. Goddard
ing
those
by
fact that Mr. Truman is
•
leadership.
to
that
beneficial
Treasury
plicated by
do;
the
floors
many
taken in response to the chang¬
eight ball of what it sees as its
impotence to deal with monetary
or
interesting!
How
buy and sell each day?"
,
the
at
or
How
$1.2 billion the $2.1 billion of ad¬
ditional member
bank reserves
caller into being last September
under the law empowering the
"Fed" to
impose additional re¬
serves up to four more percentage
points on demand deposits and 1 Vz
points on time deposits.
Sjt
very
are
in
(Special
has
and
Broker?
floor
a
fundamental attack upon adminis¬
trative waste, and that is not in
dampening effect upon business
activity might very well offset—
safe
establishing
expenditures until
the
isn't
to non-members for
of
"Chronicle's"
the
major, carefully planned drive to
get itself out from behind the
this
not
was
small segment
a
and may or may not
write out the maximum terms
dominant
Congress
pretation from the nation's Capital
consumer
about
the
(This column is intended to
can
one
to
require¬
flect the "behind the sceneinter¬
of
the
banks
reserve
state banking system.
seriously want to prevent
a
budgetary deficit from de¬
veloping by their inaction. They
three
which
support
requirements should
sake
horn
So far
not
leaders who savvy the problem,
the
The
reserve
the
alternatives
and full of headlines.
things
Board's
its insistence upon subject¬
of
political issues, dramatic,
these
to
non-member
be applied
Second of the alternatives is the
the
Congress,
three
hot
the
the
convinced that
billion
reduction of expenditures.
billion.
are
hearing
stand
precedent that the Board could
budget at only about $1.5
uary
of
ments.
as
dicated at not less than $3
and perhaps $4 billion.
—
Congress,
the
upon
Board's
supplemental
be
little avail
avoiding a budgetary
deficit is involved, for the deficit
without expenditure
cuts is in¬
sev¬
achieving
of
•
ing
sharply—all to
far
so
been
is
course,
of
ways
*
.
What
Truman's
number
-
remarkable.
was
debilitated
excise
voted, myriads of subsidies for
veterans, for farmers, for mil¬
the
The
The
proposi¬
loan com¬
industrial
bankers
the
One
influence.
bankers,
and
tear
pub¬
committee
Board's
descended
pieces,
personal and
has failed
this session
to-
when
a
was
if there
So
taxes will be cut and
hundreds of expensive subsidies
catch
the
thin.
was
who
billion.
be¬
Board's
of those compara¬
major
a
for
panies,
schedule, and that he wants $4
Board
for the
before
commercial
"middle"
the
man
estimated.
As
hasL been
pointed out heretofore, the public
to
tion
brackets and the inheritance tax
de¬
a
in
is
other words, will be poorer than
uary
in
taxes
hearings
support
personal
than
poorer
the
occasions
insists
still
the
up
now
one
rare
exercise
that from the
ficit
works
in
able
the
revenue
I
income
Revenue
Taxation, has
touched off .the budget issue as
surely as the starter's gun releases
the sprinters for the 30-yard dash.
opening
upon
he
the
reason
was
tively
and
prestige
of
a
politically
peal of Taft-Hartley, broad exten¬
successful President to keep the
sion Of the scope of wage-hour
and social security legislation, and
excise tax boys from simultan¬
eously nicking a billion off recompulsory health insurance, are
dead ducks. .■'Lv'.
% | ceipts. Mr. Truman will not co¬
effort, the
of Regula¬
higher reserves
before
the
failure
cooperation
and
were
And
lic
would
as re¬
large
its campaign in early March.
gan
Democratic
*
extension
probably
are
WASHINGTON, D.C.—From now on to the end of the present
session of Congress the overwhelming domestic issue can very likely
become the Federal budget.
This is so, negatively, because the Congress has finally demon¬
*
rather
chances for
tion
strated
*
.
',he
reserves.
Notwithstanding the investment
;
V/^-v -m *
gJ
y*
the
step
renewed
were
would not raise
...,
A
Behind-the-Scene Interpretations
took
of
saying that if the 4 and iy2 re¬
serve
on.
and
over,
1949
it - reduced "by
50 Broad Street
Trading Department
120
New York 4, N. Y.
AFFILIATE: CARL MARKS & CO. Inc. CHICAGO
Tel.
broadway
REctor
2-2020
@FedFRASER