Full text of Commercial and Financial Chronicle : November 6, 1947, Vol. 166, No. 4644

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NOV 7

194/

ESTABLISHED 1S39

M
y-:'

Reg. U. S. Pat. Office

Volume 166

Number 4644

New

Can Europe Furnish
Collateral for Loans?

The Investment Outlook

National City Bank of New York

Mr.

Ward

points out available

obtainable,

even

would be small fraction of pro¬

jected loans.

Adds it would be

unwise to tie up

they

such assets since
"the seed-corn of pri¬

are

vate

enterprise" and would
loss to

The

question

Britain

and

tion

here

pro¬

other

Western

are

Span ning

loans

history of
humanity,
from

land, while encouraging unnecessary capital investment. Points
to testing time for British Treasury's credit when £1,000 million
in railroad investments are paid in Government paper in January.

distin¬

LONDON, ENGLAND—It may seem extravagant to describe the
prices of British Government stocks on the London

recent fall in the

-3> Stock

dawn

from

first

pledge

Egypt
Mr.
Toynbee notes

stocks

that of the 21

bonds,

and
other assets in

ing

cieties

so¬

civ¬

*An address by Mr. Walker be¬
fore the 21st Regional Conference
of the Pacific Coast and
Rocky

Mountain

States, San
Calif., Oct. 22, 1947.

Havana

seen

inter¬
stock

markets

since

the end of the

Experienced observers will know how to interpret the
report of the President's Council of Economic Advisers

the effect of

States.

But when

war.

the

back¬

ground to the
fall
(and the

preceding
rise)
is
ap¬
preciated, the
justice of the

Harold

des crintion

will

Wincott

probably

be conceded. The British

Government

power

moment

when

economic

laws

the

precise

all

the

natural

were

conspiring

cheap money. Six years
brought an immense

against
of

1945

Socialist

returned

was

had

war

but dammed-up volume of pur¬
chasing power. There were the

small

savings of the

street,

aggregating

(Continued

man

on page

the

£6,000

some

35)

the Administration.

Thoughtful students of all these outgivings have
(Continued

Francisco,
tv

Lithographing Go.

the

national

Returning Tide?

foreign aid upon the economy of the United
They will, of course, not make the mistake of
ilizations
a 11
States which
supposing that the President feels himself bound irrevo¬
but
seven
they have
cably to each and every suggestion contained therein.
have d i s a pacquired or
Frank F. Walker
can acquire by
peared. In his Neither will they for a moment assume that the President
Wilbcrt Ward
study of the did not know in advance of
expropriation
publication what was contained
from their na¬ Western European civilization he
in the report, or that this document, when
finally made
inclined
to
the
view
that
the
tionals who presently own them
public, contained any word or syllable
"rhythm of disintegration," as he available to the
It is a fair suggestion that coun¬
tries which call on use for aid termed it, which was so clearly which the President would have preferred to have omitted.
should first make reasonable use discernible in the closing history
Precisely the same can, naturally, be said of the recent
of
earlier
of
their
own
realizable
assets
civilizations, was al¬
report of the Secretary of the Interior relating foreign aid
visible
Those
assets
include
not
throughout
the
only ready
greater part of Europe. The un¬ proposals to our national resources.
It probably would not
(Continued on page 40)
derlying principle of "challenge be very wide the mark to say much the same thing about
and response" which had charac¬
^Remarks by Mr. Ward at the
the recent report of the so-called Paris Conference.
Cer¬
International Finance Session of terized all
growing civilizations
the National Foreign Trade Con¬ was not being affirmatively met tainly what the Secretary of State has been saying for the
(Continued on page 32)
past half year, more or less, on the general subject of aid
vention, St. Louis, Mo., Oct. 20
1947.
to foreign peoples must be taken as the official word of
recognized

United

the

sensa¬

the

recorded

collateral,

most

As We See It

the

Ex¬

change

tional happen¬

the

the holdings
of

increasing the Government's short-term indebtedness and in en¬
larging already excessive bank deposits. Says it is leading to
"suppressed inflation," and is raising unduly capital values in Eng¬

EDITORIAL

civilizations in

the

ex¬

pecting to re¬
ceive
grants
us,

II the

WINCOTT

British financial expert describes development and operation of the
Labor Government's cheap money policy and points out its effects

recent times.

countries
which

By HAROLD

Editor, London "Investors' Chronicle"

inflation.

guished English historian, Arnold J. Toynbee, completed the sixth
volume of his monumental work entitled "A Study of History."
In
the opinion of scholars of history few works of such significance have
appeared
i n<&

European

•

A few months before the outbreak of World War

pounded as to whether it would
be practicable and desirable for
Great

Noting growing pessimism regarding European recovery, invest¬
banker points out we must become accustomed for many
years to carry on business in disturbed world. Says large backlog
of new corporate issues may depress bond prices, but contends
stock values have not yet reflected enormous rise in our national
income, price and wage levels. Advises combining investment in
leading common stocks with government and carefully chosen me¬
dium security corporation bonds as protection against either defla¬

ment

cause

owners.

Copy

Eclipse of Cheap
Money in Britain

Partner, Dean Witter & Co., San Francisco

Vice-President,

Price 30 Cents

The

By FRANK F. WALKER*

By WILBERT WARD*

collateral,

York, N. Y., Thursday, November 6, 1947

•'

page

29)

State and

■'

Municipal
R. H. Johnson & Co.
Established

Bonds

1927

INVESTMENT SECURITIES

Hirsch & Co.
Members New York Stock
and other

Bond

64 Wall

Street, New York 5

Exchange

Exchanges

BOSTON

25 Broad St., New York 4, N.Y.

Troy

HAnovcr 2-0600

Teletype NY 1-210

Clevelal^d

(Geneva

London

(Representative)

Albany

Buffalo
Dallas

Pittsburgh

Members

OF NEW YORK

Syracuse

Harrisburg

Scranton

Wilkes-Barre

Williamsport Springfield

Woonsocket

SERVING SOUTHERN CALIFORNIA

$2.40 Conv. Preferred

90c

Underwriters and

5. SPRING

ICS

ANGELES

Corporate Securities

•

PASADENA

•

Established

REDLANDS

New York

NATIONAL BANK

1-395

Toronto

THE

Cincinnati

Chicago

Columbus

Bond

Brokerage

CITY OF

NEW YORK

Service

Members New
120

Denver

Toledo

Buffalo

Portland General

Electric Company
When Distributed

and Dealers

90c Conv. Preferred
on

York

request

Stock Exchange

Broadway, New York 5, N. Y.
Telephone:
Bell

Hardy & Co.
Members New York Stock Exchange

Members New

York Curb Exchange

30 Broad St.

New York 4

REctor 2-8600

Teletype:

Analysis

upon

request

& Common

Reynolds & Co.

1899

CLEVELAND

MEMBER ICS ANGELES STOCK EXCHANGE

TELETYPE: LA 68

IIAnover 2-0980

Montreal

for Banks, Brokers

OTIS & CO.
(Incorporated)

CLAREMONT

N. Y.

Teletype NY

$1.25 Conv. Preferred

♦Prospectus

WILLIAM ST.,

New York

THE CHASE

dealers Assn.

*Universal Winding Company

sr.

TUnity 5 761

Company

Conv. Preferred

Twin Coach Company

Distributors of Municipal
and

York Security

Department

Raytheon Manufacturing Co.
Solar Aircraft

Investment Securities

New

Bell

Bond Dept. Teletype: NY 1-708

SINCE 1927

tyigettsellerSDurst, Ina

HART SMITH & CO.

PHILADELPHIA

Baltimore

Chicago

THE NATIONAL CITY BANK

NY 1-635

Tel. DIgby 4-7800

Tele. NY 1-733

ira haupt&co.
Yorh Stock Exchange
Principal Exchange*

Members New
and other

111
REctor

Broadway,
2-3100

Boston

N. Y. 6

Teletype NY 1-2708

Telephone: Enterprise 1820

trade

Due

Thursday, November 6, 1947

Alabama &

By WALTER E. SPAHR*
Professor of Economics, New York

Cv. Deb.

12/15/57

CHRONICLE

Origin and Evolution of Our Free Enterprise System

Amer. Tel. & Tel.
New 2%%

& FINANCIAL

COMMERCIAL

THE

(1838)

Executive Vice-President, Economists' National

University

Committee

Monetary Policy

Louisiana Securities

Rights
Dr.

Spahr in tracing development of democratic and constitutional government along with free enter¬
prise system points out it was private enterprise and private capitalism that made possible progress of
nation.
Stresses need of fostering equality of competition as a means of determining proper prices of

When issued
Prospectus on request

B ought—S

old—Q uoted

commodities and services,

and contends no government or collection of bureaucrats can compare in
efficiency and in intelligence with the masses who are free to vote their dollars as they think best. Con¬

New York Hanseatic

cludes

Corporation

York 5

120 Broadway, New

paying

are

terrific price for unscientific government and unscientific economics.

hundred and sixty, years ago, all but three delegates to
Philadelphia agreed to, and signed, the new Constitution
Congress of the Confederation with an explanatory letter and resone

the Constitutional Convention in

Teletype NY 1-583

BArclay 7-5660

September 17, 1787,

and transmitted it to the
olution

indi¬

cating the way
in which the

Savoy Plaza
3/6s, 1956

but

ginning of important economic
and political changes in Europe

proposed govshould

ment

Savoy Plaza

Class "A"

This

land.

Constitution

was

the

Common

nine

York Curb Exchange

t at

ficient for the

Telephone COrtlandt 7-4070

Teletype NY 1-1548

establishment
of the

Spahr

Walter

states

The

tion

framers

our

Independence and

by others, as
the economic doctrines ad¬
and

Physlocratic

such

Quesnay,

Turgot,

capitalistic

fore

address

the

Cluett, Peabody

Convo¬

HAnover 2-0700

New Orleans,

York
York

preceding the Industrial Revolu¬
tion. And, as each decade passed,
following
the
adoption
of
our
Constitution, the rate of progress
became
In

the

Davis
Elk

Curb

120 BROADWAY,

Exchange

NEW YORK 5

our

had been relatively slow
It was only after

progress

Hurd Coal &

Wharton Iron &

S. Finishing com.

ever

in any equal period oi
in the history of the world

seen

years

Our ancestors

the

time

American

Revolution

lived much

Members Baltimore Stock

120

probablj
Bell

Steel

live

Title

Guaranty
New

Northern

little different from

the

Centra! States Elec. (Va.)
Common

(Continued

26)

page

Trust
England

Aspinook Corp.
Loft Candy

Commodity Outlook for 1948

Common

By LEONARD SPANGENBERG *

Frank G. Masterson & Co.

Dye

ist,
or

old

Boston & Maine R.R.

—a

Aetna Standard Eng.

young

either

Federal Liq. Corp.

sciously

Warner & Swasey

find

Punta Alegre Sugar

lines.

the calloused

Even

well
the only certainty for 1948. It

that

the mselves

the I you have

operations for
along
bullish

politician in Washington uneasily
scans
the
headlines, and muses

employer
employee,

Bates Manufacturing

year

bearish

industrial¬

his

pattern
coming

they rich or
poor,
farmer

Wks.
Boston Terminal 3^4-47
United Artists Theatre
Dumont Laboratories
Piece

United

uncertainty

is at such

very

may

time that

the

beneath

con¬

or un-

must dig

headlines of the

day

unearth fundamental facts and

political, economic, and
these, and upon 40
experience in studying

figures

—

social.

Upon

Hood Chemical

consciously
guessing what
next year is
likely to hold

Kirby Lumber

for them.

dictions

Newmarket Mfg.
Moxie Common

U. S. Glass Co.
Lea

young

Int'lDetrola

who

Time, Inc.

veteran

owns

gas pump

whether

and

5reeT\e<miGompan^

Dr. L.

Spangenberg

small

not it

but

address

would

Oct. 28,

American-La France

Dictaphone
Giddings & Lewis

Dr.

such consideration, it is
to realize that activity
in 1947 has been at strato¬

any

tar

levels.
Even now,
the
average
of business volume
throughout
the
country
is
a
robust 30% above normal. Natur¬

forever.

you

have

Babsonchart,

forecast

theory is based, it would
that a staggering recession
—even amounting to a major de¬
pression—is overdue.
The
truth
is,
however,
that
much
of the
over-expansion of
appear

recent years has been
to

war

terials
have

coming

off

thrown

far

the

means
room
ness

for
and

Even

that

United

Kingdom 4%

'90

Exchange

New York 6
Teletype NY 1-1610

Argo Oil

Thus,

Utah Southern

literally in a
war. This
there

before

Oil

stii

busi¬
must

major readjustment.
rate

(Continued

on page

Troster, Currie & Summers
Members
New

ARIZONA EDISON

*Air

SOLD

—

Dealers

Ass'n

Products, Inc. Com. & "A"

Emery Air Freight Corp.

Common

—

Security

Detroit Harvester Co. Com.

COMPANY

BOUGHT

York

22)

Noranda Mines

South African Mining Shares

Curb

Broadway

Digby 4-3122

the

if the remarkable

Canadian Securities Department

York

Stock

ma¬

activity

Brown Co.

New

Chicago

being dis¬

lot of top-notch

trade

Members

production is

were

brief
a

Joseph McManus & Co.

limbc

consumers.

during

Mgr.

belt-lines

into the

consumer

Mgr.

Asst.

entirely due

production. Goods and

been

KANE,

Common

Georgia Hardwood Lumber Co.

QUOTED

Common

British Securities Department

*Prospectus

request'

Prospectus available to

dealers

and

banks

only

Goodbody & Co.

G. A. Sax ton & Co., Inc.
70 PINE ST., N. Y. 5

Paper

MICHAEL HEANEY,

^Tennessee Gas & Transmission
*

Securities

our

registered this year is
not entirely duplicated
in 1948,
the
average
decline should be
small. In fact, we expect a 5%

continue

1947.

Ont.

which

ally, such feverish output cannot

Spangen¬

Abitibi Pow. & Paper

^Standard Milling Company

HAnover 2-9470

Curb and Unlisted

expect

We Maintain Active Markets in U. S. FUNDS for

*Standard Ry. Equipment Mfg.
Standard Stoker

Exchange

NEW YORK

Ac¬

spheric

been following your

Minn. &

Law

the

of destruction instead of

necessary

growing

records.

new

tion and Reaction upon

Grinnell

*Robertshaw-Fu!ton Controls

York Curb

Teletype NY 1-1140

WALTER

depression

let

with

concerned,

wise

expand

berg at the Annual Babson Busi¬
ness Conference, New York City,

Trading Markets in

New

WALL ST.

the business curve

seen

kinds

examine the

of all,

First

The investor in his skyscraper

*An

pre¬

based.

are

all

accordance

prospects for business in general.

business.
of¬
fice, wonders whether he should

his

Members N. Y. Security Dealers Assn.

trends, our

1948

set

tributed

to take out a GI loan and

37 Wall St., N. Y. 5
Hanover 2-4850
Bell Teletypes—NY 1-1126 «Sc 1127

for

Business Volume Lower

1948

in Kalamazoo wonders

of
forecasting

years

The eager

Fabrics

1923

Established

Members

<$>-

citizens,

Stock

Detroit Int'i Bridge

liberation of mankind hastened by

ahead toward

Teletype NY 1-1227

Transportation ir:

today.

was

golden harvest time warns of the season's end, once again we turn our thoughts
a new year.
We try to cut through the mist of the future and arrive at a
carefully balanced forecast upon which plans for 1948 may be safely constructed. All our

Eng.

2-4230

the days of Julius Caesar than as

As the

Electric System
Gen'l Aniline & Film "A"
Hooker Electrochemical

New

Exchange

Broadway, N. Y. 5
WOrth

lived ir

men

Mitchell & Company

the

Spangenberg, in estimating business volume at 30% above normal, predicts purchasing power will
continue high and there will be only slight recession in 1948.
Sees national income for year about
$190 billions, but warns foreign situation is not reassuring and our dominant role in international drama
will require united action of all economic segments to maintain a vigorous and healthy economy.

& pfd.

with Stock

Kittanning Coal

have been marked by the greatest
economic progress that man has

Dr.

Robertshaw-Fulton Controls

5's

short, the 159 years following
adoption of our Constitution

Iron

Virginia-Pittsburgh Coal

Monon Coal

Babson Park, Mass.

Taylor

Coke

Virginia Iron, Coal & Coke

Vice-President, Business Statistical Organization, Inc.,

Clctu.al Tilarket 6 Qu

Com. & Pfd.

cumulative.

here and abroad.

Tel. REctor 2-7815

Coal

Horn Coal,

West

The

rapid.

increasingly
were

Constitution, economic

Business and

Stock Exchange

branch offices

our

system

Members

New

Exchange

NY 1-1557

La.-Birmingham, Ala

Direct wire* to

PONNELL & To.
New

Stock

took great leaps forward with the

tion of

cation, Troy, N. Y., Nov. 5, 1947.

York

economic

days of Caesar.
The sciences oi
medicine, chemistry, and physics

Up to the beginning of the In¬

by Dr. Spahr be¬

New

25 Broad St., New York 4, N. Y.

that
progress became rapid.
More was accomplished in a dec¬
ade than in a century in the period
and

1787

Smith.

Adam

and

only ushered in a new
for the people of this country

*An

Request

economists

not

the

Members

to use machines

began

dustrial Revolution and the adop¬

era

Bought-—Sold—Quoted
Prospectus

leading

vocated

of this Constitu¬

adoption

were

Hamp¬

the world

effects

Constitution,

The ninth

ratifying it.

to ratify was New
shire, June 21, 1788.

Commcn

revolution

political

being fought under the ban¬
liberty, equality, and fra¬

Declaration

state

American Water Works

1760.

try

Consti-J

tution between®
the

was

in.Eng¬

The
philosophies
of
liberty,
equality, &nd fraternity, expound¬
ed. in Europe by Montesquieu,
Voltaire, Diderot, and Rousseau,
were also preached in this coun¬

e s

should be suf¬

31 Nassau Street, New York 5
Bell System

way

ternity.

the

French

ner

conventions of

Vanderhoef & Robinson
Members New

that

ratifica¬

tion

under

We often date it from

The

provided

Vapor Car Heating

well

getting
new

be¬

Revolution

Industrial

The

operation.

the

well.

into

put

roughly,

marked,

Steiner, Rouse & Co.

WHitehall 4-4970

Teletype NY 1-609

J-G-White 8 Company
INCORPORATED

Reynolds & Co.
Members New

Members N. Y. Stock Exchange and Other Principal Exchanges
115 BROADWAY

NEW YORK 6, N. Y.

37 WALL

STREET

NEW YORK 5

ESTABLISHED 1890

Telephone BArclay 7-0100

Teletype NY 1-672

Tel. HAnover

2-9300

Tele. NY 1-1815

120

York Stock Exchange

N. Y.
REctof 2-8600

Broadway, New York 5,
Telephone:

Bell Teletype: NY

1-635

COMMERCIAL

THE

Number 4644

Volume 166

I NDE X
and

Articles

By LEONARD

Cover

Mr.
'

Origin and Evolution of Our Free Enterprise System
—Walter E.

Concrete Program for

their

the public at large

forerunner of

In
modern
times,
especially since the advent of
Reserve System, the

the

fact

The

1 f

Launches Securities Clearing

Leonard

time to

market

continue foi

come.

this

confused

the financial

from

emanate

Study

Promote

Foundation

High Prices Are Not What They

unusual

Seem, Says National City

of NYSE Public Relations

Nationals' Holdings of Hard Currencies 23
Purchasing Agents, Reports Buyers

Swanton,

Robert

Caution

Exercising

strict

that

Questions Adequacy of Bank Loan Rates.

Bankers Trust Co.

place

(Boxed)

Timely

Both True and

Official Year Book Issued

London Stock Exchange

some

respects.

insofar
were

Bank

Insurance

and

concerned, but

Public

Investment
8

Field

probably

was

due

Investment

Dealer-Broker

Real

Recommendations

well

Sterling

Einzig-—Inquest on
Convertibility

Securities Now in
The

News—Carlisle

State

which

***

Bargeron

News

41
q

Funds

About

Activity—

Business

Indications

Banks and Bankers—

'Omitted

Published

Dominion

Weekly

Twice

Other

COMMERCIAL

Bank

Office

and
per

Monthly
B.

WILLIAM
25

DANA COMPANY,

Park Place, Mew

Publishers

York 8, N. Y.

2-9570 to

REctor

WILLIAM DANA SEIBERT,

R.IGGS,

WILLIAM

Every

Publisher

city

and

Other

Chicago
a

c/o

news,

—

Offices:

$38.00

$42.00

per

year.

per

Publications

Quotation Record—Monthly,
(Foreign postage extra.)

Earnings
year.

Record

(Foreign

account

the

exchange,

Monthly,
postage extra.)
—

fluctuations

remittances

for

for¬

eign subscriptions and advertisements must
made in New York funds.

bank clearings,
La

Salle

St.,

111.
(Telephone: State 0613);
Gardens, London, E. C., EngEdwards & Smith.

CERTIFICATES
Bond & Mtge. Guar. Co.

ary

25,

York,

highly

1942,
N. Y.(

post
the

quarters
overbought position
prevailed which had to be cor¬
rected, but instead of a reaction
of secondary proportions, a break
of major proportions ensued, due
possibly to the fact that people
1946,

Newburger, Loeb & Co.

Subscription Rates

Members

Subscriptions
in United
States. U.
Territories and Members

Possessions.

Union, $35.00

per

15%, national income was up 10%,
earnings on stocks in the Dow
and dividends on these

30%

over
same

stocks

other

words, for

the

other,

were

15%.
reason

some

insofar

value

business is

effort to

Punta

Alegre Sugar

Lea Fabrics
Warren Brothers "C"

Susquehanna Mills

DUNNE&CO.
Members N. Y. Security

25 Broad St., New York 4,

explain

(.his

away

most vocifer¬
group of chart readers, busi¬
ness
soothsayers, and all manner
of observers of psychic phenomena
phenomenon,

rare

ous

have

their

into

come

own

and

put to shame the statis¬
ticians who, over a year ago, had
the misfortune to correctly pre¬

have

and

trend

business

the

dict

stock

lower

prices

were

CORPORATION
New York 5, N. V.

52 Wall St.
Tel. HA 2-8080

Major breaks in the stock mar¬
usually portend
a
decided

ket

worsening of the business picture,
and therefore the break was wide¬

Tele. JVY 1-5425

melt in

u. s.

Trust

where around the corner.
The

only segment of the econ¬

has suffered in the
has been those soft goods
businesses which supply the retail

omy

Retail

stores.
were

Company

which

last year

stores

overstocked

Bought—Sold—Quoted

undoubtedly

1946, and es¬

especially high. This situation was
corrected
in
two
stages:
First,

very

QUOTED

The

profits.

—

FIRST COLONY

) C{k

pecially with ersatz merchandise.

sell

SOLD

—

proven

completely correct even il
the wrong economic reasons.

for

BOUGHT

proved wrong, not in their

prediction of the future, but be¬
cause, in spite of the correctness
of these predictions, the market
fell 50 Dow-Jones points. On the
other hand, those who predicted
to

Common

the

earnings and the dividends which
actually developed.
Statisticians
were

Elk Horn Coal

Their forward commitments were

N. Y.

WHitehall 3-0272—-Teletype NY 1-S5G

low

able

Dealers Assn.

con¬

cerned.
In

Haytian Corporation

market had a
forecasting

stock

prices and still retain part of then-

were

Broadway

break but without any

are

commitments

forward
duced

late

1946

were

and,

re¬

second,

Members Neio York Stock Exchange

and

other

leading exchanges

NEW YORK 5

1 WALL ST.

Telephone DIgby 4-2525

(Continued on page 33)

interested in offerings of

year;

S.
of

B. V. D.

High Grade Public Utility and Industrial

New

York

15 Broad St., N.Y. 5
Bell

Teletype

Stock

& Trust Co.*
*Third

Spencer Trask & Co.

25 Broad
Tel.:

1-2033

Exchange

Street, New York 4

Members New York Curb Exchange

135 S. La Salle St., Chicago 3
Tel.: Andcver 4690

HAnover 2-4300

Teletype—NY 1-5
Albany

Boston

Glens Falls

Schenectady

Worcester

C. E.

analyi'i

quarter

available

Exchange

WHitehaO 4-6330

Corporation

Public National BanEi

PREFERRED STOCKS

Members New Ycrk Stock

office at Nev
Act of March

8, 1879.

Pan-American

Prudence Co.

second-class matter Febru¬

at the
under

unintelligent

by an inexperienced
of speculators.

Lawyers Mortgage Co.

Company
Reentered

2-4500—120

System Teletype N. Y. 1-714

Lawyers Title & Guar. Co.
N. Y. Title & Mtge. Co.

1S47 by William B. Dar.a

REctor
Bell

depression which must be some¬

for

1908

TITLE COMPANY

market quotation

Established

Members N. Y. Security Dealers Asa*.

Manager

etc.).

135

liquidation

Drapers'

lland,

issue

corporation news,

records,
state

rate

President

Business

Thursday (general news and ad¬
issue)
and every Monday (com¬

statistical

plete

per

week.

Canada,

that it

During the first three

page

prac¬

J.K.Rice,Jr.&Ca

Reserve
about

was

group

year.

Note—On

Thursday, November 6, 1947

vertising

$25.00

the

0576

PJEREERT D. SEIBERT, Editor &

Other

t>25 00

S. Patent

CJ.

this

Countries,

and

FINANCIAL CHRONICLE
Reg.

article

-See

way

made

j Washington and You.

Federal

business

1946 to

May,

speculation

Whyte Says)

Haile Mines
U. S. Finishing Com. & PM,

public, having seen values
spite of increased earnings
and dividends, has given up all
ideas of following values and now
thinks only in terms of a possible

NSTA Notes

The

the

Industry.-

Markets

Tomorrow's
(Walter

Mutual

and

was

frightened

Registration

Trade

Corner

the

Ahead of

Washington

From

Salesman's

due to

was

and, therefore, a
of the
market
where
people
owned
stocks at
enormous
profits. The
result of the tremendous rise in
unseasoned
issues
was
that it

Securities

Estate

Securities

the

situation existed at the top

Securities.

rules, and the fact
the secondary companies did

exceedingly

Utility Securities.

Railroad

from

the

1947

May,

few

margin

prevented

Reporter's Report

18 ; Prospective Security Offerings

the

Events

Coming

had

that

capacity business.
the lack of reaction

25 ! Our

Securities

Canadian

extent

corporations
The results of

12 ; Our Reporter on Governments

Stocks

Bookshelf

Man's

Business

It was

tically guaranteed all

Fa~3

Observations—A. Wilfred May

Cover

(Editorial)

See

its

the wartime economy

Regular Features
Page

and
because during its life the stocks
of the best corporations in Amer¬
ica were never overpriced while
stocks of those corporations which
can be considered as marginal had
rises of enormous proportions. The
fact that no serious reactions took

Sweden Requisitions

began

reactions of any consequence

Bank

Donald Hogate Is Director

unusual

was

that

market

duration

and

the

ended in 1946 was quite

unusual

not

Communists Penetrate Wall Street

Leo Cherne Says

bull

1942 and

Jersey Worsted Mills

Moore Drop Forging

Anomaly

recession, however,

Jones industrial averages were up

The

Increased Money Supply

Market

readjustments
which this
great struggle made
necessary have been completed.

NAM Cites Price Effects of

business

the

beginnings

Taxj Impact on

Business

during which

usual

torious conclusion and at least the

Foreign Aid Burden. 17

Increased Productivity

H. Riley Forecasts

Roderick

index

great war was fought to a vic¬

would

its

the

purpose,

that

find

Compulsory Bidding Views

Truman's Economic Advisers Report on

Merrill

Suit Unfounded, Say Accused Firms

year,

fulfilling

were

The

munity, it might be well to review
the financial and economic history

Anti-Trust Suit Against Investment

IBA Blames Suit

the stock mar¬
May, 1946, and the
September-Octo¬

same

Instead of

com¬

of the last five years

Monopoly

New

picture would certainly have de¬
cidedly deteriorated a year after
the stock market had made its top.

thinking and the completely con¬
trary
predictions
which
now

Corporation-. 11

the

barometric

midst

the

Herzig

level

was

ber

that

fact

some

Firms

Aeronca Aircraft Com. & Pfd.

be fair to assume that if the stock

FICB Place Debentures

Banking

beyond that time.

see

ket occurred in

business activity will

U. S. Exports

Justice Department Files

sufficiently clairvoyant

decline

high

Plan Not Broad Enough

David W. McKnight Holds Marshall

STREET, NEW YORK

Since the top of

adjust

the present

Curb Exchange

market

higher level in
recognition of

Dinner

Security Dealers Association Announces

Maintain High

are

the

Committees

i ts

-'f

York

to be able to

William O. Douglas- 16

Implications of the Bill of Rights—Hon.

New

the

G. Parker

Uncle Sam Looks Abroad—Chauncey

market

will

here

Securities Dept.

Obsolete

months in
advance, but no longer.
It is
scarcely conceivable that the stock

Credit—Kenneth K. Du ValL

for Sound

Need

good forecaster

the other that

Deposit Insurance—H. Earl Cook__

The Banks Under Federal

get

Federal

market has been

and

earnings

us—

later!

99 WALL

of business changes six

and

but

transitory—

Investment—Thurston H. Ross

stocks

will

proportions.
and

explained

idends

Real Estate

wants

them

Telephone: WHitchall 4-65S1

can

the

nobody
of

the

school of

One

that these div¬

Commodity Prices—Roger W. Babson

seem

thousands

most

sooner

ly heralded

dis¬

that

and

business recession of considerable

this

crepancy

that

are

bonds

upswing.

obvi¬

thought

the Boom"—H. D. Everett, Jr

"Back of

INSIDE U.S.A.
There

the resulting price level

apparently low prices.

ously believes

Treaties!—Sen. Arthur Vandenberg—

community and

stocks and

common

Let's Speed Up Peace

financial

The

Wells

Policy—W. G. F. Price

Threat to Prosperity!—John Dutton

The Biggest

of stock market be-

Contends market erred in

argues

be corrected

soon

AND COMPANY

Co.

years

present time to be in a state of mental confusion as to why there
exists the great differentiation between the actual yields and earnings

Germany—Lewis H. Brown

Corporate Profits—Alden Rice

Sound Bank Loan

-2

S. Herzig

Stock Market Forecast—Leonard

should

B. S.

Current Confusion

Spangenberg

precipitous 1946 decline, and

1948

Business and Commodity Outlook for
—Leonard

its

Spahr

Herzig reviews in detail past five

havior in relation to business factors.

Collateral for Loans?—Wilbert Ward-Cover

S. HERZIG

Partner, Sartorius &

Britain—Harold Wincott--Cover

The Eclipse of Cheap Money in

(1839)

A Stock Market Forecast

News

The Investment Outlook—Frank F. Walker
Can Europe Furnish

FINANCIAL CHRONICLE

request

Unterberg & Co*

Members N. Y. Security

61 Broadway, New

Dealers Ass'n

York 6, N. Y.

Telephone BOwling Green 9-3565
Teletype NY 1-1666

COMMERCIAL

THE

(1840)

A Concrete

FINANCIAL

CHRONICLE

Program for Germany

By ALDEN RICE WELLS
Vice-President

Johns-Manville Corporation

Chairman,

Not

President

used—if it is used properly—as a

im¬

years

tite division of

Russia,
never

H. Brown

Lewis

can

present partition of Germany as
an accomplished fact at
least for
present.

That

Aspects of Problem

policy must deal with

Germany

Western

are; tbe

invasion

the

problem

the

By the end

five

they

years

export

must

much per capita as before
war.
In the meantime, they

twice
the

must be fed
,

primarily from Amer,

advanced not as le-

-J7 loans

lirf, but on a five-year plan under which food will be used as an
incentive
into

production

that

she

to be

food

Germany

Western Europe

incentive and

means

a
as

get¬

ting production—then it is merely
pouring dollars for relief down a
bottomless rathole with no hope
of eventually getting either Ger¬
many or the other countries off
the

backs

the

American

tax¬

payer.

On the other hand food

can

•

summary

Brown,

currentlv

policy

°&eC esL'Si

R-mort

book

abandon the

phy in favor of a plan that from a
practical standpoint can be main¬
tained for 50 years or more.

many's

army,

general

plants

munitions

Ger¬

staff

and

and war mate¬
already been

rials industries have

Germany should never

destroyed.
be

permitted to have an army of
any kind.
Instead, there should
be a coordinated army of occupa¬
tion for Western
Germany pat¬
terned after the SHAEF organization built by General Eisenhower

paid for by Germany.
it should come under

Straus, N. Y,, $3.00.

completely

Morgenthau philoso¬

Farrar

mUitary

for the invasion.

our :
pre-

this

comfortable.

new

ask

or-1 kank

Gen-

army

The

loans

^eir

suddenly

character

eo-

very

bur-

densome maturities,
Hist

need

rectors
■

will

his

selveg

from

p|101

was

not

disentangle
the

finance

di_

them-

arti(iciaI

fancy

re-

Eisenhower

will

urer

show

what

steos

are

financial

ensure

upon

bility

~
Perhaps the first question should
"Mr.
Treasurer, you report

be:

from

hand,

that

had

the

administration

''Continued

page

30)

years

our

history;

timers
their

with

who

kept

control

why

business

in touch
by
going

their plants rather than
looking at elaborate sets of statis-

through

would

ask

the

you

"What

telling me our surplus
up when I know

way

well the company is just the same,
but
we
have
now
run
out
of
cash?"
That

ends

the

questions.

The

Old Man knew that the net result

the

year's

bank loan

was

operations

was

When the treasurer told him

needed—he knew

was

What

nonsense.

was

need¬

was

capital to replace the

new

lost.

Sloppy though it

may seem, ac¬

leave
many
items of
cost off Income Statements. With
countants

costs

understated,

profit

inflated, and of

figures
capital

course

evaporates. The details of this op¬
eration

published in a pre¬
but S. Sloan Colt,

were

article,

the

Bankers

Trust

Co., has put it quite succinctly;!
"One significant factor general¬
ly overlooked in the current profit
picture is that accepted methods
of business accounting result in a
substantial overstatement of

ings
Thus

under

earn¬

conditions.

present

some of the current profits
quite illusory and really rep¬
resent the using up of capital."

are

This past year has demonstrated
the

damage

spiral

business and

contribution

the

these

the

inflationary

large

fictitious

profits. The subject has interest¬
ing ramifications, but probably

Bought—Sold—Quoted at Net Prices

would

EASTERN CORPORATION

kind

the

not

of occupation should be
t.'.e

you

;

Old

mean

went

President

ago:

there.

particularly disliked

question:

vious

year

was

Treasurer,

treasurer -he

overabundance of

After five years

Ultimately

his

resources

able

General

should use his great
Europe to help bring

policy that would place
the Germans the responsi¬
for

below,
why in a

show for this loss of

If he

further

are

der

dropped
know

the cash

the

cash?"

loss.

corporation is to produce
and sell goods at a profit, and for
this they must have in addition to
their physical property an ade¬
quate amount of cash. From this
starting point a few questions direeled at the corporation's treas-

then don't we have more cash today than ever before?" When this
together an integrated and coor- is answered fully the director can
dinated civilian economic organithen see why playing with bank
zation to deal with the economic ' loans is as safe as playing with
control of Western Germany un- i dynamite.
prestige

have

of their

also report one of the most profit-

other

Whem

for

cash

the

probably would, replied to the
first question that prices had gone
up so much all their spare cash
went
into
inventories, the Old
Man might look at his plant, at
his stock-pile, and ask the crucial
question: "No change here; what

atmos.

and

other members of the United Na¬

When

they had to supply the cash, they
insisted on adequate strings.

mjnd themselves that the purpose

should

additions

changed
ordinary

from

(.rn'']a" j business transactions

forces of America, Great
Britain and France to be supplelater

prices

1920

negotiation of a
bank loan in this atmosphere re-

mented

tions.

by Mr.
Germany."'

oubT^hed

in
ac¬

companied

Wells

much

,ie,.essa.-,

should

To do this, we must

provided

merely

relief basis—if food is not used
an

new

too

practical;j cupation for the three Western necessary
practical cupation for the three Western.
zones bringing together the milistrength'

rising

Stary

such

P°wer in

requirements.
If

for
tor

Alden

looks

]

invasion

hand,

one

A
$12.4

Germany | calIs the aftermath 0f 1920 when

1?1.e

the

bank loans

integrated and coordinated military organization of oc-

We must pro-

repaid.
obiective

the

it equalled Current Lia¬

they wanted

millions

total

of repayment if we expect;

under

can :

export to buy necessary raw materials and the balance of her food

advance
advance

ide in
vide in

means

German industry

to get

On
build

Repayment.

should

tune

billions

Zones

rials and food.

weekly.

Military Occupation of Western

get industry going so that with
exports they can buy raw mate¬

bank

loan

$100

Europe.

(4)

for

long

hurry. Careful bankers too were
not impressed by 4 to 1 ratios of

their

the

war.

that

pattern of integrated and
oi ganization which
successfully built under

Western

never

bothered about their cash balance

Current Assets to Current Liabili¬

place to stait that

command

office

ties unless

oidinated
so

scarce-

insulated

bilities.

for

ing his office as Chief of Staff
to return to Germany for a couple
of months to reinstate in Germany

doing
the
same thing to

.lsenf,?wei

sufferers.

—

tics

materials and

raw

fel¬

observe others

ganization

48,000,000 people who cannot pos- j Europe.
sibly provide more than 50% of :
(2) We must give new hope to
their
food
requirements.
These j Germany and Western Europe,
people in Western Germany can i
y^e must use f00(j in order
only provide the other half of to force the production of coal in
their food requirements by manuboth Great Britain and Germany
facturing and exporting goods to ?jn^ use coa^ as a.dynamic means
the rest of the world.

running

all

know

determined

balances

war

We should begin with

partition of Germany means
(1) Organization. We must set
that Germany's breadbasket in the j
Up an organization to deal with
east is now in the hands of Po- i ^ig
problem just as we set up an
land
and the Russians.
In the | organization under General EisenAmerican,
British
and
French : hower ancj SHAEF to deal with
in

cash

doubt find small comfort in the size

consoling
when they go

Western

corporations'

1 y

tained.

The

zones

items of cost off income

many

quality o

their

entirely new policy
Germany and West¬
ern
Europe, it will be necessary
immediately to visualize a new
organization designed to see that
the objectives of policy are ob¬

aspects of the problem:

four

must have

for

the cancer in the body-

new

Allies

Once

oolitic of Western Europe.
Four

strategic materials
that would en¬

for

the

ports and not stockpiled for

the

therefore

for

their

They
d

a n

finished products were being used
for peacetime purposes and ex¬

entirely new policy for
of Germany which is

it present

succeed.

basic

times that the

the revival

must

clarity

the

view

attitude

find

alarmingly.

low

necessary

directors

part of the duties of the
of occupation there should
inspection system covering

the

opinion nothing can be
accomplished in either Germany
ar
Western
Europe
under the
Marshall Plan unless we in Amer¬
ica
announce
with the
utmost
In

recognize that
the quadripar¬
Germany,

Most

down quite

Organiza¬

maintained

new

•

army

come.

We must also

the

Nations

able

the

goods

physical

tive.

and

feet and

repaying

providing Amer¬
accept
repayment
in

will

ica

impera¬

own

United

years.

to America

loans

all consid¬

ered

their

capable

cully

objec¬
which

tives

stand

the

ment

eventually able

production,

Into

tion

getting these countries

means

possible
the
accomplish-

the

Co. Inc.

previous article,
corporations' declining cash balances and
a

Sees increasing need
capital to meet both replacement costs and physical expan¬
sion. Advises steering clear of bank loans and attacks
accounting
depreciation rules. Sees need for reform of accounting principles.
for

<♦>-

Goddard &

statements, resulting in inflation of profits.

and

has made

very

Mr. Wells comments

Americans

fallacies

General Manager, J. H.

again contends accountants leave

beginning can be made to a solution of the problem of Western Europe un¬
recognize and admit that the Morgenthau philosophy, as dictated by
Roosevelt in the Quebec, Yalta and Potsdam Agreements, is predicated on

even

and

Following through the subject opened

Holding that flv* "Morgenthau Roosevelt" philosophy, and quadripartite division of Germany are wholly
impracticable, Mr. Brown offers following program: (1) Ending reparation of capital goods; (2) curtail
de-Naz.fication; (3) eliminate shackles on German exports; (4) include Germans in Marshall Plan dis¬
cussions; (5) establish central government for Western Germany; (6) institute Continental type of
central banking system; and (7) provide a new currency.
Believes France will cooperate.

Corporate Profits

LEWIS If. BROWN*

less

Thursday, November 8, 1947

that

labor

leaders

It might,
however, prove a very profitable
study for Senator Taft, whose
care

committee
be of

some

explore.

price studies could

use.

None of this helps the business¬

Central National

Diebold Inc.

Corporation

ESTABLISHED 1927

22 East 441th

Aspinook Corp.

making

Colt

Mr.

Street, New York 16, N. Y.

then

using
finds

CORPORATION

Established

Tele.

REctor

21-8700

1-1266-7-B

Direct

Wires

York

Co.

INCORPORATED

1026

New

request

Sellout an*

Security Dealers Association

PHILADELPHIA & LOS ANGELES

41 Broad Street

Security Dealers Association
New York 4, N.

lost.

not

toe

here and there,

Broadway, New York S

Members New York
Members

was

begins cutting down
liquidating a few
unnecessary frills or overstocked
items, remarking, "We have les9
capital. We now will operate on
the
smaller amount
of
capital.

4% Convertible Debentures due 1956
Memorandum

120

begins to find out just how

much

large,

Phone:

loan

is really asking for is new
capital to replace the amountsi
lost, our hard-boiled executive

GRAHAM-PAIGE

AVAILABLE

Co.

bank

Realizing that what the treas¬

MOTORS

urer

Sterling Motor Truck

Ward

his capital, and
Colt is quite

Mr.

needed.

Du Mont Laboratories

''SPECIAL REPORT

good fat profit,
along and tells

because

correct

Brockway Motor Co.

comes

'him he is

Teletype: NT 1-2948

Telephone:LExington 2-7300

man, however, who discovers that
just when his treasurer tells him;

There

will

thank

you."

bank

loans,,
*

If, however, as is the average
case
today, he finds very large
amounts of capital lost, he will
1 See

and

the

June

26,

"Chronicle,

June

194?

28)

}

1947.

(Continued

on page

Volume

166

Number 4644

THE

Steel

The

COMMERCIAL

Observations

Carloadings
Retail

Food

Price

Industry

•

LOS ANGELES,

informal

Business

By A. WILFRED MAY

Index

Failures

The regularity with which most raw materials have been reach¬
ing manufacturers generally, made it possible for total production to

Confusion created by lack of

the Department of Justice

monopoly by either

The bureau commenting
otn

"Employment has

district

the Investment Rankers

summer

months of this

workers and students

vacation

numers

key)

of seasonal farm

Unemployment declined 225,000, the bureau stated, to a level of
1,687,000, the lowest recorded since November, 1945, just following

non-farming industries, where the employ¬
50,500,000 in October. Farm employ¬
ment, estimated at about 8,600,000 in October, was practically un¬
changed from that of September.
Prices were of somewhat more than usual interest the past week,
since as "Business Week" in its current editorial, "Outlook," points
out, it marked the first anniversary following the final removal
reached

sale

index

some

900

commodities

and

not

fast

"Products other than farm and foods—mostly industrial—are up

20%.

They beat other products because they were up so much less
when the lid finally came off. The
cost-of-living index has risen from
Against these rises, the consumer has added only

6% to his income.
"When

prices

either that

run

from consumers' incomes, it means

away

(1) people have to get

priced out of the market.

are

And

pay, or

(2)

na¬

and

drink;

furnished.

and

the

of abuse as the
securities laws anu
Exchange Com¬
of Security Loans of

ensuing

the

Securities

Division

Reserve Board
years

Brown

the administrators

after the extended Tem¬

National Economic Committee hearing*
monopolies,(**) apparently neither the Com¬
mission, the Federal legislation, the various staic
authorities and Blue Sky laws, the Better Busi¬
ness Bureaus, the NASD, nor the tightened Stock
Exchange regulations, are deemed to be effective
Irrespective of the truth or falsity of the At¬
torney-General's charges, the government as such

Company Common

Brown

Company Preferred

Wilfred

May

avoided

have

the

conflict of

the present

Brown

Company 5s, 1959

HART SMITH & CO.
52 WILLIAM ST., N. Y. 5
B<Ul

IIAnover 2-0980

Teletype NY

New York

oft indicated long-term status of the SEC.
In the first place we must remember that the Commission itself
was
established
as
an
administrative body to administer, with
the Federal Reserve Board, the "mandate" of Congress and the peo¬

mover.

148M> to above 160.

the

1-395

Toronto

Montreal

action with the clearly and

small to you, remember that this whole¬

seems

includes

porary

should

in the year. If that

avenue

every

the
of

thereof, and eight

of OPA ceilings.

Says the editorial, "Over-all wholesale prices have risen 16%

for

the Federal

level of

against

boards

supply ol!
music was also

lavish

and

explored

institution

mission

the ending of the war.
It is also interesting to note that all of the increase in the number
of employed occurred in
total

bankers

foundation

the

ment

suit

The

attended.

suc¬

brokers

financial

the

fusing to the lay observer and to tne stucienl
of
regulation.
A decade-and-a-half after the
dramatized
Congressional
Hearings(:;i)
which
(with a cast headed by J. P. Morgan-cum-mon-

the labor force."

were

from

the Association, filed last
Thursday by the Department o'f Justice, although presumably justi¬
fied on narrow and technical legal grounds, is bewildering and con¬
investment

leading

higher point except in the

when large

year

institution

Government's

huge

thousand

with

groaned
food

The

tion's

civilian employment stated:
been at

never

About

bankers

and

be maintained at

a high level the past week.
Output of industry was moderately above that of the correspond¬
ing week of last year and while order backlogs showed a slight de¬
crease in some lines, demand for most
goods remained of record size.
Of great interest on Friday of last week was the report released
by the Census Bureau which revealed that the number of civilian
jobs advanced by 332,000 during October to reach a total of 59,204,000.

pronounced

was

cess.

the SEC in controlE ng

—

party

Ii.
Corbrey
& Co.,
650
South
Spring Street, on Hallowe'en Oct.

UN-"RESTRAINT"—IN THE REFORM TRADE

CALIF.

cocktail

held at
the Los Angeles offices of Carter

Production

Auto

and

Corbrey Hallowe'en
Parly Huge Success

Trade

Commodity Price Index

(1841)

Production

Electric Output

State of Trade

CHRONICLE

FINANCIAL

lot of them

ple

safed
make

formally expressed in the rigid legislation. Thus it is vouch¬
wide powers to institute investigations, to issue stop orders, to
rules and regulations including those governing registration

prospectuses, and to conduct exhaustive hearings on procedures.
It appears that not only the investment bankers, but the Com¬
mission
itself, have been under the impression it has had such

and

authority,

white-collar groups, histori¬

that otherwise it should (as it has) cure abuses

requested additional legislation or its

through

We will BUY
u*e)

changed Securities of

Chic., Mil., St. Paul & Pac. R.R.
Denver & Rio Grande West. R.R.

Gulf Mobile & Ohio R. R.
Minn. & St. Louis R. R.

possessed powers.

(Syst.)

Western Pacific R. R.

cally, always fall behind the parade."

Exports continue to intensify the upward pressure on prices, and
while they are below their May peak they remain large ranging any¬
where from 7% to 15% of our
production, according to the magazine.
The excess of exports over imports cuts directly into the amount
available for domestic

they effect prices, the

and while

use

paper

one

knows exactly how much

concludes, that it

may

mean

the whole

difference between catching and not catching home demand.

which

sales

tional sales, it
The

policies

attributed

to the unseasonably mild weather
sections of the country. Seasonal promo¬
noted, were on the increase.

was

prevailed in
was

many

general confidence of retailers

last week.

Wholesale

volume

reflected in their buying

was

slightly above the level
of the previous week and moderately exceeded that of the corre¬
sponding week of a year ago. The showings of Spring lines of mer¬
chandise were well attended with a large volume of orders placed.
rose

0.9% BELOW

Temporarily at least the backbone of the recent

scrap price spiral
according to "The Iron Age," national metalworking
weekly. There were no advances this week in the price of scrap at
Pittsburgh and Philadelphia and in the Chicago area the price of
heavy melting steel reflected an average decline of $3.25 a gross ton.

has been broken,

"The Iron Age" scrap composite price—based on the
average
heavy melting steel price at Pittsburgh, Philadelphia and Chicago-

declined $1.08
ton.

this week and

gross ton

Out-of-district

scrap

still

prices ranging from $45 to $47
market there remains at $40 a

being
gross

now

stands at $41.50 a gross

shipped

into

Pittsburgh

ton, while the so-called local

gross ton

this week.

effect,

hearths before they would submit to a "runaway" market,
indicating the possibility that steelmakers will win part of their
fight against inflationary scrap prices.
open

It will take at least

few weeks to determine if the withdrawal

from the market

well, other segments of the Securities Act
Exchange Act."

the

We have

prepared

and the provi¬

Soya Corp.
Great Amer. Indus.

Virginia Dare Stores

all

forms

new

distribution, inclu. ing

issue

specifically the allotment of new issues to insiders." And Commis¬
sioner Hanrahan only last August before the NSTA re-stated the
Commission's functional status thus: "People will not invest in a
dishonest market. They want a security whose price is fixed by the
untampered influence of supply and demand. They want
the securities field. It is our job to see that they get it."

the Department of Justice to con¬
existing statutes and the admin¬
istration thereof.
But the conclusion surely seems warranted that
its belief in the adequacy of the law and the wide administrative
Possibly

cern

DIgby 4-2370

Broadway, N. Y. 6
Teletype

1-1943

it did not behoove

itself with the adequacy of the

powers

SIEGEL & CO.
39

fair play in

held by the agency (SEC) charged with enforcement by

THE "MARSHALL PLAN"
What it

the
A

(*)Hearings before the Senate Committee on Banking and Cur¬
rency, 73rd Congress, on S. Res. 56 and S. Res. 97, were held in 1934
"to investigate the matter of banking operations and practices, trans¬

actions relating to any

topic of
and

the most timely

the day, explaining
and

scope,

industries

sale, exchange, purchase, acquisition, borrow¬

ing, lending, financing, issuing, distributing, or other disposition of
dealing in, securities or credit by any person or firm, partnership,

means

practical analysis of

likely

Copy

singling
to

available

out

its concept

American

beneficiaries.

request

association, corporation, or other entity, with a view to recommending
necessary
legislation, under the taxing power or other Federal

G. H. Walker & Co.
SINCE

Members

for

example

Part

"Savings

and

Investment,"

Neic

HAnover

(Continued

on page

39)

1900

Stock

York

ONE WALL STREET,

et seq.

1st.

Exchange

NEW YORK 5

2-4000

Providence

Louis

International Detrola
llie

Southwest Gas Producing

LAMBORN & CO.,Inc.
99

STEEL INDUSTRY

American Maize Products Co.
and

ACTIVE MARKETS

1946 explained how "thoroughly the Commission

exploring

31)

circular

Teletype NY 1-955

even

Dec.

been

DEALERS!

Exchange

York 5, N. Y.

example of policy statement, Mr. Caffrey at a press con¬

3815

ATTENTION

Stock

York

and

allocation of steel products for export under the Marshall Plan, but
on page

New

St., New

DIgbv 4-7060

Commission-with-industry work has apparently been
as far as the currently complained-of stabilizing
bidding procedures are concerned, for there is no record of £
request for further legislation having been made therefor.
satisfactory

powers.."
(**)Cf.

(Continued

Wall

Such joint

offering of prices from $3 to $4
.below recent highs will have any lasting effect on scrap price trends.
It is possible that steelmakers will not seriously
object to the
or

Members

letter to the industry and other'"interested

Conditions today

the scrap market are not by any means following the
patterns
which they have in the past.
Some officials have insisted that they would close down

consumers

Gude, Winmill & Co.

sions of the Securities

Caffrey

persons" significantly stated: "We wish to make it plain that if the
Commission determines to make recommendations to the Congress
it will be intended as a step in the overall program which may

has

PREVIOUS WEEK

Stated Position

its own continuing commit¬
tee, the "Statutory Revision Committee," to study the need fo:
changes with interested outside persons.
Subsequently on June 4

ference

STEEL OPERATIONS SCHEDULED AT

SEC's Clearly

for which purpose it created

1934 Acts,

Chairman

Turning to retail trade, volume in the week just ended was
slightly below the level of the preceding week but remained moder¬
ately above that of the corresponding week a year ago. The slight
decline

The

example the Commission early this year announced resump¬
tion of its war-interrupted program for joint study of the 1933 anc
For

WALL

STREET

NEW YORK 5, N. Y.

low-priced stocks of several speculative Steel

Companies

available

for

Retail

Distribution.

Bought—Sold—Quoted

SUGAR

MERCER HICKS & CO.
Members

Nat'l

Association

of Securities

Dealers,

Inc.

Raw—Refined—Liquid

FREDERIC H. HATCH & CO., INC.
Established

150

BROADWAY, NEW YORK 7, N. Y.

Telephone:

DIgby

9-4224

Teletype:

1-2813

MEMBERS N.
63 Wall

SECURITY

Street, New York 5, N. Y.

Exports—Imports—Futures

1888

DEALERS

ASSOCIATION

Bell Teletype NY 1-897

DIgby 4-2727

THE

(1842)

COMMERCIAL

A Sound Bank Loan

FINANCIAL

Thursday, November 6, 1947

CHRONICLE

The Biggest Threat to Prosperity!

Policy

By W. G. F. PRICE*

By JOHN DUTTON

Vice-President, American National Bank and'Trust Co. of Chicago
C.

Asserting bank loan policy must be tailored to needs of individual bank, Mr. Price points out aim
should be to enable bank to carry out the type of borrowing business it wishes,to encourage.
Outlines
four generalizations, viz: (1) bank's personnel should know clearly what is the loan policy; (2) the
policy should be subject to periodic review; (3) policy should recognize obligations to customers; and
(4) policy should not discriminate against small or new businesses. Warns of perils of declining bor¬
rowers' equity and urges keeping loan policy in focus with business prospects.
There is a temptation to define policies in such broad terms as to make them almost
meaningless.
"Liberal" or "conservative" when used to describe a loaning policy are al¬
most as meaningless as when the same terms are applied to politics.
A so-called ''liberal"
not be
all.

liberal

It may

simply

mean

will-

ingness to
explore
thoroughly all
t h

facts

surrounding
application

institution may badly

fit the re¬
quirements of another. I should
like to suggest that the starting

point in the formulation of a loan¬
ing policy is the relationship be¬
tween capital funds1 and* the loan
portfolio. In this computation I
believe

should

capital funds

the

deduct

amount of

business

velop

function

our

cerned

far

prediction. So far

liquid capital
the

serves

same

magic number which of it¬
a danger signal.

self alone flashes

•

values
readily

apparent in
casual

sis.

analy¬

"Conserv¬

ative" is

in any other business.

must

suffi¬

amount

cient to

thoroughly safeguard our
creditors from shrinkage in the

value of

some¬

our

Some

assets.

For

any

bank,

one

too

many

other factors enter into the equa¬
tion. What
hidden

amount of the

the

are

Does the bank make it

movements

to make

times, but by
always, a synonym for
unwillingness to develop all of the

in this barom¬
long pull and
recently. Total capital funds are
used

practice

reserve,

information necessary to arrive at

reserves?

unallocated

and

William

Price

means

decision.
a

loaning policy which
such

objective as
"making all the good loans we
can
make, and still avoid taking
undue losses" seem precise enough
to be of great value.
is

some

obvious

policy

must

needs

What is

*An

the

taken

both

eter

that

tailored

the

loaning

individual

bank.

objective for one
Mr.

Mid-Western

Credit

Price

Confer¬

the

here

fixed

since

assets

are

the
weekly reports. In October of '29
the relationship of loans to capital
was about 4 to 1. What happened
in the next five years is still a
separately

vivid memory to

most of us in this
room.
On Dec. 31, 1934, the ratio
of loans to capital had dropped

little below 2% to

end

the

sound

address

the

place

over

shown

not

Nor does

advocates

have

interesting

1. At year

after V-J Day,
ratio had moved up slightly to
1945, shortly

about

From thereon

there has been

out, as you know,
rapid and almost

the accruals based either
portfoliogtotals or on loan
portfolio income? Of prime im¬
portance, what is the quality of
the individual items making up

the loan total? It is the answer to
this

determines
loan

Trading Marketa

American Furniture Co.

the composition of

What

Federal

quality of the bond
account? What is the practice on
amortization of premiums and on
taking
into
earnings profits
realized

Scott, Horner &
Mason, Inc.

these

all

answers

loaning policy
for itself. A few moments ago I
made some disparaging comments
about the definition of policies in
gently formulate

such

broad

terms

render

least

outline

the

chins

terms

which

policy should
the type

loaning

one

stated, after making

analysis just suggested.
It

should

have

LD 11

immiiiimiiiiiiiimiiiimiiiiiiiiim
128

definite dollar target, be

up or

from present totals.
Loan¬
ing policy should be able to state
what types of borrowing business

the

bank

wishes to

encourage

discourage. By way of illustration
I mean not only types of loans
such
as
term loans, installment

ST. LOUIS

(Continued

Trading Markets

page

34)

The

Stix & Co.
INVESTMENT SECURITIES

$1.50

Federal
New

September

for f) Months

30,

1047

the

Street, Boston

REctor

Members St. Louis Stock

Months

1947

1946

$2,979,945

Net Profit

2-5033

$1,562 904

Earn. Per Sh.

American Air Filter

Consider H.

Willett

For
or

Murphy Chair Company

Immediate Execution

190%

Exchange

A.M.,

Pac.

from
Std.

10:45

Time:

$8,960,201

Floor
11:30

Sp-82

Varnish

POWER)

DOUBLED.

WAS

And

yet for

and that stock and bond dealers and

government,

general

are

only a parasitical growth to be
until the government finances every¬

best,

thing.
The

Deal

New

introduced

also

tax

which they mis¬
method of soaking

policies

people

represented to the majority

the

the hands of those
result venture capital went into hiding

rich

which

divert

would

who had less of it. But
in tax free municipal

our

bonds. For

money

many

into

years

the New Dealers tried

too but it evaded them. As a direct result of
these attacks uoon the thrifty and industrious members of our nation
VENTURE CAPITAL CEASED TO FLOW. Since 1932 there has been
get at this money

deficit of

accumulated

new

capital formation of $125,000,000,000

(Department of Commerce figures). This is what New Dealism has
yet the people don't understand that this short¬
of reinvested capital which has accumulated is the reason why
have an acute deficit of housing, machinery, steel capacity,

age
we

now

railroad cars, factories and capital
understand

the

same

took

over

at
is

equipment of all sorts. They don't
has not been functioning in

Street

Wall

did for 60 years before New Dealism
have inflation induced shortages, high prices

that

now

The New Dealers have put the strangle-hold
effectively during the past 15 years but the

and depreciated money.
on

Wall

Street

very

wornout, superannuated machinery and tools now needing replace¬
ment in this

mines

and

a change in government's policy
England today is suffering from obsolete coal
down industrial equipment and their socialist

country cries aloud for

Wall

toward

Street.

broken

government will keep them in that condition indefinitely. Our New
Deal is

graduaully forcing this nation into the same abyss.

billion of new capital plus $6 bil¬
would mean $42 billion of NEW
CAPITAL NEEDED
THIS YEAR. Allowing for a
3.8% forward
march in production which adequate capital brings about this would
necessitate the creation of $48 billion in 1951 and $50 billion in 1956.

lion

make

think

you

deficits,

past

will be able to raise that much new

capital

laws where the rich are soaked until there is no
incentive for risk taking? Can the man making $10,000 a year furnish

under present tax

his high taxes and increased cost of living?
and banks do it? They don't put up

the funds after he pays
Can

the

insurance

companies

do it with a SEC and a NASD rigidly confining
machinery of this country so that today speculative
are not often
handled by underwriters and distrib¬
of securities? Can we do it with 75% margin requirements that

investment

stocks

the

20% of its proper volume considering

growth of the country since the twenties?

Can we do it when

political minded Attorney General accuses the major underwriting
firms of this country with monopoly when these firms have been
a

doing

business

under

standard rules of trade practice and custom
by even the New Deal SEC as proper, and

for the past 50 years? Can we create REAL
under such conditions?

WEALTH

I say we

cannot do so! A re-election of the Truman

Administra¬

other Democratic, New Deal, coalition of left wingers
and believers in socialistic economics will mean a continuation of
tion

any

disintegration and

decay

our

productive equipment in this

(Continued under "Security Salesman's

Corner"

on page

16)

254%

We Maintain

Active Market in

per

makes total

This

because

$1.76

share dividend has
been
payable December 1, 1947 to
stockholders
of
record
November
1.

that

efficient way that it

Increase

$3,518,805

$4.50

Earn. Per Sh._.

$1.20

other hours.

Reliance

1946

declared

of Orders

Quotes call TWX Sp-43

INVEST¬

September 30

Ended

1947

SECURITIES

ThE

ever

means

tolerated for another few years

Increase

Per Cent

Net Profit

American Turf Ass'n

in this country

$0.78

$1.50

Months

SPOKANE. WASH.
NORTHWEST MINING

years,

restricted

brokers

the
9

LOUISVILLE

CREATED

since Roosevelt introduced slander against
perpetuating political power in this country,
the people have been told BY GOVERNMENT PROPAGANDISTS
that investment is some sort of evil thing—that investors who risk
capital are the enemies of labor—that speculation is bad and should
15

has gone

September 30

Ended

Exchange

Telephone—

WAS

WHICH

(PURCHASING

past

business

Per Cent

York

machinery

WAGES

which has been accepted

EARNINGS

St.LouisI.Mo,

DAYTON HAIGNEY & CO., Inc.
Private

Stock

Share Earned

Per

Ended

and

has cut stock trading down to

Company

Common
STREET

Eco¬

MENT PUT BEHIND IT AND AT THE SAME TIME LABOR'S REAL

utors

Long-Bell

Lumber
OLIVE

Bureau

risk money. Can we

Boston Edison

509

National

this, the output of labor doubled because labor was given better

tools

common

New England Lime Common

the

from

data

WAS NEEDED DECADE AFTER DECADE FOR INVESTMENT. Due
to

the

Boston & Maine Prior Pfd.

that

later corroborated

and

Mr. Mitchell points out that $36

less

down

Lynchburg, Va.
Tele. LY 83

sales?

states

cost this nation and

Street, Boston 10
Tele.

the

believe

Preferred

Tel. Hubbard 3790

risk?

diversification

and

expose

Boston & Maine RR.

Walter J. Connolly & Co., Inc.

the loan port¬

folio, both with respect to quality

meaningless. Therefore, even
before this body of experts let me

Bassett Furniture Ind.

Traded in Round Lots

adequate

them

Dan River Mills

Prior

what

capital relationship. How
does
management review

often

to
•

primarily

Mitchell, President of Sylvania Electric.

by the U. S. Department of
Commerce, shows that during the 60-year period between 1869 and
1930 about ONE-FIFTH OF THE NATION'S TOTAL PRODUCTION

The

LYNCHBURG

which

question

questions, I believe, are necessary
before
management can intelli¬

JIIIIIIIIIIIIIHIIIIIIIIIIIIIIIIIIIIIIIIIIII

BOSTON

loan

Chicago, 111., Oct. 28, 1947.

ence,

regular accruals to a loan

further

nomic Research

I know there

article by Don G.

IT!

con¬

not

and

coincidence

•

fixed assets. The net

and hence de¬

from

handling securities. Mr. Mitchell says, "In our country,
capital formation, is on the one hand, taken for granted, and on the
others caricatured, misunderstood and penalized." AND HE PROVES

at the

to be

figure happens

brokers

ratio is about 4 to 1. The fact that

1929 level

new

Products Inc., entitled "Capital Formation—Life Line Of Progress"..
It should be required reading by everyone interested in the future
welfare of our country, including of course, investment men and'

bank
credit. By the beginning of this
year
our
barometer had moved
up to about 3V2 to 1. Today the

uninterrupted expansion of

the

accumulated deficit of $125 billion in

The October 30 issue of "The Commercial & Financial Chronicle"

carried

loaning policy<$may

capital formation since 1932 and proven value of such investment in pre New
Deal days, Mr. Dutton declares not even fraction of the backlog
will be forthcoming unless tax atmosphere favorable to risk taking
is again restored. Says "soak the rich" tax policy in reality works
to detriment of labor, its supposed beneficiaries, and sees nation's
prosperity endangered unless immediate steps are taken to remedy
present impasse. Cites policies of SEC and NASD as stumbling
blocks to free flow of venture capital into productive channels.
Noting

for

$22

Wisconsin Electric Power Co.

dividends of $1.50 pc:

the

current

per

COMMON STOCK

year.

the dividend

yield

approximately 'V/e.

(Stock

Dividend

distributed

North

American

Co.)

Co.

Approx. price—$20 per share

STANDARD SECURITIES

CORPORATION

IB! BANKERS BOND ^
Incorporated
l«t

Floor, Kentucky Home Life Bldg.

LOUISVILLE 2,

Long Distance 238-9

KENTUCKY
Bell Tele. LS 186

Members Standard

Brokers

Peyton

Stock

Exchange

Spokane

Dealers

Underwriters

Building, Spokane
Branches at

Kellogg, Idaho and Yakima, Wn.

Detailed

analysis

interested

dealers

available for
on

request.

MDHW2 & @®.

COMSTOCK & CO.
CHICAGO
231 So. La Salle St.

Teletype

4, ILL.
Dearborn 1501

CG 955

Members'.

225

EAST

MASON

PHONES—Daly 5392

Chicago

Stock Exchange

ST.

Chicago: State 0933

MILWAUKEE

(2)

Teletype MI 488

[Volume 166

Number 4644

THE

COMMERCIAL

& FINANCIAL

CHRONICLE

(1843)

"Back of the Boom"

WHAT PRICE MARKETABILITY?
Earned per

Paid

Approx.
Price

1945

:|:No.

Amer.

NEW

*N.

BEDFORD

S. E.

Dividends

''"•'N.

"A"__

of $1.75

per

2.00

5.66

1.87*4

2.24

Y. Curb.

5.20

2.62

Rayon

1946

5.22

Viscose

American

*lndust. Rayon
*

1946

5.19
5.25

2.25

41
19

2.03

1.75

'^Unlisted.

share paid

New Bedford Rayon Par¬
0.75 paid so far in

ticipating "A" in each of the past 7 years;
1947.
Dividend of $1.00 per share declared
25,

1947,

payable November
November 14, 1947.

stockholders of record

New Bedford "A"

—

Approx. Price 19

F. H. HOLLER &
-

CO., Inc.

Members N. Y. Securities Dealers Ass'n
111 BROADWAY, NEW

BArclay 7-0570

YORK 6, N. Y.

NY 1-1026

(1844)

THE

COMMERCIAL

FINANCIAL

CHRONICLE

Thursday, November 6,. 1947

Bond Club of Detroit Elects New Officers

N. Y.

DETROIT, MICH.—The Bond Club of Detroit has elected the
following new officers: H. Russell Hastings, President; Jones B.

Security Dealers

Dinner Committees
Hanns E.
&

ner

Chairman

Consolidated Edison

the

Consolidated

consolidated

Edison's

the 12
months ended Sept. 30 showed $1.61 per share on the common stock
compared with $2.25 for the previous period; and for the third quar¬
ter 40 was earned compared with 230 last year. The third quarter is
normally a slack period so far as
earnings are concerned. Ihe pres¬ vestigation of the electric rate
ent
adverse showing s^ms due structure). An application for an
increase will probably be filed in
to a combination of factors:
company

strong

commission

insist

tric

though

rates,

readjustments

be required.

may

While New York

City may not
opportunities for indus¬

present
trial

growth

other sections

construction

of the

with

par

country, the

housing

January this year (equivalent
to 540 a share after tax adjust¬
ment). (3) Rate cuts aggregating

and this will furnish

develop¬

ments,

about $9,000,000 per annum

some

500

under way

(near¬
became effective

share)

hotels,
office
buildings,
theaters, etc. will probably get

Moreover,

($5,682,000) taking effect Aug. 15.

rates,

(4) Due to duplicate interest pay¬

big

ments, earnings have not yet fully

plants;

refunding savings.

has not

re¬

duced the $1.60 dividend rate this

part

the

funding

preferred

The

program.

considers

the

vertibles

stock

sale

con¬

tially

convertible
at

the

into

sw'e

be prepared

rial

honds

0,000

four-year

has

pany
to

factors

are

for

(Brooklyn

granted

world's

earnings
The

electric

rate

commission,

year's cut,

has

(the

addition

ordered

increase
an

gas

rise

the

with

Edison,

able

restore

the

utility,

Industry—Analysis in
issue

current

and

"Review

Financial

tions"—Hirsch

Co.,

New York

Condi¬

Broad

investment.

M. -Warren,

Director of

Research for Van Alstyne, Noel

Co., New York City,
home

last

after

months.

in¬

was

died at his

illness

Impact

of the

Discussion

three

Southwestern Public Service

Marshall

effect

Plan—

securities

Circular—Batkin,

Jacobs

Motors

Other

committee

Co.;

are

Herbert

& Co.;
New York
Hanseatic Corp.; Curtis J. Straus,

New York.

companies

Osgood

New

York—New

Also

available

are

analyses of

Company "B,"

Tennessee

York Hanseatic

Products & Chemical and Fashion

way,

Park.

Corp., 120 Broad¬
New York 5, N. Y.

Week

Developments

the

Current

developments in
the industry—Vilas & Hickey, 49
Wall Street, New York 5, N.Y.
—

cular

the

several

industry and stocks

low-priced speculative

steel companies—Mercer Hicks

Co.,

150 Broadway, New

York 7,

Lake

singling

Plan"—Analysis
scope

and

industries

American

out

Strauss,

Straus;

Strauss

Valentine,

John

Bros.;

Abra¬
John

likely to be beneficiaries—In "Se¬
curities Outlook," a monthly dis¬

Valentine

Gen. Am.

District

Superior

Power

Transp. Corp

$4.25 Preferred Slock
A
banking group headed by
Kuhn, Loeb & Co. is publicly of¬
fering today a new issue of 150,-

General

American

Transportation Corp. S4.25 cumu¬
lative preferred
stock, series A,
without

$98

per

The

—Loewi

proceeds will

Co.,

225

East

Mason

the

Bell

Long

Lumber

Company-

Detailed analysis available for in¬

added

231

from

South

Salle

Street,

Chi¬

National
York

Bank

City

New

Special report — Walston,
Ploffman & Goodwin, 265 Mont¬
—

Street,

gomery

San

Francisco

business executive—

Pacific

available

are

reports

Gamble Robinson

Co. and

$101.50

loans

stock

prices

per

will

ranging

be¬

31,

1949, down to $100
per share after Dec. 31. 1957. The
stock
also
may
be
redeemed
through the sinking fund at the
price of $100
Net

per

profit

share.

the

subsidiaries

months

ended

amounted

corporation

for

June

gregated

the

six

30.

$3,510,822.

calendar year 1946, net

Steep Rock Iron Mines, Ltd.

part to

bank

preferred

new

Dec.

and

Calif.

used

initially will be
working capital.

redeemable

fore

4, 111.

balance

The

terested dealers—Comstock & Co..

value,

par

$5,700,000

repay

and

Also

Co., 1 Wall Street,
5, N. Y.

M. S.

Co.

share plus accrued dividends.

cussion of topics of interest to the
G. H. Walker &

of "Business and Financial Digest"

cago

Marshall

ham

Co.—Analysis in the current issue

Metal—Cir¬

Master

Steindecker,

Heimerdinger

000

Street, Milwaukee 2, Wis.
The

Kuhn, Loeb & Go. Offers

Corp.—

Analysis—Seligman, Lubetkin &
Co., 41 Broad Street, New York 4,

quarterly com¬
parison of leading banks and trust

1947,
For the

profit ag¬

$3,598,870.

Ohio Seamless Tube Co.—Mem¬
Amerex

Request

Holding

Corp.—Circu¬

& Goodwin, Inc.,

orandum—Bond

Bissell

Meeds,

120

63 Wall Street, New York 5, N. Y.

COMING

Portsmouth Steel Corp.—Data—

lar—Laird,

EVENTS

Broadway, New York 5, N. Y.

Paine, Webber, Jackson & Curtis
1879

committee.
the

Co.,

Broadway, New York 4, N. Y.
Graham-Paige

—62nd consecutive

Texas Public Service

Established

ticket

Products, Inc.—

New York Banks and Trust Cos.

New York

Entertain¬

Seligman is also Chairman

the

Wien

Bros., Inc.,
Broadway, New York 4, N. Y.

investor and

^Tennessee Gas Transmission

■Prospectus

N. Y.

59 years old.

Trading Markets in Common Stocks

the

Co., and Melville S. Wien,

markets—Strauss

"The

Public Service Co. of Indiana

appraisal—Kalb, Voorhis &
Co., 15 Broad Street, New York 5,

4, N. Y.

explaining concept and

Federal Water and Gas

Dresser Industries, Inc.—Invest¬
ment

Florida Ramie

Steel,
Minton

state

general

Fertilizer
the

opera¬

profitable basis in

ment and Hotel Reservation Com¬

Otto

Railroad
a

Chairmen

are

Herbert Singer, Luckhurst

general

operating

J.
O'Kane, Jr., John J.
O'Kane, Jr. & Co., and Welling¬
ton Hunter, Aetna Securities
Co.,

Barnes, A. M. Kidder
D. Knox, H. D.
Knox & Co.; Frank H. Koller,
Jr.,
F. H. Koller & Co.; Walter Mur¬
phy, Murphy & Durieu; Lee D.
Sherman, L. D. Sherman & Co.;

understood that the firms mentioned will he pleased
send interested parties the following literature:

Minton M. Warren Dead

been

necessary.

upward adjustment

relation to its huge

busy working in
case

last May

increase

Union

continue

largest

tions to

com¬

temporary increase) but

its staff has been
the

the

planned since

apply

rates

follows:

proves

Eventually

sary.

construction

should

Future

round

of electric rates may prove neces¬

program.

picture

Later if wages and mate¬

costs

price level,

raise required funds for the $250,0 0

lit¬

during the present heating

resulting

later to is-

$100.000.onr)

some

Hanns E. Kuehner

John

Richard

Recommendations and Literature

less

Street,

season.

Having thus accomplished
eouity financing, the company

will then

This will take

Chair¬

of the committee.

man

third

Seligman

members

Dealer-Broker Investment

own

while

Co.,

Bertram

Mr.

buildings
their

Unter¬

Vice

Business

relief

price

level).
its

office

and

rates may rea¬
sonably be expected but probably
not in time to give the company

common

prevailing

berg

P resident.

mittees, respectively.

An increase in gas

will

stock

which is starting its 31st year, will hold a Fall Dinner
Nov. 6 at the Hotel Statler, Detroit, at which Howard A.
Coffin, Representative of the 13th Congressional District of Michigan,
will be speaker on the subject "Behind the Scenes in
Washington."

Party

especially if a
wage increases

re¬

company

these

Gilbert

The Club,

tle time, and there may be a fur¬
ther
interim
dip
in
earnings,

equity financing (the
probably be ini¬

debentures

and

Directors consist of the officers and Merle J.
Bowyer, Paine,
Webber, Jackson & Curtis; Douglas H. Campbell, First of Michigan
Corporation; Joseph F. Gatz, McDonald-Moore & Co.; and J. William
Siler, Siler & Company.

present low
sell power to

formerly had
this business,

cut expenses.

approaching

offer of convertible debentures

Miller, Kenower & Co., Vice-President;
Currie, Crouse & Company, Secretary-Treasurer.

Unterberg,

Gilbert S. Currie

Shannon,

For the present the most press¬
ing problem is to get efficient new
equipment installed, in order to

(the usual 400 quarterly divi¬
dend, payable Dec. 15, was recent¬
ly declared).
The company re¬
an

stores

Clarence

E.
Jones B. Shannon

H. Russell Hastings

its

can

today

b y

prof¬

very

announce¬

ment

increase future net.

year

cently announced

profitable than residential should

Despite the sharp shrinkage in
company

with

Edison

which

reflected

earnings the

March 5, 1948,

according

year or so,

the

Waldorf

itable type of "growth" for Edison.

during 1946, the largest reduction

bond

in the next

Astoria

ther substantial reduction in elec¬

the

Asso¬
to

held

fur¬

for

Dinner

Annual

Security

unlikely that the

will

appointed

Committee

York

ciation

commis¬

state

the

appears

been

the

Dealers

earnings

about 5%

only

has

22nd

New

very

(after write-offs

proposed

effective

became

base

sion), it

increase of about $10,000,annum

currently

are

against
rising
coal
prices (up about $2.50 a ton), al¬
though electric operations (with
some lag)
recover a good part of
the
higher
fuel
costs
through
automatic rate adjustments.
(2)
per

present
As overall

can

case.

the rate

protected

000

for

report

the not too distant future and the

(1) While the company does not
publish net earnings for the gas
business (which contributes about
15%
of gross)
it is understood
that operations are now running
into the red and are an important
factor in the recent decline in net
income.
Gas
revenues
are
not

A wage

earnings

Kuehner, Joyce Kueh-

Co.,

Cities

Service

Co.

memorandum—A.

Co.,
N.

—

Kidder

Wall Street,

Research
&

New York 5,

Buckley Brothers,
1240 Walnut
Street, Philadelphia 2, Pa.
Also

tion

available

is late

Beryllium

Investment

Field

informa¬

Corp.

and

Nov.

Gruen Watch.

(Detroit, Mich.)

21, 1947

Securities Traders Association of

Missouri Pacific
5 \i

Serials

American Gas & Power
3-5s,

1953

Portland Electric Power
Gs,

1950

City

Valuation

Philadelphia
and

Bonds—

appraisal—Stroud
123
South
Broad

Co.,
Inc.,
Street, Philadelphia 9, Pa.
Also
and

available

are

appraisal of Railroad Equip¬
on

123 Public

Utility Common Stocks.

Gilbert J. Postley & Co,
29

BROADWAY, NEW YORK 6, N. Y.

Direct

Wire

Chicago

Ward

Inc.—Special

report—

available

Truck.

are

Detroit and Michigan Annual Fall

Party at the Prince Edward Hotel,

Windsor, Ontario, Canada.
Nov.

30-Dec.

5, 1947

Smith, Kline & French Labora¬

(Hollywood,

Investment Bankers Association

tories—Study on one of the oldest

Annual

ethical

wood Beach Hotel.

drug firms in the country

Betz

Broad

& Sullivan, 123
Street,
Philadel¬

phia 9, Pa.
Utica &
Inc.

—

Convention at the

Holly¬

November, 1948 (Dallas, Tex.)
National

Security Traders Asso¬

ciation Convention.

reports on
Aspinook Corporation and Sterling
) Motor

Trust

Fla.)

—Coffin,

Co., 120 Broadway, New
York 5, N. Y.
Also

analysis—C. E.
Unterberg & Co., 61 Broadway,
New York 6, N. Y.

South

Diebold,

Bank

National

valuation

ment Certificates and Price-Earn¬

ings Ratios & Yields

Public

Co.—Third quarter

Mohawk Cotton Mills,

Circular

—

Mohawk Valley

Investing Co., Inc.,
Street, Utica 2, N. Y.

238

Genesee

March 5, 1948
New York

sociation
the

(New York City)

Security Dealers As¬

22nd

Annual

Waldorf Astoria.

Dinner

Volume 166

COMMERCIAL

THE

Number 4644

CHRONICLE

FINANCIAL

(1845)

Real Estate As An Investment

Commodity Prices

By THURSTON H. ROSS, Ph.D.*

By ROGER W. BABSON

Beverly Hills, California

Mr. Babson reviews rise in commodity prices and

predicts American
housewife will be faced with higher prices in coming year.
Urges
practice of economy by following simple dietetic rules and curb¬
ing inordinate appetite and "second helpings."

Rea! estate expert

be made in

increased loan ratios.

asking me some rather tough ques¬
would have to be an oracle, as well
as
a
statistician.
However, I do the best I can. Right now I am
deluged with inquiries as to when the peak in wholesale commodity
Readers recently have been
To answer all of them, I

prices will be'$>
whether there
will be a fur¬

have little to

the

cards

well-advertised

ly, and with
fingers
crossed,
the
whol e s a 1 e

peak

price
should

the

seen

early
second
quarter of

prices
cost

the

rise

further

living,

1948.

retail
and

program

Brief-, eign aid, with its indicated strain
upon
the domestic economy, is
the farmer's cue for holding his
wheat, or other products, for still

living.

Roger Babson

The
for¬

chest.

their

rise
cost

ther

—

when

and

in-

evitable.

higher prices.
that

hold

will

prices

farm

during 1948. This year's short
corn crop, plus heavy foreign de¬
mand for wheat and other food
up

the

products,

While the food

all

will

strain,

factor.

radically

not

situation.
A Glance

bring

at the.Record

Conclusion

up-to-date

you

commodity price inflation, I shall
risk boring you with a few siatistics.
The latter, as you know,
much maligned,

are

but do serve

Since August, 1939, to
date, the Bureau of Labor's

purpose.

recent

all commodity

wholesale price in¬
Build¬

109.5%.

dex has advanced

ing materials have skipped ahead
to the tune of 103.5%, other things

The reai

165.3%.

advanced

have

culprit, however, is farm prod¬
ucts, with a gain of 207.4%. Hence,
the unprecedented prosperity in
the farm belt, which seems des¬
tined to continue for a year or
so

Merchandisers should

at least.

that

keep

are

areas

careful not

should

very
to lose their profits by

"invest¬

questionable

making
ments."

better idea of
what the current commodity price
inflation means in terms of dol¬
lars and cents, I shall cite a few
To

give

you

specific instances.
Back in Au¬
gust, 1939, railroads and manu¬
facturers could buy a ton of bitu¬
minous coal at the mines for $2.50

must

they
$4.85 to $5.25 per ton.
pine lumber then was
$22.35 per M; today it
$80. A pound of butter
1939, would have cost
to

today

$2.70;

ket

man

pay

cocoa

selling for about 5c a

pocketbook while slimming
The best exercise is to
push food away from you! "Second-helping-itis"
is
the
most
the

figure.

New Commission Rates
Stock Exchange members

leaving

matter

how

has

left

for

increase

commissions

after

is
then was
pound, the

amendment to the

Consti¬

providing for the calcula¬
commissions

money-

for
balloting,
has
approved by the affirmative
vote of a majority of the ballots
cast. The vote was 756 approving;

membership
been

disapproving; 2 blank or de¬

373

fective.

if
labor
still
higher

to offset advancing

living

factor

some

lower

price

level

safety
at

indicates to

that

com¬

mercial property, from an invest¬
ment standpoint, is
beginning to
are

bearish

his

pay

bigger
than

has

taxes

The

rent.

worker

holes

has

his

average

and

pocket today
had

ever

and

before

the

from

recapture

still

many

resi¬

new

poorly supplied with
merchandising
facilities.
Many

tial

must

property
standpoint.

investment

are

dential

areas

older

estate

commercial

There

history of this country or of
other country than I know of,
yet investors in multiple residen¬

any

real

districts

inadequately
However, there has been

served.

are

great deal of over-expansion of

their capital and accumulate their

commercial

interest

places.

small

out

this

relatively

which

amount,

the

tenant

himself has available to spend.
we

that 20%

agree

not

than 25% of the average man's in¬
come should be paid for rent and

other
rent

costs

occupancy

alone,

ficulty

reconciling

rental

rates

housing projects,
prospective capacity of

the

are

some

residential

and

housing—both new
properties. Well located

old

houses

with

facilities

modern

those

established

likely to

are

adequate

invested

capital.
jerry-built

re¬

On the
houses

hand,
poorly located in districts a long
way from work places and with¬
out

favorable

identity

apartment

facilities

other

Central business property
has shown less speculative ten¬
dency
than
outlying
property,

and

long-time swing, where
well located, it has a substantial
over a

investment integrity.
to

seems

prohibits

business

property

current market,
most

financial

investment

equities in the

except under the

unusual

circumstances, be¬
today's prices a rapid
the cycle would very

swing

likely liquidate
of the

tion

However, it

that sound

practice

cause

good investments to be made

very

even

will have great dif¬

in low cost

even

substantial por¬

The

great

pressure

invest

funds

rapidly accumulated

in times of great

times of

inflation

such

experiencing

today is
distort one's judgment
constitutes
what

out

on ,a

must

and

is being
speculation.

admit

that

are

put

money

pure

likely to
as to what

investment

point

need

prosperity

some¬

what confused

The

The aggregate rate of return on

schedule

new

commis¬

sions, which is the first change in
the rates since March, 1942, be¬

estate

deviation

return.

The

Financial

Chronicle)

become

associated

with

Det¬

Co., 105 South La Salle
Street, members of the Chicago
Stock Exchange.
Mr. Jones was
mer

Sills, Troxell & Minton, Inc.

Joins Clark Davis Staff
(Special

generally
income

The

Financial

government tu¬
know when to hold

Farmers, under

have

The

Financial

Swanson
wtih

has

Adams

merchandise

Adams Street.

Co.,

by the new finan¬
cial terminology, which to me in¬

available

and

under

exhorbitant

houses,

allowed in

rents

new

reduced residential occu¬
net
income
due
to
in¬

rather
than to vacancy or lower rents,
has largely offset the gain in com¬
mercial property returns.
operating

returns

cost,

increasing

are

typical

business

ments

return

of 8.4%

year

property

ago

invest¬

showed

dollars

the

$84

per

investment

equity

$390

re¬

ceived the difference between the

$84

income

total

and

first
$57.46,

the

mortgage cost of $26.54 or
which
amounts
to
14.73%

West

the

address

by Dr. Ross
21st Regional Trust Con¬

:i:From

does

Spe¬

should

that

and

an¬

I believe that

summary,

following observations

are

the

signif¬

icant:

(1)

Real

estate

good

in¬

vestment, but not up to 100% of
its
present
clay
market
value.
Every piece of real estate has its
investment

band

tive band.

The

broaden

stability,

and

its

latter

because

specula¬

has tended

dollar

in¬

since

particularly

tne

War.

(2) Mutliple residential prop¬
erty is becoming more hazardous,
particularly where not well lo¬
cated

and
attractively built
to
economically a long stand¬
(not an emergency) housing

meet

ing

need.

(3) Central business property is
still

prime investment for insti¬
prepared to carry their
investments through all phases of
the business cycle. Losses on cen¬
tral
business
property
usually
occur
only on forced liquidation.
a

tutions

(4) Any investment involving
for
responsibility
management
presumes
obligations
which,
it
to

seems

me,

has

financial institu¬

business

commit

approaches

in¬

of the

sense

investment

there must be

some

very

at
all,
material

substantial additional
security than the real estate it¬
self.
This security usually is in
and

Outright purchase of prop¬
erty
or
equity
investment,
if
equity can be thought of in any
sense as investment,
can be jus¬
tified only when the customary
equity obligations are explicitly
absorbed by a long-time respon¬
sible

would

property,
to

who

attention

call

equities are
which have no

paper

our

equities,

substance

than

the

paper

of stock market of boom

profits
days.

into

taken
when

which

must be

consideration today,
real estate as

think of

investment,

which
tive

pays

Costs,

may

prices

the

taxes, depreciation, in¬
all other operating

leaving the

vestment

return

rent

over

net

in¬

long

pe¬

riod of time.

(5) Capacity to produce, to meet

abiding

verified

need

existence of

the

adequate support¬

ing customer market, is
mary

the pri¬
test of all commercial prop¬

erty.

Long-time

(6)

ment should be

less

than

(7)

equity

calculated

invest¬
on

not

annuity basis.

Comparative prices in real
are deceptive in near-.

ly all phases of the business cycle.

Bearing these points in mind, I
that a financial institu¬

believe
tion

can

perform

acceptable

service for its clients or its bene¬

investment of a
proportion of its funds
estate of income produc¬

ficiaries,

by the

sold.

estate

real

ing type.

weight

be given to compara¬

confusing

process,

because

Amott.Baker&Co.
INCORPORATED

depression, prices indicate levels
less than justifiable
values.
While in times of inflation, such

far

tenant

and

Valuation by comparison is always
a

which

reliable

reasonable

factor

Another

cer¬

estate sales

many

lease

surance

also to the fact that in time of in¬
flation

trust

under

lease, signed by gilt-

edged tenants.

commercial

very

the form of

Thus

lessee.

tainly
justified
in
real
estate
ownership
of
an
industrial
or

equity

involve

not

equity purchasing, if it

present,

real

estate

prices

generally indicate an amount far
in excess of sound investment val¬
ue.
Let us remember that price is
historical fact, while value

is an

opinion based on prospects in the
When thinking of invests

future.

we
usually think of a
long period in the future.

Rocky Mountain States, San Fran¬

rather

cisco, Calif., Oct. 24, 1947.

We appear

Coast

cannot

that

vestment in the true

word.

mind.

own

understood

purchasing

ments,

believe

and

ference

the Pacific

well

contradiction

ment."

net

thous¬
value;
61% or $610 per thousand of this
value was covered by first mort¬
gage at an average rate of 4.35%.
The first mortgage cost per $1,000
excluding return of capital was
$26.54.
Therefore, 39%
of the
and

cludes

affiliated

105

volume

prices, producing greater
percentage leases. On
the other hand, even in view of

Chronicle)

ILL.—Elmer

become
&

of larger

because

equity investment.

With Adams & Co.
CHICAGO,-

Price Trend

Chronicle)

MIAMI, FLA.—Victor Clifton
has joined the staff of Clark Davis
Co., Langford Building.

average

occupancies
shown increased

higher

value

(Special

their hands.

the

lower first mortgage rates
and increased loan ratios. Twoive

CHICAGO, ILL.—Lee M. Jones
has

there

Commercial

Equity

from

re¬

due to

With Detmer & Co.
(Special

has

although

years,

wide

investments

facts

long-time holding
which is likely to carry us
to
all the phases of the cycle
again
and again.

tion

equity position.

these

ticipation of

itself.

present many hazards to sound in¬

real

ation

that

demanding a continually increas¬
ing share of income. Yet I am net

rent

formerly with Dempsey & Co. and

possible, however, that
prices of certain imported raw
materials may move lower in the
not-too-distant future.
Prices of
cocoa,
burlap, and shellac, are
being artificially maintained at
exorbitant levels by foreign gov¬
ernments.
But it may well be
that these governments of pro¬
ducing countries are over-playing

now

the

reconcile

telage,

paying only about 7%,
equity return of 10%.

cifically, the term "equity invest¬

higher.
Production
costs cer¬
tainly will not move lower in the
months ahead,
and might well

Farm

income

other

gross

of 20%.

proved by the Board of Governors
on
Oct. 17 and submitted to the

Steel
other raw materials are already
scarce.
Nylon stockings may soon
be
scarce
again.
Rents will be

in¬

other essential outlays, with which

turn

for some published and distributed to mem¬
and certain bers.

for

entire

soften, because equity buyers

user

continue to show

mand for finished goods

strike

Dr. Thurston H. Ross

real

estate

the

was

This

resi¬

average

dential

being made

were

time also.

little tiie

creased

should

the
of just

cally

pancy

wages

There

realisti¬

apartment districts,

purchasing
power,
plus came effective on Monday, Nov.
high
employment at 3, and the schedules of rates kand
good wages, points to heavy de¬ service charges have been already

especially

loans

basis and

forget
think

continued

increase,

mained about level during the last

prices

come.

vestment

public

when 60%

three

have in¬
creased since August, 1939, about
160% and will go higher.
Huge

time

e a

particularly

by overwhelming vote affirm rec¬
ommendation of Board of Gov¬

tion of

s p

the tenants to pay.
I believe that there

NYSE Members Approve

The

glibly of high
wages
and
high salaries,

with

prevalent American disease.

tution

taxes.

your mar¬

Materials Outlook

material

Raw

paying over double the August,
1939, food prices. My advice is to
practice economy by following
simple dietetic rules. There are
many good substitutes for costly
meat, eggs, etc.
A few shifts in
diet, and a little curbing of in¬
ordinate appetite can easily fatten

ernors

o y e e

income

comparable number of

type

vestment practice.

price now is 49c. This fact bodes
no good for the 5c chocolate bar.
Raw

it, the av¬

American housewife in the
months ahead, will be faced with
higher prices in order to fill her
market
basket.
Already, she is

N. Y.

in a business cycle
today, perhaps
properties
show not so far as prosperity is con¬
4.02% average for first mortgage cerned, but certainly so far as the
money; 64% loans and an aggre-1 price structure is concerned.
gate net of 9.2% on the pronerty
In
investment
in
real
estate,
as a whole, thus leaving 18.4% on
which has relatively low
liquidity,
equity.
Compare this with 1938 must be made with full consider¬

Today

same

Southern involved basis and an increase of
selling for
gross commission income by ap¬
commands
proximately 20%, which was ap¬
in August,

24V2C; today the price

Whereas

68V2C.

While I regret to say

fact in mind.
Farm
seller's bonanza these

Farmers

days.

after

American

erage

the

<$>-

i n-

meaning

supply-demand

tight

the

alter

pivotal

conservation pro¬

tend to ease the over¬

may

gram

When we examine the integrity of a commercial property, we rely strongly on the
capacity of the tenant to produce income.
Income of residential investment properties is
directly related to the net income producing capacity of the tenants.
I say net income,

but sometimes

circumstances, I be¬

Under the
lieve

still a prime investment for institutions,
multiple residential property is becoming more hazardous.

Under the c o m e which
program,
they belongs to the
lose by playing their
em
sell.

to
"parity-price"

and

reached

Points out central business property is

but

tions.

holds, despite high values and high taxes, there are some very good investments to
residential houses.
Says equity returns are increasing due to lower mortgage rates and

to be at a high point

Wholesaler and Retailer of
Investment Securities
Our

Trading

Department

specializes in real estate bonds
and

bank

stocks, title company and
participation certificates.

150 BROADWAY
Boston

NEW YORK 7, N.Y.

Philadelphia

(1846)

THE

COMMERCIAL

FINANCIAL

CHRONICLE
7

' ' ' r ■'

Thursday, November 6,
******

V-

Demand for the

Portsmouth Steel

itamsylvaiiiaBrevities

Corporation

Beryllium Corporation

Although

New York. Philadelphia and
Angeles Stock Exchanges
-

New

Also

Member

the

Western District

Co.

indications

Present

will

•sales

Philadelphia 2

that Q>—-——

are

$57,000^000

exceed

for 1947, with net equivalent to

New York

Los Angeles
Pittsburgh, Pa.
Hagerstown, Md.
N. Y. Telephone—WHitehall 3-7253

about $2.50 per share, compared
with

"Private Wire System between
Philadelphia, New York and Los Angeles

$2.07

per

reported

Late

for 1946. Increased sales volume

this year is, in part, a "(reflection
of

increased

pany,

The

prices.

com¬

however, has raised prices

Only 26% since 1939.

prod¬
ucts continues to exceed produc¬
tion
capacity. Output of paper

Bank & Insurance

towels and toilet tissues has been
restricted

the

result of

ex¬

plosion

and

machine
not

paper

restored. The
company
has succeeded in in¬
creasing its manufacture of facial

Philadelphia Transportation Co.
3-6s 2039, Pfd. & Common

tissues

Chestnut

Street, Philadelphia 2
New York Phones

Locust 7-1477

HAnover 2-2280

Teletype PH 257

and

wax

White

According

paper.

Dental

American Box Board

Steen,

cents per

indicate

nine

share. This
months

Empire Southern Gas

A small decline in sales coupled
with higher manufacturing costs

Pittsburgh Rys. Co.
Sterling Motor Truck

and

increased

have

Nazareth Cement

not

which

expenses

been

entirely compen¬
sated
for
by higher prices are
contributing factors. Sizeable
backlog
of
orders
for
dental
equipment
and
flexible
steel

Warner Company

Byllesby & Company
OFFICE

shafting

are in hand
and plants
manufacturing these
item^ . are
operating at an accelerated pace.

Stock Exchange Bldg. Phila. 2
Teletype
PH

Flexible

steel

expected

shafting output is
largest in com¬

pany's histcry this
Recently

Ben Franklin Hotel Com.
1500 Walnut St. 6-1950

sales

year

reach

may

Transportation Issues

approaching

record

last

$19,786,223.

year's

Because

of higher costs, however, net

$1,100,000,

Phila. & Western RR. Com.

compared

with

for

Teletype
PH

first

$46,197,523,

N.Y. Phone
COrtlandt 7-6814

375

the

042,926
ters
to

over

months

increase

were

the first three

$3,quar¬

1946, net income dropped
$284,519, down $401,279 from

Increased costs of operation to¬

and New

gether with taxes and other fixed

Charges took

ma¬

Valley

Despite
mines

the

its

last

about
$2,590,000 for 1947, com-;
pared with the $2,701,535 reported

1946.

Earnings per share on
1,929,127 shares of common

the

Lehigh
Valley
expected tc
about even,
according to
President C. A. Major. Reflecting
year

10 cents per

exceed

stated

$100,000.

that

gaged

the

and

heavy

the

demand

radio-phonograph
sets
refrigerators, Philco Corp.'s

and

sales

for

set

new

1947

expected

are

record

1941

will

have

been

despite

close-down

for

introduction
models

setvand

the

accom¬

vacations,, the

radio

many

new

television

and

disposal

la^t

Glass

Higgins,

Co.

Plate

Glass

Co.,

third

quar¬

half

July

1947,

the

company set

up a reserve of $2,500,000 for possible inventory ad¬
justments and it is assumed that
no

further

serve

additions

this

mally

nor¬

than

99%

out

high records. Gross revenues
$35,000,000 are expected

of about
to

produce

equivalent to

$2,300,000
better

than

Brooke

Iron

Stockholders of E.
Iron

Go.,

have

will

3 p.m., Dec. 1, to ac¬
offer to sell their shares

$16

share. The, bid is being

per

made

joint

Lukens Steel

Corp.

Foundry

and

Co., Worth Steel Co.

Warren

end

agreement

for

the

Pipe

entire

out¬

companies,

summated,

has

the

sale

not

con¬

been

net,
per

has

nounced. E. & G. Brooke Iron

basic

1880,

malleable

Railroad

as
or

stands

New York—HAnover

Bell

System

299

Mc-

Securities

the

Exchange Commission that it be*
granted prior jurisdiction rights
in

reorganizing the street rail¬
Judge
the

Guggenheim and

New

York

the

cash,

terest

and

feasible

that the

decks

parties in in¬
their sleeves and

roll up

reported

all

for

get at the job

system's

$23,000,000.

appears

cleared

asking

distribution

holders

Thus

group

investors

partial

be approximately

are

McVicar;

petition

of evolving

plan

fair

reorganiza¬

tion.

Although the SEC has been
the right to conduct the
proceedings, that body will at¬
denied

tend

and

participate in the hear¬

ings.

fair

Correction
In
in

article which appeared in
"Chronicle" of Sept. 4, on

the

chance

Pittsburgh Railways Plan," it
erroneuously stated that the
parent

book

value

the

Pittsburgh Railways Co.

was

ap¬
new

common

book

Norfolk

Western

Rail¬

in which Pennsylvania and
subsidiary, Pennsylvania Co.,
a
large stock interest, has

way,

its

the plan was $55 per share.
A

$80

recalculation
value

share,

per

indicates

the

approximately

arrived

fol¬

lows:

hold

stock

$1 extra dividend

its

PRO

FORMA. AS

Total assets of

DEC.

new

the

nine

months

ended

3eneral mtge. bonds

net loss

may

$10,000,000
2.989 7-79

ceive
in

liabilities-tickets

501,905

credits

1.173

Reserves

1,605,733

approximately

because

1,706 0C0

Current

Deierred

$7,051,37-2.

1946

$41,607,793

Deduct:

Unredeemed

re¬

31.

corporation

Equipm't trust ctfs.

For

recorded

the

$16,804 593

for

lag

Balance

approximately

common

The

$7,700,000

including the in¬
crease noted above, which with
an anticipated improvement
in
should

result

for

Indicated

dividends

operations,

CITY OF PHILADELPHIA BONDS

Nelson

page 10, titled "Trustee Offers New

Railroad

freight rate increase. However,
the system is expected to re¬

Valuation and Appraisal

2-9369

Teletype—PH

Judge

ment.

October

5-4648

any

the effective date of the interim

Philadelphia—PEnnypacker

may

amendments

stock proposed to be issued under

$1,000,000

RAILROAD EQUIPMENT CERTIFICATES

such

ending in the black for 1947. Op¬
erating results, however, will not
be responsible for the improve¬

ported

Telephones:

which

made,
plans
may be proposed by the debtor
by any creditor or stockholder.
of

low-phos¬

A further loss of

Fidelity Philadelphia Trust Building
PHILADELPHIA 9

include Consideration

objections

manufac¬

suffering its first net loss
in 100 years in 1946, Pennsylvania

been stepped up,
although insuf¬
ficiently to .keep pace with the

Valuation and Appraisal

proposed

Co.,

incorporated
turers

Sept. 30, Pennsylvania R.R.

Dolphin & Co.

Reorganization

an¬

yet

Available Publications

will

until

cept
at

Penna.,

court
has
Adair to

amendments

Brooke

& G.

BirdSboro,

shares and has placed the
a 75-cent
quarterly basis.

Municipal Bonds

Pitts¬

the Amended

accumulated

common

Jersey

the

public

declared

Production

subordi-:

thereto oy W. D. George, Trustee,
iiled on Aug. 7, 1947. The hearing

products without diminishing in¬
demand.

Plan

Co.

share. The company has been able
to
obtain
higher prices for its
creased

re¬

Master

hearing

Revised
and

the

Special

conduct

for

Cigars, Inc.

sales
earnings of Bayuk Cigars,
Inc., for 1947 are likely to be at

new

subsid¬

against

Concurrently,1
ordered

Jules

against second period's net.

Pennsylvania

quarter
the best of the year,

claims

system.

per

phorus foundry and forge pig iron.

fourth

the,

and

claims should be

dismissed

cents

re¬

will be necessary.

the

to;

port upon the question whether

also

stock among the three purchasing

first

affiliated

its

way

standing issue. Distribution of the

the

and

tentions

President

of its industrial storage battery

hearing

all-time high of

will

two-week

Master,

iary companies to hear and

Federal

Pittsburgh Plate
II.

$77,000,000
in
$121,600,000 in 1946,

and

plished

This

with

profits

with

compare

the

Vicar previously overruled con¬

something

$200,000,000.

over

Special

F87,075.872, higher costs reduced

television,

radio,

i:i

claims of Philadelphia Company

director.

ter sales hit

continued
for

rehabilitation

rebuilding four
freight cars -a day in its own shops.
Philip T. Sharpies, President of
Sharpies Corp., has been elected!

Pittsburgh

Reflecting

net

Major
is en¬

states that although

Corp.

Mr.

company

large

program

share less than 1946;

Philco

Adair,

proceed

are

break

estimated at $1.30, only about

are

date for

B:R. fcr the

may

February, Lej
high coal & Navigation Co. is ex->
pected
to show net income of

for

the

hearings

burgh Railways Co. asserted by

R<R.

the beneficial effects of the recent

close-down

during

the

Pennsylvania

The court has ordered Watson
B.

such

freight rate increase, October

With

the corresponding 1946 period.

Pennsylvania

other

After

nine

ton

all

Operations

j
!

and net

Exchange

cents

practically

Lehigh

important
proceedings.

for

Court

other parties in interest.

Lehigh Coal & Navigation Co.

Although operating revenues of
Philadelphia Transportation Co.

Packard Bldg., Philadelphia 2;

freight

the higher co:t

in¬

net

affected

coal and by

$1,-

Philadelphia Transportation Co.

Stock

below

increase

interim

'Nov.

set

luuea

will

year

will

net

recent

District

two

reve¬

substantial

terials.

reported for 1946.

Bayuk

Sfc

Philadelphia

substantially

508,097 for 1946.

Samuel K. Phillips & Co.

rate

Operating

show

has

with

compared

slight

the

about

common

showing.

poor

ter, but results for the

not expected to run much above

Riverside Metal Co. Com.

Members

became

issued last Week showed

have

$19,500,009,

closely

Phila. Warwick Com.

its

division.

year.

retail

turned upward and gross for the

Phila.

relatively

net

about
$855,000, or $2.85 per
share, against $1,114,860, or $3.73
per
share, in the Corresponding
1946 period.

Empire Steel Co.

Telephone

which

Botany Mills

RIttenhouse 6-3717

Co.

Co. for the third
estimated at $220,000,

about

would

PHILADELPHIA

Mfg.

Fred

Mfg.

quarter
or

H. M.

Dental

President, net profit of S. S. White

WHitehall 4-2400

but

Improvement in the third quar-

yet iully

H. N. NASII & CO.
PMia. Phone

gain,
the

The consolidated income account

1946.

Will

increase

come

year,

plant at Chester last year,

and

damage

the

nues

both

show

share on

$1.72

revenue,

figures reflect

the

expected

ac-!

effective last Feb. 11. Increased
material costs were also a factor
in

Demand for Scott Paper's

increasing
Philadelphia Elec trie

per

for

fare increases granted last Feb.
18
and i the
13-cents-aii-hour
wage

f 1.80

due

year,

company spokesman.!

dollar

every

the

expenses,

like1

the

———-

cording to

1121

Pursuing its program of ex¬
pediting tue reorganization of the
Pittsburgh Railways Co. system,

York Curb Exchange

1420 Walnut Street,

Rwys. Reorganization
Moves Ahead :;*• •
•*»

compared with $1,354;088, or $1.37, on fewer shares for
period of 1946. Sales were $41,196,563 against $34,133,333.

BUCKLEY BROTHERS
Los

out

Pittsburgh

anticipated in the final quarter

Scott

Members

Co.

flattening

'■"""

Paper Co. last week reported net profit of $2,042,624 "fori
the nine months ended September 21, equivalent to $2.15 per share, i

Request

;

%?;

Philadelphia Electric

Scott Paper Co.

Data

popular "Phillies"

brand.,:. •;i„

Production, Profit and Sales Prospects

Gruen Watch

303,000

stock

book

appears

$24,803,194

value

Pro

per

Forma

$81:85

Balance

Amended

16,804,509

Sheet

Exhibit

in the

Trustee's proposed amend¬

ments

dated

Aug.

1947.

C. B. Nelson Now With

net profit for the year.

John G. Kinnard & Co.
Phila. Elec. Co. Common

•Nor.ltid.Pub. Serv. Com.
Harshaw Chem. Co. Common

Price-Earnings Ratios and Yields

Trading Department Active in

123 Public

ford

Western Pennsylvania
Copies

•Atlantic City Elec. Co. Com.

Request

ager for

Louis.

-123 SO. BROAD STREET

PHILADELPHIA

PEnnypacker 5-0100

1528 Walnut St., Philadelphia 2
New

Boston

York
San

Francisco

Chicago ; )

9, PA.

PEnnypacker 5-7330
Pittsburgh

has
G.

become

Kinnard

White & Company of St.
the past he was with

Members

1^0 BROADWAY

N. Y. Stock Exch,

10th Floor, Peoples Bk. Bldg.

REctor 2-6528-29

PITTSBURGH 22, PA.

Lancaster

Scranton

Pitts. Stock

Exch.

New York Curb Exch. (Assoc.)

NEW YORK 5, N. Y.

Grant 3900

Allentown

John

Taussig, Day & Co., Inc.

AND

Incorporated

Nelson

with

Chronicle)

MINN.—Clif¬

Co., Baker Arcade. He was
formerly Springfield, Mo., Man¬

Bought—Sold—Quoted

E. H. Rollins & Sons

Financial

Issues

•Incorporated

Tim

Braxton

associated

Direct Wire to New York City

by prospectus

MINNEAPOLIS,

Utility Common Stocks.

•Roberts & Mander Common

•Offered only

(Special

Bell

61 Broadway

NEW YORK, N. Yr

Bowling Green 9-3937

System Teletype—PG 4'j3

Joins J. W.
(Special

The

Goldsbury

Financial

Chronicle)

MINNEAPOLIS, MINN.—Rich¬
ard P.

ciated

Cogswell has become
with

asso¬

Goldsbury

Co.,.807 Marquette Avenue.

Volume 166

Number 4644

THE

COMMERCIAL & FINANCIAL CHRONICLE

Holds "Marshall Plan" Not Broad Enough to
Maintain U. S, Experts at Recent Level

Joins

The

Financial

Curb Launches Securities

Chronicle)

Maukert

The "Marshall Plan" for European
self-help to be supplemented
is not broad enough to maintain our exports at

has

become

associated

with

Merrill, Turben & Co., Union
Commerce Building, members of

high rates because only 35% to 40% of our foreign trade is, the Cleveland Stock
Exchange. He
with Europe and as yet, at least, there is no "Marshall1
was
formerly with H. C. Wain•Plan" for the9
wright :& Co. and the National
rest of the
gen
fertilizers, medium tractors,! City Bank of Cleveland.
world, accord¬
ight iractors.
ing to a com"In the longer-term group there
p r e h ensive
should be included: Iron and steel,,
Max Jacquin, Jr., To Be
analysis of the petroleum, farm
machinery, steel
plan just com¬ plant equipment, electrical
equip¬ Bliss & Stanley Partner
pleted by Da¬ ment, petroleum
equipment.
Max Jacquin, Jr., member of the
vid
W.
Mc"In the
case
of
mining ma¬
K night,
New
a
Yprk Stock Exchange, will
chinery, the position is an inter¬
p a rtnerand
mediate one in. that it remain'i become, a partner in Bliss & Stan¬

The

re¬

Walker & Co.,
Strppf

"Wall

high

the

first

but

year

fourth year declines by
while
in the case of
^

•

the

one-half ;i
electrical
cicvii itai

Wipment, demand is high in the

City, members

first three years as the equipment
tabulation d emonstrates.''

n P W
New

David *W.

MoKnlght

Y
Y

New

the

York

n r k
o r

Mr.

between

clearing members

Oct.

Curb

Jacquin

who

messengers,

checks

drawn

clearing members
security
houses, according to Fred C. Mof-

tion

fatt, President of the Curb Clear¬
ing Corporation, who devised the
plan
in
cooperation
with
the

partment in

and

over-the-counter

Cashiers'

Section

the

Exchange Firms.
Clearing members will begin
making deliveries of securities to
the

retired

new

tween

9 and

deliveries

31.

10:30

will

Combined

a.m.

then

made

receiving banks and non-member

will

call

the

order

one

delivery, effecting certifica¬
those in excess of $1,000.
Clearing members may pick up
their checks at the delivery de¬
The

plan

community

opinion of

described
in the

total

Mr.

Wall

annual

but

are

routine

Street.

was

billion,

$15.9

Europe the rate was only
billion, of which $5.6 billion
to
the
16
nations
(plus
Western Germany) seeking help
under
the
Marshall ' proposal,"
the study points out. "These lat¬
$6.2

went

ter

countries

lion

•only sligntly
of shipments
■

194 b

seeking $6 bil¬

are

for

goods

rate

half

requirements

will taper to $4.3 billion.
"As a matter of fact,

portance of
tne

exaggerated

view

that these countries

billion

running

fact

seeking $d

whereas

our

production
the

billion.

$225

been

the

are

goods,

national

gross

been

Plan

has

economy

im-'

the

the Marshall

domestic

the

initial

the

their

and

year,

than

has

annual

As the

rate

recent

re¬

port

Secretary Krug strongly
emphasizes, it is the record do¬
mestic

levels

consumption
which

production

taxing

are

"To

rather

than

and

exports

facilities.

our

translate the Marshall pro¬

posal into terrs cf specific bene¬
fits for individual businesses and

agricylture

Obviously,

for

not

difficult.

too

quite

Europe will need

time

some

high volume
foodstuffs, notably bread
cereals,
but their
1948
require¬

-of

our

ments

expected

are

•depending,
siderable

measure

course,
cn

less
con¬

yields

crop

basic consideration with re¬

Southern

Enterprise

spect to Europe's food needs is
that tberp has been a serious loss
•of
■

:
•

supplies from non-American
notably Eastern Europe

and

recovery

suiting in
-

slow,

may

re-

"Turning

'aries.

industry

first

beneficidis¬

necessary

tinguish between t^ose industries
whose
products will be needed

temporarily,
•

Dependability

abnormal dependence

America.

-on

■

Built

sources,

the balance of this
and

will

for

those
be

constant.

throughout

namely

vear

continuing,

relatively

class

In the short-term

the following:
Goal, shipping, freight cars, nitrowould

mine and mill supply, and petroleum supply fields,

in his four employees that ideal

their point of

little

foundry in

place

rough wooden

Stockham

shed in Birmingham, Alabama, he inculcated

and 1948

the demand

which

Through distributors in the plumbing and heating,

BACK IN 1903, when William H. Stockham
started

dability
the

which

primary

STOCKHAM

maintained
reason

PIPE

for

of product depen¬

through

the

FITTINGS

the

years,

leadership

COMPANY

Wherever

the

earth;

today.

thoroughfares;

the

successful

offering

of debentures for the

Credit

Intermediate

is¬

Federal

Banks

was

valves and

design

pipe fittings.

through

every

Stockham plant facilities

From the engineering

phase

and

are

production,

complete.

the

plants

and

every

the

subter¬

towering
petroleum

conceivable

proc¬

industry; in great hotels and apartments; and

ess
<ai

A
sue

vast modern plant for the exclusive manufacture

available

works

power

complex

production and refining; in

FIG Banks Place Debs.

readily

pipe lines—deep down

are

busy

labyrinths

buildings;

made

are

use.

there

under

ranean

From that little foundry of 44 years ago has
grovcn

fittings

residences

fittings

for which

large

are

they

and

small—Stockham

dependably fulfilling the
were

valves
purpose

intended.

made Oct. 21 by

Charles R. Dunn.
New York, fiscal agent for the
banks.
The
financing
consisted
■of

$20,000,000

1.20%

Another

consolidated

Southern

•--debentures dated Nov. 1, 1947, and

ern

-due

Aug. 2,

1948.

The issue was

at nar. The proceeds, to¬
with cash funds of $22,^335,000 were used to retire $42,335,000 of debentures due Nov. 1.
1947. As pf Nov. 1, 1947 the total
-amount of debentures outstanding

advertisement
industrial

industries,

the

series

developments.

ready

its

Equitable

part

has

Securities

Corporation

helped

finance

supplying

others

with

featuring

many

South¬

capital

funds.

placed
gether

NASHVILLE

NEW

DALLAS

YORK

MEMPHIS

KNOXVILLE

$357,220,000.

Prescott, Wright Go. Adds
(Special

The

Financial

HARTFORD

BIRMINGHAM

was

GREENSBORO

NEW ORLEANS

Chronicle)

KANSAS CITY, MO.—Alfred

CHATTANOOGA

BROWNLZE O. CURREY, president

-Baylies has become connected with
Brescott. Wright, Snider Co., 916.
Baltimore Avenue.

Securities Corporation

322 UNION

STREET, NASHVILLE 3, TENN.

TWO WALL STREET,

great, ir*

important step

rate

>v:w

Moffatt, who

Stock

volume

export

the

simplification through

tralization
in

afternoon.

service to the entire 13-

rancial

the

possibilities

"During the first half cf 1947

.our

hour after

Exchange.
,

for

each

Associa¬

tion of Stock

from partnership in Gruntal & Co.
on

innovation*-

procedure,

delivery department of
the Exchange,' the Curb Clearing Corporation be¬

members

Nov.

Street

firms during the morning by Curb

ley, 15 East 58th Street, New York
City,

service,

new

Wall

Curb

is ex¬
pected to accelerate materially the
clearing of security transactions

search of G. H.

Clearing Corporation

delivery of securities between member firms of
Exchange Securities Clearing Corporation and
banks and brokerage houses which are not members of the Curb
Exchange was inaugurated on November 1.
the New York

transacted

director of

Centralized

CLEVELAND, OHIO—Oscar E.

/by American aid
recent

Merrill, Turben Staff

(Special

(1847)

NEW YORK 5, N. Y.

cen¬

procedures

COMMERCIAL

THE

(1848)

Calif.

Bank and Insurance Stocks

FINANCIAL

CHRONICLE

Anti-Trust Suit Against

Group of IBA

Justice

Elect Growell Head
ANGELES, CALIF. — At
the annual meeting of the Cali¬
fornia Group of the Investment

This Week—Insurance Stocks
Fire insurance stocks

price. This condition has been brought about b,y two contrary

market

ciation, which it

accuses of abetting marketing restrictions, and
injunctions against 16 specific practices which are reputed

wants

be restraints

York,

trend in premium volume the past
and the two-year downward trend in the market values

movements, viz!: a strong upward

charging

lew

Association

years

of fiie insurance stocks.

with

Accoiuing to Best's "Aggregates^
and

Averages," stock fire com¬
panies wiote a net premium vol¬
ume
of
$1,640,500,000
in
1946,
compared with $1,226,025,000 in
1945, an increase of 33.8%.
Yet
during 1946 lire insurance stocks,
as measured by Standard & Poor's
weekly index declined from 135.0
to 119.5, a drop of 11.5%.
Dur¬
ing the first six months of 1947,
net
premium volume expanded
still
further,
but
Standard
&
(

Poor's index has thus far in

119.5 to 117.9.

declined from
Based
of

1947

1946 year-end figures

selected list of 21 leading fire

companies, each dollar
these
stocks today

insurance

invested

protected,

would

average,

$1.72 of invested assets, com-

approximately
$0.70
of
bonds, $1 of preferred and com¬
mon
stocks
and
$0.02 of
real
estate.
It is
important to cake
prising

value

liquidating

stated

conserva¬

very

tively, inasmuch as only 40% of
unearned
premium
reserves
is
used in its calculation, it is prob¬

closely true to say that, on

ably

practically all "invested

average,

assets" belong to the
without

stockholders

offsetting liabilities.

any

■^Pref.
Invested

Invested

Market

Siiare

Boston

of Mkt.

Liq. Value

Per $

$1.95

48%

148.96

$1.05

$0.90

1.21

0.87

1.32

Association

Warren

America,

Weedon &

Crowell,
Crowell,
Co., Los Angeles, was

elected

Chairman.

named

were

Schwabacher

Other
P.

officers

Schlemmer,

Co., San Fran¬
cisco, Vice-Chairman, and Bruce
McKennan, First California Co.,
San

Francisco,

urer.

Willis H. Durst,

Secretary-Treas¬
Wagenseller
&
Durst, Inc., Los Angeles; C.
Wesley Hall, Wesley Hall & Co.,
San
Diego;
George
W.
Davis,
Davis, Skaggs & Co., San Fran¬
cisco;
and
Thomas
E.
Morris,
Blyth & Co., Inc., San Francisco,
elected

0.55

0.87

1.09

were

0.95

1.12

the

executive

committee.

1.50

0.34

1.16

1.11

0.68

1.49

1.20

2.04

0.92

1.12

1.45

42.02

20%

Great American

39.10

1.30

0.32

0.98

65.57

2.43

1.28

1.15

1.50

130.46

108

1.21

0.49

0.72

0.94

Fire

Fianklin

Fire

Hartford

Insurance

Home

45.51

25%

1.76

0.68

1.08

114.90

95 V2

1.20

0.18

1.02

113.64

2.32

0.79

1.53

New

68.01

River

1.39

0.66

0.73

26y4

1.36

0.75

(0.61

0.38

York

Smith

Co.,

Francis

Wall

Street,

City, has been elected

1.03

1.47

68.78

2.08

0.92

1.16

1.27

80.45

1.09

0.45

0.64

1.07

2.32

1.23

1.09

1.27

Springfield F. & M

65.C9
86.87

46%

1.86

0.73

1.13

1.30

U. S. Fire

87.40

1.66

1.01

0.65

1.16

123.17

Phoenix Insurance
Prov.

Washington
M

St. Paul F. &

Insurance

Security

—

suit

that
wa s

(2) That Morgan Stanley & Co.,
First Boston Corp., Dillon Read &

exhaustive

Co., Kuhn Loeb & Co., Blyth &
Co., Smith Barney & Co., Lehman
Bros., Harriman, Ripley & Co.,
and Goldman Sachs & Co., be en¬
joined from participating, directly
or indirectly, in any buying group
formed to merchandise a security

elected.

inquiry" and
it

"would

great help,
particularly to
small

busi¬

nesses."

The

firms

are

cused

and

Clark

issue

"restricting, controlling

fixing

and

channels

the

prices, terms and
upon
which security

methods,

the

conditions
issues

Tom

ac¬

merchandised."

are

which

other of said

any

defendant

banking
firms
is a
participant; and that participation
by any of the following defendant
banking firms to wit: Glore For-

claimed by the Attorney General
that the firms involved handled

Co., Kidder Peabody & Co.,
Eastman, Dillon & Co., Union Se¬
curities Corp., Stone & Webster

between June 1, 1938 and June 30,

Securities

1947

about 69%

securities

new

issues,
aggregating
in
amount
over
$14 billion. The Investment
Bankers Association was charged

lation.

gan &

White
Hall

Corp.,

Weld
&

Co.

formed

groups

Co.,
Harris,

Drexel

Co.,

and

(Inc.),
in
buying
to merchadise a

security issue, be enjoined in such
a manner as the court may deem
necessary in order to create actual
competition
in
the
investment

porations, all of which have their

banking industry.
(3) That each firm be enjoined
from placing any officer, director,
agent,
employee or
partner,

main

offices in New York City,
Morgan Stanley & Co.; Kuhn,
Loeb & Co.; Eastman, Dillon &
Co.; Kidder, Peabody & Co.; Leh¬

nominee

man
Bros.; Smith, Barney & Co.;
Glore, Forgan & Co.; White, Weld

New

1.16

1.09

duPont

1.26

35.82

Hampshive

North

1.25

Fire

are

Clifton

1.06

National

and

two types

lobbying against regulatory regu¬

N. Y. School Bd. Ass'a

1.20

of N.

Co.

Ins.

issuer

issuer; that each
which of these
of business it will con¬
duct for a particular issuer, and to
keep
out
of
the
business
not

re¬

with abetting the restrictive prac¬
tices of the accused firms and as

Clifloa Smith Elected

0.83

Hanover Fire

ties of the'same

Warren H. Crowell

Bankers

0.48

2.17

adviser

taken "after

1.42

55 y4

action

1.43

Bankers

be required to elect

the

65 %

117.19

Asso'iation

Investment

purchaser for resale of the securi¬

soon

after

83.09

Fidelity-Phenix

the

anti¬

nouncement of

92.75
_

together with

Clark told

74.58

insurance

Continen t Insurance

Fire

Assets to

2.19

$94.62

Agricultjral

Per $

Invested

Per $

of Mkt. of Mkt.

(Asked)

12/31/46

Insurance

Aetna

Stocks

Assets Bonds

Recent

Assets Per

Ratio

& com.

banking firms

violation

the

porters

note, also, that the average ratio
share to li¬
quidating value per share is 1.12;
thus approximately
90% of in¬
vested assets belong to liquidating
value
or
stockholder's
equity.

since

trust laws. Mr.

of invested assets per

Furthermore,

trade.

As forecast in last week's
"Chronicle," the Attorney General of
the United States, Tom C.
Clark, on Oct. 30 filed a civil suit in the
United States District Court for the Southern District of New

invested assets to

exceptionally high ratios of liquidating values and

engage in monop¬
Asks dissolution of Investment Bankers Asso¬

bought at current levels are buttressed by

Banking Concerns Filed

Department charge 17 underwriting firms

olistic practices.

LOS

By E. A. VAN DEUSEN

Thursday, November 6, 1947

(4) That each defendant bank¬
ing firm be enjoined from inter¬
fering with the right of any issuer
to
select
both
the
method
by

The

accused

firms, constituting

10 co-partnerships and seven cor¬

Co.; Drexel

& Co.; The First
Corp.; Dillon, Reed & Co.,
Inc.; Blyth & Co., Inc.; Harriman,
Ripley & Co., Inc.; Stone & Web¬
Boston

either

the board of directors

issuer

any

whom

for

acts

financial adviser

purchaser of securities.

which

curities

will
and

dispose

outlet

the

its

se¬

through

ster

poration.
real estate;

^Includes

$1.02

$0.70

$1.72

Average

which the issue will be sold.

(5) That each defendant bank¬
ing firm be enjoined from inter¬
fering with the right of any in¬

Securities Corp.; Harris, Hall
& Co., and Union Securities Cor¬

1.12

approximately 2.3%.

The suit asks

restraining orders

to force the accused firms to aban¬

interesting situations

Some very

disclosed

are

this

tabulation.

wum,

North

maximum

America;

For example, more

ferred and

vested assets per

found in National

than $2 of in¬
$1 of market are
obtainable in such stocks as Ag¬

Association,
Franklin, Hanover, National Fire,
Fire

ricultural,

Washington

Provider en

and

Se¬

curity of New Haven.
stocks

that such

interest

also

Aetna, Hanover, Secur¬

ity and U. S. Fire provide in ex¬
cess of $1 of bond investments per

to their

$ of market, in addition

preferred and com¬
Likewise, such stocks

investments in

sto-In.

mon
as

Agricultural, Fidelity-Phenix,
Association; Franklin, Han¬

Fire

America.

National Fire,

Phoenix,

Washington,

Security

Providence
and

each

of North

Insurance

Home,

over,

Springfield
provide

Fire

Marine,

of $1

in excess

preferred and common stocks per
$ of market, in addition

to their

investments in bonds,

mum

Company

Insurance
common

in North

pre¬

but

are

intriguing.
However, ap¬
may be deceiving.
In
other words, the stock which looks
like the best statistical bargain is
not necessarily so, and vice versa.
For example, National Fire, with
pearances

$2.32 of invested assets

per

experienced

pro¬

School

Smith

for

Association.

Board

has been

years

Mr.

member of

the

years.

For

the

two

past

he has held the post of Vice-

President of the board under Leo

Giblyn, President. The associa¬

tion

represents

New

the

State

York

the

villages

state.

North
per

other

hand, Insurance

America,

with

only

$3.20

strong upward

Harold

Barclay Forming

trend in total net

Own investment Firm

operating earnings since 1930.
The

ever,

situation

whole, how¬

suggests that choice fire in¬

surance

stocks may

today be

pur¬

CHICAGO,
clay

ILL.—Harold

forming

Barclay

Bar¬

Invest¬

ment Co. with offices at 39 South

years,

criminal charges are made

investor from

The
specific
charges
in
the
complaint state that the defend¬

(6) That each defendent bank¬
ing firm be enjoined from refus¬
ing to negotiate with or to com¬
pete for the purchase of securities
of any issuer either because some
other investment banker is

penalities
imposed.

Salle

asked to be

are

under agreement:

are

eliminate

(1) to
competition among

themselves

and

investment

other

bankers as
well
as
prospective
purchasers of securities; (2)
to
prevent, restrain,
and
discredit

competitive bidding, private place¬
and

orders

sales

Street, to engage in the

agency

Federal

ministrative

ad¬

State

and

requiring

agencies

Another

significant

charge

that the accused firms seek to in¬
fluence

ment

this

and

the

control

financial

and

control

manage¬

activities

and

concerns

been

to preserve

the

such

traditional

issuer,

has

banker

for

because the busi¬

of such issuer might be in
competition with the business of
ness

issuer for whom

some

defendant firms acts

has handled

one

of the

adviser

security issues.

(7) That each firm be enjoined
from asserting any right to deal in
the securities of a particular is¬

merely

suer

has

competitive bidding.

issuing
La

the
disposal of securities by issuers;
and (3) to circumvent regulatory

$1 of market has achieved

been

have

over

ments,

operating earnings since 1935.

York

Freeport, L. I. board of education

nounced downward trend in total
net

practice

other

ants

President of the New

stated

are

and

figures

specific business practices

common

Clifton B. Smith

River.

very

has

choosing freely both the methods
by
and
the
agencies
through
which it will purchase securities.

which

stock value is

Fire, and mini¬

To this writer these

market,

stitutional

don

because

such

firm

participated in
the merchandising of any security
issue emanating previously from
such issuer, or from recognizing
or
deferring to such a claim by
any other defendant banking firm.
managed

Hanover Fire,

and Mini-

AMEREX HOLDING

from

liquidating values and

NATIONAL BANK
Bankers

the

Request

Government in

Members New

Burma, Ceylon, Kenya
Colony and Aden and Zanzibar

Paid-Up Capital

York Stock Exchange

Reserve

BROADWAY,
Telephone:
Bell

(L. A.

NEW

YORK 5, N.

Fund

BArclay 7-3500

Teletype—NY

26, Bishopsgate,
London, E. C.

Branches in India,

Laird, Bissell & Meeds
120

Office:

Subscribed Capital

The

Bank

conducts

every

£4,000,000
£2,000,000
£2,300,000

banking and exchange business

1-1248-49

Gibbs. Manager Trading Dept.)

encourage

centralize

purchase

description

Trusteeships and Executorships
also undertaken

finan¬

and

over

issuers

promote

con¬

solidations, mergers, expansions,
refinancings, and debt refundings
in order, among other things, to
create an
increasing volume of
security issues
for
themselves.
Added to all this, the firms are
said to conspire among themselves

Kenya Colony and Uganda

Circular

acting

they

invested assets.

Head

existence

advisers to those from whom

cial

both

of INDIA, LIMITED

CORP.

(8) That each firm be enjoined
creating, managing, or par¬
ticipating as an underwriter in a
so-called standby account, that is,
a
buying group with continuous

-urities business

able

purchase
security
issues.
They are also charged with utiliz¬
ing their domination over the se-

chased at very attractive discounts

Maximum bond value is obtain¬

and

curities in
Harold

and

concentrate

distribution

the
se¬

single market (New

York).

Barclay

from

the

formed

merchandise

security issues of

issuer

and

when

particular

issued.

(10) That each firm be enjoined
acting with any other de¬

from

fendant firm

the

other

concern

securities

Securities
was

business.

Mr.

Barclay

formerly in the trading de¬

partment of Caswell & Co.

business, either to
specific relief asked by the^ select jointly or to delegate to
Justice Department complaint is:
anyone the selection of the secu¬
(1) That each firm be enjoined rity dealers to participate in sellThe

(9) That each firm be enjoined
from participating in any overlylarge buying group, that is, a buy¬
ing group which is larger than
necessary to handle a particular
security issue.

from

occupying the dual function

(Continued

on page

25)

Volume 166

Number 4644

THE

COMMERCIAL

Monopoly Suit Unfounded, Say Accused Firms
Partners and spokesmen of
underwriting

denouncing

accusations.

nonsense."

John M. Hancock

Harold

concerns

methods followed

charges "utter
of "sharp com¬

existence

stresses

petition, operating in 'gold fish' bowl."
out

issue statements

calls

Stanley

civil

Morgan

Stanley

Statement

Co.

The

sense.

true.

charges

just

are

not

I cannot speak for the other

firms

men¬

tioned.

charges

the facts.

but

how

can

what

say

Morgan

Stanley thinks
about

it.

Our

the

American

fish bowl'.

business made

lated

will

regu¬

of.

Our

life

firms in

including the
and

full

our

with

own

com-

industry,

firms

named

government

and

agreement with anyone to restrict
of

monopoly.
ties, industrial
a

underwriting in that period.
In
addition, the terms which any in¬
compete

banker

with

that

commercial

direct

loans'

with the

of insurance

must

offered
who

bankers

and

offer

can

those

'term

have any

vestment

banking business.

Lehman

Brothers

has

make

businesses,

'private placements'

and

effort to comply with
of the law,
regulation of the Federal
authorities and has al¬

been

ways

fessional

guided by

and

those

ethical

pro¬

principles

which have been developed in the

business, and which
mere

go beyond the
requirements of law.

The

American

public knows
underwriting and whole¬

that the

saling of securities is

companies and other

(Continued

of the Investment Bankers

issued

that

on page

essential

and

to sell

through investment bank¬

be,

and wrote articles criticizing pro¬

posals for compulsory competitive
bidding.
involved

against
by

IBA

Anti-trust

Division

ganda"

are

Col. Murray

funda¬

Hanson

The

prevent

mentally

its

members
of
the
Association
for
having
individually and collectively ex¬
attack

cannot

IBA

the

upon

has

any company

securities

the

ers

public

because

simply

the

pany

Association' that is consistent with

The importance of encouraging
citizens to state their views freely

(1) The Investment Bankers Asbers

and

some

its

by competitive bidding.

and is under

solicitation of an

Such

freedom of choice is the very basis
of competition.

This advertisement is not,

mem-

proposed administrative regu-

lations

appeared before the Securi¬
and
Exchange
Commission

tions

and

has

legislative

any

and opposed

lations

securities to be sold under
of

tern

compulsory

now

charged

"lobbying,"

and the ICC to

[ment

as, an

appear

(Continued

through

its

decisions

own

offer of these securities for sale

of such securities. The offer is made only by the Prospectus.

150,000 Shares

how

and

ness,

and to meet its responsibility

with

whom

busi¬

General American

for results.
The

injunctions proposed by the
in

government

and

counsel

were

firm

and

dants

tion.

for

was

elect

the

(Cumulative—Without Par Value)

defendants

discriminatory
forced to reject

taken

defend the
Other

similar

ac¬

OFFERING PRICE

defen¬

posi¬

ously

would

handicap

not

the

substantial

of
re¬

lessening of

Copies of the Prospectus
writers named in the

the present very real competition

that

exists

bankers
court

among

today.
the

PER SHARE

only seri¬

financing

American industry, but would
in

$98

(Plus accrued dividends)

The government's proposals,

adopted,

sult

$4-25 Preferred Stock, Series A

confer¬

unworkable,

courts.

have

Transportation Corporation

Department

the

fantastically
our

them
tion

the

unrealistic,

and

that

pre-suit

between

ences

may

be obtained in

Prospectus and others

any

State only from such of the several under-

as may

lawfully offer these securities in such State.

investment
doubt

any

country will permit

the Sherman Anti-Trust Act to be
used

accomplish such

The suit

cannot

vesting public

rowers.

has

result.

industrial

Someone,

reasons,

Kuhn, Loeb & Co.

benefit the in¬

misled

for

bor¬

whatever

the

ment.

Depart¬

November

6, 1947.

the

and to corn-

on page

vestment

Industrial management is entirely
and able to make and
carry

im-

the proposed regulations

NEW ISSUE

free

with

despite

(fact that it was invited by the SEC

competitive

(2) Some officers and members

proper

sys-

bidding;

24)

IBA

the adoption of regu¬

requiring certain kinds of

The industrial plant in America
the greatest in the world. In¬

bankers
have
helped
provide the funds to make it so.

ques¬

been

repeatedly recog¬
and
the
Interstate
Commerce nized by administrative agencies
and by Congress. In this case the
Commission
at
public hearings

ties

circumstances to be construed

pfffr to buy

State and

Federal laws,

following things:
sociation

any

deemed

free

negotiation

from selling

by competitive bids

other method the com¬
desirable.
The IBA has never attempted to
cised their constitutional-rights of I
! prevent any of its members or any
petition and of free speech.
It is perfectly clear from the bill other
investment banking firm
of complaint that the IBA has been from bidding on, buying, or disnamed as a defendant in this case I tributing
securities in any way
or

obscure that fact.
attempted to

never

to
choose whether to sell directly to
banks or insurance companies, or

noth¬

ion; the use in the bill of com¬
plaint
of
such
invidious
and
misleading phrases as "lobbying"
and "intense pressure and propa¬

The charges
made

activities

These

ing except the expression of opin¬

has

management

been,

com¬

against

we
are part
In selling securi¬

should

opposed to

were

Justice

ment's

Associ¬

Congress

Certain officers and mem¬
the IBA made speeches

(3)
bers

charges:

the

they

pulsory competitive bidding; and

following

the

members

told

ation

same

and certain of its members did the

always

requirement

State

defendant

«*>-

Depart¬

made every

and

years

scrutiny by the Securities
Exchange Commission.

competition

field of
business,

American

Hancock

every

not

industry has been subject to
most minute regulation and

silly to assert

in any

vestment
John

widely spread. The 9-months'
figures for 1947 show that 62 firms
loaning each did more than $10,000,000 of

companies,

Everyone knows that for

It is

sharp

every

agencies.

the

laws

of
securities
financing.
if any industries are more
stringently regulated than the in¬

business

complaint, also with banks

mention

State

Few,

vestment

gold

phases

banking busi-

other

insurance

our

day.

Competi¬
tion in the in-

tion,

Stanley

p e

in the

daily

It is stringently regu¬

and

the

'in

done

mane

was

memorandum prepared ior Attorney

protest-

supervised by the Securities
Exchange Commission, which
is thoroughly familiar with the
methods
and
practices
of
all

stand the light

statement

The business of
wholesaling

by Federal

organization, released

45 cents per

and

not

competi¬

Harold

other

know

the

offering

and
now

the

time

expenses

and

purposes

Association

Clark, and

Investigation
the T. N.
aspect of the

every

Bankers

Investment

T o m

uenerai

examined and Congress
passed such laws as it be¬

securities

that

lated

hearings,

the

along with 17 underwriting concerns, Murray Hanson, General Coun¬
sel of the

ones.

Pecora

campaign

for

most

which

sums

wipe out the prof¬

underwriting

accused firms.

about 14 years ago, and

has

o r

tive

the

Since

Following the filing of the Justice Department'santi-trust suit, in

oughly

most competi¬
and

may

lieved necessary.

bank¬

never

buying

on,

unsuccessful

one

successful

of ten

individual members, opposed compulsory competitive bid¬

Says IBA

ding

securities business has been thor¬

business

done,

major deal
it

low

Moreover,

this is another

busi¬

ness

margin before deducting
on
a
top
grade bond

Compulse;^ Bidding Views

interfered with its members or others in bid¬
distributing securities in legal manner. In
memorandum to Attorney General Clark, IBA denies accusation
of improper "lobbying" and refutes charge it is controlled by 17

gen¬

responsibility
as¬
sumed, and the heavy risks in¬
volved,
the
profit margins
in
underwriting security issues are
extraordinarily small. The profit

E. C.

ig-

norance

ours,

the

Either these charges are

tors

investment

some

ding.

the

handled,

$100.

banking business do not jibe with
based

successful

sometimes is

Hancock,

reported

with

levelled at the investment

press as

They
competi¬

are

by John

Partner of Lehman Brothers

%;The

same

portance of the job, the large

Justice Department's
houses, partners and

<§>.

This civil suit charging us with
restraint of trade is utter non¬

I observe the

ing business requires good busi¬
ness
judgment,
integrity
and
experience. In relation to the im¬

denying in general the charges, and calling attention to implications
The "Chronicle" publishes herewith these statements
as they have been issued and received:—
Stanley

Murray Hanson, General Counsel, issues statement claiming organ¬
ization was made defendant in anti-trust suit because it, together

tors.

of the move.

Harold

competition is so keen
good half of the time and

(1849)

IBA Blames Suit

the

eral situation among our competi¬

suit against
spokesmen of some of the firms named in the suit issued statements

Statement by

fact,

business.

against national interests.

the
17 prominent underwriting

institutions, which supply
capital direct to corporations. In

helped by a large staff, is devoted
seeking
opportunities
for
new

Charles B. Harding points

CHRONICLE

effort of my partners and myself,

approved by SEC. J. P. Ripley calls
charges "fantastic," and Lloyd S. Gilmour berates proposed re¬
striction against
underwriting houses acting as corporate advisers.
Kuhn, Loeb says "attacks on Wall Street still appear to be
popular" for political reasons and Col. Allan M. Pope scores action
as

FINANCIAL

large

that

are

Immediately following the filing

25)

(1850)

THE

COMMERCIAL

FINANCIAL

CHRONICLE

Thursday, November 6, 1947

Illinois Security Dealers Associations Annual Dinner
Held at Morrison

Hotel, Chicago, Oct. 31, 1947

.•££
%-

of the

south and west. This trend

has not

from

inherent

It is not

long ago that

consecutive

dividend to

its

national advertising campaign called
reading public to the fact that for the

Pennsylvania

year

stockholders.

common

1946, the Pennsylvania stock

was

Railroad

market

paying

was

1945, and

well

even

fairly generally considered

o£ the few real investment issues in the rail
group.
servative an issue to be a spec-<e
tacular

performer or
a
"trading favorite but it was widely

high

hailed

into

one

It Was tob

con¬

ideal

medium

for

steady income and market stabil¬
ity.
The

last

nessed

public

two

have

years

drastic

change

attitude

wit¬

towards

the

these

level

during those

years

were
coming in from this
normally unprofitable end of the

business went

the

beyond
century

last

the
re¬

mains unbroken and will presum¬

individually. In the
these

adverse

of dieselization

little

very

few

establish

lows.

new

nothing

daily

the

There

current

earnings

picture that would tend to contra¬
dict

the

most

market

action,

and

for

part railroad analysts
not inclined to look for
any

are

dramatic
over

change

for

the

better

the visible future. It is not at

all difficult

find

other

securi¬

ties,

particularly outside the rail
field, selling in the same general
price range but having
ably better prospects.
What

ing the

not

was

roads

Some

were

these

may

con¬

adverse

corrected

are

apparently in¬
the territory served and

herent in
the type

of business handled.

was

that

the

inflationary

spiral of costs had
gradually been creeping up on the
eastern roads

Pennsylvania
mune

this

had

whole and that
not

general

Generally

speaking

the

proportion of short haul business,
in the passenger and .as well as in
load

car

and

l.c.l.

freight.

goods such

coal and iron ore, is

generally expensive to handle.
is obvious
of

that the

terminal

costs

a shipment moving 50
just as heavy as if the

are

shipment

moving 300 miles.
There is, however, a vast differ¬
were

in the amount of revenue

ence

minal

large

cost

situation

turbine

stage.

part

consists

the

and
up

L.c.l. and passenger business
by
the very nature of the

Also,

trend.

The

forces.

This

heavy

situation

ularly acute when the
is short haul.

types

themselves

labor
partic¬

movement

Moreover, these two

business

not

lend

readily as other
phases of railroad operation to
mechanization such as would in¬
crease

and

the

productivity

labor

keep the unit cost.s under

trol.

Another

railroads
trial

east

factor

con¬

general

operating in the indus¬
is

that

the

not

ing

handle

condition

time

may

although

New York 4, N. Y.

Telephone BOwling Green 9-6400
Teletype NY 1-1063

all

not in

term

near

meantime,

the

Western,
nominal

from

show

earnings

Norfolk

ed to $155

As you

heard,

naturally
ment

the

worked
the

country

mature

and

the

detri¬

sections

the

benefit

loss to a
this country.

or a

fine

The

Lehman Brothers Staff
Lehman

Street,

New

Brothers,y 1
York

of the New York

Stock

become" associated
in

the

William

the

bond

C. F.

takes,

alertness

new

is to

ties

the

are

our

mis¬
develop¬

planning

rec¬

into t're

supervisory capaci¬

doing all

respects, and

if this fine

be extended

We in

past

foresighted

necessary

are

future.

Childs and

rest

and

ord

Knowledge

all

firm

banking

to all
but it would be

sure,

for

gratifying

ments,

has

depart¬

Vice-President

office of

mistake

oars,

record

years

us.

Exchange,
Panke

with

municipal

ment.
Boston

recent
of

City, members

that Karl J.

announce

history for bank sol¬
stability, and safety.

vency,

we can

in these

try constantly to

bankers to plan for the

encourage

Company from 1931 to 1940, Mr.

future and to provide against con¬

Panke

tingencies.

dent

then

and

became

Sales

Vice-Presi¬

that

Fisk

year,

joined

Sons, Inc.,

the

Research

The

Mr.

Panke's

duties

include

New England

insured banks that have been

placed
than

receivership.

330,000

institutions

depositors

were

More
those

completely

pro-,

tected.

By authorization of the Banking
of 1935, the Federal Deposit
Insurance Corporation exerts
every effort to forestall failures
by aiding the merger of weak in¬
Act

sured

banks

tutions.

with

stronger

insti¬

There have been 156 such

mergers, with the Federal Deposit
Insurance Corporation disbursing

$176,000,000; The advantages

some

of this

type of action

depositors

are

that all

fully protected and
no
interruption to
banking
service
in
the
com¬
munity. The successor, or absorbing
that

are

there

bank

takes

all

over

of the weak bank.

Harvey

with

nature

Planning
of

our

Essential

problems

changing constantly, and it is the

assets

and

assumed
is

sound

assets

The difference

paid

*An address by

the

23rd

Annual

Mr. Cook before
Convention

the National Association

of the

Auditors

and

of Bank

Comotrollers,
timore, Md., Oct. 23, 1947.

Bal-

the

deposit liabilities'
the continuing bank

promptly in cash by the

Federal

Lehman

coverage

territory.

and

dealer in

municipal and government bonds.

Brothers

nearly 14 years of its
the
corporation
has
paid $87,000 000 in the

between the amount of these sound'

Manager

trends

decentralization of industry have

receivership

the nation's

Karl J. Pastke Joins

and

245

single depositor in
This marks an all-time record in

rest

Population

into

in which there has not been

bank

the

promptly

fourth

firm's New York office until 1943.

the

operation,

are

year

its stock.

territory is
of

without lo:s to the depositors.

have

well

now

Corporation has
1,319,000 depositors in

closed

insured
banks.
Of
their $509,000,000 of deposits, 98%
were made available
immediately

bil¬

Insurance

protected
401

the

Since its inception, Federal De¬

posit

which,
June 30,

lion.

than

1947, amount¬

Perhaps I can best
point by reviewing'
experience in Federal

own

Deposit Insurance Corporation.

the de¬

prospect. In the

income

our

hold 95%

essential.

illustrate

banks

all

hard pressed, even with increased
dividend

con¬

posits

will

fact of this constant change
that makes research and planning-

very

nation

the

certainly

company

De¬

Corpora¬

the

and

this

corrected

this -is

banking

stitute 92% of

and
delays
in
naturally affect the entire
operating performance. As with

situation

Insur¬

stitutions

the

country.
25 Broad Street

ance

bottlenecks

power

the Federal

era

tion. These in¬

expeditiously. The result¬

motive

new

posit

transit

the

Federal

development

Deposit Insurance Corporation like to think
was ushered in by the Banking Act of 1933.Today there are nearly 13,400 commercial banks and trust
companies
and 200 mutual
savings banks whose deposits are insured by the
that

present

losing- ground to the
GUARANTEED RAILROAD STOCKS-BONDS

sufficient

since

banks should maintain and
improve internal auditing and controls.

generally con¬
ceded that Pennsylvania's traffic
is just too high for the maximum
efficiency. The existing facilities

operations

relatively

improvement in conditions of banks

addition to sound credit
judgments,

will

make

the

recounts

ter¬

labor

with

even

now

re¬

fuel, both of which have gone
very sharply.

involve

Special Securities

best

years

handling

miles

im¬

Bonds

Short

haul business, unless it consists of
the train load movement of bulk

been

Guaranteed Stocks

major

located fairly close to¬
This makes for a large

are

ceived.

recognized dur¬

boom

war

appreci¬

power

diesel program and the high hopes
held out for the coal-fired
gas

these

fronted.

gether.

Pennsylvania

motive

new

description.

any

take

ket

almost

switching
matter of fact, for

head

Banking Act of 1933, but warns nature of bank problems is changing constantly, and research and planning is essential. Sees no
danger in upward trend of risk assets in banks, and points out, in

for

even

volume

the

FDIC

the road has installed

are

whole

Director, Federal Deposit Insurance Corporation

many years

ritory

By H. EARL COOK*

of time
may

subject to correction. Up until the
year
Pennsylvania has
done virtually nothing in the
way

traffic centers in the eastern ter¬

continues

course

influences

current

ably continue. Nevertheless, even
during
intermittent
periods
of
general strength in the rail mar¬
as

served
business con¬

which

time but others

stock

territory

significant start at correcting this

record

the

long way towards
obscuring the real problems with
a

influences

going: back

business
and the profits

passenger

shares. It is true that the dividend

middle

The Banks Dndei Federal Deposit
Insurance

course.

general factors

operations.

that

its full

run

the

and
the
type of
ducted, there, are some particular
conditions affecting Pennsylvania

the attention of the magazine

hundredth

yet

Aside

poration.

Deposit Insurance Cor-'
The advantages of this

latter

technique, when it is made

flexible

tions

where

care

there

(Continued

for

situa¬

only

on page

43)

one

Volume 166

Number 4644

THE

COMMERCIAL

FINANCIAL

CHRONICLE

The Need for Sound Creole
By KENNETH K, DuVAjLL*

By CHAUNCEY Gt PARKER*
Director of Administration,
International Bank for Reconstruction and Development

Asserting change in economic weather

is forthcoming, Western
banker contends job of granting and administering credit is, becom¬

Asserting International Bank aims:at world-wide

ing increasingly vulnerable.
Urges careful examination of loan
applications and says loan, policies must be geared to needs of our
economy.
Sees possible trouble ini behavior of prices and warns
marginal business enterprises which are "war babies"* may suc¬
Warns against carelessness in

scribes bank's functions and limitations.

and stability, its administrative executive de-

recovery

Stresses loans

be made for productive
projects of reconstruction and development and must have sound; financial base.

of labor in

Europe to.

When you

consumer

credits.

must

class, cabin class
examination.

for weeks.

strictly noncontroversial!

W h

boy who, having struck it rich,
visited the best hotel in town,

conveniently broad and

this

Such specialists and

audi¬

to be

;eem

will read¬

Jur

ily

agree

;he

the
proposi¬
tion that there
is a need for

and. now shows the
signs of beginning to
joil off at the top.
Nothing could
delight those who wish to see the
many

been

and

grown

be,
particu¬

extension

Kenneth

Vail

why the need for the
sound

credit

at this
particular juncture in history—at
this critical time not
only in the
history of our own United States
but also in
the history of the
in the

economic

under

and

history of those

political

which

we,

we predestined
doomed to follow

concepts

the

United

men

than

creasing
nomic

who

decade

weather.
have

the

change

risk

administer

the

economic

and

grown

withering

great

under

are

attack.

we
a

ahead

among

dom
bear

when

times are
who have

credit

must

know

the

that

years

grow

increasingly vulnerable. The wis¬

the

all

eco¬

Those among us
the job of continuing to grant and

today only in the Western
Hemisphere do we find organized
society committed to the proposi¬

world

the

been

taking

know

political concepts under which

in¬

chances

Those

thai

granting credit
dnce slow recovery got under way
in the early thirties
know how
relatively simple it is to succeed
in

and

skill

that

credit

bring

policies

and

cisions may well become

to
de¬

deter¬

mining factor in the prolongation
prosperous
conditions or the
precipitation of a crippling period

tion that the best
possible results
come from men
working out their
economic salvation as individuals
rather than as
pawns in a state-

directed

statistical

and

controlled

plan

come

economy.

and

been
fied

and

tions

have

as we

understand the term, has

and

being attacked, vili¬
wiped out in many sec¬
the

world.

ourselves—why

Let

the

not

because

free

enterprise

the

strain

world

this

has

true?

two

devastating

seriously
tried
wrecked—any economic
not

abused

because
taken

tack

not

economy

come

against

it not clear
have

was

and,

capitalism,

know

section of the wofld

it,

never

great

which,

ing from feudalism

one

chance in

strug¬

environment?

that

come

given

at¬

well
blind

are

indifferent

hostile

emerg¬

the end

the World. War

sively by

I;, was led impul¬
minority that sought

overnight to create

a
world pat¬
terned from books written
by dis¬

satisfied
world

of their

United
like

men

States

who

dreamed

own?

our

economic

own

freedom

political

freedom, is one of
those blessings which humans are
to

prone

forget

until

they

dis¬

this be the broad, gen¬
background against which we
Work, what are some of the par¬

eral

ticulars with which
concerned?
seems

cerned

First and

me,

should be

foremost, it

should be

eon^

with the

particular phase
Pf the economic cycle in which we

*Keynote address of Mr. DuVa-.l
the

Mid-Western

ference,

Chicago,

Credit

111.,

1947.

drdered

unless

you.

have first»

queued

and

they had made to get elected.
They were face to face with the
curse of bad money

lot in England

far

bulk

but it is like eating
without sauce, butter

spaghetti,

I heard a

export

palate is concerned, and like it
algain because an hour later you

what

You

h.ave

hungry.
It is true that
England or in France you see

this

sort

feel

expe¬

rienced

c o u 11

but

Parker

England

always

has

world-trading country and
are suddenly impressed with

the

low

world

which

into

state

has

trade

fallen.

have

you

motored down from London in the

evening,

I was lucky enough to

mile

You

city, its

war

while

month

through the

proceed

wounds healing to a

breakfast
dozen

which

for

terity diet

bed

they

fore

the

Cotton

puz¬

the International

the
of

its

and

sister

chief

The
45

that the

De¬

and

Mone¬

has

just

financial

London.

found

Oct.

Con¬

23,

government

put

And, fifth, its in¬

sumers'

to provide

goods

should

areas

sideration

construction.

main

the

protesting

to rewondered if they
retain

ideologies and keep the promises

and

stability,

financial

had

which is followed with

inteiest

not so fortunate or

perhaps wise.

The

(Continued

International
page

36)

peri-ods

shall not find it
necessary

adopt the policies of forced
liquidation
which
characterized
thq short but precipitate setback
of: 1921-1922

astrous
thirties.
refer

and. the

depression
By

almost

This

announcement

not an

The

offer to sell or a solicitation of an offer to buy these securities.
offering is made only by the Prospectus.

dis¬

the

statistical

early
position I

,000,000

with

emphasis to the rela¬
tionship between so-called "risk"

assets—largely
capital funds.
to

find

loans

today—and
astonishes me

occasional

banker

still

It would be

manufacturer

limits by

any*

logical for

calculate

his

comparing inventory to

current

liabilities.

With

Indiana, Inc.

some

notable

exceptions, the banks ol'
country have capital funds in
strong proportion to loan totals.
Despite this, human psychology is

First Mortgage Bonds, Series G, V/%%

the

such

that

come

bankers

some

Dated November 1, 1947

that with sound-

nursing cquld be

visory agencies is
portance

such, have
these

structive

factor of im¬

which

over

control!

agencies

and

1, 1977

Price 101.625% and accrued interest

brought through a crisis of con¬
siderable proportions. Then,
again,
the attitude of: the bank
super¬

that

Due November

be¬
panicky and force situations
may

bankers, as
us hope

Let.

take

sound

The

con¬

Prospectus

be obtained in any State in which this announcement is circulated from only such of
undersigned and other dealers as may lawfully offer these securities in such State.

may

the

when

course

readjustment sets in.
In any

event, let us realize that
plenty of capital to absorb

the shock of possible credit losses
when a change in the economic
weather

comes

nurse our

problem

can

afford

cases and avoid

HALSEY, STUART &, CO. INC.
COFFIN & BURR
•

the

economic
are

free
may

show

our

smoldering

fires

maladjustment;
from

depositor

(Continued

37)

AND

COMPANY

GRAHAM, PARSONS &, CO.

INCORPORATED

THE

November 6,

194?

GREGORY & SON
INCORPORATED

AUCHINCLOSS, PARKER &, REDPATH

cyclical type

page

PHELPS, FENN &, CO.

(INCORPORATED)

of economics which promises bet-

OTIS &, CO.

HARRIS, HALL & COMPANY
A. C. ALLYN

pressure

have the opportunity
belief in

of
we

EQUITABLE SECURITIES CORPORATION

INCORPORATED

adding the fuel of forced liquida¬
tion

DICK & MERLE-SMITH

THE ILLINOIS COMPANY

MILWAUKEE COMPANY

been

An impressive record

stronger

boom

suc¬

the energies

restoration

j by neighbors

their

could

1947.

the

political

achieved.

struggling

Institute,

and

equal con¬
Bank with re-

The governments oi

power,

releasing

the

and

receive

country,
in

con¬

incen¬
words,

people.
Europe's basic
problem, the revival of production

that

underdeveloped

the

In other

Belgian Government had

ceeded

Representatives of Latin
were

our

in releasing

Paris.

development j'of

financial

our

telligent action
tives for work."

America

victory.

taken

steps

sterling, dollar converti¬
bility and the conferences - on the
Marshall,plan were culminating in

aus¬

tremendous
for

work

house in order.

England

impossible

being waged

people had

courageous

nations, the stock¬

continue

was

Fourth, to the vigorous and really

holders of these institutions, were
assembled

liberation

still

war was

our

incentive

organi¬

International

Fund.

tary

this

that

fact

and early enough to
prevent destruction of our plants
by the enemy. Third, to the fact

attending the Sec¬
Meeting of the Boards

for Reconstruction

velopment

Mr. Parker be¬

Textile

five

swift enough

of Governors

Bank

such food

New York City, Oct. 22,

"To

First, to the liberation of

country by the gallant British
troops.
Second, to

the

way

)

are.

every
address by

things.

We had been

fruits and juices, and so on down
seen

physically, and
why things are the

ond Annual

varieties of fresh

the line. You have't

thought

and American

prepare you.
The
handed to you has

can

said,

and

only

England's

you

from the

scar, you board the ship, go to
and
the next morning have

experience

monlient

times

The Belgian

and

officers

docks.

productive

and

Belgium?"

floodlighted, looms
a

Belgian diplomat, "To
attribute the pros¬

you

zled

zation,

still

people,
but
you
see
people who are hungry both spir¬

do, the Queen Elizabeth, its colos¬
sal
orange
and
black
funnels
are

highly placed English¬

itually

Chauncey

tries,

ask

perous

starving

exam¬

ination

production,

hopes and energies of the people.
man

permit.

industrial

and

pendulous bureaucracy, and, worst
of all, the inhibiting effect on the

cjr cheese, so far as tickling your

and its dreary

companions, customs barriers,
price-fixing, unbalanced agricul¬
tural

e-d

b t a i

ham

and

iik concerned,

and

worth

aside

If you are a hotel guest you can

ejat

you
i

$50

fare

eggs.

with

bill

the

cow¬

With

appear.

;

much

banks

our

posits.

from
is

the

Has

part

that

time

to me, the

seems

position

take

thing

*An

greedy,

men?

the fact that all life

gle

this

than

tbssed

you

You feel like the

thinking in terms of a safe rela¬
tionship between loans and de¬

advantage of and

meaning dreamers who

oftentimes,

not

system?

free

occasion

short-sighted

—

strain which would

wars—a

has been

ask

economy
of
had to stand

have

depression.
Fortunately, it

Capitalism,
use

But all classes must undergo a most'
rigorous though very

other

know

we
a

prosperity

favor

aow

tourist.

you

credit

after

n-o

been

good.

have

Are

say,

States, have dwelt since the be¬
ginning of our history. You and I
that

the

conception

Weather

and

"bust'' in

Chances Favor Change in Economi

overwhelming importance

world

than
bust!'

over¬

this "boom and bust" pattern?

apropos
dwell
on

the reasons

shall I

or,

larly
to

and

widely held.

may

"boom

always

However
it

of free enterprise

economy

will be.

this

years

i t i

m a

aware<

capitalists
and they know full well

historical

credit; in fact,
there
always
has

well

are

nature of

hat the tide has been rising these

there

enemies

t h

alien,

operating at this time.

cyclical

economy,

ex¬

tension

•—*

ence

the sound

experts in the credit

urges

leave England these days, in the autumn of 1947, the traveler proceeds to
or 24 hours ahead of sailing time, depending upon whether he travels first

polite customs'

make

related to

Ascribes shortage

employment in governmental and non-productive pursuits, and
greater mobility of manpower.

unnecessary

To "keynote" a credit clipic, such as
this, your program chairman
that I speak on* "The need for the extension of sound
credit."
Now, that title strikes me as being
as

purposes

Southampton 12

suggested

field

Sam looks Abroad

President, First National Bank, Appleton, Wis.

cumb with price declines.

(1851)

(1852)

THE

COMMERCIAL

NSTA JHI
AH i^p JL JrA NA#A«

Blyth & Co. Underwrites
Indianapolis Power

Implications of the Bill of Rights
By WILLIAM O. DOUGLAS*
Justice of U. S.

Common Slock
investment

banking

group

by Blyth & Co., Inc., is
underwriting an offering by In¬

the Constitution's Bill of Rights

"even when we deal with a minority
Upholds Justice Brandeis*
dictum "greatest dangers to liberty lurk in insidious encroachment
by men of zeal, well meaning but without understanding." Says we
still have a close identity with socialist democracies of Western
that seeks to confuse and divide us."

dianapolis Power & Light Co. to

ASSOCIATION

holders

its annual

convention, the Florida Security Dealers Associa¬
tion eiected T. Nelson O'Rourke, T. Nelson O'Rourke, Inc., Daytona
Beach, Fla., President.
•
Other officers elected were A. M. Seaber, Merrill Lynch, Pierce,
Fenner & Beane, Jacksonville, Vice-President; and D. Kirk Gunby,
A. M. Kidder & Co., De Land, Fla., Secretary-Treasurer.
.

its

stock

common

whereby the stockholders of rec¬
Nov.

ord

subscribe to
214,451 additional shares of com¬
mon stock of the company at $22
may

per

each

make

The

held.

four

A Soviet professor of law recently stated, "Man should have no
rights that place him in opposition to the community."
The idea has
ancient lineage.
The slogan for centuries under monarchies was-

subscription warrants will expire
19.

Nov.

During the period of the sub¬
scription rights the underwriting
group
may
offer shares of the
common stock
to the public at a
price

similar: "The King can do no wrong."
from time im-<8>
memorial has,

freedom

indeed,

the

price on the New York
Stock Exchange in the'preceding
sale

the

from

T. Nelson O'Rourke

addition

Kirk

Gunby

the

officers, Thomas S. Pierce, Clyde C. Pierce
Corp., St. Petersburg; George M. McCleary, Florida Securities Co.,
St. Petersburg; F. Boice Miller, B. J. Van Ingen &
Co., Miami; and
James Cranford, Atlantic National Bank of
Jacksonville, make up
Board

the

cost

Hitler

will

pany's

construction

obtained

from

the

operating
new

securities.
One of the
this

Securities Salesman's Corner

program

struction of

cost

Prosperity?

Unknown to the people we are traveling the same road as
England and France. The only difference is that we started with the
finest system of capitalism and productive tools the world ever knew
until Roosevelt began to tinker with that system after he eventually
took over in 1932. He not only never solved the depression but he
prolonged it. The war made it appear on the surface that we re¬

deeper into the mire. What we are having
is not true prosperity. It is a post-war inflationary boom which

now

is based upon a war created shortage of consumer goods, a Roosevelt
depression, created shortage of capital goods, combined with an in¬
flationary condition based upon a combination of these factors and

depreciated

(which

money

monetary policies).

Once

goods

and

made

are

also

these

direct

war

created

the lag in capital

result

New

shortages of

Deal

consumer

goods still remains,

world wide pump priming fails (as it surely will just as
in the thirties) we will then have a serious depression.
There

con¬

generating sta¬
White River,

estimated

40,000

and

it did here

early

40,000

kw.

scheduled

kw.

turbo¬

for

1949.

com¬

second

turbo-generator
is
completion by the

latter part of 1950.

99l/2%

and

net

will

ap¬

plied in part to the payment of
$7,000,000 in bank loans currently
outstanding,
with
the
balance

the :tate invades the rights of the people and takes over the building
of homes, of banking, of manufacturing etc. that the people gradually

funds. The remainder

lose their initiative and

funds which may result from

also

tell

WILL

them

FATRLY.
at

1 he

AND

they take

AND

KIND

by their taskmasters, who
THAT THE GOVERNMENT

over

AND

WILL

TREAT

EVERYONE

England they are now telling the people just that but
time pateralistic government is FORCING MEN TO

same

WORK

before

GOOD

swallowed

WHERE

WHEN IT

THE

GOVERNMENT

WANTS THEM

WANTS

WORK.

WORK

THEM

course,

this is only

the

beginning of the eventual denial of all civil and religious rights.
Big government always takes over GRADUALLY.
If
no

are

to preserve freedom in the United States

must have

compromise with government ownership. We must also eliminate
party from control of our government which has stifled

the political

the

flow

Otherwise

lapse

either
take
and

capital into

only

industry during the past 15 years.
question of time until an economic col¬

complete and

all-engulfing will overtake our people that
dictator of the right or the left (it makes no difference) will

our

people
the

venture

it will be

Constitution and burn

this

will

come

take back

can

the

about, will depend

bureaucracy which

control
now

their

exists

White
upon-

business

House steps. When,
whether or not the
and

banking

Washington.

from

added

ceeds,

the

Company's

together

general

of the pro¬

with

additional

earnings, will be used for its
improvement and expansion pro¬
and for the carrying of in¬

gram

creased

receivables

and

estimated,

based

contemplated

improve¬

ment and

expansion program will

ranging from 102%

100% and through operation of

the

company's outstanding

cap¬

$20,000,000

com¬

new

lative prefererd stock,
A

shares of

4V4%;
common

de¬

cumu¬

($100 par),

1,719,354

and
stock.

retail sales of the corpora¬

and

its

subsidiaries

for

the

B. E.

Simpson & Company

California Building, Denver 2, Colorado
Telephone KEystone 3101

Bel! Teletype DN 157

were es¬

record

own

cannot

pride what took place
England in the cases of

New

Vanzetti

what has

nor

ideals

public
signs

"No

which

until

ancestry.
repudiation

which

our

Re¬

And

founded.
Natives

was

some

Japanese

lynching

the

Allowed,"

Alaska, were
negation of our American ideal.
The security of the state or the
social welfare was invariably ad¬
vanced
as
the
justification for
each and every lawless act of tnis
All of which bears out

character.

observation

Mr.

Justice

likewise

are

the democratic socialist
For

with

industries have

many

and

enter¬

free

it, has to a
degree disappeared. Yet in spite
of that great difference, the civil
rights of the individual under
these socialist regimes have, with¬
out exception I think, continued
to
flourish,
political opposition
has been unhampered, the press
has not been shackled, and the
prise,

know

churches

remained open.

have

Socialist

Have Close Identity With

Democracies

Yes,

radically

spite

the fact that
political and
emerged

different

economic programs have

Europe,

have

try

democracies

socialist

the

western

with,

identity

in this coun¬

Brandeis that, "Experience should
teach us to be most on guard to

them.

protect liberty when the govern¬
ment's purposes are
beneficent.
The greatest dangers to liberty

Dignity and worth of the individ¬

lurk in insidious encroachment by
men
of zeal,
well-meaning but

when

without

understanding."

such

But

episodes

did

not

set

the

had

years.

civil
are

country

are,

our

decreasing
with
the
Moreover, by reason of
of speech and of press,

conscience

the

sacrificed.

where

individual

the

rights

almost

instances

the

nation

the

be aroused to prevent any

spreading
practices.

these

can

increase
noxious

totalitarian

systems, how¬
sacrifice or obliteration of
rights of the individual
is
prominent and is apparently
the
universal
technique.
Free¬
dom of speech and of press would
be dangerous to those in power,
since
they would create doubts
and suspicions concerning the in¬
the

civil

vulnerability

generate
And

full

rulers

the

opposition

recognition

$7,071,000,

and

recently hung in the

cafes and theatres of

the

But the

countries of western Europe.

amounted

$255,662,000

differences

latter

belittle.

latter,

come

with

intend

way

socialized

them.

compared

over¬

organiza¬

which

tion—differences

been

Our

without blemish.

$285,083,000

in¬

social

and

in the

England.

not

taled

net

economic

would

while

totalitarian

difference

the vital differences

sential to the defense and welfare

fiscal year ended Aug. 2, 1947 to¬

Established 1929

that they

ever,

prise the

That

even

try

the ground

sinking fund at 100%.

shadows

absence

countries.

famous treason and sedition trials

freedom
to

rights in the democracies

their

great when we compare this coun¬

happily,

able at prices

of civil

and

technique is not exclusive¬
ly that of dictators.
In the 18th
century
when
democracy
was
emerging in England, the young¬
er
Pitt sought to justify the in¬

during the next five

tion
I

The

sacrificed

The debentures will be redeem¬

and
the

democracies and Communist Rus¬

require approximately $25,000,000
years.

between

and

Germany

sia is to be found in the existence

And

Net

SECURITIES

less obvious point:
important differ¬

most

between the democracies

and

revolution

series

COLORADO and WYOMING

Nazi

oration's

the

varying

both

Douglas

emphasize

ence

present cost levels, that the Corp¬

tions.

the

I mention these obvious matters

that

had

pattern.
By the turn of the
19th
century England
won
by
supreme advocacy and steadfast¬
ness the civil rights which fear of

bentures; 165,600 shares of

FOR

BROKERS, DEALERS and BANKS

has

forms

inven¬

tories which may be necessary in
connection with expanded opera¬

absolute

varying objectives But the objectives, no matter how venal or
how worthy, have invariably been
the
excuse
for
suppression of
civil rights of the individual.

uted

italization after the sale will

MARKETS

de¬

preciation accruals and undistrib¬

The

PRIMARY TRADING

William

Every

property rights. There are folish people among us who say "if private
industry can't do it then the government will have to do it". But
property rights and human rights are one and inseparable. Our
history is replete with examples that show conclusively that once

are

ism

Americans

interest.

accrued

proceeds

power

happened in the Far West to

Goldman,
Sachs & Co. head an underwriting
group that is offeringly publicly
today $20,000,000 R. H. Macy &
Co., Inc. 25-year 2%%
sinking
fund debentures, due Nov. 1, 1972
The

Totalitarian¬

Sacco and

Lehman Brothers and

higher than

God

which

dilution

ex¬

ample.

Lehman

are

view' with

Group Offers
Macy's Debentures

indeed,

secret police, wiser than any
judge, more powerful than any
dictator.
That, too, would cause a
any

who stand in their way.

the

current

those who prate about human rights being superior to

are

the

generator is scheduled to be

net'on.

only got

first

pleted

(Continued from page 6)

covered but it

involves
new

Indianapolis, at
of $13,830,000.

The

The Biggest Threat to

tion to be located
near

By JOHN DUTTON

principal projects in

masses

was,

Communist

who

control

com¬

and from the sale of

religion would cause
to realize that there

party

Those

program

from

treasury,

revenues

temporal
totalitarian
regime demands. These freedoms
are, in truth, unruly forces, the
source of gravest danger to those

recent

illustrations.

the

Governors.

are

the

company's con¬
struction program which is esti¬
mated to call for expenditures of
$35,200,000 over a four-year pe¬
riod beginning Jan. 1, 1947. The
balance of funds necessary to fi¬
nance

and

among

214,451 additional shares of com¬
mon stock will be applied toward
the

the
Mus¬

solini

period.

Proceeds

been

State."

sale

24-hour

—

tion price and
last

The slogan of every dictator

lower than the subscrip¬
no higher than the

Europe and concludes it is the special responsibility of the Bar to
our civil rights
an active potent force in our national life.

share at the rate of one share

for

Supreme Court

Comparing concepts of individual rights under totalitarian system
and our own government, Justice Douglas calls for observance of

headed

FLORIDA SECURITY DEALERS

Thursday, November 6, 1947

CHRONICLE

FINANCIAL

*An address by
at

the

Annual

Justice Douglas
Dinner

$9,335,000, respectively, in the pre¬

Rhode

vious fiscal year.

Providence, R. I., Oct.

Island

Bar

the

Association,

29, 1947.

fair

ual
We

play,
first in

are

similar

have

of
our

traditions

due

process.

scale of values.

his rights not only
against his fellow

respect

asserted

but
also
when
asserted
against his government. He has,
contrary to the totalitarian philos¬
ophy,
rights
which
frequently
place him in opposition to the
community.

men,

not

portance

democratic
lecture
tarian
to

emphasize

the

im¬

civil

rights in the
scheme of things to

Russian

regimes

other

what

totali¬

deem

their

inadequacies. The
peoples of each land are entitled
to work out their own destiny. I
hope we are always tolerant of
their attempts. As measured by the
standards of western civilization,
some
are
in their infancy—just
beginning to walk, so to sneak,
after being freed from the chains
of a slavery penturies old. These
people of the world have different
beginnings, different backgrounds,
different heritages and traditions.
It took English-speaking peoples
seven
or
eight centuries to win
their Bill of Rights. Others who
are
just emerging from serfdom
who are still in slavery would,
given their freedom tomorrow,
have a long and painful path to

travel
full

tions

before

they enjoyed the
liberty. Tradi¬
habits of thought cannot

blessings
or

(Continued

on page

42)

Volume 166

Number 4644

COMMERCIAL

THE

FINANCIAL

CHRONICLE

Advisory Council Reports
Foreign Aid Burden

own

generated.

Moreover, the indus¬

trial paralysis which could be

high exports have added to inflationary pressures, but points
out rising domestic production could sustain present heavy export
demands, and urges retention of high tax levels to offset fiscal
impact.
Sees greatest problem in grain and steel shortage.

pected

result

countries

sions

would

have

ex¬

other

some

repercus¬

major proportions

our own

comprising Edwin G. Nourse,
Keyserling and John Davidson Clark, in reporting to the Presi-

The report assumes for illustra¬
tive purposes a foreign aid figure
based upon the Paris Conference

Report which would reach
imum

annual

rate

max¬

billion

during

the first year, including
$1 billion already author¬
ized, and which would produce a

about

maximum export surplus of about

$12

billion

not

-a

total

mean

exports at

billion

Since these levels
those

This

year.

would

peak

than $20 billion

assuming

reached

are

imports.

lower than

during the second

appreciably from

year

to year, it

follows that the export surplus re¬
G.

Dr. John D. Clark

Leon H. Keyserling

Nourse

sulting

the nation's economy

the burden which would be imposed on

foreign aid, has issued the following sum¬

by providing increased

of the investigation:

mary

principal questions considered in the Report are the extent
of the burdens that would be im-<^
the

United

the

economy

Effect of Past Aid

by providing fur¬
ther foreign aid during the next

few years

and the capacity of the

Domestic

The
to

size

the

export surplus

pre¬

pared under the direction of the

not, in view of the tremendous in¬

Since

Secretary

with national
cal

report

companion

Interior

the

deals

and physi¬

resources

capacities, the Council of Eco¬
its atten¬

nomic Advisers centers
tion

the

upon

effect

exports,

the amount of goods

first

terms

goods made available abroad and
withdrawn

domestic

from

con¬

in terms of
price effects; then these price im¬
pacts are looked at in their rela¬
tion to the general functioning of
the domestic economy; and then
the effect on government finance
and

sumers,

second

date

highly relevant to

surplus in the future will be lower
than it has been in the recent past,
while

our

total domestic output of

goods and services will
be

higher in future

The

size

furnishes

the

surplus
of

measure

impact, since it represents the ex¬
cess
of goods and services sent
abroad

Actual

domestic

most

consump¬

is
the

significant items

now

far

war.

For example, per capita con¬

higher

than

before

sumption of meat has risen from
125

in the prewar
period to an estimated 155 pounds
for 1947. Such shortages of goods
as we experience reflect unparal¬
pounds

leled

levels

based

year

domestic

$18.3 billion, and the export

production
facts

lead

domestic

foreign
but

the

demand

the general

eign aid

surplus financed through
eign

aid

economic

program

has

conditions

our

for¬

reflected

Europe

and the depletion of their buying
resources.

Since

the

end

the

cause

pressure.

Prices

the government has financed

about one-third of
the world

two-thirds of

our

exports to

whole, and about

our

total export sur¬

fore, been substantially less than
that of the total export surplus.

the

conclusion

impact of

program

new

size upon the American

sustained

sharp controversy, said Mr. Riley, speed?
Or
will
heavy
public
to whether industrial produc¬
spending, whether on public works
tivity had risen during the war at home or on relief and recon¬
sufficiently to make feasible wage struction abroad, again become
increases

demanded.

and

the

dimensions

then

This year with busi¬

expenditures on new plant
equipment expected to run
$15 billion, bringing the

has

The

already

V-J

billion,

and

1920

the

were

reflected in

a post¬
productivity
amounting to a full third in three
years.
The same kind of spurt,

increase

for¬

result from the current

been

stresses,

predicted, must be expected to
heavy in¬

Any such rapid growth of

ductivity

will

pose

lems, he warned.

industry

fully

pro¬

tooled

specific commodities in relatively

will

short

to step

turn this generally optimistic
pic¬

ture if not

Will

dealt with

(Continued

effectively.

on page

33)

These problems do not face us
today, Mr. Riley concludes. The/
may
not face us in 1948.
But
sooner or later they will come to

the fore and will have to

swered,
we

Riley

Mr.

for

markets

the

crash

consumers

1929, if

for

want to

renewed

right

answers,

must be ready with the

he concluded.

With Wainwright & Co.
(Special

The

Financial

Chronicle)

off,

MANCHESTER, N. H.—Clinton

be ready and able

W. Jackson has become associated

irrto the market and make

the difference, Mr. Riley asked.

they, in addition, be able to

with

Boston.

C.
In

Wainwright & Co. of
the

past he

was

Anthony & Co.

only and is under no circumstances to be construed as an offering
offer to buy, or as a solicitation of an offer to buy, any of such shares.
offering is made only by the Prospectus.

the

214,451 Shares,

upward
remained stable

Indianapolis Power & Light Company
Common Stock

played

important part in the in¬

in grain

(Without Par Value)

prices, due to high

foreign demand for wheat in the
face of adverse crop developments.
Grain price increases have spread

livestock and other food prod¬
ucts. But even for food, the sharp
to

New

Foreign Aid Program
In the absence of

aid

Rights, evidenced by Subscription Warrants, to subscribe for these shares have been
issued by the Company, to holders of its Common Stock, which rights will expire at
three dclock P.M., E.S.T., November 19,1947, as morefully setforth in the Prospectus.

Subscription Price to Warrant Holders
$22 per share
The several underwriters named below may offer
cise of Subscription Warrants, or otherwise, and

shares of Common Stock acquired through the exer¬
shares of Unsubscribed Stock, at a price which may
vary each 24-hour period commencing 3:00 P.M., Eastern Standard I ime, on November 5, 1947. Such
price shall be not less than the Subscription Price set forth above, or more than the last sale price of
Common Stock on the New York Stock Exchange in the last preceding 24-hour period in which
Common Stock was sold on said Exchange.

program,

billion

annual

in the

rate

quarter of 1947 and

current

annual

rate

rent

level

about

Copies of the Prospectus may be obtainedfrom the undersigned only by persons to whom
undersigned may legally offer these securities under applicable securities laws.

the

second

estimated
about

Blyth & Co., Inc.

$10

billion. Assuming that our imports
remain at approximately the cur¬

billion

Harriman Ripley & Co.

Hornblower & Weeks

Hemphill, Noyes & Co.

Incorporated

total exports during next
year would sink to an annual rate

year, our

$13 billion

less, compared to
an
annual rate of $21 billion in
the second quarter of 1947 and an
estimated

current

annual

rate

occur

our

rapid

A. C.

Allyn and Company

Schoellkopf, Hutton & Pomeroy, Inc.

ex¬

November 6,1947.

reduction

A. G. Becker & Co.

Incorporated

The major re¬

ports to Europe.
this

Corporation

about $18 billion.

While

Stone & Webster Securities

Kidder, Peabody & Co.

exports would probably not inflict

Man¬

chester representative for Tucker,

The

the

and

precipitated

need

large-scale government interven¬

and

buy the expanded output that our

or as an

an¬

shrinkage

consumption

such

the

prevent

cautioned.

want to prevent the

investment,

When American

capital expenditures slacken

or over¬

farms?

major prob¬

however, that problems raised by
supply could distort

to absorb the expanded
output of American factories and

necessary

tion,

vestment.

economy

report

since

Day
to
over
only
question
about productivity is how fast is
it rising?
He pointed out that the heavy
capital expenditures made in 1919
$30

because

that will help keep the
running at top

that

of the assumed

industry and agriculture find

economic machine

this year, although the export de¬
mand has been diminishing, it has

ductions would

plus. The impact of aid has, there¬

was

during the second quarter of 1947,
when the export surplus reached
its peak. In the third quarter of

of
war,

maintained, these

are

annual rate of $4 to $5 billion by
next year, contrasted with the $13

The large part of the export

there

larger

been

four-fifths of their

1947.

pros¬

has

a new foreign
it is likely that our
export surplus would sink to an

of pur¬

long-run

of these shares for sale,

Since the end of the war, gov¬
ernment financial aid to European
countries
has
financed
about
excess

1946

pressure

much
has

Impact of

in 1946, and nearly
all of it in the second quarter of

and

Management

demand

inflationary

principal

sur¬

the

Price Level to Date

high

prices,

plus to $10.3 billion.

chases from

1945

Can

high national income.

the goods and serv¬
import. In 1946, total rise stemmed
largely from the ex¬
exports were $15.3 billion and the
ceptionally
high
domestic
de¬
export was $8.1 billion.
In the mand.
Looking at the economy
second quarter of 1947, total ex¬
generally, price inflation has been
ports reached a peak annual rate caused
mainly by domestic factors,
of $21 billion, imports were about
but shortages of specific commod¬
$8 billion, and the export surplus
ities present different problems as
rose to an annual rate of $13 bil¬
will be shown later.
lion, but in the third quarter ex¬
ports declined to an annual rate of
The General
over

ices that

the prices

producing?

can

This advertisement appears as a matter of record
Effects

creases

export

general

probably

years.

impact

The

inquiry into the general impact of
a
new
foreign aid program be¬
cause, at the levels of new foreign
aid under discussion, the export

view

sustained.

added to the

The effect of the export surplus

larger

enjoying a general standard
living far above any prewar
of

levels

been reached during

and the tax structure is examined.
The Impact of Past Aid—Size

have

than

the current year.

from

tion

of Price Administration.

total

less,

level.

and Labor agree on the wages and

and for most of the time will

could

funds, upon domestic production,
consumption, and prices. Burdens
measured

productive

capacity during and since the war,
prevented the American consumer

financed in part with government

are

American

crease

Mr. Riley was formerly
Director of Research of the Office

war

has

date

ton Hotel.

about

put if maximum employment and

naturally decreased
available for
domestic consumption. But it has

to support those burdens.

economy

foreign

pect for increasing American out¬

Consumption

States

future

any

absorption of expanded output.

Controllers Institute at the Carl¬

aid program will at no time equal,

which

and Purpose

The

posed

from

consumer

kind of

same

spurt, which reflected a postwar increase of
productivity as a result of the heavy capital expenditures made in
1919 and 1920, must be expected to result from the
current heavy
investment, Roderick H. Riley of the National Planning Association
stated on Oct. 27 at the meeting
—
of the Washington Control of the
improved plants will be capable

ness

substantially

Scope

the
The

year,

quarter of 1947 and would decline

Edwin

Roderick H. Riley of National Planning Association
says same
kind of spirit in activity following World War I must be
expected
soon because of current
heavy investment.
Says problem will be

upon

economy and upon world

stability.

The Council of Economic Advisers,

Economist Forecasts Increased

economy, substantial prob¬
of readjustment would
be

lems

Holds

dent

(1853)

serious short-run damage on our

Economic

Leon

Central Republic

Incorporated

H. F. Boynton & Co., Inc.

Company

(Incorpoiated)

Henry Herrman & Co.

.18

THE

(1854)

COMMERCIAL

Canadian Securities

CHRONICLE

& FINANCIAL

Thursday, November 6, 1947

By PAUL EINZIG

In commenting on crisis in

grave mistake was mad 3 by
Exchequer Dalton in advancing date of convertibility. Holds Britain's ex¬
port deficit and Secretary Snyder's interpretation made convertibility impracticable.

sterling convertibility, Dr. Einzig points out

British Chancellor of the

By WILLIAM J. McKAY
Slowly but surely Canada is laying an enduring foundation on
which Canadian foreign trade and finances can be soundly developed.
In spite of manifold pressures to resort to palliatives and hasty ex¬

LONDON, ENG.—The debate on the economic crisis which is taking place in the
on its reassembly after the long summer recess has assumed largely the
pedients the Dominion has wisely decided to concentrate on construc¬ character of an
inquest on the convertibility of sterling. And, according to a lobby wit, the
tive planning along more independent lines than in the past. Indeed
verdict wnl
$>to

great extent Canada is now turning her current difficulties to

good account. Although disguised^
—
as a result of a consistently favor-! of Canada's special circumstances.
which are entirely unlike those of
able overall commercial balance,

| the Canadian foreign trade posi¬
tion has always been
nerable

unduly vulexternal

unfold

nomic and financial relations will

accordance

Canada will

which
ture

policies in closer cooperation
with this country. As far as the
long-range aspect is concerned
there appears to be little diffi¬
culty.
Schemes
for
greater
eventual

to Canadian re¬

recourse

for

sources

the

for¬

purposes

eign relief, however, will require
considerable time for their actual

implementation and in the
time

the

for

with

crisis

present

clearly illustrates.
Now a new pattern is beginning
to

Europe, there is a clear

shape her fu¬

the

and

Western

placing the Canadian
a
special category.
From the point of view of this
country any measure that will
strengthen U. S.-Canadian eco¬

detrimental

influences

countries

the

Britain

mean¬

immediate

Dominion's

U. S. dollar problem still remains

case

situation

facilitate

the general task of Eu¬

relief. With regard to the
Canadian standpoint it is signifi¬
efforts

Canada's

that

cant

Geneva not only

heralded the end
of the deplorable foreign
trade
era
dominated by the strangling
effects of Imperial Preference and
the Hawley-Smoot Tariff, but it
also constituted a notable step in
the

direction of

fuller integra¬

S.-Canadian

tion of the U.

econ¬

S.¬ omies. This objective can not be
Canadian
trade
agreement
de¬ achieved, however, until the means
signed to correct the chronic im¬ are found whereby the U. S. and
Canadian
dollars can be freely
balance of trade between the two
will

have

not

im¬

Consequently
obliged to give

exchangeable.
During the week there was little
change in the external section of

unconstructive

the bond market but the internals

restrictions

were

inclined to

U. S. imports in order to stem the

with

the

drain

free funds.

mediate

effect.

Canada

still

consideration

such

measures

her existing U.

S. dollar

sympathy
slightly lower level of
ease

Stocks

irregular

were

reserves.

with

Any
action
of
this
kind
is
naturally viewed with repugnance

junior golds in demand in antici¬
pation of government relief

in both countries

measures

direct

conflict

desire

liberalize

it would be in

with

mutual

the

everything possible
foreign trade. Con¬

sequently it is necessary to find
means
whereby
Canada
would
have

time

to U.

access

ties for

current

S. dollar facili¬

needs

until

such

the operation of the longplans exert their beneficial

range

Any financial arrangement with
would

devised
be

the relief

for

entirely

measures

templated

for

countries

this

distinct
which

the

Europe.

the eventual

purpose

from

are con¬

war-ravaged
Canada has

of repayment

means

and the
nary

object of any extraordi¬
steps to solve the Dominion's

immediate
relieve

problems would be to

the

best

customer

this

country of the necessity to curtail
the

volume

S.-Canadian

trade.
The

facilities

afforded

by the
International Monetary Fund are
too limited in scope, and in view

the

gold

paper

the

for

stimulation

Oils

production.
for

increase

also

were

petroleu^i jproducts.

Frank B. Qafin fo

Merge
With Merrill Lynch
Winthrop

Smith,

managing

partner of Merrill Lynch, Pierce,
Fenner & Beane, has announced
the

consolidation
B. Cahn

of Frank

the

business

& Co. with the

Baltimore office of Merrill

Lynch,

effective Dec. 1.
This

firm

ber

of the New York

Exchange

and

one

Stock

America's

largest securities houses.
Frank

Cahn

will

become

Pierce, Fenner & Beane.

STAMFORD, CONN. — Lindsay
Thompson has become asso¬
with

DeHaven

Town-

Crouter

delphia

& Bodine, Phila¬
investment
firm.
Mr.

Thompson

was

formerly

asso¬

whilst

sound

The

Dalton
to

un¬

the

resump¬

tion

con-

dent

pur¬

matter

In his speech on
October 24, Mr. Dalton reaffirmed
once
more
that the adoption of

wholly

wrong.

convertibility
ment.
He

the date.

Herbert E. Herrman has become

Dreyfus & Co., 61

tive

ever

known

of the New York Stock Ex¬

Herrman

was

pre¬

CANADIAN STOCKS

64 Wall Street, New York 5

WHitehall 3-1874

sterling

much

was

would
been

have

such

haste in

had

it
not

resuming

had to be suspended in all
probability before the end of this
tested against criticising the offi¬ year, for the gap between British
cials
of
the
Treasury and the exports and imports was greatly
Bank of England who have been increased by the facilities given
to foreign holders of sterling to
accused
in the Press of
having
advised him on the matter of con¬ spend their money in the United
In

his

speech

vertibility.
clared

have

that

Mr. Dalton

decision

Government

Municipal

Provincial

Corporate

the most
from

remark¬
Dalton's

Mr.

with him alone, and any criticism
on
account
of
it should
be di¬

defense is the absence of any ref¬

rected

convertibility.

against

else.

So far

have

been

admitted
cials

him

good.

that

some

been

have

Had

the

had

accused

bility

had

it.

fact

debate

taken

Dalton

Mr.

effect

fateful

place

would

have

found it difficult to face the storm
criticisms.

suspected of having advised him
in favor of returning to converti¬

against

the

August,

offi¬

this

erence

nobody

But it would

better

even

who

and

is,

many

been

very

things have happened since the
suspension of convertibility that
the whole disastrous experience is
now
looked upon as a matter of
past
history. Also Mr. Dalton's

true,

most

advised

The Bank of

him

England

nalists,

tic

away

their
ability to
resume convertibility at the pres¬
ent stage was none too firm, and
that they
would not be disin¬
clined

that

discuss

recently,

ference

postponement.

"off

the

transpired

has

the

record"

with London

that

Britain's

Quite

plain

made

confidence

con¬

other Americans

understood

pessimistic

all

utterances

ing

character.

the
if

British

tion

should

him

have

from

evident

been

inspired

Amer¬
ican and British newspapers thai
Britain's difficulties were viewed
in

official

responsible

circles

American

tech¬

Colonel Crosthwaite-Eyre, is
in the United States on a
So the chances are

that

Dalton

Mr.

will

let

off

comparatively lightly.
Even so,
his prestige in the country and
his popularity in the Labor Party

the

of Taxation
Merrill

Foundation

for

have

suffered

result

the

convertibility crisis.

Study cf Effect

Business

Advancement

Financial

Knowlr

endowment fund

organized to promote study of economic
problems, was announced yesterday by Winthrop H.
Smith, President of the Foundation and managing partner of Merrill

and

business

Lynch, Pierce, Fenner & Beane. <3>
The

announcement of

rill Foundation

was

the

Mer-

made in

■

con-

[

nection with +he announcement of
a

grant of $175,000 to the

Presi-

—r

nouncement

the

Foundation

delayed pending trustee

was

ap-

proval of its first major grant.
Mr. Smith, in announcing the
educational foundation, quoted as

follows from Mr. Merrill's

with

original

suggestion to his partners:
"We,
in common
with

have

would

critic

lecture tour.

The

edge,

never

was

obviously

statements

ity,

mislead¬

doing

formidable

Merrill Foundation fo Promote

of convertibility

postponement

policy
that
was
the Government in
disregard of their protests.

adopted

posi¬

Government.

Daltcn

Mr.

most

they merely obeyed instructions;
having registered their objections
they had to assist in the execu¬

refrained from stating it, ir
public, for it would have embar¬

Even

But

tion

rassed

have

along.

Press

official

correspond¬

American

September, Mr. Snyder reaffirmed
this, though of course
he and

his duty to

sound Washing¬
informally. This, iap¬
parently, he failed to do. On » the

most

Americans, may have come to take
for granted the country's great
growth and prosperity which have

at least

contrary, he is known to have
Qisolaye-t the utmost confidence

resulted

from

our

political

and

in his abilitv to make convertibil¬

economic democracy, just as many
of us take for granted our Con¬

ity work.

stitution and Bill of

Now he claims that he

the

all along
v/ith
grave
misgivings, but for
obvious reasons be did not show
prospects

"It

utterances

economic

concerned.

were

would

have

been

to display in public any¬

thing but the utmost confidence,
to

convertibility

uoon.

But there

Treasuries,

the

Nor

when

with
officials.

matter
or

was *

there

any

discus¬

American

for

systems
and
beliefs
profoundly from ours

lege for

taxation

uate School of Business Adminis¬

tration of Harvard University.
Merrill

conceived

Foundation

1945

"Coupled
to

our

within

with

their

democracy

challenge
the

need

our own

country for a bet¬
understanding of the basic
principles underlying the Ameri¬
can
system and an examination
of those principles in the light of
ter

the

was

by Charles

growing up in other countries
throughout the world.
are

dent and Fellows of Harvard Col¬

The
excuse

Rights.
pointing out the ob*
that the United States

which differ
Chas. E. Merrill

Winthrop H. Smith

study of the effects of
business. This study,
which is expected to extend over
was no reason for him to conceal
the next two years, will be made
his
pessimism within the four
under the supervision of the Grad¬
walls
of
the
United
States
or
return

had been decided

is but

vious to say
is now at one of the major cross¬
roads of its history. Political and

his true feelings. This explanation
can be accepted as far as his pub¬

statesmen

NY-l-1045

One of

omissions

able

rested

nical subjects such as convertibil¬

sing

SECURITIES

States.

manfully de¬

very

the

pro¬

CANADIAN

Even then, however, it would

er.

convertibility.

officials of that Bank had inspired
the financial Press with optimis¬

British

INCORPORATED

the

loopholes through which
large amounts of dollars were lost
as a result of abuses of the provi¬
sions of convertibility. But most
of
these loopholes were the in¬
evitable consequence of the inter¬
pretation of convertibility forced
on him
by Mr. Snyder. Had the
British
interpretation been ac¬
cepted there would have been
much fewer loopholes.
It would
nave
been possible
to continue
convertibility some months long¬
many

re¬

than

weaker

been

perfect an¬
criticised on

both sides of the Atlantic for

and

By
earlier,

been

has

and possibly even earlier,
high officials of the
Washington
Administration,
in
private conversation with jour¬
members and

once

& COMPANY

since

ever

May,

wrong

TAYLOR, DEALE

RECTOR 2-7231

stated

was

that

here

over

Obviously

N. Y.

that

All

sense.

by Mr. Dalton's critics was tnat,
had
he
approached Washington
with the request of approval for
a
postponement of convertibility
his request would have received
sympathetic consideration. He did
not deny
this, but preferred to
ignore the subject. In fact, it is

viewed

Broadway, New York City, mem¬

Mr.

postpone¬

But, then, no¬

claimed that such
suggestion was made in a posi¬

body has

ton

With Dreyfus & Co.

bers

that

Government

States

suggested

ever

ment

denied

emphatically
United

the

has

lic

NEW YORK 5,

the inevitable
the Loan Agree¬

was

consequence

"old"

inconvertible.

been

have
He

swer.

to convert

tion

was

been

viously with Hirsch & Co.

TWO WALL STREET

Dr. Paul Einzig

this

sheer

was

iett unanswered piecisely
criticisms for whicn there

should

convertibility
he
a large amount of
sterling earned before July 15, so
that by that elate his dollar posi¬
had

the

that

sued

those

carrying out the

suming

evi¬

policy

been

therefore

be¬

comes

himself

have

vertility the
more

words, it

speech

letter of the Agreement
by re¬
suming convertibility on July 15,
any
sterling
earned
by
other
countries prior to that date would

with

understanding.

Lynch, Pierce, Fenner &

change.

A. E. AMES & CO.

fined

his

decision to

proceed

not

Strangely enough, Mr. Dalton's

own

confidence
himseli pos¬

bluff, and it cost the loss of many
millions of dollars. Had he con¬

seeks

justify

did

his

sterling,

in other

sess.

Mr.

Dalton,

admission,

mind."

Merrill

associated with

CORPORATION

Mr.

dence

ciated with the Stamford office of
Beane.

MUNICIPAL

which

approached by Mr. Snyder with a
positive suggestion for discussing

With DeHaven, Townsend

send,

PROVINCIAL

should

"Suicide

limited partner of Merrill Lynch,

ciated

GOVERNMENT

ents

consolidation

brings to¬
gether the oldest Baltimore mem¬

CANADIAN BONDS

issues lower and

higher following the recent price

effect.

Canada

be,

ropean

to be solved. Similarly any U.

countries

House of Commons

current

which

and

future

problems

face."

E.
Mr. Smith said

that the trustees
carrying the pretense so far as to Merrill, directing partner of Mer¬ of the
Foundation had examined
rill
Lynch,
Pierce,
Fenner
&
resume convertibility months be¬
•several dozen proposals
during the
It was organized with an
fore the date fixed under the Loan Beane.
past two years. "Of all of the,sug¬
Agreement, This was done for the original donation from the firm's gested studies," Mr. Smith' said,

sole

purpose

inspiring

confi- partners totaling $1,000,000.

An-

"hone- seemed

vital than

Volum?

166

Number 4644

THE

truly objective examination of the

Graduate

School

COMMERCIAL

Business;
'effects of taxes on business.
Harold
F.
Johnson,
Attorney,
"The
trustees of
the
Merrill Prospect, Ky.;
Stanley King, Pres¬
Foundation believe that this pro¬ ident
Emeritus, Amherst College;
posed study, surrounded by every John, J.
McCloy, President, Inter¬
safeguard of complete .academic national Bank for Reconstruction
freedom, will produce an unbiased and
Development, Gordon Rentmass of data that should
open the
schler, Chairman, National City
door to a new approach to the
Bank, and Albert F. Jaeckel of

whole

problem

business

taxa¬

Chadbourne,

tion."

The

trustes

the

Brown.

Foundation

Mr. Merrill, Mr.
Smith, Dean
Donald K. David of the
Harvard

of Williams

are:

Hunt,

Professor

Jaeckel

and

Bertrand

Fox

College is the Admin¬

istrator.

FINANCIAL

of the rest of the world in the
face
of rising prices

everywhere.

A
in

Statistical

Office

NAM, in comprehensive report, traces relationship between trebled
money supply and increased physical
production of only 70%.
Urges management and labor to hold prices and wages down to
allow production to
The phenomenal increase in
is

major factor in the current

Association

investigation

report

period

covering the ten-year
1937-1947, shows that only

that

have a better record
than the United States in holding
the line" on prices.
Of the re¬

maining

suffering
with

countries,

from

China

serious

being

more than trebled

while

physical

the

tween
erts

prices

not

are

now

even

are.

higher

than

both

hold
tion

and

levels

increase

supply

allow

the

produc¬

closely approximates

ra¬

the

factors

which

opening of
way,

announce

York

City

"is low

gap

preventing
in

the

warns,

the

public is concerned."
The NAM also observes that the

present price level is low in rela¬
tion
to
national
income,
even

though figures from the Bureau
of Labor Statistics show that since

further

any

partners

1939,

prices

contributed

some

Leo.

Mr.

try.
ment

Robert

mil.

Sidney Jacobs
a

general brokerage business spe¬

cializing

Unlisted

Sidney Jacobs

Securities.

formerly with

was

have
.

analysis,

report's

based

statistical

United

States

Department figures,
growth in the money
since 1912, when it was

With F. L. Putnam & Co.
PORTLAND,

MAINE —Valeda

"The important

ber

that

the

thing to

money

whole

225%.

(3)

National

(4)

income

Gross national

has

the

lar

value

physical
'Thus

remem¬

"The

dol¬

contrasted

with

units)

of ..production.
find. th&t while
the

money

1939,

(as

supply was trebling since
income—the... total

national

«6f Hall: income from current, pro¬
duction—increased from $72.5 bil¬
lion to $199

billion, and the gross
national product—the total mone¬
tary value of all goods and serv¬
ices
produced — increased
from
•$90,4 billion to $226 billion.

We
in

plain

conclusions

states, "but-that the rise has

used

for

pur¬

chases.

While money supply is a
'key factor in price developments,
this

does

not

that

the

ap¬

parent price level is to
plained solely in terms
money supply."

ex¬

the

The

•effect

NAM's

the

mean

conclusions
money

been

the
on

The

same

are

setting
authority

same

gesture,

doing

recently

have

there
oceans

the

any

Pointed out

the

"The

Only

world

aware

beyond

one

which

Soviet's

major assets

policy

easy
easier to

he construed
any

as an

since

much

Europe,

It is

accident that the Soviet has

not

participated in peace treaties,
and that, invjted to 19
separate
agencies set up since the war, the
Soviet did not even
reply to hall"
the
invitations,
declining
the
others."

Cherne
are

follows

order in
let

warned

the

war.

material

piece

cause

Soviet

chaos,

ours

restore

ideas,

things,

work.

policy

odd*

since chaos

this devastation of

alone

gigantic

the

that

Soviet's favor,

always

But

necessity

one

marked
"All

Mr.

Cherne

European

countries

worse

war,

off

than

and

are

re¬

follows:

what

today'

before
worse,

the
were

better off under Nazi domination.
Even

France,

which

(Continued

has

always*

page 36)

of record only and is under
or as a

circumstances to

solicitation

buy

$20,000,000

Macy & Co., Inc.

Twenty'Five Year 2%% Sinking Fund Debentures,
due November 1,
1972,

not

greater; that
present price, level is low in
relation to the national income;
that so far as the volume of buy¬

ing power controlled by the public
is concerned, there is little if
any
danger of a collapse of either
prices

national

gross

product

low

step

Copies of the Prospectus

may

be obtained in any State from such of the several
Underwriter6,
as may lawfully offer these securities in such State.

including the undersigned,

Another

important
fact,
the
NAM points
out
which distin¬
guishes the prices rises here from
the
is

99V2% and accrued interest

proportion to the money supply,
and that to prevent a further rise
in prices, it is essential to

.1-

Price

production, because the

inflation

that

shown

the
no

integrity
contrary,

other

American

signs of questioning the
of

the

dollar—on

the

all reports show that
virtually the entire world is seek¬
ing to accumulate dollars.
Also—while- it
she

goes

the

Lehman Brothers

countries,
public has

may give
housewife

shopping—the

A. G. Becker & Co.
Incorporated

Harriman

Ripley & Co.

Incorporated

small
when

United

States has fared better than most

November 6, 1947

Goldman, Sachs & Co.

Blyth & Co., Inc.
Kidder, Peabody & Co.

ol;

must be

of such securities. The offering is made only by the
Prospectus.

R. H.

be¬

conirary.

Continuing,

sells French postcards and French

offering of these securities for sale,

are

destroy than to builcL
Chaos is the basic cornerstone of
Soviet postwar policy in

thing

said.

hole," Mr.

chaos, anarchy, starvation, dis¬
ruption, and political confusion—

soldier

same

in the

ace

Cherne stated.

stupid

become

other than

This advertisement appears as a matter

substantially

comfort
on

supply

our

actual

the

adjustment
in money value, or prices.
The
<exact amount of this price adjust¬
ment depends upon the
rapidity
with
which
the
money
supply
over,

Tnc..

Exchange Street. Miss Nadeau
oreviously with ennora j.
Murphy Co.

which

other words, since physical up production, and to prevent any
production has not increased as further expansion in the money
rapidly as the money supply, supply."

turns

C^..

the

foreign affairs,

150%.

{ *4'In

ithere has had to be

minimizes the threat of Vishinsky.

(5) Wholesale prices of all com¬
modities have increased 100%.

income and in the

"This is

beyond
Soviet
borders, and obviously have no
respect for our ability to produce.,

in¬

statistic," the NAM con¬ follow from these facts are that
tinues. "It is. buying power— ac¬ the increase in the
money supply
tual dollars owned by the
people. has. been so great that, the most
"An increase in the money supply, impressive fact is
not" that prices
therefore, inevitably must be re¬ have been
increased," the report
in

added

L. Putnam

Committee

Taylor

officials, he

concept

affairs

product has

increased

hot just a

flected

un-American

Soviet

since

at pres¬

supply

mismanaga-

House

the

creased 173%.

that date to $33.4 billion in

1939, and to $108.5 billion
(

been

(2) Physical production of in¬
dustrial goods has increased 70%.

:$19 billion in 1933—and increased

ent:

the

coun¬

pointed

have

quarter of 1947.

record

creased

$11 billion.
It increased to $26
billion in 1929, then dropped to
.since

first

this

with
isolationist;

power

are
"raving intercompared with th?

world

the NAM says, gives this
overall picture:
(1) The money supply has in¬

the

.supply

$72.5

for

strongly
we

1939,

'Treasury
traces

the

The

NAM

from

rose

billion in 1939 to $197.6 billion

risen.

The

income

both communists.

has

the

way

technique, he said, was being ap¬
plied by the Committee in billing
Larry Parks, in the spotlight with
John
Howard
Lawson,
script¬
writer. It is like grouping together
a
bedraggled Red Army soldier
with Vishinsky, and
saying they
are

Batkin, Jacobs & Co.

Nadeau

but

latter,

communism.

mmiflaw

that

guish between descriptions of how
prices have risen and why they

concern

stupid

the

retail
(consumer prices)
01 %—through - August; 1047:

the

specifically

expressed

the

handling the Com¬

are

abroad

was

distin¬

munists

help

with

leanings," Mr. Cherne said.
Cherne

which

National

zations

only with

;about

and

organi¬

obviously

staff of F.

prices

Cherne

Leftist

and

the

brokerage

rstudy is designed to penetrate the
mass
of
popular misconceptions

NAM

houses have

this country have
risen at wholesale by about 100%

supply,"
adding that its

money

and sponsored

production, insofar as the vol¬
of buying power in the hands

between the
money supply and the production
of goods by stepping
up produc¬
and

said,

the

ourselves id

average citizen of the Soviet. Even
many

conduct

contest

| nationalists"

financially to,

report

relation

and

Even

the

being

NAM

banks

find

now

nations. But

companies.

Affairs

the

ultimate

above, ! Russia—two

insurance

office at 115 Broad-;

New

production,"

Street

than

United

are

below, wines. We

particularly

ume

•expansion

—

cess

Fulton

varied in its

money supply, which would
indicate that there is no occasion
to fear a collapse of either prices

prevent further rises
price level, it is essential
the

---

some

the

tion

structure

points out,

demand.

"And

tech¬

and

says

Holds

Own Firm in New York1

"The
gross
national
product,
which reflects the monetary value

point where

control

all

Sidney Jacobs Forms i

demand.

then

wages

price

least

ment policy;
wages and produc¬
tivity; profit margins, and foreign

management and labor to

prices

adhering,

analyzed separately in the NAM
price report are food end govern¬

general,

reason, the NAM ex¬
it has appealed for months

current

higher costs

not

Other

this

plains,

still

worss

the .money supply is
principal' factors in the

country

economic

prices.

For

are

greater penetration of communists in
Wall Street
Hollywood," Leo Cherne, Executive Director of the
Research Institute of
America, told the New York Society of
Security
Analysts on Oct. 23. "The Communist-dominated
union has had
greater suc-<§
—
than

the

States."

the
continues, the more rapidly
the money
supply outstrips pro¬
duction, the greater is the pres¬
sure

while

rise in

ex¬

NAM

"There

price situation, "there is no
single,
explanation for the price

they

contribute

off than under Nazi domination.
Truman doctrine is Russia's best asset.
are

simple

be¬

production

and

money

are

of the

one

strong an upward pressure
prices that it is surprising that

state

Many

Sidney Jacobs Co.

that

since

gap

part of a continuing
investigation into the causes of
present prices. The NAM observes

production

unprecedented

prices

has increased
only 70%, the NAM
says

inflation,
a

brokerage houses

expanding in Europe and

comprehensive price
prepared for publication and

high prices.
out that the money

Pointing

nations there

are

living than the United States

nically, to

money supply in this country
high price structure, the National

declares

upon

supply has

four

tioning, the NAM concludes.

the

the proper perspective so
effective attack can be

launched

1939,

which

Research director says even
partners in
leftist organizations.
Sees Soviet

nations

approximate demand.

being
paint its price pic-^-

which seeks to
ture

Manufacturers

United

Nations and

six

countries which have

Money Supply

the

(1855)

"Communists Penetrate Wall
Street": Cherne

of the costs of living
countries, compiled by the

survey

"hyper-inflation."

Cites Price Effects of increased

CHRONICLE

Glore, Forgan & Co,
Laz,ard Freres €/ Co.

THE

(1856)

COMMERCIAL

FINANCIAL

CHRONICLE

"An

Investment Company with
Leverage" describes how it works
in two different ways as follows:
"If

man

invest $1,000

can

5%, he will get a return of $50 per
But if he can borrow an
additional $400 at a cost of 21/2%,
and then invest the $1,400 at 5%,
he will get a gross return of $70
and a net return, after interest
year.

By HENRY HUNT

Hold That Line!
"Hold that line" has been the Administration's battle cry

against

inflation

for nearly two years.
"Raise wages but keep the cost of
living down," say the brain trusters. Bid up the price of wheat to
more than $3 a bushel to feed Eu-'^
rope, but don't add a cent to the treasury.
During peacetime in a
cost of a loaf of bread is appar-1 free economy, however, the stockHe
ently Mr. Truman's conception of holder rightfully comes first.
is the owner, the employer of the
an
ideal economy.
executives who manage his prop¬
sPrior to the war, business was

by New Deal ideol¬
During the war, industry
performed miracles of production
-ithe nation came first and the

Hamstrung

ogies.

stockholder
the

took

back

Profits

Excess

seat

rolled

Tax

earnings back to the government

tp
Prospectus
your

upon request from,
investment dealer, or from

NATIONAL
RESEARCH

SECURITIES

CORPORATION

120 BROADWAY, NEW YORK 5, N. Y.

Some

Cafe.

Investors Inc.

Leverage.'

'Income

the writer or¬
a Montmartre
the garcon failed to
ago

years

gin fizz in

When

understand,
your
correspondent
tried
varying pronunciations of
"gin fizz" until he saw a gleam of
enlightenment in the eyes of the
waiter.
The latter, with a quick
"ah
oui!", withdrew but reap¬
peared in a moment with a young
woman

in tow.

dered—one

To be sure, as or¬

"Jeurie

Filler'

"If there is

lows:

why

son

vested it is this

basic

one

rea¬

is saved ahd in¬

money
.

with that

sav¬

ing is linked the hope that such
money can be safely employed to
produce
it

And

likewise

income.

additional

that this

true

prudently invested should,
over the years, bring a good
re¬
turn—not only in dollars but also
in that priceless possession of a
money

feeling of satisfaction and secur¬
ity.

is used with

"When the method

Miss. Valley

IBA Groqi

Elects Bert H. Horning
ST. LOUIS, MO.—The Missis¬
sippi Valley Group of the Invest¬
ment

Bankers

America
n

has

Association

elected

Bert

Stifel,
Nicolaus

Company, Inc.,
Chairman.
Walter

the objective of

production level,

an alllevel and has the
highest living standards in the
history of the world, is a short
sale, then he is entitled to hi&

time

roll

pay

opinion, and to
of

"Most
on

would

rather

play

the team of Olds-Sloan-Wilson,
the

and

many

who

confidence

their

backing

others,

are

the

United States with money, by the

million

dollars,

fry¬

ing desperately to catch up with
demand which we lay at the

the

The term

"leverage," as applied
to investment companies, is prob¬
ably not as well understood as we
had thought.
We even had to ex¬
plain it to our secretary — and
she's a very well informed girl.
Briefly, it involves putting bor¬
rowed money to
work.
It can
work
for you—or
against you.

high wages and facilities
that, despite their edge over other
countries, are still inadequate."

Lord, Abbett's

new

booklet called

doorsteps of their companies.
can't make

bear

unsatisfied

You

market out of

demand,

full employ¬

ment,

recent folder titled

the

Work"

railroad

George

"Money
Putnam

HUGH W. LONG & CO.

pur¬

equip¬

folders.

cent

Investments

Selected
issued

Company

that

out

past eight
investment in

total gain

has

American

Selected
shown

It points

the

during

$100,000

years,

called

folder

new

"Better for the Widow."

including cap¬

appreciation and income of
$92,500 as compared with an aver¬
age gain of $58,300 for the eight
winning entries in Barron's con¬
ital

test
for

$100,000
Widow With Two Children."
"How

on
a

Invest

Hugh W. Long has a new folder

Bond

Manhattan

Unusual

"An

Fund

olis

called

Investment."

recently

sent

incentive

out

senting the officers to the group
composed of Walter W. Ains-

was

worth; Russell Gardner; John R.
Longmire, I. M. Simon & Co.; Wil¬
liam P. Sharpe, Mercantile-Com¬

checks to managers and sales
representatives totaling $290,000
and averaging $720 each.

pay

Bank

merce

Trust

Garfield

and

Taussig, Taussig,

Company;

Day & Co.

Mich. Group of IBA
Elects New Officers
DETROIT, MICH. — The
Michigan Group, Investment
Bankers

Association

of America,
meeting and elec¬

held its annual

tion

at the

Detroit Club

Mon¬

day, Oct. 27.
The

Minneap¬

Investors Syndicate of

Money at Work
In

steel,

ment, and building shares in re¬

has

sympathy.

our

chase

the

recommend

both

tion

all-time

hundreds

Leverage Explained

Prospectus from your Investment Dealer or

Fund of Boston comments as fol¬

"But there are times when in¬
Creely, Gold-,
obtaining greater vestors
forget this important fact man, Sachs &
capital appreciation, it is called —that idle
money is sterile and
Company, was
'Capital Leverage.'
A 25% in¬
unproductive. When the trends of elected Vicecrease in value of a $1,000 invest¬
business are uncertain—when in¬
Chair m a n,
ment is $250; of a $1,400 invest¬
vestors are confused—apathetic— and
erty.
John
H.
ment it is $350. Therefore, if the
It is becoming increasingly evi¬
waiting for an upward (or down¬ Crago, Smith,
investor with $1,000 had borrowed
dent that industry is fed up with
ward) trend in security prices, Moore & Com¬
and invested an additional $400,
the Administration's vote-seeking
they often lose sight of this truth pany,
Secre¬
the percentage gain on his own
economic platform and will hold
—that only money at work can
tary-Treas¬
capital would have been 35% in¬
the inflation line only to the ex¬
produce dividends.
urer.
stead of 25%. The investor should,
tent permitted by rising costs. Re¬
Named to
"It is only in afterthought they
Bert H. Horning
of course, select and time his in¬
cent increases in the
prices of
vestment with great care, because recall—that the quality of an in¬ the Executive
steel, oil and automobiles indicate
Committee were: Walter W. Ainsa
25% over-all loss would, with vestment, and the continuity of a
that at least these three major in¬
the above leverage, become a 35%
Metropolitan
St.
Louis
good income, are facts remem¬ worth,
dustries intend to maintain their
loss."
bered long after the price is for¬ Company, ex-officio; E. Kenneth
profit margins and pass mounting
Hagemann, G. H. Walker & Com¬
gotten."
costs on to the consumer. Indus¬
Lo, the Poor Bear
pany, ex-officio; Chapin S. Newtrial executives have apparently
C.
Norman
hard, Newhard, Cook & Co.; Ken¬
Stabler, Financial Notes:
made up their minds that they
neth H. Bitting, Bitting, Jones &
Editor of the New York "Herald
The Wellington Fund has issued
owe
more
allegiance
to
their
Mel
M.
Taylor,
Semple,
Tribune," and one of the more a new folder called "Why We Co.;
stockholders than to partisan pol¬
Jacobs & Company, Inc.; Fred W.
"abid
bulls, commented on the Recommend
Balanced
Mutual
itics.
This decision is a deeply
market outlook last week as fol¬
Reinholdt & Gardner;
Funds" which may be mailed by Gardner,
significant one and perhaps marks
lows:
dealers to prospects without an George J. Ries, Mississippi Valley
the turning point in the fortunes
Trust Company; Gus B. Walton,
"Every individual is entitled to accompanying prospectus.
of America's forgotten man—the
Walton & Company, Inc., Little
his own opinion, and if he thinks
investor.
Distributors Group and Nation¬
Rock, Arkansas.
that a country that is working at
al Securities & Research Corpora¬
The Nominating Commitee pre¬
A Paris Memory
an all-time employment
level, an

dered

Fundamental

cost, of $60 per year, or a return
on his capital of 6%.
This meth¬
od of increasing income is called

Thursday, November 6, 1947

following

elected:
Miller, Miller,
Kenower & Co.; Vice-Chairman:
Oscar L. Buhr, Detroit Trust Co.;
Secretary-Treasurer:
Joseph
F„
Gatz, McDonald-lVIoore & Co.
Chairman:

were

•

iNCOp»0«A!l£>
48 W All
ics

STREET; NfW YORK 5, N;Y.

ancms

■>,

~'v y

Arthur A. Houghton, Jr.,

pany,

Presi¬
Com¬

and a Director of the Corn¬

the Del¬
& Western

Lackawanna

aware,

Stock Fund

::fg;

Keystone

Glass

Steuben

ing Glass Works and of

Union Common

Prospectus

the

dent

Chicago

Railroad Company, has been
ted

Director

elec¬

sfis
'dm

'
,

-•

*•..

>i.l''

Gustav E. Berlin Dead
CHICAGO—Services

With State Bond & Mtg.
(Special

The

INCORPORATED

Financial

Chronicle)

ULM, MINN.—George C.
Webster has been added to the
staff of the State Bond & Mort¬

Fund
unos

—

Chicago

—

gage
Los Angeles

26V2

Co.,

Minnesota

North

Street.

Drive, for Gustav E. Berlin, wide¬
ly known investment banker and
Vice-President

Greenebaum

Investment

passed

investing tlieir capital

(Special

SHARES OF CAPITAL STOCK OF

The

KANSAS

Waddell

Financial

Chronicle)

MO.—Eugene
Joseph R. Donovan, and
Myrtle T. Keas have become as¬
sociated with Herrick, Waddell &
CITY,

brief

illness.

associated

ity

was

(Series L1-B2-B3-B4)

away

Berlin, who
had been

age,

Greenebaum

for

over

recognized

30
an

In¬

years,

author¬

real estate and real estate

securities.

Co., 1012 Baltimore Avenue.

with
Co.

vestment

and

Mr.

years

W. Darr,

BONDS

Co.

Friday at St. Luke's Hospital after
a

With Herrick,

INVESTMENT FUNDS

held

were

Monday morning, Nov. 3, at Tem¬
ple
Sholom,
3480
Lake
Shore

was

Certificates of Participation

M. Adams,

Bosworth & Co.; Palmer
Watling, Watling, Lerchen & Co.;
and Hale V. Sattley, H. V. Sattley
& Co., Inc.

Investors, Inc.

NEW

Lord, Abbett & Co.

Committee

Fundamental

Custodian

Executive

Braun,

upon request

New York

The

composed of: William

two

He is survived by his widow,
Anne, 3100 Sheridan Road, and
children, Morton and Mrs.,
Nancy B. Glick of St. Louis.

PREFERRED STOCKS
(Series K.1-K.2)

New England

COMMON STOCKS
(iSeries iS 1-S2-jS3~S4)

Fund

(Special

ST.

Herrick, Waddell
to

The

Financial

Chronicle)

MO.—Bernard E.
Mohr is now with Herrick, Wad¬
dell & Co., Inc., 418 Locust Street.

ORGANIZED 1931

Prospectus from
your

Joins

LOUIS,

local investment dealer or

General Distributor

The

Keystone Company
of Boston
50

Prospectus
your

may

be obtained from

local investment dealer,

Incorporated

or
,

Congress Street

Boston 9, Massachusetts

Coffin & Burr

THE

PARKER

(Special

ST.

Founded J898

CORPORATION

ONE COURT STREET. BOSTON 8, MASS.

With Edward D. Jones Co.
to

The

LOUIS,

Financial

Chronicle)

MO.—David

Harris has become affiliated with.

BOSTON
NEW YORK

PORTLAND

HARTFORD

BANGOR

Edward D. Jones & Co., 300 North
Fourth
Street, members of the
New York, St.

Louis, and Chicago

Stock Exchanges.

Volume 166

THE

rebmuN'
4644

COMMERCIAL

tions

article

"Are

Too

Profits

issue of the "Monthly Bank Letter," published by the National City
Bank of New York, refutes recent statements, particularly those

by Secretary of Labor Schwellenbach, that
and that high profits are<$>
cause
of rising prices.
Quota¬ facto
excessive

profits

are

ex¬

cessive
a

tions from the article follow:
The

current

figures

conditions;

corpo¬

rate profits continue to be a sub- ' savings

ject of active—at times

bitter

even

—

controversy,
with
criticism
ranging all the way from intem¬
perate charges of "extortion" and
'robbery" to milder suggestions

under
present
figures to

cites

and

that

show

while

earners'

wage

have been

severely curtailed, earnings of corporations
have expanded enormously.
Yet,
with
all
this,
he
nevertheless
frankly
acknowledges
that
"I
don't know, and I don't believe

their
as

Among

the

power.

various

Profits and Workers'

pronounce¬

ments that have appeared on
matter recently is the

last

following

month

from

address

Secretary

Labor

before the

Schwellenbach

Amer¬

ican Federation of Labor
tion at

San

Francisco.

conven¬

Discussing

the general price rise that has oc¬
curred, and referring to the factor
of business

profits, he said:

"There is

has
say,

been, let
submerged

conservatively
as the pub¬

far

lic presentation of the
problem is
concerned.
That is the factor of

profits.

I accept fully the conten¬

tion that any manufacturer

corporation

entitled

any

basis

The

make

profit motive is

the

whole

our

economy.
I
no
more
favor a general
regulation of profits than I would
a
compulsory arbitration of labor
disputes.
I
also recognize fully
the right and need of
any corpo¬

would

ration

the

set

aside

portion

profits for future

Good

use.

sion of bank loans since the
of

particular

national

our

period
Cor¬

economy.

poration managers say quite prop¬
erly that they must set up re¬

against the day when they
might be subject to losses. What

serves

I do

object to is that

many of the
people who. contend for that

same

right—to make their corporations
secure

wage

also

—

contend

earners

that

America

the

Savings

futures

themselves.
is

earner
a

take

think

the

much entitled

care

wage

get

nestegg of insurance for the fu¬

ture as is a
corporation. It is a
proved fact that savings by wage

decreased 45% as between
1946. It is a proved fact
that the present
savings of the
great mass of the American peo¬
earners

1945 and

ple

are

V-J Day.

30% below what they were

much

about

wage

right

frank

confess

that

form

the

what out

matter

for

mutual

bargaining between the

the

latter

hard

workers of

and fast rules for determin-

ing just how much workers shall

port, announced

and

earn

save, any more than of
laying down similar rules for cor-

porations.
As

pending $500,000,000 for this
The

pose.

the

sumer

rate

facing the petroleum and

goods upon

which- income

All

what

invest in

and

save

said

war

Today workers' incomes
are higher than ever
before, their
savings are still large.

much
serves.

profit comparisons used by
Secretary Schwellenbach are un¬
in

that

the

one,

period

chart

group
in the

and

retain

given in the

are

many

concluding, it

much for the first
quarter

they did for the entire

year 1939."
The foregoing

statement by the

Secretary is couched
and

restrained

in moderate

terms

questions raised

are

great many people

and

ones

are

the

that

wondering

about.
The
aware

Secretary evidently is fully
of the

need for reasonable

earnings and of the importance of
setting up reserves against future
losses

inventories

and

other

contingencies. The sole question is
one

of how much.

the

dictum

resuu

that

jjiiLd

He lays down

any

profits that

iiiciLUuv/o

oix

seems

report

en-

economists

Labor

and

All

That

They

ate.

Seem

point to be made,
however, is that the profits themselves

are

the

reflect

first
a

turnvdown.

prices

merce

the

national

new

the

resultant

factor

the

fig¬
inventory

the

estimated

total

publicized

total

corporate

1946

the

that

par-

ticular volume of business and of

whether net corporate profits (in

profits

were

largest

adjustments
of

operations

was

net

new

can,

it is true, bor¬
from

sums

from

the

relation

considered

judging

by
Schram,

Emil

President of
the Exchange.

Eugene
Lokey,
VicePresident of
the Exchange,

has

been

supervising
public rela¬
activi¬

tions

along

ties,

with other ad-

member

Mr.
of

Hogate

publications
Prior to
that, he was with the public rela¬
tions department of the General:
Motors Corporation for 10 years,
first in Detroit and later on the'
the

last

General

the

Motors

Before

joining General Motors,

work in Indianapolis and
Chicago. He was born in Dan¬

ville, Indiana, the son of a coun¬
try newspaper editor, and wa^
graduated from De Pauw Univer-*
sity at Greencastle, Indiana, in
He

costs

plant and equipment and thus

lisher of The Wall

York Stock Exchange and partner
Vose & Co., after his battered

insufficient

Mr.

(Special

cause

death."

Al¬

The

Co., Inc.

though the case was listed offi¬
cially as a drowning, the New
Jersey police implied that Mr.

studied by a special committee of
the
American
Institute , of
Ac¬
countants.

Treasury

Financial

j^epartment

Chkoniclf)

...

With First of Michigan
(Special

McCarthy had met with foul play.
There

was

indication

ap¬

parent motive for suicide, and an
audit

made

the

accounts

Vose & Co. showed that his finan¬

cial affairs

Price

were

"in good order."

The

Financial

per

change.

share)

request

Batkin, Jacobs & Company
Broadway, N.Y. 4
Teletype N.Y. 1965

;

Chronicle)

DETROIT, MICH. — McPherson
Browning is now with First
Michigan Corp., Buhl Building-:
members of the Detroit Stock Ext
E.

$3.00 Per Share

Circular available

Street Journal.

McCarthy

some

or
another, this involves
complicated accounting and tax
questions, which are now being

late

pub¬

BOSTON,
MASS. —Lester A.
had been the object of a wide King is now associated with Mer¬
search since he vanished Oct. 27. rill
Lynch,
Pierce,
Fenner
&
Mr. McCarthy had suffered cuts Beane, 10 Post Office Square. He;
and bruises of the skull, although was formerly with Whiting, Weeks
an autopsy by Monmouth County
& Stubbs and prior thereto with
officials reported that they "were B. F. White & Co. and- Blyth &
Leonardo,

are

kind

the

With Merrill Lynch Co.

body had been washed ashore at

companies have at¬
tempted to adjust for this situa¬
tion by special reserves of one

New

(Par value $1.00

wholly inadequate in view of the
present level of replacement costs.
While

brother

Kenneth C. Hogate, who was

con¬

Class A Common Stock

that

staff

paper

Florida Ramie Products, Inc.

common¬

war

Mr. Hogate was engaged in news¬

lower

fact

years.

Washington.

to the extent to which

because

two

100,000 Shares

Second, there is real question as
earnings as
currently reported are being over¬

been manager
editorial off icq

has

from

Assistant;
P.;
the Ex-!

Robert

McGraw-Hill

the

for

1922.

the

and

of the Washington

ducted into the death of Daniel F

McCarthy,

Boylan,
Chairman
of
change's Board of Governors.

today's

being

Schram

Mr.

figures

actually

depreciation charges are
ly based upon original

...

President and Executive

Investigate Foul Play
investigation

Hogate

of Mr. Hogate to the
newly-established
position
will
enable Mr. Lokey to devote his
;ime to his major duties as Vice-

De¬

income

naming

than in 1945.

stated

Donald

duties. Th~

Daniel F. McCarthy Dead;
An

announced

to their net

point of view needs to be

and

Donald

post, effective
D e c. 1, w a s

rec¬

the

position of

Exchange
of

widely
on

Commerce

the

Stock

appointment
Hogate to tiio

New Irsue

cor¬

ord, if allowance is made for these

show

York

the

Com¬

income

the

Accord¬

Department

profits amounted to $4.7 billion
38%

they seem.' national income levels, the report
place, they contain, states:
substantial measure I
"We d° not pass judgment on

inventory profit, which repre- I
sents a highly
^llusory gain that'
can
be quickly dhanged to a loss
ing

are

not all that

when

Pointing out that corporate

profits

main

creation of

•

Public

Welfare of the United States Sen¬
Not

The

inventory
partment

half

consid¬

government

Committee

of 1947 the profits of
corporations

of 1947

re¬

New

profits.

how

for

much

This

Legislative Reference Serv¬
ice, Library of Congress, for the

preceding article.
Profits

The

director of public relations of the

worth.

cor-

Wages and Profits"
early this year by a

prepared

earnings
were
curtailed as shown ,by

tables and

our

make

should

and there

titled "Data

when

severely

$12.2 billion in

wrtn

too

numer-

profits

and

source

market, but
they will go broke if they borrow

The problem is a difficult

pertinent to refer to

selected—the first quarter of 1947
with the first quarter of 1946—
involves
a
comparison
with
a

make and how much it
should retain for reserves. But I
do know that for the first
quarter
compared

banks

lot

is corporation profits.

substantial

row

pur-

impossibility

what

should

they

erations.

period

the

just

porations

The

fortunate

for

principal

Corporations

this brings us back to
Secretary
Schwellenbach

call
The

this money

knowing

years, together
greatly increased cost of

services,
money.

could be spent, and to the patriotic

the

have

doing business and turning these

ous
other
industries, including
savings during electric light and power, telewartime was abnormally high, due
phones, and railroads,
the great increase in income
pay- '
Profits and National Income
ments, to the shortage of con¬

that

into

which

inventions into usuable goods and

pace with the growing
needs of the American
people are

significance of the
savings decline cited by the Secretary, it should be borne in mind

turned

science, in recent
with the

re-

necessities

same

services

and

the standard of living of
people to the highest level in
history. The new discoveries of

1 keeping

the

NYSE Public Relations
til

our

program of ex-

principal

»Vf.:

Hogate Director of

ministrative

raised

point, it is to be

alone, in its recent quarterly

are

goods

in¬

should

$857,000,000

technicians

man¬

the

is to make progress,
Corporations are the

mechanisms by which the inventions of
the
scientists and the

the

porate net income in 1946. Where¬

were

in
but I

cash

noted that the steel companies are
being called upon to further exdividual industries concerned. We i
pand
their
capacity,
and
the
know of no way of laying down United
States Steel Corporation

agement and

know, and I don't believe
anybody can lay down rules as to
just what profits a corporation

$328,000,000 for the same period a
year ago. Corporations manufac¬
turing automobiles earned almost

receivable, and the capi¬
tal invested in high-cost plant and
machinery for reconversion, mod¬
ernization, and development.

agreement

the capa-

sup-, way

accounts

set aside

a
"rainy day."
The
however, of who gets
of corporate earnings is

question,

both

of the relation between

one

city of these enterprises to serve
the needs of the country in the
that they must if civilizatipn

end

not

are

available

nomic

j corporate earnings and

higher dollar in¬
ventories and the resulting larger

management

strive to

for

reserves

point

wish and to

ures.

don't

are personal.
The main
question is rather the broad eco-

sorbed

should

dip into their savings and let their
personal

companies

many

j losses
as

indicating that for

war,

posedly high earnings

bonds.

this

the

great

savings, it will certainly
agreed that the wage earner

has
to

the

appeal to

earnings.
this question

clude

"I do contend,
however, that to
the extent that profits result in

price increases they cannot be de¬

sidelight

management demands it.

fended

to their real

have already been more than ab-

...

profits.

earners'

and

another factor which

returns
must
be income
of $165,000,000,000
even
when a fourth to possibly a third
original costs.
study by the Machin¬ of the profits was the result of a

by the increased capital
requirements of the business in a
period of rising prices. These in¬

this

quotation

$12,000,000,000 are too
the basis of a national

tax

to whether profits are "too
high"
is provided by the rapid expan-

"making too much I anybody can lay down rules as to
money," and ought in the general just what profits a corporation
interest either to cut prices or to should make and how much it
raise wages and so help to sustain should retain for reserves."

purchasing

of
on

shareholders, and the public individuals to whom its gains

that business is

consumer

1946)
high

(1857)'

& Allied Products Institute of favorable
tax
situation.
It
is,
Chicago sets forth several possible however, an historical fact that
ways of dealing with the problem the proportion of the national in¬
and concludes that: "Since
capital come going to net corporate prof¬
investment must be recovered in its is lower than in many other
real purchasing power, not
simply periods of high-level production
in
dollars,
under-depreciation and reasonably full employment."
should be recognized for man|
The real question about whether
agerial purposes whether recog- profits are too high or too low is
nized for tax purposes or not." not a moral
question. After all,
Unless this is done, corporations a corporation is
not, except in
may
be misleading themselves, very limited measure, a group of

High?" the November

made

CHRONICLE

ery

of present price increases.

entitled

upon

A recent

"Monthly Bank Letter," issue is taken with state¬
Secretary of Labor Schwellenbach that high profits are

for

based

In November

cause

FINANCIAL

regulations require that deprecia¬
tion charges claimed as deduc¬

High Profits Are Not What They Seem,
Says National City Bank of New York
ments of

HAnover 2-2815

(1858)

Reporter

Governments

(Continued from page 2)
decline

By JOHN T. CHIPPENDALE, JK.

from

the anxious seat.
new

somewhat.
and

Prices of Treasuries continue to drift lower,

lows being made, although the rate of decline has slowed
Volume has not been heavy and the market is largely
.

professional.
is

Yields

beginning to look attractive to investors
result scale buying of both the eligible and restricted issues

...

being done.

are

There

all-out

are no

accumulation of needed obligations.

"plunges", but quiet, cautious
.

NEW RATE PATTERN?
New

rate patterns are

being discussed quite actively

This

way

would

1 *4 % issue.

to forecast

seem

2s due Dec. 15, 1952-54 and a
for the eligible 2due 1967-72.
it is believed, might go to a
These

yields

if it does
to

government

securities

will

continue

role.

The

movement

quotations

the

down

side,

es¬

tive policies that are being taken
by the authorities in order to halt
the upward spiral in bank loans.
...

replenish

with larger returns.

their

reserves,

order

make

loans,

outshine other retail organizations

Building, too,
of
strength,
since there is no apparent end to
the number of housing units de¬
sired by American families.

Selling of government securities by the deposit banks is one of
the important factors
contributing to the instability of the Treasury
market.
So far these sales have been
mostly in shorts and inter¬
mediates, although there has been some liquidation of longer-term
obligations.
...

WHAT'S AHEAD?

for

government

the loan trend?

securities

and

of the authorities

lower

mean

important curtailment

Apparently the emphasis for the time being is
cff the government market and its movement
of prices, with all sorts
of rumors flying about as to what will
be done to curb the increase
in bank loans.
"Open Mouth"
.

operations

going strong

are

what is likely to take place in order to
bring about a change in the
trend of loans.
Can prices of government securities be
expected
.

to remain stable under such
conditions?

...

If credit restrictions are more
vigorous and indications point
in that direction, what is to
prevent the eligible issues from con¬

tinuing to

lower?

move

obligations have
ties?

effect

the

upon

restricted

textile

These

are

puzzling the money markets.

are

While

it is

realized

that

of the questions that

some

gains

unusually
heavy,
normal, even though
precedented output has gone

there

could

further

City

increase

has

Kansas

Francisco,
districts

largest

been

City, New

St.

Richmond

that

Louis,

York,

have

the

Minneapolis, Atlanta,

Boston,

Philadelphia.

shown

excess reserves.

Dallas,
The

Chicago,

Federal

San

Reserve

corporate

bond

rise

loans

also

have

the

has

been

fortnight although adjustments between
to

take place.

side,

with

New issues have

certain

these

original offering prices
able to

securities

since

fairly stable in the past

the various ratings continue

made

securities

some

now

progress

premiums

the up

over

the

The fact that corporate bonds
have been

ally somewhat should have

the down

trend

influence upon government

corporate bonds had

unfavor¬

able effect

upcn prices of Treasuries.
The yield spread between
AAA coipoiates and the
longest ineligible issue has narrowed because
the return on corp orates has declined
somewhat, while the yield on
the restricted obligation has increased
.

The

the

yield

Treasuries is

differential

now

yield only

return

seems

bottom here.

.27

between

maintained

desirable in the past, it
should

automobile

40 year AAA's

than

levels

AAA

that

corporates
were

and

considered

though government obligations

industry

Twenty-year AAA corporates

the

re¬

1948.

may

year.

Improving

will have

steel

supplies

Foreign

Situation

Crucial

domestic

prospects

are

the

earth

will

want

during

war

harmony.
As
assembly lines hit a

automobile

stride

ing

never

before

peacetime,

reached

back

dur¬

will

orders

gradually be filled—although it
seems
possible
that
even
this
astounding out-turn may not be
able

keep

with

and

wear

take

other

any

some

The

number

end,

recent

false

and

months

starts

that

wheels' began
Exorbitant
labor

the

has proved

Russia

not

she

herself

be forced to

can

and

down

costs

and

materials

potential

homes

and

plants.
Now, apparently people are tired
of waiting for expenses to decline
and

afraid

even

that

will

costs

actually climb higher. Therefore,
present building boom may

the

well

continue

for

sustaining

many

connected

with

Continued

goods will

several

years,

industries closely
it.

demand

bolster

for

iron

all

par¬

back

the

and

capital

and

steel

—20%

Income

Farm

even

—

Income

Consumption
Wool Consumption

—

Steel

5%
5%

—10%

Manufactures. +25%

Automobile
Iron

—

Manufactures

Rubber

Industry

Paper Production

—

Printing & Publishing

—

5%
5%

Shoe Output

equal

will

probably hold off un¬
along in the new year.
and publishers will not
well during 1948. Hard fuels

far

Printers

will do well to hold close to prev¬
alent output levels. Crude oil, na¬

output

should hold up well.

longest tap

bond, with

approximately .58 greater.

the

airlines

air

travel

expense

are

during
the

1948

railroads.

the

Con¬

tributing to this will be new and
larger planes, better airport facil¬
ities, and new equipment which
will minimize the
dangers arising
from erratic weather conditions.

Railway freight will suffer seri¬
ous

if hostilities

balance.

deflationary,

were

widespread

to become

in Europe.
is replacing

loans.
interested

those

For

specific

here is a comprehen¬
sive list with anticipated rate of
for

production
with

1947.

mind

all

the

changes

which

bear

percentage

show

parisons
historic

compared

1948
well

that

year

com¬

from

registering

still

highs for practically
of enterprise. In other

new

forms

there

words,

can

marked percentage

Net change

from 1947

Average

Industry

Anthracite

Petroleum

Crude
Natural

Gas

Mining

Lead & Zinc Output

Construction

Building
&
Activity

+ 5%
*

Electric Power Output
Airline Cargo Ton

Miles— +20%
Miles_.+200%

Railway Freight Ton Miles1—10%

Bituminous Coal

^'Unchanged.

—

—15%

Department Stores

Chains

Variety

—10%

Chains

Fooa

—

——

Order

Mail

—20%

Foreign Trade

Wholesale

The

Price

Commodity

inflation

There

in whole¬
sale commodity prices has not yet
run its course,
but appears to be
on

the

final

dications
be

decreases from 1947 levels

expensive with each passing day.

Outlook For 1948

stretch.
that

are

reached

spiral

Current

the

peak

by mid-winter

in¬

will

the
early second quarter of 1948. This
year's short U. S. corn crop al¬
is

ready

reflected

sharply

talk

for

still

some

seasonal

ter, and

early win¬

livestock

still
in

higher

the

late

prices
winter

for
and

prices,

and

$10,
hold

the

price (with the people's money, of
course) for the bread grain for
shipment to Europe. We hope that
aid

Should this

higher

attractive

result

continue

government is willing to pay any

called

spurring

hitting

from

farmers

butter, cheese, eggs, and poultry.
Unfavorable
feed
ratios, plus
are

prices

even

them

keep
the

$3.50,

the

prices,

wheat

to $5.00
bushel. In fact, there is nothing

going

higher prices for livestock, meats,

held

and

program,
"Marshall

reasonable

within

prove

should

harvest

bounds.

to be the case,'

Europe and the U. S.

good

next
year,
prices would ap¬

crops

then lower food

inevitable perhaps long be¬

pear

fore

under the soplan" will be

1948 harvests

Industrial
Pressure

are

in.

Commodity

Prices

industrial commod¬

early spring, but to smaller sup¬ ity prices also should continue
plies of meat. Thus, the trend of' upward for some months longer.
prices is likely to continue Here's why: A record domestic
upward probably for six to eight employment level, at high wages,
months longer.
spells continued large public pur¬

food

there

this
is

connection,
a

possibility

however,
that

shipments of foodstuffs to

Railroads Down

embarking
upon a vast program of cargo ex¬
pansion. Look for a rapid upswing
in

continue

even

Manufactures

The

will

+5%

points

—

Government methods of financing

Retail Trade—

Cement

Boot &

meat

Airlines Up

should remain close to

Airline Passenger

temporary increase in
supplies.
This
situation

electrical

budget, barring
possibility of in¬
military
requirements,

Copper

Output.-

Rayon

Foodstuffs._

weakness this fall and

and

national

creasing

Average

Industry

Manufactured

exaggerated output for 1947.
Paper production is now at an

gas,

are

The

from 1947

should

tural

levels
far above parity.
current

below

Net change

basic materials should
the

fall

not

should

Expected Output for 1948 Compared to 1947

marketings of cattle and hogs,
even
of
breeding stock, which

but

than- 20%

during 1948
decline and
Western still leave an industry very close,
to the highest levels ever recorded.

break be¬

requirements. Production of such

til

losses

industries,

with

open

Russia

tween

along

come

easily lead to

cogs

away

scared

builders

somewhat
lower. Therefore, the general pic¬
ture
is one of plentiful
buying
power
for
all categories. Farm
incomes may possibly suffer some

are

the
majority of nations on certain
important issues. Her continued
refusal
to
compromise
could

until

in
catch hold.

in¬

The

1947.

for

since

not

was

estimated

dividual tax bill may be

year,

ticularly pig-headed in her deter¬
mination to run things her own
way. 1948 should reveal whether

building industry has had

war's

lion

equal the $190 bil¬

extremely

50
different nations,
nearly
speaking different languages,
finding it difficult to agree.

Tobacco

Building Industry In High Gear

will

income

national

that the

1948

it will Longer term paper
the inflationary s*hort-term. Con¬
ingenious
trol of consumer credit will of
maneuvering on the part of diplo¬
matic and statesmen to prevent course be out the window after
dangerous developments. Of November, but late 1948 may wit¬
course,
it is not surprising that ness attempts to control business
1948

Cotton

con¬

siderably less reassuring. Even
though none of the peoples of

Hartley Act will
promoting
labor

part

Billion

the ever-present

definitely opti¬
situation,

are

the

international

National

its

forecast
for

which

automotive centers, and the Taft-

National Income $190

Purchasing power will move
along at a very high level. We

•

will

favorable impact upon

store

measure

forecast

that nearly 6 million cars will be
turned out during the 12 months'
span.

some

readjustment.

pot of gold at the foot of the

Department

see

powers.

slightly.

far

satisfying the wartime
placement demands.

crease

market

sales

extremely
high
rate,
drawing
steadily nearer to a normal sup¬
ply-demand
balance.
de¬
Any

greatest

CORPORATES AND GOVERNMENTS
The

un¬

toward

the largest percentage

area,

followed

Cleveland,

and

far

above

the

1947. Cotton textile and

over

...

adjustments in
ihe government market, because of action
to be taken by the powers
that be, in restraining the loan
tpend, not all commercial banks are
affected by the demand for loans.
Therefore, those institutions
that are not
experiencing an increase in loans will continue to take
on
needed issues as prices reach levels
that they consider attrac¬
tive.
This buying will absorb a
substantial amount of the selling
and help to keep quotations from
getting too far out of line.
While the dollar volume of
loans, as was to be expected, has
increased most in the New York
.

fibres

except
silk
will
move slightly
off, while boot and
shoe production may show small

securi¬

Treasuries

monetary authorities?

dropping market for bank

On the other hand, has the
present level of prices for
about discounted the
action to be taken by
the

output to march

tear.

Will not

adverse

be for

of course

rainbow
measures

during

While

pattern
next
manufacturing

that

and mail order houses will

mistic

along at approximately the same
levels as during 1947. There will

prices

prevailing
throughout

believe

stores

Manufacturing Lines To Bulk

...

Will the credit restrictive

bulwark

continue

activity.
variety chain

fulfilled.

manufacturing
are
ex¬
pected to register a second year
of
irregylar decline. Needs for
new
and
replacement tires will

selling

record

rubber

Instead of loans being curtailed through the loss of
reserves,
brought about by the retirement of certificates held by Federal,
and smaller offerings of bills, the member banks
are

year

will

present peaks. Consumption of all

pecially the eligible issues, is being aggravated by the credit restric¬

Treasuries to

another

entirely

impor¬

very

than hold close

unsettled

during the transition period, with psychology playing
tant

levels

current

variations, but most
of these should be slight. Manu¬
factured foodstuffs, now at alltime record highs, will probably
not reflect much more expansion,
but may very well hold close to

SELLING BY BANKS
Prices

present high levels, will enjoy

through the next 15 months, the
pent-up demand will still not be

lines will

if automobile out¬

even

continues

put

year

The longest restricted issue,

to be about bottom levels, for the
Barring unforeseen developments, it is
indicated that the gerater part of the
adjustment in yields of Treasury
obligations has already taken place.
on.

de¬

air

output will
probably shade off only slig[htly.
Except in the case of lead, critical
shortages are over.' Retail trade,

ple, that

The

considered

are

going

1947

Good Volume

2.42% yield basis.

transition that is

high

fabulous

greatly improved

motor truck movement.

Non-ferrous metals

with

now,

yield of about 1.57 % for the
return of approximately 2.20%
.

result, of

and

fields. It is safe to say, for exam¬

...

almost

built up during the war is
far from satisfied in many

still

extremely

The

volume

Thursday, November 6, 1947

Commodity Outlook for 1948
a

mand

indications that a;lV8% certificate, which is
expected very soon, may

eventually give

business

1948

the

volume.

Credit restrictive measures, together with more
vigorous "Open
Mouth" operations that are intended to aid in
curbing the inflationary
trend of bank loans, are keeping the government securities markets
with

CHRONICLE

Business and

Our

& FINANCIAL

COMMERCIAL

THE

our

co-op¬

erating nations in Europe may be
less next year than currently in¬
dicated.

There

growing feel¬
ing in responsible circles, and
among the people of this country
generally, that the bottom of the
European "gimmee" (aid) barrel
is full of holes that might well be
plugged—with a little more hard
work

and

chasing power, despite inflated"
prices. Production costs are un¬
likely to drop, and probably will,
advance
further,
should
labor
make
creased

successful
wages

bid
result

for

in¬

of ad¬

vancing living costs. These major
point to still higher, prices
the industrial category.

factors
for

It is only a question of time,
however, until deflationary forces
will

make

themselves

unmistak¬

self-reliance—by the
European peoples themselves.
Trying to stave off the. spread of

ably felt. Chief among the latter,
is unprecedented peacetime
pro-t
duction, which is pouring a vast!

Communism with

torrent

good American

dollars is proving more and more

and

of goods

consuming

into distributing
channels. Reser-

Volume 166
voirs

Number 4644

filling

here

arid

are

and

there

NEW

levels

Nov.

versary

early spring.

Bank

leaders
to

will

vances

ing the
great

early

that

ad¬

banking.
financial

the
per¬

third

1948

contracts

quarter

ment of

will

1948

reached, organized workers
-nation

10%

have

may

added

the Bank of Mont¬

was

its

Canada

gave

first

of the

241 Church

rectors of

came

and copper

their

Branches

scares

the

bank

Despite

these,

branches

from

level recently reached.

coast

Newfoundland,

opened

our
nation.
In
1948
America's role in the international
drama will become more

colorful,

introduced by
Montreal has been

nant

than

domi¬

before. The

ever

peoples

gry

of
i~

the
i

will

Thi rJ0,, ?,0k„ t0 u? for
T
w®a^_ will depend upon
strength. Management and

labor,
conservatives,
farmers and industrialists,
Repub¬
licans and
Democrats,—all must
join forces to secure and maintain

radicals

and

vigorous, healthy

and

personal

which

courage

are

democracy and

Tiif

Financial

has

Griffin

Chronicle)

C.—Harvey

become
&

The

associated

Hundley

Financial

Chronicle)

GREEN' BAY, WIS.—Arthur H.
Du Chateau has become
asso¬
ciated with Thomas

conveniently

and

the

De¬

Osaka

the

Cherry Street.
Mr. Du Chateau
was formerly with The
Milwaukee
Co. and Edgar, Ricker & Co.

Nov.

15,

New

for

York
the

First

has

the

Jr., will become

and Frank B. Hall
ner

Humphry,

general partner
a limited
part¬

James

527 Fifth

M. Leopold &
Co.,
Avenue, New York City,

members of

the

New

York

Stock

plans
a

new

corner

branch

new

•

occupy

one-

pected
the

that

the

branch—27th

bank's branch system in

York

City—will
be
opening next summer.
Frank

Roe,

Vice-President

New

ready

for

more,

10.

Avenue

The

bank

new

were

re¬

issue of Oct. 30,

our

page 24.

and

1939

director in 1926,
Vice-Presi¬

became

dent.
Sis

The

Board

:.'i

of Directors of The

First National Bank
at

of Beaumont

Beaumont, Texas announced

Oct.

the

election

years.

:!«

Lewell

his

duties

the

Republic

career

Mechanics

tional
Chase

Bank

and

merged

National

his

Metals

Bank

this

retirement in

with
in

Na¬

the

1926, he

capacity

until

1934.

Bank

Arthur
of

Oct.

29.

nounced.

Mr.

Lafferty's election

to the office of Vice President
was

announced in October.
He is a
former President of the Financial
Public Relations

Association;

ing

Colonial

New

York, announced

Oct. 29

founder of the annual bank¬

was a

school

the

University

Texas, and is widely known
correspondent bank circles.

Foreign Exchange Office orders that private
holdings of American
dollars, Swiss francs and Argentine pesos be offered to Bank of
Sweden for redemption.
In

Assistant

Trust

and

Company

order

meet

the

increasing shortage of dollars

and

granted permission by the Riks¬
dag to take this step as early as

time that private
holdings of hard
currencies
would
have
to
be

last

requisitioned.

July.
Since then Sweden's
foreigm exchange reserves have
new

orders

measure

all

Swedes possessing, in
bills, coins,
checks, Or drafts, at least 50 Amer¬
dollars, 200 Swiss francs or

ican
200
to

Argentine
the

Bank

pesos, to offer them
of Sweden for re¬

demption before Nov. 15.
reside

abroad

Great

export

Britain,

Sweden

has become

dent than

supply
On

ever on

Jan.

vitally
1,

this

gold

area

needed
year,

other

some

has

European

countries,

not

time,

Nyheter,"

Benjamin H. Beckhart, Direc¬

tional

pened
of

Bank, said: "What has hap¬
is, in my- opinion, a sign

temporary crisis.

The

advices

same

Frank

Denton,

also

Vice

announced

also

Christner,

Trust

that

Officer

charge of the real estate divi¬

ment, has been made

investment officer of
trust

reserves

rencies amounted

been

Cashiers
ment

appointed

Sweden's

ability to reestablish

With Southeastern Sees.

goods.

Sweden's

(Special

The

Financial

Chrcnicle)

JACKSONVILLE, FLA.—A. Lee

kronor,

while

cur¬

1,600 million

they

have

shrunk to 375 millions.

now

French has become affiliated with

Southeastern Securities Corp., 304
Adams Street.
In the past

West
he

was

with

the

Florida

Co.

Assistant

and

the

per¬

Assistant

the

banking depart¬
Ralph F. Sprowls, As¬

Cashier

the

75,000 Shares

B. L. LEMKE & CO. inc.

operating

The election of three

Presidents
National
of
on

Bank

the
&

Pittsburgh, Pa.,
Oct.

COMMON STOCK
new

Peoples
Trust
was

Vice

First

Company

announced

Price $3.62V2 per Share

by Robert C. Downie,
Reporting
this
the
Pittsburgh "Post Gazette" added:

President.

Charles
R.
Webb,
manager
of
the Squirrel Hill office since 1937,
was

elected Vice President.

W. Cotton

was

Fred

F. R. LUSHAS & CO.

elected Vice Presi¬

Incorporated

dent of the Oakland office where
he

has been
D.

manager

Teuteberg,

since

1940.

who

was

End office, became manager there
a few months
ago, having served
as

take

its economy remains unshaken."

for its

hard

and
to

department.
William
and Alvin G. Keller

Clifford

have

long-range view, the confidence

depen¬

this

circles point out.
They also call
attention to the fact that since the
of the war
Sweden, unlike

end

Dr.

markets,

same

pay
for its imports
U. JS.,
well-informed

tor of Research of The Chase Na¬

cannot

At the

the

for¬

utilized for purchases in the hard
currency areas.

from

The step was taken
it possible for

make

in¬

not

are

eign exchange difficulties is that
the major part of the income from
traditional

raised any loans abroad.
interview published in the
Stockholm daily "Dagens

Swedes

cluded in this edict.
One reason for Sweden's

its

order

Sweden

fprther^eclined.
The

—

24.

sonal

other

foreign exchange, the Swedish authorities have
now been forced to
take new measures.
After having restricted
imports and cut the
sums
allowed for travel
abroad, the Foreign Exchange Office has
decided to call in for
redemption^—
——
private holdings of so-called hard
Sweden Has Not Raised Loans
currencies, such as dollars, Swiss
Abroad
francs, and Argentine pesos. The
It
has been known for some
Foreign
Exchange
Office
was

Overholt,

division of the personal

William

Kleeman, President
Trust
Company of

Nov. 17, Fred F.
has
an¬

President

fey Sweden

manager at Etna since 1944.

Broadway

New York 6,

elected Vice President of the East

Whit¬

assume

Vice-President of
National

Dallas, Texas

Florence,

:;i

Lafferty will

sion of the personal trust depart¬

Mr. Roe began his banking
in 1899, and in 1904 became

Paul

Holdings of Hard Currencies Requisitioned

First

trustee

Club, will

President of the New York

Telephone Co.

the

an¬

quarters

Grand

department of the bank.

honorary

and

Irving Savings Bank of New
York City at 115 Chambers
Street,
died on Oct. 25 at the
age of 83

continued

Carl

Company

died
'I'

Bank

Alan

the

York, at
held

Trust

Mass.,

ex¬

the

for the past 28 years of

Chairman,

will

Bond Club of New York
To Hear Carl Whitmore
meeting

1921; he became

Vice
President.
Henry
Cooper
Cooper Village, one of the i
an
Assistant
Vice
Metropolitan Life Insurance Com- was named
j President and Kenneth C. Hewitt,
pany's housing developments. The '
Peter

Cashier for the Machanics and
Metals National Bank of which he
later became Vice President. After

Nov. 10 at the Bankers
hear an address

new

Nov.

elected Associated Cashier in

was

its

effective

.ft

and

age.!He

years

Street

its

ferred to in

who

Curtis, founder and

of,

Exchange.

The Bond Club of New
its luncheon

was

Mutual

of Pittsburgh, in charge of the in¬

Cen-

southeast
23rd

was

Vice President, it was stated in
the Pittsburgh "Post Gazette" of

and

Avenue

and

1.
the

forces

announced
of

the

Vice President of the Mellon Na¬

Oct.

establishment

Sav¬

trust department has been elected

Bank

epen

such

said:

National

the

York

:Jt

tral Japan area.

Admit

James

Harold

sistant

Leopold Co.

New

member

Exe¬

the

for

occupation

Chase

Association

Quincy

Quincy,

Branch

their dependents in the

The

Savings Banks of America.

building it

located

for

the

of its Group

charter

vestment

service

Becker who

served

Committee

the

forces,

Mr.

million

Hundley, 306 story limestone building. It is

had

tional

branch

Joins Thomas
to

President

Allied

Becker, associ¬
Savings

years

chairman

The National City Bank of New
York has re-established its branch
in Osaka, Japan. The branch will
same

which

Western

Buffalo,

Herbert

be located in the

the

ings. Banks

half.

office

Oct. 29.

State

that

Street

quarters

included

are

until his retirement in 1944,

cutive

populated.

number

will

ac¬

"Evening News" which also noted

Vaden,

Inc., cf
Raleigh.
He was formerly with
Southeastern Securities and
the
Carolina Securities
Corp.

(Special

today

that

Elliott

with

and

is
to

of
its

of almost $2 billion.

Tenth

celebra¬

of age, had served
as
Secretary. of the bank for 60
years,' according to the Buffalo

area.

positors

was

$168,000 to $175,000
stock dividend of $7,000.

nounce

en¬

Fred Berry is Presi¬
North Side Savings

was

Today, the bank has capital and
reserves
of
$78,000,000, and re¬
sources

war.
Operat¬
ing under regulations established
by the Supreme Commander for

WASHINGTON,
C.

ye^ vas^

will be

official

main

with

years,

occupied before the

With Griffin & Vaden
(Special

that is thinly

the

Bank

died

for

stock

Wakefield

the

The

Franklin
ated

Bank

cited

capital

Bank

increased

14 from

the birthday presents they

Bank,

economy.

long as this nation enjoys good
health and harmony, it will serve
as
a
symbol of the independence
the trademarks of
of freedom.

the

has

18.

joined the bank in 1920, and ac-j
cording to the Kansas City "Star"!

Tullos, President.

National

Noone, Vice-President

time

is at 3230 Third Avenue.

and flexibility and has
long been regarded as eminently
well adapted to a country such as

p: Canada

oui j

for

dent

strength

hun¬

world

18,

expect.

may

Francisco

The officers and directors of
the City National Bank and
Trust

opened.

were

counts for each child

1864, respectively.

tem,

the

about

proceedings. Savings bank

among

The Canadian branch bank
sys¬

signifi¬

cant,

and

San

United

1861

and

North

White Plains

Wakefield"

Miss

throned
tion

Chicago

Dakota

common

sl«

Office and both the children "Mr.

An agency was

in New York

The

of New York

-quarters

Nov.

and

early as
1859, with other offices opened in

In closing, I would like to
strike
note of basic confidence in the

future

coast

the

States and Britain.

Conclusion

The

Fargo,

"Open house" is scheduled for all

day,

Canada, and also maintains offices

million

branch

banking

the

Office

Street and

the

were

employment
totals
will
probably not drop far below the

Inter-State National Bank'
of Kansas City, Mo., died on Oct.

boy and girl, born in the vicinity

or¬

anniver¬

Ave., the bank is seeking to find

money.

rapidly

Company,

first

Savings Bank

at 233rd

growth in population merited, and
today the bank has more than 500

layoffs

in certain lines.

established

feature, however, will be

spring

real

the

Wakefield
Side

paper money

first

Finishing

Nov. 18 of the opening the

sary on

only did this money gain im¬
mediate acceptance by the
people,
but it became the official
currency
of the government of the
day.

.average of employment may next
year
approximate that of
1947.
One new

occasional

Incident

tokens they issued be¬

Canada's

Joseph C. Gross, named
Assistant Trust
Officer; Alice M.
Smith, Assistant Secretary; Leon¬
ard Higley,
Attorney.

Oct.

John

of the

are

Company of Kansas City, Mo.

by
of

These

President of

is also

Southbridge, Mass.

in¬

trade

merchants

Golding

Southbridge

Not

re¬

gard for the sacred advice handed
down by their labor lords.
The

the

Montreal

ganize the bank. The

di¬

board

her

million

the

were
announced on Oct. 31 by
Holman D.
Pettibone, President.

sis

Mr.

difficulty, more than any
other, which it is said prompted

bers

special

half

carried

Sterling National Bank

and Trust Company of New York.

this

nine

any

currency

converters

and

Street, New York, has

elected

been

barter, with a hodge-podge
American, British, French, Span¬
ish and Portuguese money. It was

^Taft-Hartley Act. The out¬
lines of the Presidential
campaign
are not yet
clear, but union mem¬
favorites without

scant

habitants

of the

for

had

Her

own.

another

political nature,—namely, to dis¬
lodge from Congress those who
failed to fight against enactment

vote

Officers

Trust

manufacturers

Tied closely to the early
and industrial develop¬
the country, the bank has

Canada

to their takehome pay.

likely to

Pitts

Lehr

Harry W. Golding, President of
Golding Bros. Company, textile

Labor's second aim will be of

are

appointment of Frank Momot

of the institution.

long record of pioneering serv¬
-expire and many others will reach, ice in the Dominion.
Up to 1817,
the wage
reopening phase. Before the year of the bank's founding,
the

the
and

domestic currency and originated
the
Canadian system of branch

round

offset

months

union

real

living. Dur¬

the cost of

many

two

The first

third

increases

wage

have

year.

obtain

Montreal—the first

Canada.

will

anni-

manent bank to be established in

Third Round For Labor

primary aims next

130th

founding

the

Chicago Title and Trust Company
of -Chicago, 111., effective Nov.
1,

the

marked

»!«

Three promotions in the staff of

•

CAPITALIZATIONS

before

Comptroller of the bank.
*

OFFICERS, ETC.

REVISED

death

Oct. 13 of
Sherman C. Shull, Vice President
and

NEW BRANCHES

wholesale
commodity
prices from getting out of hand
in the months
ahead, and result
lower

(1859)

the

nounces

CONSOLIDATIONS

industrial

Labor

CHRONICLE

News About Banks

restraining forces should prevent

somewhat

FINANCIAL

back¬

some

•and competition is about to enter
the picture with a
vengence. These

The Wheeling Dollar Savings &
Trust Co, of Wheeling, W. Va. an¬

Furthermore, inventory building
largely over in most instances,

COMMERCIAL

in many cases,

wash is noted.

THE

November

6, 1947

N. Y.

Bond &

THE

(1860)

COMMERCIAL

Thursday, November 6, 1947

FINANCIAL CHRONICLE

(Continued from page 13)

Purchasing Agents
Business

Survey Committee of the National Association of Purchas¬
ing Agents, headed by Robert C. Swanton, say sales, production and
shipments are high, but despite optimistic trendy buyers are
exercising extreme caution.

nishes the channel between capi¬
tal that is available for investment

Purchasing Agents, whose chairman is Robert C. Swanton, Director
of Purchases, Winchester Repeating Arms Corporation, New Haven,

of Nov. 2. that despite optimistic trend of business

is ex-o-

there

caution

treme

by buyers,
and
purchas¬

ing agents are
watching

closely for the
decisions
the

Congress, says
the report:

'Sales, pro¬
duction

Others have aban¬

them.

doned

Regardless

the

longer coverages
reported, the
general cautious policy of buying
for definite production schedules
continues.

special

session

tors is noted.

and

shipments
continued

Specific Commodity Changes

"Many
commodities
are
re¬
higher this month, the
falling into three general
categories: late adjustments on
steel
products; freight rate in¬
crease; effect of government buy¬
ing on sensitive commodities.

ported
causes

strong

"The increases include abrasive

ipward trend
in October,

materials, industrial alcohol, al¬
kalies,
bolts,
castings,
cement,

their
Robert C. Swanton

sign of letdown for the, heavy chemicals, cocoa bean, corn
immediate future, only 3% of the products, cotton goods, dyestuffs,
reports showing lower business— forgings, fuel oil, grains, leather,
the smallest number so reporting linseed oil, some lumber, menthol,
ammonia,
oxygen,
ply¬
this year — while the greatest nitrate
number,
43%,
report increased wood, rosins, rubber, soaps, soy¬
bean oil. Aluminum is on longer
business continuing the upswing
noted in August and September. delivery. Boxes are tight, as are
small chain and some plastics.
Many more indicate backlog of
"On the down side, fruit, quick¬
orders building up and forecast
spices,
tires,
fabricated
good volume well over the year silver,
parts. Glass containers are easier
end.
with

"Despite this optimistic trend,
buyers
are
exercising extreme
caution, for aid to Europe can af¬
fect the domestic use of critical
materials such
ent

steel, the pres¬
in durable goods

bottleneck

production.
The
diversion
to
Europe of steel now allotted to
domestic
durable
goods
would
have an impact on demand for
other materials going into such
assemblies. Purchasing agents will
watch closely the decisions of

the

special session of Congress.
"Industrial building expansion
and borne building are reported
the increase in all

Commodity

areas.

—copper

products short delivery.

"The trend reported in Septem¬

appeared

taper off.
The
October reports show a resump¬
tion of the upward climb, with
29%

showing increased employ¬
ment, 62% maintaining devious¬
ly reported high pay rolls! Tech¬
nical, skilled and unskilled labor,
both

male

and

female,

reported

short.
"As

all

picture, fewer
strikes, better labor-management
over

relations.

job

for

Comment:
anyone

There

who

wants

work.

Prices
"General

"The trend of prices is slightly

about the

remains

last month—on

but the indications are for a
high
plane.
Prices
are
up
leveling off. Most of the increases
sharply in some lines, following
are reported due to freight boosts
price decontrol. Inventories static,
passed on to the buyer. Competi¬ with some trend to reduce. Em¬
tion continues to grow. Believing
ployment increasing. Buying pol¬
that part of the answer to lower
icy remains generally on threeprices lies in increased worker months'
coverage."
up,

productivity,
gave

purchasing

particular

month.

While

measure

attention this
is no yard¬

creased

worker

the degree of in¬

53%
of those reporting indicate better,
compared
with
10%
showing
lower. Where wage incentive sys¬
tems are used, productivity is on
production,

the increase.
Inventories
"With production at new

industrial

inventories

highs,

show

slight tendency to increase. The
majority, however, show a level¬
ing off after months of reducing
and balancing effort. There is no
evidence of stock-piling to beat
the possible imposition of a prior¬
ity or allotment system.
As a
whole, inventories appear to be
at

near-minimum

operating

re¬

quirements.
"The exceptions

continue

re¬

ducing policy. A few of these re¬
port difficulty in disposing of sur¬
plus at break-even prices.
Buying Policy
"The

predominant

bracket

30-to-90 day commitments, where

goods

can

these limits.
modities

procured

However,

which

have

within

been

avail¬

new

little

business is

resulting in

longer-range view of

mitments.

com¬

Some revival of escala¬

inevitable.

For

regulated the security business.
way to de¬
Newspaper writers who have
stroy the free enterprise system
studied the case have been, for the
in our country would be to cripple
most part, favorable towards the
or put
out of business that part
investment bankers. This does not
of
the
free
enterprise system
make
us
welcome a suit
filed
which for years has successfully
us.
However, we must
and efficiently helped to furnish against
agree with a comment in the New
capital
to
American
industry.
York "Times" that "A frank dis¬
Only one part of a machine has to
closure would be the best public¬
be
destroyed to keep it from
ity yet devised to blast many of
working.
the hallucinations long a cloud
A

effective

very

Note:

Mr.

Hancock, a partner
of Lehman Brothers, was a mem¬
ber of the U. S. Delegation to the
United
Nations
Atomic
Energy
Commission.
with

Mr.

the

Baruch

Baruch-Hancock

Report on
problems.

reconversion

Contract

Termination

developed

the

for the settlement of
has

and

also Chairman of the Joint

was

which

co-author

was

Bernard

postwar
He

Board

legislation

war

contributed

his

contracts

American

Management

We would like to know how the

complaint.

this

Hermann F. Clarke Dead
Hermann

Clarke, partner in
Co., Boston, and for

Estabrook &
six

years

tional

governor

Association

the

Na¬

Securities
age

some measure

success.

interesting reading if the press
reports how the list of 17 firms

was

selected from

700

total of

investment

the

over

Associa¬

Phillips Now With
Merrill Lynch, Pierce Co.

banking

firms

have

with

each

other,
their

of competi¬
banking
business is not in accordance With

(Special

The

Financial

INDIANAPOLIS,

Chronicle)

IND.—Henry

staff of F. S.

cle Tower.

to the

Moseley & Co., Cir¬

In fact, Dillon,

Read & Co. owes its existence and

present position to such competi¬
Dillon,
Read & Co. has

tion.

always competed actively for busi¬
ness and has never been prevented

negotiating or bidding on any

from

piece of business by reason of any
restrictive agreement or arrange¬
ment with anyone.

Read

Dillon,
been

arrangement designed to prevent

companies

business.

Statement of Cot. A. M. Pope

President, First Boston
Corporation
We

proud of

are

the

vest

dealers

between

stocks

bonds

and

It.

tion

tion.

conducting

criticism

methods

dividual

We do not be¬

Allan

this

charge. We
consider
suit

Charles

B. Harding

which

the

other

chosen
than

sue

construc¬

tive correction.

basis

the

facts

Division

customers

are

render

our

invaluable to them

in financing their operations. Ours
is a natural and businesslike re¬

create

that

jobs.

The Division claims

these

should

not

great

risks.

they

order to obtain

new

the

securities

country

undertake. in

wide distribution
so

that

may

anyone

become

stockholder.
,

Single issues of

new

securities

civil afetiori

under the antitrust laws

against
certain investment banking firms,
including Kuhn, Loeb & Co. Con¬
sequently, we are not in a position
to
comment upon it in detail.
However, we know of no basis for
its charge
of monopoly or re¬
straint
that

trade

and

are

have conducted

certain

our

busi¬

con¬

labor

served by this ac-

are

the

tion in

Statement

courts.
❖

Lloyd

Gilmour,

Senior Partner of Eastman,

Dillon & Co.

Any claim that Eastman, Dillon
& Co. has engaged in a conspiracy
prevent competition is wholly
has

firm

Gur

untrue.

attained

present
place in the
s

Invest

(4) The services

Anti-Trust

industry

reasons

has

the

Pope

tiop and are confident of vindica¬

i t

interests

sumer,

believe

the

unwar¬

ranted

that the

best

our

firm

investment

made

lieve

of improv¬
banking.
From
discussions with the Division,

ing

war-

the

by the AttorGeneral.

for

Smith, Bar¬
as an in¬

proce¬

ney

constructive

charges

investiga¬

its

welcome

We find

dures to

topic.

na¬

nothing in our
own

with

of the State of New

competi¬
tion.

(2) We find ourselves charged
with having conspired to split up

ness.

ney

been

—

tural result of

today:

have given the AntiTrust Division complete coopera¬

banking busi¬

mar¬

have

lower

like to make several observations

(3)

securities.

Profit

never

York to discuss this

in¬

record of

our

serving American industry. Com¬
petition has never been keener

Although we are obliged to save
specific defense for court, I should

monopo¬

lize

piece

any

gins

of Insurance

banking

other investment
competing for

any

firm from

banking

insurance companies as a
result of attending a public meet¬
ing called by the Superintendent

with

and

has never

Co.

party to any agreement or

large

underwriters should not cooperate
with each other to
spread the

J. Goelzer has been added

The business is essen¬

facts.

the

tially competitive.

business.

issues

with

custom¬

particular 17 bankers
cooperate with each
HILLS,
CALIF.— other in underwriting stocks and
Edgar M. Phillips has become as¬ bond issues to raise capital for
sociated
with
Merrill
Lynch, American industries and munici¬
Pierce, Fenner & Beane, 454 North palities.
It
claims
that
these

F. S. Moseley Adds

City

investment

the

tion

(1)

BEVERLY

Camden Drive.

York

New

The charge of lack

with

conspired

part

Statement of Dillon, Read & Co.,

We find ourselves charged
A Statement by Charles B.
price fixing because we have
fully complied with the price sta¬
Harding, Senior Partner of
bilizing and other regulations of
Smith, Barney & Co.
the Security and Exchange Com¬
The Anti-Trust Division of the
mission, the government organi¬
Justice Department charges that zation that
regulates the securities
Smith, Barney & Co. and 16 other business.
fa

vital

It will

by our courts.

entire economy.

our

only thing they have in common
is

of 65.

E. M.

which plays

ness

Our lawyers have
knowledge the

undoubtedly learned during its
investigations.
We have never lationship which protects both the
companies we serve and thousands
conspired with any investment
William R. Rritton Dies
of people who buy securities.
I
banker, issuer or insurance com¬
think most manufacturing com¬
William R, Britton, senior part¬
pany to monopolize the invest¬
ner
of W. R. Britton & Co. of
panies will tell you that in choos¬
ment banking business nor to re¬
New York City, died at his home
they
strain competition. Our business ing an underwriting firm
think first, of a
at the age of 70.
reputation for
is openly and fairly conducted.
This is a highly competitive busi¬ ability and good service rather
than price. For our part, we say
Good Things in Threes
ness
in which fights are more
there is no conspiracy in trying to
Hector W. Bohnert of the Bank¬ common than cooperation.
keep our customers by doing a
ers Bond Co., Louisville,
The Anti-Trust Division does
Ky., is
good job in a fair and open man¬
the proud father of a 71/4-p0uad not
agree with us that publicly- ner.
#
#
#
boy, Hector W. Bohnert III. The known methods approved by the
family now has - the necessary Securities' and Exchange Commis¬ Statement of
Kuhn, Loeb & Co.
quota for a brothers' trio, or one- sion are basic to the job of pro¬
We have not yet been served
third of a baseball team.
viding the money necessary for
with the complaint of the Depart¬
American industry. to grow and
ment of Justice in its

Dealers, Inc., died at the

decided

case

This, we hope, will end the long
continued efforts to harass a busi¬

their

that to

prove

constructive to have the issues in

selective list of 17 firms named in

said

political rea¬
should

Therefore

sons.

Anti-Trust Division arrived at the

its

that attacks on
popular in.

certain quarters for

services

tion.
*

Wall Street."

the workings of

over

It would appear

some com¬

able in 30 to 60 days are extended
into 90 days and over. The influx

growing American business.

many years they have been recog¬
nized by government agencies that

needs, unemployment
result, and inflation will be

denies

agents

there

stick to

together in under¬

join

can

ers

will

insurance

business

same

and
It

most of them have much less.

is obvious that unless these bank¬

America's

ers,

Canada

amount,

this

one-tenth

thereby create new jobs.
One writing, the money needs of many
authority estimates the capital industrial companies could not be
needs
of American
industry at met.
All of our procedures are fairly
about $60 billion over a five-year
period.
If this flow of needed and openly conducted. They are
capital into industry is obstructed, necessary if we are to continue to
production of goods will not meet do our job of raising capital for

investment
an

need

to many other public bodies. He
is Chairman of the Board of the

Employment
ber

that

capital to expand production and

The Business Survey Committee of the National Association of

Conn., reports

businesses

those

and

curities business.
"Wall Street" are still

working of are
sometimes
as
large
as
the American economy.
The in¬ $100 million. However, only eight
vestment banking business fur¬ firms have capital as much as
in the effective

cog

of the se¬

the various phases

over

Monopoly Suit Unfounded, Say Accused Firms

men

the
kind

keenest
o

field

Banking
through

competi¬

tion.

Almost

indus¬

every

trial

account

handled by us
was

time

handled

by
tor.

one

competi¬

These

counts

obtained
held

ac¬

were

and

S. Gilmour

only' through
aggressive competitive action by
our partners.
The government ap¬
parently contends that to permit
an
industrialist to use his judg¬
ment

to what banker he selects

monopoly; that if

leads to

in¬

dustrialist has to raise capital he
should not utilize the services of

who

houses

those

have

proved

themselves capable, but must risk
failure

engaging the services

of those

of less proven ability.

assert

ment, that

who advises

does

the

govern-*

Investment Banker

industrialist

compliance with law. the issuance of securities, should
For many years investment bank¬ not be permitted to participate in
ing has been closely regulated by the underwriting of such securi¬
ties is as silly as it would be to
tb^ pRouriti**0 an^ Fveh^nr"*
mission
and
other
authorities assert that a surgeon specialist
which have statutory jurisdiction who advises a patient that a major
ness

in strict

Volume

operation is necessary, should not
be
permitted
to
perform
the
operation.

Industry

IBA Blames Suit on

its

ridiculous

history.

Isn't

endeavor

shackle it by restricting its
ability
to obtain the financing
necessary
to do the job?

FINANCIAL

CHRONICLE

Compulsory Bidding Views

requiring compulsory competitive
bidding.

organizations

and

Persons

Statement by J. P. Ripley,
Chairman, Harriman Ripley

man

Ripley &

fantastic.

Harri¬

Co., Incorporated

has not, either
alone nor to-

trust

laws

.each other;
they are in
competi¬
with

commer¬

banks

hold

Joseph P. Ripley

several bil¬
lions

advanced

loans

term

issuers, and also with insurance
companies with which about $7
billion

securities

have

been

during the past

placed privately

that

the

investment

banking

right

ex¬

before

government

promulgating rules or regulations
should give notice of their inten¬
tion to do

and afford interested

pate

opportunity to partici¬
rule-making by the

persons an

submission

arguments.

the

were en¬

their

views

and

were part
alleged conspiracy is not to
deal with the ultimate question of
fact raised by the charge. Unless
the charge is to rest merely upon
vague generalizations or upon un¬

of the

proved

assumptions,

to point to

sary

demonstrate

lationship
all

and

sion

conspiratorial

the

other

has

always

been

re¬

firms

members

are

that

justify the conclu¬
any
such relationship

that

existed.
"The

circumstance

that

the

members of the IBA opposed com¬

pulsory

competitive

bidding in¬

stead of supporting it surely does
not prove the
existence of any

conspiratorial
it

"Likewise

neces¬

facts that

We submit that there

facts

it is

some

between

the IBA.

between

defendant

the

proposed

litigation.

them

relationship

and

the

firms.

"It

the
not

should be remembered that

charges against the IBA are
charges merely against a few
or against the persons
whOv

firms
from
or

time

time,

officer#

were

members of the Board of Gov-

They are in
against all

ernors.

charges

real

sense

the

700

members of the

organization. This

true

particularly

activities that

because

the

subject mat¬
principal charges made
the IBA were activities
are

ter of the

against
that

were approved by the great
majority of its members.

"We

that

the Attorney
charge the 700
the
IBA, most of

assume

General

will

not

members

whom

medium sized

are

small

investment banking firms located
in all regions of the country, with

having engaged in

combination

cordance

busi¬
extent

with

members

sentiments

the

this

and

majority of its

overwhelming

fact

well

known to the Anti-trust Division.

The IBA has

firms.
the

been "domi¬

never

controlled"

and

that

recognized

those of

consistent with

are

nated

ten years
The

the position
it is lawful to express opin¬

ments

gaged.

(1861)

citizens are en¬ The members of the IBA were or
conspiracy to violate the Sher¬
titled to appear before committees entitled to take any position on
man Act
in the absence of facts
the Anti-trust Division, and we are of
Congress for the purpose of the merits of compulsory compe¬
are confident that the courts will
In this
presenting their views on pro¬ titive bidding that they believed to support the charge.
sustain our position.
posed legislation.
The existence to be right. Their choice of one memorandum we have attempted
1
The opposition of the IBA to and
side of the controversy rather than
special characteristics of this
to make a full and objective state¬
proposals for compulsory competi¬ right have recently been expressly the other is not proof of any
ment of all of the relevant facts*
tive bidding was not, as alleged by
recognized by Section 308 of the criminal intent or purpose.
the Anti-trust Division, dictated by Federal
"It may be
Regulation of Lobbying
assumed that the We earnestly request the Attorney
the 17 firms who are the principal Act
(Title 3 of Public Law 601, members of the 17 firms shared General to consider those facts be¬
defendants in this litigation.
On 79th
Congress), which provides the belief of the other members cause we believe that
they show
the contrary, the IBA acted in ac¬ that the
regulatory provisions of of the IBA that compulsory com¬

not

Which

sion apparently takes

ions

compete
intensely with

cial

The Anti-trust Divi¬

of the IBA.

right of citizens to express their
opinion on economic questions de¬
pends upon whether their opin¬

only

tion

same

petitive bidding, but illegal to ex¬
opinions against it. We do

vestment

bankers

the

rights were

this

pressly recognized by the Admin¬
petition in precisely istrative Procedure Act (Public
way
in which those Law 404, 79th Congress), which
exercised by members provides that agencies and depart¬

not believe that the constitutional

In-

way.

importance

press

lated the anti¬

any

The

and

appear
before administrative
agencies and there to state freely

ions in favor of compulsory com¬

gether with

others,

pro¬

speech

The
charge that there is a
monopoly among certain invest¬
ment bankers is

position with respect to

posed rules and regulations.

Those per¬
and organizations exercised
constitutional right of free

their

Co., Incorporated

their

sons

❖

compulsory competitive
bidding expressed their opinions
to administrative agencies and to
members of Congress.

sumed that the 17 firms

the activities of the IBA

tive administration of anv syF*°™

(of administrative regulation that
who (citizens should have the right to

favored

"Merely to assert generally that

(Continued from page 13)

has before it the

now

biggest job in

COMMERCIAL

THE

Number 4644

166

the

the section shall not apply to any
committee

support of
legislation.

Apart from these 17 firms

who merely

person

not

the

opposition

petitive bidding was not in the
public interest but this is not the
kind of relationship that will sup¬

the

port

charge

conspiracy.

Numerous other persons not mem¬

that

assumed

is also

"It

before
Congress in

appears

improper

was

unlawful for the

bers of the IBA also

publicly op¬
competitive
bidding.
It
be just as reasonable to

posed

IBA

has

which is unique among the indus¬

members

who

tries

parts of the country. Most of these

public and to attempt to convince

were

700

other

that

there

ever

for

the

members of

in any

basis

whatso¬

conclusion
the

IBA

combination

that

have

the

joined

conspiracy

to violate the anti-trust laws."

spiracy

ness

regulated
the

Since

country.

1933

Federal and State laws

numerous

have been passed relating to

vari¬

sized

members

all

medium

are

small firms.

other

700

located

The

charge

that these 700 members of the IBA

phases of the business.

ous

other

nearly
are

requirements have engaged in a combination or
in¬ conspiracy to assist the 17 firms
dustrial, utility, railroad, and fi¬ to monopolize and to dominate the
banking industry is
nancial corporations run into bil¬ investment
lions of dollars, and an attempted absurd on its face.
t
disruption
of
the
underwriting
The

capital

new

states

municipalities,

and

machinery

therefore

deplor¬

High

able.

Spots of IBA Memorandum

The

submitted

Cox and

for

the

security issue shall be

sold.

ad¬

filing of the civil suit,

origin to the opposition

of the IBA
bers

and

of its

some

(11 J* That each firm be enjoined

acting in

concert with

underwriter in

any

buying group
in which such firm participates,
or with any security dealer in
a
selling group, to maintain retail
prices for securities, and to fix
any

maintain uniform dealer dis¬

counts

where

such

commissions,
except
activity is permitted

act of Congress

rules and

regulations of

by the

an appro¬

priate administrative agency based
upon

such

act

Congress,

for

the sole protection of investors.

(12) That each firm be enjoined
from
others

in,

engaging
to

engage

erations of any

causing

in, market

op¬

kind designed to

rities.

It furnishes

record of the

question

when

petitive bidding
the

SEC

compulsory com¬
was proposed by

public utility issues
points out, despite the over¬

and

whelming opposition of IBA

purchases, except where such
tivity is permitted
Congress

act

the

ac¬

rules

ministrative

and

appropriate ad¬

agency

based

upon

such, act of Congress, for the sole

(13)

That

Bankers

the

dissolved

ordered

America
and

the

defendant firms be enjoined from

organizing
association

practices

joining

engaged

any

similar

that has similar

poses.

other

pur¬

persons,

and the

distribute

make

written

material and to take other appro¬

either

steps,

priate

privately,
of view

publicly

their point
matter of public

express

any

interest.

hardly be suggested that
improper or unlawful for
IBA privately to

was

members of the

present their point of view on the

question of compulsory competi¬
tive bidding to members of Con¬

The right of the citizen to
representations is be¬

gress.

such

make

question. The free, candid
private exchange of informa¬

yond

tion and views between individual

citizens and members of Congress

normal,

accepted

able part of the
in

desir¬

and

legislative

process

democracy.

activities

these

"Since
IBA

the

inherently lawful and

were

The

memorandum

the

also

reviews

proceeding before the

state

Commerce

Inter¬

Commission

Ex Parte 158, in which the Com¬
mission held hearings on the mat¬
ter

requiring the sale of rail¬
by
means
of
competitive bidding. In these pro¬
ceedings, the memorandum points
out, the views of the IBA did not
road

securities

differ in kind
activities

quality from the
those persons who
or

favored compulsory bidding.
"So far in

discussing the activi¬

the

are

basis for the

improper

'lobbying'

believed

charge of

attempt

has been made to state objectively
the facts with respect to what the
did.

seems

appropriate at

this

point to comment briefly on
the significance of those facts as
they relate to the charge that has
made

against the IBA.

"It is assumed that it will not be

have infected

colored these

harmless activities with illegality?
As

Division

tion

charge

against the IBA, the Anti¬

trust

ties

the

understand

made

answers

this ques¬

by asserting that the activi¬
IBA, although lawful

of the

considered

tainted
with an unlawful purpose because
they were part of a larger illegal
conspiracy that was formed and
executed by the 17 firms.
alone,

are

"Counsel for the IBA have read
the

counsel

for

the

firms

engaged

were

this belief

not and

are

conspiracy.

any

by
the

believe

they

those memoranda show

the 17 firms

General;

Attorney
that

submitted

memoranda

erroneous

that
not

But

and

should be assumed that there

was

conspiracy in which the
17
firms, had joined, we assert with
a

confidence
dence

that

there

evi¬

whatsoever to

suggestion

that

support the
the
other
700

of the conspiracy, much less that

Commission

Interstate
or

Commerce

before committees

were

aware

they were parties to it, or that in
opposing compulsory competitive
bidding the members of the IBA
were

prompted in

intent

any way

any

Congress, were unlawful or
improper in and of themselves. It

firms in any combination or con¬

is essential

spiracy

to the fair and effec-

that the
joined
with the 17 firms in an illegal
enterprise. This kind of purely

ground,

same

members

doctrinal

the

IBA

had

association is not

ade¬

quate, basis for the charge that the
of
the IBA
conspired

members

monopolize the investment

banking business.
"The charge that the members
of the IBA

parties to the al¬

were

that the

to the assertion
in

some

the

control

way

IBA.

From

said

instances

has

been

earlier in

cific

dominate

what

17 firms

this memorandum,
it must be clear that in the spe¬
in

which

IBA

the

compulsory competitive
bidding the officers and the Board
opposed

of Governors of the IBA

not

were

responding to the dictates of the
17 firms.
On the contrary they
were
acting in accordance with
what

the

was

sentiment

the

majority of the members
organization. It may be as¬
serted, however, that irrespective
of what was done in these specific

purpose

to assist the 17

which it

may

as*-

instances, the 17 firms exert some
general and continuing control or
domination

over

It is to this

individual members.

general charge that

next turn

our

its

the IBA and

shall

attention."

Business

Directory

i>eiroit

and

Industry for 1947-48

—

con¬

tains

150,000 business and indus¬
listings naming the execu¬
tive personnel with address and
phone number—Charles J. Harris,
trial

832

Fox

Mich.

Detroit,

Building,

conspiracy is thus reduced

leged

great

members of the IBA

the

persons

of the

suggested that the activities of the

and

the

other

illegal con¬
merely because they
shared the point of view of the 17
firms, as it would be to assume,

sarily

IBA in

opposing compulsory com¬
petitive bidding before the Secu¬
rities and Exchange Commission

parties

proper,

Con¬

tinuing the memorandum states:

these

that

assume

"It will

the question that neces¬
arises is, what extraneous
facts or circumstances are alleged

mem¬

the

would

with the 17 firms to restrain trade

proposal, it was pro¬
mulgated as Rule 50 by the SEC.

Investment

Association

the

been

protection of investors.

bers

IBA

regulations of

its

entitled

are

speeches,

for

ties of the IBA that

issue it

any

the

attention

the

views

the

interested

zens

is
on

bring

public generally, that compulsory
competitive bidding was not in
the public interest. Groups of citi¬

and

compulsory competitive
bidding for certain types of secu¬

stabilize and maintain the market

price of securities in

mem¬

poll of IBA members taken

from

As¬

prepared

was

of the

traces its

ing groups, or the institutional in¬
vestors, including insurance com¬
panies and others, to whom any

Bankers

Investment

not only denies the charge of
improper
"lobbying"
but
also

(Continued from page 12)

and

Messrs. Hugh B.

members

General

Attorney

and

Against Underwriters

was

Murray Hanson, Counsel

sociation,
vance

part of

C. Clark by

Tom

Justice Dept. Files
Anti-Trust Suit

which

memorandum

IBA

Fifty
Suggested
Services
for
Correspondent Banks, Their Cus¬
tomers

and

Northern

Employees

Trust

La Salle

The

—

50 So.

Company,

Street, Chicago 90, 111.—

paper.

j.
Prices for Agriculture

Forward
—D. Gale

Johnson—University of

Chicago Press, 5750 Ellis Avenue,
Chicago 37, 111.—cloth—$3.00.
International

Monetary Fund-

Schedule of Par Values—Interna¬
tional

Washing-

Monetary Fund,
ton, D. C.—paper.

International Monetary

Policies

—Lloyd A. Metzler, Robert Triffin and Gottfried Haberler, Direc¬
tor

Board

Administrative
of

Governors

Services,

Fed¬

the

eral Reserve

System, Washington*
D. C.—paper—250.
Money,

Credit

Banking

and

—

Revised
In

the

refuting the accusation that
IBA

trolled

dominated

con¬

the 17 underwriting
firms, the memorandum furnishes
by

data

regarding the number of its
membership, which is now 716,
(the largest since 1939), divided
into various regional group divi¬
sions.

It outlines the constitution

of the

organization to

prove

that

the ultimate control of its affairs

is vested in

and exercised

annual convention, and that of the

members serving on its Board
1943-4, only nine

of Governors in
were

associated

with

the

ac¬

The memorandum concludes:
"Even

if the Attorney

conclude

that

General

there

basis in fact for the charge that an
unlawful conspiracy exists in the
investment banking

field, it does

not follow that the charges
the

the

The

—

pany,

Press

Ronald

Com¬

East 26th Street, New
Y.—cloth—$5.00.

York 10, N.

More Than

ing

Conquerers—Build¬

Fair Trade—Otto
Mallery—Harper & Brothers,
Street, New York 16;
N. Y.—cloth—$3.00.
Peace

Tod

49 East 33rd

Preparing for the 1949 Federal
Budget—The

Outlook

penditure, Taxes
Debt

—

Chamber

United

Ex¬

the Public
Department*

and

Finance

Commerce

the

States, Washington 6, D. €X

—paper.

Will Dollars Save the World?—

cused firms.

should

Edition—Ray B. Wester-

field

against

Henry Hazlitt — Foundation for
Economic Education, Inc., Irving-

ton-on-Hudson,
New
York
—
paper—75c (lower rates on quan¬
tity orders).
Venture and Adventure in PostWar

Europe—Herbert P.

Vice-President

tional

Bank

the

Snyder,

First

Na-

Chicago—Foreign
IBA are well founded or that Banking
Dept.,
First
National
organization should be named Bank of Chicago—paper.

(1862)

THE

COMMERCIAL

CHRONICLE

FINANCIAL

Thursday, November 6, 1947

tinent against strong central auto¬
cratic governments.

(Continued from

should

page 2)

the American and French political
revolutions and the English Indus¬

tacks

of the sixteenth century
could have slept for two centuries
to awake in 1750, he would have
found far less to marvel at in

would

the

people

earth

before

system

tive.

man

came

leisure,

which

for

time

and scientific

pursuits. Thereafter,
became much more rapid.

progress
The
world

universal
and

is submitted

tragedies

almost

hunger, with
for only

surpluses
the very

luxuries

free

of gov¬
dictator¬

our

most important

piece of wisdom. When Sir George,
long a close student of business
and economic

gave

education

lead

system

people and
others of the world have fought
to free themselves, the following
observation of Sir George Paish

capitalistic
more produc¬

With increased productivity

people

would

who

people back to

than

introduction

consideration

ernmental paternalism

before

methods made

earnest

the

those critics of the capitalistic

ship, from which

the

and

fluctuations, visited
country in 1937 he said: "Long

this

experience has caused
the

conclusion

crises

nomic

from

come

time

rather

result

that

time

the

eco¬

which

world

the

to come

the

are

political

action

few, began to pass. The standard
of living for the masses began to

than of economic action, and can
be avoided only when the states¬

rise and

men

to rise rapidly.

Our typical wage earner enjoys

of all nations have

understanding
and have some

consequences of

electricity,

automobile,

with

hot

bath¬

their

actions.

own

It may be said that the states¬

the

world, taken as a
operating under pressure, often
have, since the war, and
automatic heat, the telephone, the especially in recent years, acted
radio, the movies, and so on and in such a manner as to bring the
rooms

cold

and

water

men

whole,

world machine almost to

on.

The

coming

greater

machines,

the

attackers

capitalistic

the rapid develop¬
of science, the en¬
larged freedom for the individual

system,

brought this great

petition, simply do not understand
its
nature, virtues, and accom¬
plishments. They misread, or do

istic methods,

ment and

These

use

progress.

developments

only

came

when protection for rights of per¬
and

son

property

awaken

was

sufficient

reward

and

ambition.

Our Constitution attempted to give
people such protection, and the
results

should

clear.

As free¬

dom for the individual has devel¬

oped, and

political systems have

cultivated and protected this free¬

dom,

the

mankind

intellectual
has

been

power

released

and

economic progress has been rapid.
In the Middle Ages, people fol¬

lowed

practices

those

advocated

quite

similar

based upon a system of
private enterprise operating under
of

conditions

not

free

read

all,

fair

and

history

com¬

the

and

history of this country.
The framers of

our

Constitution

had learned and understood much

better what the lessons of

had

teach.

history

mentally-managed economies
As
a

they

consequence,

are.

gave

Constitution providing for a re¬

Constitution

these

arrangements,

the

parently

most

the Preamble of the Constitu¬

tion

stated, among other
things, that "We the people of the
United
States, in order to
secure the blessings of
liberty to
.

ourselves

and

tution

for

establish

the

America."

stitution,

United

and

was,

tection

is,

oppressive

taxes.

His

The profit motive was crushed

the point of elimination.

sult

economic

was

The

to
re¬

stagnation,

starvation, ignorance, disease,

pes¬

tilence.

One of the remarkable

majority rule but
protection
for
minority

with

individuals.

and

groups

was

The

his

cast

ballot

for

against those who would
him.

That

far

be free

govern

political democracy
the voting population
The individual

That is

ar¬

they

or serv¬

give

what

The
ments

accomplished in
since 1787.

critics

our

accomplish¬

might do well, first of all,

consider

whether

not

the

great business

depressions, which
to have provided them with

seem

their principal indictments of

our

capitalistic system and their shortrun

view of human progress, have

not been

chiefly the result of wars
improper interference with

and

the

officials.

important

unwise

economy

ment

wars

cause of our

govern¬
are

major

loosely, simply de¬
operating under a re¬

eco¬

In theory all powers of govern¬
in this country are derived

from the people.

both the authors and constitu¬

are

ernments

each

societies
peace

and

instead

overthrow

the

join

peace

for

world

work

attempting to
of private

system

enterprise operating under condi¬
tions of free and fair competition.

within its

strate,

does,

that

economic

state

own

government,

by specific

governments
except

powers

can,

The

States

and

those

Although
ment

our

the

capitalistic

system

are

our

one

fairly

granted.

Federal

therefore

cise

that

implied from those

ference with the economy by inept
critics

government

those powers expressly granted it
by the Constitution of the United

over

the

general

prohibited

constitutionally, exercise only

control

then

where

Federal

under

officials,

enumera¬

by the Constitution of the United
States or by their own constitu¬

powers

government

—

independent
sphere. The Con¬

tion, authority over those matters
of
general concern.
The
state
governments were, in principle,

try and elsewhere are also caused
in large degree by unwise inter¬
%

Federal

and

stitution of the United States pro¬
posed
to repose in the Federal

If the evidence is found to demon¬

and social upheavals in this coun¬

—

sovereign

tions.

Basically,

operate under two distinct gov¬

capitalistic

system

"We the people"

ents of our government.

made

seems

form

ment

disturbances, as the evi¬
clearly to demon¬
strate, then it would be more to
the point for the critics of our

nomic
dence

or, more

mocracy,

of what has been

country

for

economic democracy.

resting things today is the amount publican or representative
of doubt expressed as to the value of
government.
this

was

to vote his dollars

against any commodity

ice.

concerned.

racy,

and

the

pro¬

our

peo¬

ple, and the degree to which the
importance of the individual was
a

consideration

basic

concern

to the

drafters and ratifiers of
Constitution.
The

Supreme

United

States

while

the

United
letter"

Court
has

our

the

stated

that

the

body

"the

govern¬

limited

Constitution, its

such powers is abso¬

lute, and laws passed in the exer¬
to

all

such

powers

are

superior

conflicting state laws. Al¬
though the power of government

The

ence

ment

the spirit
Independ¬

Declaration's

refer¬

"just" powers of govern¬

reveals

itation

in
of

belief

legal lim¬
arbitrary power in any

form. The Declaration also asserts
in effect, as does the Preamble of

the

Constitution, that government
is created primarily to se¬

itself
cure,

not

to give, certain rights
people.
"We hold these

the

truths

self-evident,"

says

the Declaration, "that all men

are

created

en¬

that

equal

they

are

dowed by their Creator with

last

dozen

attack

those who would offer devices for

living that nowhere at
in

the

enabled

any

time

history have

world's

ever

people

standard of

attain

the

living and the degree

freedom which these 159 years
have brought to
the people of

Indeed, it is

say that,
although it has been the great in¬

stitutions

individual

freedom

and

private enterprise
in
this
country that have been employed
twice

the

last

thirty

years

peoples and nations of Eu¬
rope from the onslaughts of auto¬
rescue

cratic governments,

these

find vocif¬

urging that

groups

place

institutions

re¬

free-

dom/'with those of autocratic

gov¬

ernments.

Turning Clock

deriving

their

just

among

Backward

There

are

powers

the consent of the governed.

history

that justify the recent and current

attempts

turn

country's

our

clock of progress backward—back
to the employment of devices that
are

which

danger¬
well-being of the in¬
dividual and of a people in gen¬
the

eral.

The

multitude

from

which

history

themselves
marized

ing

throughout
to
free

perhaps
the

the

sum¬

head¬
view of

general

shortsighted

things

struggled

can

under

events

people

have

for

reasons

this reaction toward those

last

thirty

years."

many

tive.

people to lose their
In

perspec¬

situation in which such

this

liberty embraced seems to have been forgotten, or
private property, the not understood, or misinterpreted.
right to engage in enterprise, the There has been a
strong tendency
right to exchange goods freely, the 1o base programs of so-called "re¬
right to enter into contracts, this form" upon emotion rather than
the right to

nation in the following 159 years
reached the highest level of living

the solid foundations provided by the methods of science.

of any

The lessons of hundreds

country on earth. Our peo¬
ple accomplished more and did it
in less time than any other
people
in the history of the world.

Those
our

upon

have

been

tossed

who

have

been

their

anticipated

understand

sonal

gains of

history and the history of the

years

various
not

who

nations

seem

not

realize

the

world

that this

welfare

tions.

The

aside

willing
or

the

above
their

of years

by those
to

rate

realized per¬

cratic

dictatorship, were progres¬
sively
and
rapidly reduced to
something approaching zero. Mil¬
lions

had

choice

their lives.

but

Savings and

plishments

generations

lose

accom¬

lifetime

have

and

been

swept

Destruction
and
waste
have seared the face of the globe.
away.

Debt has been saddled

ing

extent

Taxation

structive.

the liv¬

before

never

has

become

de¬

Few people and homes

anywhere

this

bitterness

havb

earth

and

hate

and

This is the scourge that auto'cratic leaders in government have

brought to millions aid millions
people in this world in recent

decades.
And

the

yet

these

events

those

who

more,

not

tragic

keep

lessons
be

seem

less,

lost

clamoring
central

for

govern¬

ment, and for less, not more, free¬
dom for the individual.
Today in
this country, we are experiencing

sharp conflict between those, on
side, who clamor for more
government — Socialist, Commu¬
nist, or totalitarian in some form
a

one

—and

les3, or no, private enter¬
prise, and those, on the other side,
who wish to arrest this trend and
work

for

greater freedom

the individual
of

the

and

for

continuation

with improve¬
have experienced
of our
past
159

progress,

This conflict raises
to what

last

dozen

long-time
respective na¬

questions

is the proper

social

organization

good

type

short, what is

aim of

and what is a

government
a

any

good

—

economy.

Our history during the last 159
should provide ample proof

years

that the framers of

Constitu¬

our

tion, in so far as fundamentals are
concerned, interpreted correctly
the lessons which the history of
the world taught and still teaches.
The peculiar, indeed the disturb¬
ing, thing is that in this £buntry
it is necessary to explain and to
the

defend
such

lessons

learned

over

long period of time by the
various
peoples
of
the
world.
Basically, the responsibility for
this situation seems to lie chiefly
a

with

educational

our

particularly with two
our

schools

turn out

quately

many

teachers inade¬
to

guide

the young people
under their supervision,

(2)
of

instructors

our

social

sciences

proportion of whom
no

(1)

which

manner

who come
and

structure,
groups:

education

equipped

reliable

fields

proper

nature and

in the
great

to have

seem

understanding of the
implications of science

of the lessons of history.

Since

the lessons taught by the
history of the world and by that
of our own country are so widely

misunderstood

ignored,

this

additional emphasis
some
of thece lessons

fact calls for
what

teach

aim
as

what

social

to what is a

should

the

organization and
good type of gov¬

ernment.
Protect and Foster Individual

the

politically ambitious
precedented accomplishment was saw an opportunity to
elevate
launched in an atmosphere marked
themselves, to become bosses to
by a growing belief in individual exercise power they never had
freedom and the virtues of pri¬ before and probably never ex¬
vate enterprise, and at the end of pected
to
have.
Dictatorships
a
series of rebellions of people sprang up abroad and an unprec¬
edented march toward an uncon¬
here, in England, and on the Con¬
un¬

against

The liberties of people, al¬
ready sharply curtailed by auto¬

known to be evil and

ous

large proportion of people, here
With such a concept of govern¬ and
elsewhere, have been de¬
ment
and
of
individual
liberty pressed, harassed, tired, and dis¬
written into our Federal and state
couraged,
political
demagogues,
constitutions, and with recognition amateur
and
politically-minded
of the fact that
liberty and gen¬ economists, and others have found
eral well-being could not thrive
a
fertile field which they have
except under a capitalistic system cultivated
day and night. History
in

for

vote

Their rulers decided for

war.

years.

lessons in

cer¬

Men,
from

the

an op¬

them.

ment, that we
through most

of Progress

unalienable

instituted

portunity
that

did'

nation

individuals have

ticularly during the
years,
under severe

The
economic
depressions
and
Rights,
that
dislocations, the most severe of
among these are Life, Liberty and
which
are
perhaps
the
result
the Pursuit of Happiness.
That
chiefly of wars and dictatorial
to
secure
these rights, Govern¬
governments, seem to have caused
ments are
tain

soon

despair.

and

thought and the spirit, and it
is always safe to read the letter

ence."

have

seen.

people

escaped

organic law, the
Independence "is

our

that

made these accomplishments pos¬
are now and have
been, par¬

erous

Constitution

States

instruments

leaders

even

seen—

ever

substantially accurate to

Constitu¬

liberty of

of the

Declaration

for

call economic and political democ¬

Accomplishments

States

basic

has

other

clashed, and they led their people
into the most widespread and de¬
structive war that the world
has

sible

the

Together
Doubt As to Nation's

Consti¬

Constitution

devoted

Declaration

bore

the

probably

and

crats

seen.

Constitution

government debased his currency.

attainments—the greatest that the

these United States.

our

the

and private capitalism,
resting upon the cornerstones of were made to fit the needs of the
private property, freedom of con- rulers who did all in their power
traet* freedom of enterprise, and to keep themselves in positions of
freedom of exchange, that made authority.
The
ambitions of these auto¬
this progress possible. These basic

of the Con¬

especially

proportion

the

under

tional Law, will reveal how great

publican form of government with

our

authority.

this

study

posterity,

our

regulation

ap¬

fundamental

consideration is that of the impor¬
tance attached to the individual.

provisions

leading

detailed

the

the system of private en¬

was

terprise

world

Under

in¬

some

Importance Attached to Individual

dividual, rather than the State,
social
and
community became the basic consideration.
planners. They used land in com¬
The individual, qualified to vote,
mon.
The individual was

organized

central

except
as
this
may
be
done freedoms were exercised amidst a
through amendment of the Consti¬ widespread belief in the virtues
of free and fair competition, the
tution.
generally
accepted
theory
and
To preserve the republican form
of government, the general doc- practice of government being that
government should lay down and
irine in this country has been, and
enforce such rules and regulations
is, that the legislative, executive,
as were necessary to preserve and
and judicial departments of gov¬
to insure such competition.
Be¬
ernment should be separated and
lief in the freedom and impor¬
their respective powers exercised
tance of the individual, regardless
by different men.
The Constitu¬
of inherited qualities or economic
tion of the United States requires
this of the Federal government status, aside from the period and
area
of Negro slavery
in this
but not of the states.
Neverthe¬
country,
gradually
spread
and
less, in harmony with the general
probably has attained the highest
belief in the wisdom of this ar¬
degree
of
acceptability
ever
rangement, all state constitutions
reached in any country in the his¬
require this division and balance
tory of the world.
of powers in varying extents.
Yet, in the face of these great

They

knew what
evils of Statism%nd govern-

the

ordain

The

of capital and capital¬

use

stand¬

still."

body politic, the powers that they
delegated to the Federal govern¬

greater

of economic law
appreciation of the

conveniences

today not available
royalty prior to 1787. He has

themselves

United States cannot be resumed

For

Ignorance, hunger, famine, and
pestilence stalked the lands of the
machines,

ple

ment

of us."

one

deemed to reside in the peo¬

cials.

Winkle'

life

the

was

private enterprisecompetitive system and work for
improvement in the quality and
practices of our government offi¬

trial Revolution.
Professor Carleton Hayes put it
as
follows:
"If some 'Rip
Van

common

their unfortunate at¬

cease

totalitarian form of
government developed-1even
in
this
country.
Slogans,
promises, programs, and policies

stitutional,

Liberty
It

quite clear that no so¬
cial organization is good if it does
seems

not, in addition to contributing to
the material well-being of a peo¬
ple in general, protect and foster
individual liberty.
Individual
eral

been

liberty has

considered

in gen¬
priceless

Volume

166

heritage.
It Jhas been man's per¬
petual aspiration.
He has strug¬
gled for ages to enlarge the scope
of
individual
liberty, including
tbe freedom necessary to develop
hjs personality to the limits of his
physical and mental capacities and
to safeguard the same freedom for
his fellows.

The

justice and de¬

sirability of such freedom
ognized

are rec¬

all truly enlightened
people.
When we curb
this freedom, we take a
step back¬
and

free

ward.

When

find

new

ways

COMMERCIAL

THE

Number 4644

CHRONICLE

FINANCIAL

cation

of standards revealed in tives, instead of government com¬ Hoc volo; sic jubeo; sit pro ratione
competition, that the selec¬ pulsion, plays its beneficent role. voluntas (This I will; thus I order;
An
what is superior can be
enlightened
government, let my will be in place of reason).
made in any objective manner.
In recent years we have seen a
earnestly striving to increase the
It seems quite clear that most well-being of society, will recog¬ multitude of instances in the fields

such

tion

deviations

all

not

govern¬

from the objective stand¬
provided by free and1 fair
competition have been injurious

ments

ards

requires,

for

monopolies be regulated in

ef¬

a cooperative enterprise.
agents and individuals en¬

which this has been the dominant

society is
All

leadership seems to be due in
large part to the fact that these
people

attempt

speak

with

some

authority in fields in which

they

are

not

competent—for

in¬

competitive
It
for

is
a

when

operate

lieu

enterprises.

probably

characteristic of the standards of

the Liberal is liberal

gaged in the production, exchange,
and
consumption of goods and

justice

prove

services,

"This I

and

distribution

the

national income both

pete and cooperate with
other.

comes
a

desirable,

also,

government, in time of war,
governments of necessity

principle

—

about; it may
nothing more than

oeing liberal with other people's
savings. Of the Progressive he in¬

This

than the subjective
will, and thus I order."

quires

practice

that

should

an¬

one

to what it is he is

pro¬

employers,

production,

progressively greater amount of

conscious effort.

agencies that

will provide

ensure

peace.

The

agents of production, the best op¬

fix

prices of those
products in which a rise in prices

best

ics, these standards
tained

cooperation

among

the

ascer¬

operation of the
free and fair competition,
this

that

and

econom¬

can

only by

forces of

fact

basic

the

wishes

what it

conserve.

Reactionary he inquires

is he is reacting from

against.

his

case

may

prin¬
when we depart from ob¬
jective standards and attempt to

against corruption, dis¬
injustice,
demagoguery
or
anything which, according to
objective standards, may be good
or bad from the point of view of

solve

social welfare.

importance
When

human

welfare.

lose sight of this

ciple,

economic

other

and

social

problems

by reliance upon the
subjective decisions of those with
power to enforce
them, we are
lost in

principles
to

revert

Scientific
People

exist.

cease

the

primitive device of
settling controversies by force, no
matter how

may

cleverly disguised this

the devices
characterize part of what

which

some

Since

of the most

one

forces in this world
one

is the power

over

person

corrupting
another,

corresponding responsibility goes
with every grant or assumption
of power. This responsibility can¬
not

exercised

The intelligent person does not
rely

and

upon

labels

based

not misled
emotion.

upon

Contentions of Two Groups

This

ing

country is today witness¬
struggle between two groups:

One of them is composed of those

who, apparently not understand¬
ing the lessons of history, are
clamoring for more government
coercion

call modern civilization.

reacting
honesty,

endless forest of clash¬

ing personal opinions.

A good government

those

remind ourselves that in

difficult and requires

employed

nothing

com¬

become dictatorial and totalitarian

nature,

ended.
Objective, not subjec¬ gressing from and toward, and
tive, standards are the only ones how he proposes to get there if the
to employees, and owners of natural by which justice can be measured. end seems desirable. Of the Con¬
the resources and capital equipment We need, today particularly, to servative he inquires as to what

fort to obtain the results that free

permitted

widely and currently used labels
Liberal, Progressive, Conserva¬
tive, and Reactionary. The intel¬
ligent person calls for definition.
He inquires as to what it is that

that of the

example,

telligent people are not misled by
emotional agitations or by such

of administrative and case law in

ards

to social well-being.
The application of these stand¬

nize and conform to the fact that

enlarge this freedom, we progress. and fair competition appear
Such freedom recognizes, above
yield in similar fields; that
ail things, the sacredness of one's weak
and the honest be protected must cooperate. All are necessary,
personality. Probably every im¬ against the strong and the dis¬ and it is as futile to argue that
portant religion in the world has
honest, to the end that that com¬ one of these agents of production
recognized and clung to this great petition may be fair; and that is more
important than any one
fact.
It ran like a fugue through
prices, with certain exceptions, be of the others as it would be to
the teachings of Christ. It lies at
neither fixed nor controlled, but contend that any one leg of a
the bottom of that courtesy with the
results of this free and fair
four-leg table is more important
Which the refined person deals
competition, to the end that they than any one of the other three.
with his fellow men.
It is prob¬
The
may
reflect accurately society's
better
the
cooperation
ably one of the most vitally funda¬
appraisal of the value to it of among the agents of production,
mental elements that make human
these goods and services.
the better is the well-being of
existence worth while.
Examples of appropriate excep¬ society promoted. A fostering of
One of the arresting and dis¬
tions to the rule against price fix¬ free and fair competition facili¬
concerting things so noticeable to¬
such
ing are found in the necessity for tates
cooperation.
The
day is the large number of re¬
the government, in order to estab¬ smoother .the
competition,
the
ligious leaders who, despite the
lish a standard of values, (a) to more effective is the
cooperation.
paramount place given the indi¬
fix
the
weight of, and conse¬ Cooperation, under conditions of
vidual by the teachings of Christ,
free and fair competition, becomes
which they profess to follow, are quently the metallic price for, the
monetary unit used as a standard practically automatic and largely
ardent advocates of social and
in its currency system, and (b) to devoid of conscious effort.
When
governmental systems that would
fix the rates charged by public competition
operates less freely
reduce the individual to the status
and private monopolies which are and
less fairly,
of a mere tool
cooperation be¬
of a dictatorial
government. This unfortunate sit¬
uation in the field of religious

(1863)

properly unless

and

trying

are

to head

this nation in the direction of so¬

cial

retrogression.
The other is
of
those who know

composed

something about the teachings of
history, and are,
consequently,
fighting for an improvement in
social well-be¬

economic and

our

and widening,
if possible, the scope of individual
bring an increase in pro¬ change, the assurance of the great¬
freedom; for a wider recognition
duction. That is, such a procedure est benefits to the
consumer, and personality
inability to see the inconsistency
of every individual,
of the sacredness of the individual
of their position in their own field may be the least undesirable of the attempts to obtain the best knows how objective standards of
personality; for free and fair com¬
the choices, all of which are un¬
of Christian religion in which
sharing of the national income all justice are provided, and adheres
they
petition, with monopoly watched
desirable.
But such government require peace. When conflicts of to them.
offer themselves as workers
or

stance, in Political Science and
Economics—and to their apparent

Would

If these

master,

to the scientists in

reasonable

seems

there

those fields, it

to suppose

that

would be some real gain for

society.
Fostering Equality of Competition

History also seems to teach
Quite clearly that a government
cannot

aid

level of

the

raising the general
living in society and at

time protect and enlarge
the scope of individual liberty un¬
same

less it fosters free

and

fair

com¬

interest

quickly

devices that
and

will

restore

of
justice

means

provide
In general,

peace.

In recognition of these facts, a
the individual is free to;
dollars as
he prefers! good "government will never cease

mocracy,

his

vote

Democracy is incomplete in
of

either

well

the

regulating activities
is inoperative.

any

these

neither
other

fa& -cultivating

aspects is im¬
is

operate
restricted in
can

and

improving

the devices and

aid

Since,

better

and

the

economic

world,

fostering equality of competition,
impelled perhaps chiefly by the
profit motive
and by providing

ficiency
the

intelligence

of people

mass

who

with
free

are

nition of the fact that all

and of

justice; they belong to the

world of arbitrary will and power.

Drifting Away From Basic
Principles

essary,

that

that all should cooperate,

all

country, like so many
throughout most of the

drifting will lead

Corruption

us.

and

ruthlessness

government

equally entitled to
far-reaching in other
Producers can never obtain justice, and that this justice prob¬ countries, and they have been ap¬
at the same time the means of best.
protecting the weak against the better guidance than that given ably can be obtained in no better pearing in a variety of forms in
strong and the honest against the when all buyers are free to spend way than through the smooth op¬ the United States. Responsiveness
dishonest.
their dollars for this and withhold eration of free and fair competi¬ to pressure groups has almost be¬
come
the characteristic order of
It is important that we under¬ them from that. Buyers can never tion, and through the enforcement
be served as well as when they of the objective standards yielded the day in our government. Demstand
that
there
is
value

and

determining the social
proper

they think

better

means

to vote their dollars

prices of

com¬

modities and services than that of

can

vote

their

dollars

they

please and when producers must
respond to these indicated pref¬

free and fair competition. It needs

erences.

ture

Apparently every depar¬
this method of buying

from

be emphasized these days that
tiie only objective standards
of
value and price known are de¬

and

termined in this manner.

waste,

Freedom of competition of itself
is

not

enough;

also be fair.

competition

And fairness of

must
com¬

petition implies conformity to the
rules

fairness
acceptable
to
that society which is endeavoring
to fester competition.
The test of
1he fairness of these rules is found

whether

not

they

tend

produce the conditions that would
prevail
if the
equal strength

and

each

freedom

the

same

fair

day, would interfere with
free operation of economic,

the
as

well
The

over

one

individual

insidious

and

exist.

is involved,

justice

objective standards of
those

are

conditions

free

yielded
and

under

fair

com¬

petition; and it is most important
that all courts charged with the
responsibility
of
making
just
awards

required
to

the

economic

statute

field

find

and

Without
such
an
objective
standard to guide, all standards of
justice become subjective in na¬
ture.
of

There is, then, no standard

Tightness

except

that

corrupting thing. It places
responsibility
upon
the

power

freely

and

great

person

fully,

of one individual

over

the
an¬

other is

sharply curbed. Power is
widely diffused and it is difficult
to concentrate

it if economic and

political democracy has free play.
Furthermore, the system of incen¬

agoguery is widespread. The sci¬
ence of Economics has been swept

wind
of
contentions
and has in large degree been pros¬
tituted morally, ethically, and sci¬
entifically. Objective standards of
by
the
destructive
Keynesian-Socialistic

science
a

have

deluge

been

submerged

writings

deter¬

The fact

acts

and

dominated

by the subjective ap¬
and recommendations of

praisals

the authors who improperly

enforce such standards.

by objective standards.

by the appli¬

not

economic and political democracy

It is only by free and
or

power

another

does

com¬

competition,

political, democracy.

which

In so far as the economic world

with whom the power rests. Where

which competi¬
tion is a part, is rivalry.
And
rivalry is universal in life and
operates in some form in any type
of society.

the

operates

genus,

inefficiency,

and
maladjustment.
A
heavy burden of proof rests upon
those who, in periods other than
wartime,
when
maladjustments
and regimentation are the order

had

accorded

petition.
The

elements

omy

econ¬

by such competition in the fields

mined by the court. Justice would
still be determined by the power
of some individual uncontrolled

competitors
in

selling injects into the

have become

are

them

Our

offer

science.
a

ernment and unscientific econom¬

been, and are being,

palmed off on uninformed people
as

which

ness

ernment.

for

the

political and economic science.

Gov¬

provide.

can

last-mentioned

requisite
requires that

society

good

sciences

History, Economics, and

Sociology
This

government
that
in accordance with
standards of good¬

know what science is and that

respect it.

We should under¬

stand that

only

knowledge is advanced
the methods of science.

Science

meth¬

matter

odology; it is not a question of
the subject matter with which we
may
be dealing.
One may be
unscientific

anything.

The

science

understood

and

haps

are

this,
the

by too few

fundamentally,
social

the root of
culties

about

implications

is per¬
lyin-? at
of our diffi¬

disease

many

in the world today.

If it be assumed tentatively

science offers

that

support for the

as¬

sertions made here, questions nat¬

urally arise
assured

to how we may be

that

will prevail
to what we
may do as individuals to contrib¬
ute what we can toward the right
and against the wrong.
An individual, unless he be in a
over

right

and

wrong

strategic position with great pow¬
at his disposal, can ordinarily
accomplish
relatively
little
in

ers

matters
do

of this

his

kind.

All he

when

and

best

can

where

opportunity is afforded.
In gen¬
eral. he should first see to it that
he

well

grounded

facts

re¬

garding these basic issues. There¬
after he
and

can

his

cast bis

economic

spends his dollars.

political vote
votes

He
He

addresses

and

will listen.

talk
can

can

write

can

rrrke

those

who

attempt to get

action from like-minded
Just what the results will
be, perhaps no one can say. Never¬
group

people.

theless, those

are

the tasks of each

Some of the ominous results have

individual if he would do his part

been

to obtain for himself and

steady encroachment

upon

the liberty of the individual,

the
greatly enhanced power of the
nature of the power being exer¬ State, the rapid and reckless dis¬
cised. It would still be subjective, sipation of our national patrimony.
These are trends of events which
and therefore, according to objec¬
tive standards, arbitrary and un¬ every intelligent individual should
just. It would simply be a case of wish to stop and try to stop. In¬
that the power happens to reside
with a court does not alter the

operate

objective

articles and letters.

people have been paying

terrific price for unscientific gov¬
ics that have

will

scientific

We in this

neces¬

are nec¬

for political and
democracy; and for a

the

considerable degree.

than by

controlled;

economic

obtained only by observing and
understanding the operation of the

sity and virtues. It will always people
No government, no government occupy a neutral position with re¬ world, have been drifting rapidly
Human beings apparently have
spect to the importance or inter¬ and far from • these basic prin¬
never devised
a
better means of organization, no government bu¬
ests of any one of the classes of ciples.
Apparently no man can
reaucrat or collection of bureau¬
encouraging individual develop¬
the agents of production in recog¬ predict with
crats can begin to compare in ef¬
accuracy where this
ment and social
progress

protecting

constitutional

upon

facilitate

understanding of its

objective staq<Jards of justice are

rules which will

cooperation

ing

and

should

they

appear,

eliminated

the person possessing it recognizes
and respects the sacredness of the

fair

and

ex¬

competition -can¬ this means that courts must be forces and results of free and fair
properly unless there provided to which people with competition, all other standards
be
both
economic
and
political: conflicting interests may repair, of appraisal as to what is proper
adjudication
offers
more in the economic world are sub¬
democracy. In a political democ¬ since
racy, the individual is free to-east promise of ensuring justice than jective, not objective, and, there¬
his political votes as he thmks does resort to force, except as used fore, decisions and acts based upon
best—omitting, of course, children, by - the State to enforce those of such standards are an improper
the insane, and perhaps other m-! its laws which are based upon the exercise of power. They fall out¬
competents. In an economic -de¬ principles of equal justice for all. side the realm of economic science
Free

paired,

which

not function

petition and applies the standards
yielded by such competition when
in

instruments

our

will not

religious leaders price-fixing should utilize as ob¬
scholars, what jective standards the prices and
science in the field of religion has profits revealed under conditions
to teach,
and leave other fields of peacetime competition.

leaders.

eration of

dren

the

social

system

his chil¬

and

ernment that he believes

gov¬

good.

The

speediest results doubtless
be obtained, and with the
least effort, if there should emerge
a candidate for the Presidency of
would

(Continued

on page

28)

(1864)

THE

COMMERCIAL

Origin and Evolution of Our Fiee
Enterprise System
(Continued from page 27)
country could soon be set on

them

course.

the

interests

nothing

and

proper,

its
healthier,

much

The intellectual and

tout the truth.

terial

Considering the history of this
nation and the qualities of the
majority of the people who have
anade this country what it is, it
seems highly probable that the re¬
action to
toe most

such

event,

any

that

seem

much

that

good for the people of

Hie United States would be gained
?should such a
person
dedicate
Jhimself to this undertaking.
Three fundamental things would
toe required of such an individual:

understanding

proper

what constitutes

good social

of
or¬

ganization and government; (2)

determination not to deviate from

nation, freed from un¬
government restraints, should

the aggregate

Regardless
person

take

toward

living.
whether

emerges

such

Presidential

who

businessman

treasurer's

level

his

trusted

recommendations may

find this situation:

Cash

$ 5 million
10 million

Inventories

Total

adult person

do all he

she

this

turn

direction

every

country in the
which it should go.

I doubt if Mr. Colt

ment and

aged

and

these

people

United

they have taken

over

tries

the

often happens

businessmen

into

restless may

daytime realities.

which

other

coun¬

believers

either

doubled

inventories

Whether

of price write-ups

because

physical size,
processes and repre¬ new capital is needed. The under¬
sentative government
have de¬ lying difference is seldom ana¬
faulted on their responsibilities.
termination to present such facts
lyzed with the result that identical
Millions of good people in this financing is too often used. The
spd principles to the general pub¬
world have in recent years been difference in risks alone is suffi¬
lic, to the best of his ability, with¬
swept to their doom by ruthless cient reason for a difference in fi¬
out
the

objective standards of right
and wrong in so far as science
produces the answers; (3) a de¬

regard to consequences.

The
-and

common

demagogic tricks

compromises

the

typical

increase

democratic

governments whose officials have nancing. Basically, however, the
nothing for truth or justice price write-up calls for replace¬

cared

the

welfare.

general

ment

old

capital, physical ex¬
disap¬
The people of the United States pansion requires new capital.
pear completely.
There would be
How much is required can be
have
lately been drifting in a
mo deference or
preference shown
dangerous direction.
to any group.
They have estimated, using methods outlined
Self-serving pres¬
in
the
been
previous
article,
and
growing increasingly care¬
sure groups would be rendered
against the
ratios for
less about protecting and perpetu¬ checked
impotent. Only truth and the gen¬
ating the institutions and practices cash, receivables, inventories, and
eral

politician would of

course

welfare would count.

Such

would

person

the people
compliment

sumption

this

paying
country the

implied

the

as¬

that they wish to hear

that have carried them

well and

current liabilities that

The

Today all of
consider

and

need to stop and
then dedicate our¬
us

speed

capital

and

loss

price level.
the
measured

degree
be

can

roughly, using Procter & Gamble's
newly available Balance Sheet.
As
previously pointed out the
probable that the response to such dedicate ourselves to the
preser¬
large profits of the year were due
•a compliment would be in
accord¬ vation of the independence and
in part to the ignoring of many
ance with
the best traditions of
liberty of ourselves,) and our fel- economic costs.2 Cash and United
the people of this
country.
lowmen, as did the -signers Of the States Government securities de¬
This nation needs such a man Declaration
of
Independence in clined in the past year from $49.5
the

truth

and

truth, and

nothing

it would

Presidential

President.

good

but the
highly

seem

candidate

His

and

influence

for

this

country and in the
world could be incalcuable.
With
tois help, and with that of all who
tvould support the basic
to which he would

principles
adhere, this

selves to the preservation

good

things

1776.

life.

need

of these
need

assert, as did
they, that "for the support of this
Declaration, with a firm reliance
the Protection of Divine Provi¬

dence,
other
our

our

mutually pledge to each
Lives, our Fortunes and

sacred Honor."

million

was

but

on o r

million.

"No bank loans, thank
This is no seasonal or tem¬

porary

condition.

need to
we

run

will

the

The

money

business is gone;

secure

new

This
wisdom
is
drawn
only
from hard experience.
Experience
looks at facts.
The rise in the
the

trouble

treasurer

—

year caused

although

could

have

alert

presented

the

more serious
repercussions. In
the future prices may either fluc¬
tuate around this new

price level
normal, in which case new per¬
manent capital is
required, or go
higher with more of the same re¬
sults, or go lower with quite dis¬
as

astrous

consequences

capital needs

are

filled

present

by bank

loans.

Experience has taught that as
capital drains away the cash bal¬
ance is only the first
to undergo
shrinkage. That is where we stand
today. Next comes other liquid
assets, chiefly inventories, and fi¬
nally the deterioration of prop¬
erty.
Illustrations
How
toe

the

disappears may
by taking three

items from the balance sheet of

corporation

sound

financial

$ 5 million
20 million

$10 million

Inventories

10 million

cash

and

Liabilities

the

equivalent to
of $31.6 mil¬

year is of course dis¬
particularly when an
Income Statement compiled with
generally accepted methods shows
profits from operations soaring
to $81 million from $38 million.

One

would

profits

such

that

suppose

would

have

resulted

Total
Current

$25 million
Liabilities—

added rather than reduced cash.

prevent

a recurrence

$15 million damaging his

can

of 1921 from

company

if he steers

clear of bank loans.
If enough
working capital still $10
follow this policy we may
not
the
financial
position
have
to
live
through
such
a
seems
adequate.
The treasurer
period. Although businessmen can
probably tells his boss that unless
put their corporations in sound
something
unexpected
happens
financial
condition
by
perma¬
they have enough to get along on.
nent
financing now, they can't
He may add: "we'll pay the loan
stop one continuing further drain
off when we liquidate some
of
without a change in the tax laws.
this inventory."
If our executive still feels like This drain is an inadequate de¬
asking questions he might try preciation allowance. Its effect in
this one: "Why do you describe one year is not serious. The cumu¬
With

million,

in your balance sheet an inven¬
tory that doubled in price in ex¬
actly the same terms as one that

lative

effect

very

serious

in¬

deed.

ending Septem¬
doubled
in
physical
volume?" ber, 1945 property replacements
for civilian production were at a
Any
businessman
knows
that
minimum.

when prices double
in

short

— particularly
what
time—they can in an

years

the next two years

replacements

were

cost

made

On the

substantially more than
equipment.
Today
other hand he knows also original

that if

unit

equally short time be cut in half.
sales

twice

the

have

levels, he

number

grown

can carry

his

inven¬

tory without undue risks. It seems
obvious that there is a consider¬
able basic difference

between

that describes

ber of units.

additional

num¬

made

could

placement
60% over

costs
the

run

the

whose

first thing they

this

between

real

ficti¬

and

tious

depreciation charge).
This
profit has been taxed at wartime
rates.

loss

Every bit of this tax
capital.

was

obsolete.
men

textbooks

out

wears

tell

becomes

that their treasurer is

carefully charging enough money
against income to provide them
with

the

keep
their
equipment in good
There seems
to
be
no

plants
shape.
other
A

means

and

for depreciation.

purpose

few direct

questions will

The President

might

the Treasurer:

ask

twelve

same

from

years

now

it does today?" The answer may

be: "We have no basis for

ing it higher
Of

course

function
would
the

lower,

predict¬

as¬

it will be the same."

sume

predicting is not a
accounting at all. It

much

simpler to

property account

bring

date

each balance sheet is prepared.
This is described in the previous

article

together

with

the

appro¬

priate charge to the Income State¬
ment to
over

This

trends,
ave

ensure

profits

neither

are

that

predicting

accountants

price

seem

acquired unconsciously, leads
that property ac¬

predictions

quired at low prices will
tired

possibly fifteen

years

re¬

later

at the same low prices.
Then, for¬
getting
this
prediction,
more
property might be acquired, five
years after the original, at high

prices but with a life expectancy
of only ten years.
The account¬
ant, predicts that the first item
will

replaced at low prices in

the end year and the second item
at high prices in the same end

1940—Property $12
million—life expectancy 12 years.
September, 1947—Property $12

charge

cash which

accelerates the boom.

This reduces

in bad times.

spiral.
do well

would

Businessmen

to>

States

example of the United
Steel
Corporation
and

charge

the

follow the

each

though

tax

for

allowed

depreciation
it is not

proper

even

year

They

purposes.

should,
however,
insist
on
a
change in the tax law as the tax
is identical with a capital levy.
With the tax rate
at 38%, the
capital is more than any
can
stand for long, and

business
of

beings socialism closer.

course

methods the aver¬

The slip-shod

C.P.A. uses in describing busi¬

age

transactions is not often rec¬

public,

the

ognized

nor

obviously do they much care. Ac¬
countants themselves seem to take
little interest in the consequences

their practices.
As an inter¬
nationally known economist, the

president of the large foundation
wrote
few

me:

"I have found that very

much

interested in

understand

accountants are

professional

some

easily able
the eco¬

implications of their prac¬
of the problems with

nomic

and

tices

deal in present¬

which they try to

ing financial information."

bookkeepers,
acto relish the role,
When the post World War I infla¬
tion-deflation cycle occurred no
head was raised to inquire if per¬
ountants appear

haps the facts had been misrep¬
resented to businessmen, thus pro¬

ducing an exaggeration of the
cycle.
During the long calm of
the '20's the explanation that "it
all

sion

When

were

abso¬

lutely accurate method of provid¬
ing the proper reserves, but it
averages out.
Unfortunately for
this

speculative
ex¬
permitted to take the

downward

the

Not

counting practices came out.
did

later

few

men

such

Arundel Cotter breach the dike

questions

isn't

allowed to

No hint of the forcing
spiral by ac¬

spotlight.

admitting

also

was

1929-32 depres¬

the

occurred,

cesses

out"

averages

stand.

have

again like Lifo*

The lowest charge,

been

that

capital and

waste

nemptation

heard to defend their methods by

Accountants

income in boom times

just when the company can best
afford it—as is the case with Lifo>
for inventories. It also reduces the

disinterest

with

some

shrewd

inventory

about

prac¬

tices.

Although the luxurious habits
our government had acquired un¬
der the Roosevelt Administration

explanation, the government
and the prospect of a Morgenthauas many private statistica
financed war almost guaranteed a
organizations will gladly furnish
postwar inflation, few corporation
either
charts
or
tables
for
nominal fee which show clearly treasurers were willing to revise
accounting methods.
This
that construction costs have risen their
well

quite steadily for

over

genera¬

tion.

Accountants who maintain that

Depreciation based on replace¬
costs produces the heaviest

ment

until

year.

their system works in practice are

prewar

predicts that the next one
will cost $1,500. The fact that in
his operation the owner of the
company lost $500 appears to be
of no concern to the accountant*

Historically

understated.

habit

costs $1,-

now

500 and

ness

"Why do you predict that this
piece of property will cost exactly
the

He merely sets up

which

car

new

car

interest

lost

has

prediction.

;he

old

but by that time the

out,

drain

re¬

veal how curious is the process by
which this simple requirement is
carried out.

lis

The

out.

wears

one

accountant

to add to capital, as
is usually the case in depressions*
and thus adds to the downward

Probably most business¬

assume

old

wears

the tendency

that depreciation is set up to pro¬
vide for the replacement of prop¬

erty

his books the purchase
of a car for $1,000 and set up
lis
depreciation charge with a
prediction that the new one can
ie purchased for $1,000 when the

will put on

comes

Depreciation Question

Accounting

accountant

the

Instead

dictions.

pre¬

talking sheer opinion.

They have
no facts to back
them up.
Whan
facts there are point to a steady
drain of capital over a long period

that

has

become

noticeable

face of

was

almost immediate

large savings for their firms using
methods which by now even the
American Institute of Accountants

considers orthodox.

Inadequacies of Standard
Accounting

Today the subject of the inade¬

management only now due to the
recent large and swift price rise

quacies of standard accounting is

Accountants have

famous

facts to back

Yet many treasurers
up this opinion because no con¬
million—life expectancy 5 years.
tact
is established between the
persist in describing both situa¬
Reserves Provided—$7 million.
$20 million tions as identical.
old fully depreciated property and
They even per¬
Cost to replace today — $19.2
Current Liabilities—
$10 million sist although the whole write-up
the new that replaces it.
Con¬
million.
A price inflation doubling in¬ of balance sheet values
sidering the ease with which ac¬
goes into
Additional reserves needed by
Income
Statement
ventory
costs
and
of
countants take on the responsi¬
occurs,
and
the the
management decides to reinforce course becomes an easy mark for
2 "Chronicle" June 5, 1947.
bility of predicting a price level
Total

would suppose

one

would

Based

re¬

depreciation had
average of twelve years to run:

September,

heading of

businessmen

avoid.

than

level.
In
actual figures this would produce
the following result for a corpora¬

tion

prediction by his accountants, the
businessman has already inflated
his profits by $4,200,000 (the dif¬

For five

the

that

well

—

The individual businessman

inventory that has had a price
write-up applied to it and one

condition:
Cash

$5 million

Inventories

twice previous

cash

illustrated

Cash

permanent

-capital."

price level of the past

its cash position with a
bank loan. The result:

deterioration

dictions

one

turbing

say,

you.

changed. FurtherCurrent
Liabilities
in¬
A

lion in

-still

little

creased from $19.6 million to $32.2

Current

(Continued from page 4)

$30.5 million although

the physical size of the inventory

ratio

even

when it

years

under

comes

found

were

to be sound at the old

far in 159 years.

today

could

countant's assumption that prices
in 1952 will be the same as 1940

ference

Capital Requirements

New

may

States

replacement

other plus the

any

governmentally-man-

economy
over

real

are

minded

take

such

depreciation.

situation

with big business. The years when

down, the dreams of
1921 which keep some historically

prices

turn

govern¬

made for

costs

the

only at higher prices can¬
banker would like the looks of
cel out at today's prices practically
this.
Any attempt to sweeten it
all depreciation reserves set up
up
by additional
loans would
for the period. The standard ac¬
probably meet with some sales

agitators

dictatorial

allowance

economic

made

Unless this is done, the aggressive

for

often

by big business because
operates on a cash basis with

$15 million

Liabilities.-

resistance.

upon

business

one-man

criticized

$15 million

Current

everything comes at once and the
bank
loan
matures
just when

the

This

sponsibility
can

September, 1952 unless prices de¬
cline—$12.2 million.

.•

re¬

candidate in this country, the re¬

rests

Thursday, November 6, 1947

that the very
would do is to set
As of today the net effect in the up an account to allow for errors
turns to normal the unfortunate
i;hat might arise from such pre¬
example given is identical with
When and if the price

of all the individ¬

resources

better levels of

candidate would

gratifying.

would

^ivould

wise

the tax collector, the labor leader,
the "liberal" politician, etc.

ma¬

uals of this
in

CHRONICLE

country who would go before
tue American people and speak to

•our

FINANCIAL

very

much
alive.
Nationally
businessmen, bankers, and

economists

various

have

written

previous
article.
Financial
papers,
bank,
bulletins, and statistical services
now discuss the subject at more
or less length.
Yet

aspects

the

beyond ensuring that busi-

»» ■WiU'tyV

Volume

in sound financial

nesses are

con¬

there lies the even more
important problem of the social
consequences
of misstating the
situation in accounting and statis¬
tical presentations.
Little atten¬
dition,

tion is at present devoted to this,
ibut it is encouraging to note that
few of the very top men

in the

country are giving it thought. For
instance, Mr. Voorhees, Chairman
the Finance

United

Steel

after

article:
with

Committee

States

■wrote

of the

Corporation,

reading the first

have

this

read

lively interest and

article

in sub¬
what you

stantial agreement with
have

tq,.say in it. I especially like

what
social

about the
tax
consequences
of
which
ignores
eco¬

have

you

and

accounting

say

nomic costs."
No

evidence

establish
cal

the

and

THE

Number 4644

166

here to

needed

deteriorating politi¬

economic

relationships

unless

motive
which

trolling

high places view with alarm the
widening rifts in human society
which when coupled with man's
increasing knowledge of nature
may spell chaos in the not too dis¬
Under

circumstances

such

probably essential that the

means

by which society is held together
be
re-examined,
as
familiarity
sometimes

The economic life

whole

range

almost

covers

activities

boom-bust cycle,

three-way

inflation,
between

struggle

capitalism, socialism, and commu¬
nism, and international economic
warfare

far

unresolved.

are

Nor

I know has there been any

convincing

method

presented

mation

incorrect

basic

question

who

what controls economic activities.

Mr.

Hoffman,

Committee

Chairman

for

sions, then

that.

describe

compelled
cars,

Mr.

Ford

this

•expand

later

Who

"economic

and

establishes

directly

life

almost

which

major
made

Street

Yet these

determine

have

our

law

affect

Sears

Roebuck

decisions
Most

are

much

error,

law

Washington.

Ford

and

decisions, but the
de¬

plorable state of economic affairs
of

these

two

general classifications: either, if
only human nature were differ¬
ent or, those evil men in Wash¬
ington or Wall Street are
to
blame.
As both
arguments are
essentially
superficial
in
that
criticism is aimed at straw fig¬
ures, not much progress can be
made
We

this

come

the

3 New York

1947.

that in
the profit

assume

least

"Herald-Tribune" Sept. 14,
..

daily

accounting
this

organ

sional
ant

counting

Certified

wields

true

effect

the

that

ac¬

reached

was

Institute

latter

add

evident

with

by the police.
that

"Eco¬

sense

that

Since

central

au¬

determine it.

economic

confusion.

come

by creating such a lawmaking
body, assuming reasonably sound
laws are made, the economic con¬

Account¬

flicts of

authority,

our

day

can

be resolved.

seriously inflationary consequences that wouM
mismanagement of the situation in such com¬
modities as food and steel
require selective distribution to
the most
necessary domestic and foreign uses.
The tw«
types of uses are interrelated, because the demand in both
cases takes
place at the same strategic spots in the Ameri¬
market.

can

cial

time past been detecting what appeared to
returning tide of New Dealism.
In these columns
on

President's

Council

further

Economic

"The

though of

in government expenditures, stimulation of

and

are

it
in

year

could
part

the

Advisers

individual

takes

which

and early this
that

these

proposal for new foreign aid requires that we
wisdom and courage than ever before the
to our whole economy that are now revealing

dangers

themselves in the form of relative

eign aid

some
some

year,

recent

al¬

of
of

For

its

to regulate use and hold prices
they are our old friends, ration¬
ing and price controls.
If not such devices as these*

in check"

then

serve

conservation

ous,

most

urgent
two

and to prevent

uses

spiraling of prices.**'
applied only tm
very broad category r€

specific

economy

counter

expressions

are

much

way

well

have

been

Wilson

the

reasoning of the report.

warranted is evident when the

selected

Wyatt,

all the rest (climaxed

and

other

measures

standards, the supply here would be ade¬
nutritional and other needs satisfactorily

although not luxuriously.

find it difficult to

guess what the authors of
have in mind when they speak of "vigor¬
affirmative measures to assure distribution to the
we'<

this report

the nation's

use

nutritional

quate to

unless

are

Now, all this is of

and hold prices in check will be needed
in this country.
With such measures to maintain health¬
ful

cannot imagine what "conserva¬

by Chester Bowles, Paul
Franklin Roosevelt

even

Piece

piece with recent attacks

"spec¬

ulation," "Wall Street," "the interests," "big business," and

level,

postwar

avail¬

them/*

measures

All of

place any other interpretation upon
the passages found in this latest
report.
Here are
them.
They will repay the most careful thought.

regulate

use

"trial balloons" intended to

continue at the levels set by foreign
need, and if the domestic demand for food remains at or
to

part,

our

tion and other

measures

have the courage to

himself.

"If wheat exports

near

adequate if

are

The for¬

to face certain domestic prob¬

squarely, but remedial and preventive

able to

pro¬

At any rate, reinstatement of sweeping
definitely under advisement in Washington.

difficult

compels

program

Porter,

and the rest.

shortages and inflation¬

at strategic spots in the economy.

ary pressures

reports of a change of heart on the part of
general public concerning price control, rationing

controls is

sav¬

measures

face with greater

test current

the

use

speaks of "relative shortages of specific com¬
requiring "export controls, allocations for
domestic use, discouragement of misuse or excessive
use, efficient transportation and distribution, and the
curbing of speculation and hoarding of goods."
Not
only are the ideas definitely New Dealish throughout*
but the wording, the catch-phrases, the "cliches," might

of the controls and other inter¬

some

business

course

resulting from the

Council

this

appeared to reject late last
nouncements

general inflationary threat

combined impact of foreign and domestic demand
requires
the continuance of tax revenues at
present levels, maximum

with

effec¬

measures

modities"

ferences

with

"The relative shortages of
specific commodities re¬
quire export controls, allocations for domestic use, discour¬
agement of misuse or excessive use, efficient transporta¬
tion and distribution, and the
curbing of speculation ami
hoarding of goods.

That it

direction, or at least
so
it seems to us.
Indeed, it would appear that the
President has rather definitely made up his mind to
steps

return to at least

be dealt

can

coordination of all

undertaken.

run

various occasions cited

expressions, or what seemed to us to be inescap¬
implications to some such effect as this, in offi¬
or
semi-official outgivings.
This latest report of

several

consequences

a very large
part of
whole), but one needs to be rather
naive to suppose that the Council is
concerning itself
with these items exclusively.
Such a conclusion would

overt

able

The

tively only through careful

our

some

have

"food" (which, of course, is a
.itself) and steel (which involves

(Continued from first page)

spiraling

"The

Cor¬

only from a
responsible lawmaking body.
Those inclined to pursue this
argument further may find that
can

As We See It
a

prevent

result from

These

for

foreign aid program will have a severe or a
impact on our economy depending upon the
domestic measures we adopt.
These measures involve both
the administration of
foriegn aid and related questions of
domestic economic policy.

lems

this line of

rection

of the profes¬

Public

identical

reasoning is true
then
in
periods
when
prices
change, management decisions will

the

English

it is enforced

book¬

tremendous

and

uses

new

"The

and

•

moderate

fact.

cause

nomic Law" used in the

consultation

after

ing, and the enlargement and aggressive
to control
dangerous expansion of credit.

conclusion

by the police
from govern¬

American
The

...

tion

run

One

than

one

firm).,

obliged to wonder if the Truman Administration,
a

year ago

handwriting

the tide has
wise

time when competi¬

riot has tested the mettle of

which had

the

by the absurd anti-trust suit against

leading underwriters at

apparently at least got

the wall, has

now

glimpse of

about decided that

again turned, and that it would be politically

return

the

tactics

and

the

techniques of its

predecessor.
If it has made any

such decision, it has issued

sharp

challenge not only to its political opponents, but to the

people of the United States who only a short year ago
chief danger here is that this
supply situation
be translated into further increases in the price of seemed to have "had enough" of regulation and govern¬
and steel products which would
give an additional mental spoon-feeding.
We can only hope that the rank and file have not
inflationary impetus to the whole economy.
High domes¬
"The

may
steel

tic

that line.

generally
country at

both useless

are

urgent

economy

From

Standards—

grew.

enforced

most

the assumption

never

representation

through

the

standard

our

based

Accountants.

they

made independently.

one

articles

misleading. The second article
began with some current con¬
sequences to business of accepting

every

sources

with

Washington
power to create

under

two

29
4»"

and

law?

law

are

ment

countless

arguments about the

will fall

prices

counting reports

logic.-

economic

body

generally

—

conditions which affect

merely

and

which

his

and

course

law"

that

political

economic life. Wall

bankers

Street

de¬

practices

trial

them

the decisions which

are

these

habit and inertia

minor decisions are
hardly be traced either

Wall

change. As a
result when prices do change ac¬

men

and
can

first

Economic

wise

the

design,

the

inertia

and

thority legislates "Economic Law",

purchase, how much they pay, or
Jhow much they buy. In short the
basis

habit

point? Are
fully aware that
their decisions will profoundly af¬
fect the future of society? There
is
of
course
no
central
body.
they

that

items

new

that

the legislators whose de¬

are

cisions

decide
the rate of pay for his employees
is unexplained. Nor do they ex¬
plain how Sears Roebuck's pur¬
chasing agents' activities are con¬
trolled—what

The

For convenience

concept.

observation

until

price

change their
his business,

that

result

the
dominating factors
establishing economic law.

by the police and in no
sense corresponds to laws of eco¬
nomics, which are theories based

they themselves did
either

Exchanges can refuse
privileges.
So varied a
of authority has produced

source

enforced

can

you

business

How

decrees.

Stock

listing

the term "economic law" to

use

change in human nature.

1933 and that

their

counting rests

the land.

during past weeks

after

enforce

Devel¬

cycle

tell

Stock Exchanges
to call on the police

made the point that standard ac¬

obviously true, un¬
will not act more
sensibly in the future than in the
past. An increase in sensibleness
comes
under
the heading of a
will

force
The

but

power

law

men

ran

All

poses.

have

in economic life accounting is the

Although

Dealers

Commission, and

the various Stock Exchanges set
certain standards for special pur¬

conclude that

can

Street

state Commerce

deci¬

for

used

toe moderated."

New

Other

are

Corporation, says;3
"If men act more sensibly in
the future than in the past, fluc¬

"Wall

such

the Security and
Exchange Commission, the Inter¬

the basis for the statistical

presentations also

debaker

fortunately

sound

prevails.
as

the

for

used

opment and President of the Stu-

tuations in the business

Treas¬

the

Economic

the

idea

bodies

decisions,

widely

are

that

accounting

serious

then

result

Department's

ury

distortions will develop.
Since accounting figures are not

semi-official

resolve any of these problems.
The

such

ing to profits. Consequently the
figures
businessmen
use
when
making decisions are the con¬
trolling power in our economy. If
the information is correct, then
under our conception of capital¬
ism, the economy will function
smoothly. However, if the infor¬

grew

the

that

the

duces

reasonable chance of add¬

lihood.

the

Treasury De¬

returns. Usually the expense
of keeping two sets of books pro¬

decisions

have

keeping

weigh

tax

Ford,

show

which the individual gains a live¬
At present such problems

made by

which

breeds

forgetfulness.
The very fact of a disintegrating
society is evidence that major
changes in the means by which
society is kept orderly will come
«—assuming
there
will
be
an
orderly society in the future.
the

decisions

Sears Roebuck, or General Motors
executives are based on figures

scribed

tant future.

evidence

(1865)

siderably or progresses satisfactorily depends upon the use
of vigorous, affirmative measures to assure
distribution to
prices.

The United States

power.

These

but

average

those

little

responsibilities

keeping that all business enter¬
prises must follow in preparing

the

and

such
it

heavily.

basis on

the

There

its

CHRONICLE

partment sets standards of book¬

both

street

decisions

desires.
that

probably secure
economic law

changes

FINANCIAL

designed to pro¬

ated.

fact

then

power,

could

and

is the

duce profits are made is the con¬

only

the

ward. If profit, or rewards,

has acceler¬

of us are
enough to work hard
get some kind of re¬

energetic

years

drive-wheel

the

economic life. Not many

that in recent

man

motive

COMMERCIAL

and

foreign

demand

for

industrial

and

agricultural

machinery is closely connected with the steel problem.
"The

general

conclusion

regarding steel

food is this: Whether the domestic situation

so many

items could not be

had at all—except

well

worsens

forgotten those days when

con-

occasionally and sporadically in the

black

prices

today.

market

at.

even

higher

than

those of

(1866)

THE

A Concrete
(Continued from page 4)
their own political and economic
At

hope in Western j
Germany, it is possible to begin to

time

same

pattern

this

coordi¬

organization is
being developed in Western Ger¬
many, its civilian economic coun¬
terpart should be in the process
of

development for

Western Eu¬

rope as a means of making sure
that the objectives under the Mar¬
shall Plan will be attained and
that

appropriations made by
the American Congress to imple¬
any

the Marshall

ment

dissipated

sideline

will

frittered

activities

bearing

Plan

that

not

away

have

the primary and vitally

necessary objectives.
In building this broader organ¬
ization for Western Europe he

should

act

civilian

capacity

for whatever time is required be¬
fore

taking

his

over

duties

new

head of Columbia University.
Given such an organization, our

policy and directive from
Congress should require that we
first
attack
the
psychological
problem of Germany.
This can be done by the follow¬
ing program, each part of which
presents many problems and dif¬
new

ficulties

but

which

none

impossible of attainment.
Program for Reviving Germany
The

for
hope is:

giving

program

many new

(1)

Declare

Ger¬

end to the rep¬

arations of capital goods.

Bring to an immediate and
early end de-Nazification except
top Nazis in cate¬

gory one.

(3) Permit the Germans to

ex¬

port by quickly untying the shack¬
les

that

and

bind

now

feet

the

their

form

hands

regula¬

tions

prohibiting barter and the
making of contracts with foreign
business
the
of

firms;

the

provision by

International Bank

foreign

for

with

currency

loans

which

German industrial firms may buy
raw materials and send out sales¬
and

men

engineers to

port business;

secure

ex¬

and by the whole¬

sale elimination of the

regulations
remaining from Nazi autarchy and
"Schachtism," the red tape and
bureaucracy of the German Landerats and the regulations of the

American

and

British

Military

governments that prevent exports.
(4) Invite the Germans to take

part in the Marshall Plan discus¬
sions?

the needs of

Germany.

(5) Proceed with the establish¬
ment of

central government for

Western Germany, building it out
of the Economic Councils that are
now

representative of the German

states, providing for its approval
at a later date by popular election.
(6) Abandon the Morgenthau
concept of a banking system pat¬
terned after the Federal

Reserve

System in America and institute
a

central

many

bank

for Western

Ger¬

patterned after the central

banks

the

other

countries

Europe.
(7) Provide a new currency for
Germany as soon as a central gov¬
ernment

with

balanced

budget
is in effect, a central bank func¬
tioning, and sufficient consumer
goods available to give a new

purchasing power.
policy along these lines
is announced, even though it may
take months to carry out the pol¬
icy, a revolutionary change in the
psychology of the Germans will
take
place and much of their
hopelessness will disappear. The
currency
Once a

German

people will go to work

Even

though

will be poor

they will
a

they

know they
for two generations,
to work to try to

place

for

centive

get

means

going

production

themselves

the

average,

German

people

are living on a diet of 1200
calories a day. That is one-half of

of the people of Britain
one-third of the diet of the

the diet

and

people in America.
tion diet and

and

work

It is

no one

produce

starva¬
can do heavy
on a diet of
a

the

made

report
have

which

being

recommended

that

dietary experts work out a fiveyear plan of diet for the German
people proceeding gradually from
a 1300 calory diet to 2600 calories,
but with
special supplementary
food incentive diets for special¬
ized groups starting with the un¬
derground miners in the Ruhr. I
have recommended that under the
Marshall Plan this basic
diet

guaranteed

five-year
the other

nations, mainly the United States,
on
a
declining basis—100% the
first year, 80% the second year,
60%, 40% and 20%.
By making it possible for the
Germans
to
export, they must
then rebuild their productive ca¬
pacity
and
their
exports
fast
enough to make up the difference
in
this declining guarantee.
If
they wish to have more than 2400
calories diet, they must produce
For

five-year period this de¬
clining guarantee for food would
cost about $2 billion.
The first step in using food as a
means of getting production would
be to bring over meats and other
special energy foods and put them
in the 75 colliery stores in the
Ruhr

Ruhr Coal

Production

Then give to the 170,000 under¬
ground miners of the Ruhr cou¬
pons that would enable them to
get a 75% increase in the rations

themselves and

exchange for a
production.

50%

made

stop

the

first

effective

spread

step to
Communism

west of the "Iron Curtain."

Given

a new

policy,

new organ-

ported

coal

barges

coal

are

now

pro¬

the

crisis

that

bound

through

ain

could

buy

her

food

and

British

are

taken, the threat is still there
drastic transportation crisis

has

present

made

places dependence

no progress
Western Ger¬

Europe

countries

Western

unnaturally long
rail haul. This ties up railway
equipment that is already griev¬
ously short.
an

that

have

been

repaired by the
military governments, keeps the
good cars and sends back cars that
in bad repair. This contributes
to the vicious cycle.
are

into full

partnership

America and Great Britain;

grated economic organization un¬
der the Marshall Plan for
Western
Europe, would, I believe, meet the
requirements of France.
Thiru,

re¬

France must be assured that Ger¬
militarism will not be re¬

man

labor

government

and

the incentives that have

nationalization,

induced

iron

that

rather

ways

have

The

operating at a small
percentage of capacity due to a
shortage of coal.
moratorium

could

productivity of the indus¬

definitely
back, in my opinion,
by the fear and uncertainty of the

nationalization program. Coal, the
manufacture
of
electric
power,

declared

for

one year to 15 months on the
and transportation have now been
shipment of these 10,000,000 tons nationalized. Sir Stafford Cripps
of coal out of Germany, a revolu¬ in a speech before Parliament on
tionary dynamic would be insert¬ the British crisis, said that more

ed into the whole
If

now

exported

could

toration of not
of

from

used

months within

Western

for

coal from

for

Europe

year

could

crisis.
The fact remains,

if America
loan

as¬

can

again

take place
Western

Incentives

leaders

supplied

for

all

Marshall

because

the

coal

sented such

uviivvvt

Miners

factions

many

/-I

and

own

help

recovery

can nationalize at her

and

expense

not

the

ex¬

critical problem for.
~

are

reluctant to face

When i

Went

into

would-be found in

Germany. But
studies developed, it beVAV/JJVU,
?eame•' amazingly
clear that the
as. my
...

OlUVAiV-O

war.

one

tell

the

recovery

It, is

also

reluctance of every-' America
the

prefectly

c a n

not

clear

that

continue

its

^^$&>must

Under normal

circumstances,: do this is to help-Western
Europe
government and Great Britain to get industrial
everyone share equally
production going and the standard
austerity program is under¬ of living
rising.

the desire of the labor
make

and

mighfc'fevem

•

Without

question

Germany,

and in Great Britain perhaps, it
But for two years
the-*'f• Kg nece^arv" to* make aridi"ernment of Great Britain hasJear

American

loajtt- to

buy

food

supplies that could haye^ been
bought in part, at least, with^taal1
had they gone to
work-fo^ig coal
for export.
The simple fact is that more and
more
austerity, while necessary,
now
only tends to' push Great
Britain further down in

depres¬
cycle. Austerity cannot take
the place of production; As
long
as Great Britain does not
dig and
export coal, more loans are sim¬
ply continuing Great Britain on
the American dole, and the people
sion

supplies of food • necessary

Great

Britain

and to produce extra coal during

incentive to get

production

gping and not merely for relief.*
-

ft is

tion

that

stipulate

definite recommenda¬

the

American

some

Congress

sjjyph plan

as out¬
lined in the report which is
being
made as a condition for the appro¬

priation of funds for the Marshall
Plan.

,.„,v

The: question has been raised
to- whether

France

will

along
with; tljis. program. From my in¬
vestigation in France, covering
the
leaders
of ..labor,
banking
go

and

Assurance

What
would, of course, be
contrary to the Socialistic concep- France?

week

that

the

hold

the

true.

Out
who

six

voted

million

Frenchmen

Communist, there

are

less than 750,000 real
Communists,
The balance are Frenchmen

first,

who

voted the Communist ticket
protest against current post¬
war economic conditions.
The Communist
Party in France

recognizes

that

power

has

overthrow

the

not

the

govern¬

ment and is

following the Moscow
waiting two or three years
economic depression that
play into their hands.

line of
for

will

France therefore is not the main
obstacle to the
recovery of West¬
ern Europe.
The main obstacle is
the ideological stand of a

portion

of the Labor Government of
Great
Britain that prevents the offer of

production
economic

that

will

enable

ade¬

tide.

Britain Needs Food, Raw

Materials
Even if Great Britain

exports coal
still need

some

digs and

outlined, she will
additional loans to

buy supplementary food and
materials.

In my

opinion, the

raw,

peo-,

pie of Great Britain have not yet
been told the truth about the
tent of the

austerity

ex¬

program re¬

quired if there is ,no additional
help forthcoming for Great Brit-,
ain
It

under the Marshall Plan.
is not in the, basic

interests

of America

of the

Great Britain should

world that
be permitted

to fall or, under excessive
auster-

W».

f' delay

•

her

economic

re¬

covery.
But it is. also clear that
unless
Great Britain .is
.willing to

dig and
export coal as *heir:contribution to,
the; recovery of Western
Europe

under the

are

the

for

France

requirements of

Marshall Plan, further
and ■ help from America

would
as

be used

want that if

the

said

France

;Ic|ans
cnIyf:o5i condition that it

governmentJ "T believe that
do not like or
France will cooperate
providing
they can help it.
we understand her basic
require¬
Offering the miner added in¬
ments.
J
centives to go to the six-day week
of

miners

the real

standable

has

key to the French situation. My
investigations show that this is not

problem of

and the
UNRRAr or relief loans to Europe.
truth is at the.
take • prompt and
bottom of Great Britain's dlfficuTvigorous action to prevent the
ties—not the whole problem of
spread of Communism west of the
course, but the basic problem.
"Iron Curtain."-The
only way to

Everyone
Communists

They are trying ^yery«
Germany and Western Europe lay
offering ■ direcfcilfn|tr£~the:. digging and exporting of
centives
to
get the miners
to
coaLbyGreat Britain.
again dig the coal at the rate of
and in the quantities that they
America Cannot Continue
European Relief
produced in the years before the

country

France.

crux

except

very

veto

quate exports of coal to turn the

miners." have^ pre*

-n

This

the

adequate incentives to the miners
to work a
6-day week and get full

of the*-American taxpayer.

pense

recovery

this issue.

thing

Germany to

of their

years,

Great Britain

Plan

try until she
in

added

con¬

Germany, this

study the problem of German rethe eoaLmdus&yv
pcbVery; I expected that the answer

problem.
Yet

however, that

supply
Britain

Western Europe should be to dig
and export coal and to
postpone
further nationalization of indus¬

Great Britain recognize that coal
is the very crux

and

must

Great

ther^ Britain's contribution to the

coal from Great Britain.
Direct

through the Marshall Plan in the
that way of food and raw materials to
the export of alleviate
Great
Britain's
crisis,

countries

give up its long term
objectives because of the current

not

however,

way,

Germany

the

would

Germany

Europe

only

is
necessary rather
than less and that the government

Germany, the res¬
only Germany but

this moratorium

socialization

picture of West¬
Germany and Western Europe.
these 10,000,000 tons of coal

ern

integrated

of the control, which would,
permitting German opera¬
tion of the Ruhr, prevent her
from
strangling the steel industry of

being held

The fundamental fact is that if
a

men

while

tries of Great Britain is

been

Under

power

al¬

work.

Municipal power plants that
supply thousands of small plants

ore.

trol organization of
could
be
assured

Socializa¬

upon

than

in the past year in the res¬
toration of the industrial produc¬

tion.

the

other

Second, France wants

taken

integrated organization of
Western Europe which I have out¬
lined, to be followed by an inte¬

Slows

tion

many

rest of the world.

study of this problem
indicates that the real difficulty
is that we are attempting to ex¬
port 10,000,000 tons of coal from
Germany to Russia, France, Swit¬
zerland, Holland, Italy, Belgium

is
of

and the

Output

meantime,

the

been

bility of Western Europe and the
Intensive

reconstruction

Great Britain has the coal. She vived. The plan outlined in this
fact that Great Britain is
has the barges with which to haul report will satisfy France if she
longer exporting coal to West¬
it. She has the miners with which has an equal part with America
ern
Europe is one of the biggest
to dig the coal. The miners them¬ and Great Britain in its adminis¬
contributing factors to the dollar
tration. Fourth, France wants
t,o
shortage with which she is now selves, I am assured, would dig
build up her steel
the coal if they were
industry and to
given in¬
struggling — attempting to over¬
do this she must have
long range
come
this problem by resorting centives. They can be given such
assurance of a
supply of coke from
The only real obsta¬
to austerity, Nationalism and So¬ incentives.
the Ruhr in
cle is the ideological
exchange for Lorraine
cialism.
theory of the

avoiding the main issue
necessity of digging and
coal while using the proceeds

that may affect the economic sta¬

Threat

as¬

The

laudable under

measures

material

with

way

With coal, Brit¬

raw

be
Plan

to avoid it.

if all these

long

large portion of

Nationalization

matic power.

in the

even

of France.

quirements.

Western

develop in Germany this winter
unless something drastic is done
But

the

Marshall

Europe, of which Ger¬
is a necessary part, and not
merely at the reconstruction of
Germany alone to the detriment

toward curing the dollar
shortage
now the crux of the crisis

Europe, but
the basis of her diplo¬

was

would

the

many

prices would al¬

in Great Britain.

only was Great Britain in
prewar days the largest supplier
coal

France wants

Western

that is

trans¬

was

obtainable

ports.

was

Not

The

The Ruhr miners

meet

centers

First,

cure the gap that now exists
between Britain's imports and ex¬

not

rivers and canals.

increase

ducing 220,000 tons of coal a day.
Under
this
plan it is possible
within 12 months to get them up
to 330,000 tons per day.
The annual production of the
Ruhr is going at the rate of 66,000,000 tons. The new plan would
provide an annual production by
the end of 1948 of 99,000,000 tons.
But immediately such an in¬
crease in production is
promised,
it is apparent that the transpor¬
tation system of Germany cannot
haul it away from the mines. This
is
due
basically to the severe
bombing
of
the
transportation
system during the war.
A special report, which is being
included in my main report, was
written suggesting what might be
done to make greater use of the
transportation system of Germany
to

areas

rent

by short rail hauls to other

industrial

in coal

Moreover, each country secur¬
ing coal from Germany in cars

will have

sent

was

that

aimed

of misery they are going to
have
an
increasing amount of
misery.
Thirty million tons of coal ex¬
ported from Great Britain at cur¬
most

their families

Halt Spread of Communism
we

used in the immediate

The

for

Coal that

sured.

area.

Increase

Coal Should Be Supplied by
Britain

done,

countries.

ous

sured

ity

of these vari¬

areas

Thursday, November 6, 1947

tion of equality. But if the Social¬
ists continue to insist on an equal¬

4«

1200 calories.

family of nations of Western
Europe.

Once that is

CHRONICLE

the years before the war, coal was
supplied by boat from Great Brit¬
ain to the large ports of Europe.
Around these ports had grown up

the industrial

again.

and

again.

build

but

of relief
instrument and an in¬
as

and export more.

(2)

for the 80,000

food not

in
no

FINANCIAL

The fundamental fact is that in

new

use

the

Program for German^
1 4~

ization and

destiny.
nated

COMMERCIAL

not

accomplish the objec¬

tive of
recovery.

*■-

•

IR
opinion, the American
Congress would -be derelict in its
to the American
taxpayer it •
.

see

clearly the

essence

•

of this problenafvand to
act inteili-V

gentlyi^ohit.:^
..

Even if the

cost is several bil¬

lion

dollars n.^year for the next
five years in the
form of loans, I
believe that if these loans
are in¬

telligently made,

not*

incentive to get

?u
that

they

relief but

production,

be repaid.
Repay¬
ment should not be
expected until
can

wltf ilV% years during
Europe

Western

would

basisCG
The
these
the

which
have

°n 3 se^~suPPorting
problem

of repayment of <
America presents '*
transfer problem that

loans

same

Number 4644

Volume-166

confronted

COMMERCIAL

THE

FINANCIAL CHRONICLE

in World War I and

the latter part of

the week after rising to a new record high level
early in the period. The Index figure closed at 288.55 on Oct. 28, com¬
paring with 291.65 a week earlier, and with 233.71. on the correspond¬
ing date a year ago.

World War II; But there is and
can
be a difference.
the

Some

loans

required

(Continued from

under this

program , can be made
International Bank and.

from the

duction

be repaid to the International
Bank. Some of the loans can be

transfer

through

physical

goods

the
from

reduction

§300
the

far, the
complished

loans.
has not ac¬

program

of years,

such

ity

for

97.0%

either

ago.

labor

American

industry

and

o r

long
would permit the
these
loans
ad¬

period of years,

over

repayment

vanced

Another

method

should

American

loans

the

week
week

one

Current

1,681,700 tons

steel

net ton

ago,

Nov.

users

96.1%

operations

1947.

month

one

represent

month

This

Monday

the

0.9

point

one

increase of 378 cars

above the preceding week.

Europe

Other factors included the favorable

year ago.

It also represented

Export-Import Bank and then
payment in the years to

in 1945.

come

can

the
used

minimizing

would

light
and power industry for the week ended Nov.
1, 1947 was 5,009,286,000
kwh., according to the Edison Electric Institute. This compares with
4.963,816,000 kwh. in the preceding week, and was 8.2% in excess
of the 4,628,353,000 kwh. produced in the
corresponding week of last

the

internally to meet

requirements.

The amount of electrical energy distributed by the electric

relief

own

effect

re¬

this

paying out American
to
bring
relief
to
Western Europe and Great Britain
mean

credit

now

later

and

AUTOMOTIVE OUTPUT RISES ABOVE PREVIOUS WEEK

goods manu¬
Europe that could be

OCTOBER

the forward march of
Communism
beyond
the
"Iron
stop

Curtain" may require another five

of intelligent and construc¬

years

tive help from America.

help

should

made

But this

in¬

j
i

Should this goal be reached or even approached, states this
authority, 1947 will stand as one of the highest production years in
automotive history, being exceeded only by 1941 when 5,108,992 units
were produced.
In 1937, 5,016,437 units were built and 1929, 5,621,045
units, in which a record was achieved.
Production in the United States and Canada during the past
week totaled 105,834 units, compared with a revised figure of

helping people to help them¬
through an organization,
small but competent, capable of
seeing that the basic principles
selves

the

and

sults obtained.

desired

re¬

Last

It should have suf¬

The

inevitable

to what

face

question

Russia

such

will

arises

constructive

the

plan

cars

not go to

Her policy is to
wait hoping that America will fail
or

not

dig coal

the

other

that

Inc.

countries

France
of

did

for

thev

Despite this

failed
times

failures

depression of

Europe

and

but in the

the

British

United

The cost of such
in

out

business

with

loss

or more.

entirely

among

many as a year ago

failures involv¬

Down from 70 last week, 56 concerns

ended, not quite four

when 15 failures

were

reported with

Small failures involving liabilities under
mild increase this week, rising from 11 to 14,

half

the

they

having

were

week's

trade.

total

Up
almost three times

a
as

failures, numbering 32, were
little from the preceding week's
numerous

the

same

week

Manufacturing, with 18, claimed the next largest number of
during the week with no other industry or trade group
as many as

concerns

Geographically, about

failing.

equal number of failures occurred in

five different regions.

Empire

States
a

went

in this size grotip in the week just

concentrated in retail

severe

proportions not only in Western
well.

recession

WHOLESALE FOOD PRICE INDEX OFF SHARPLY IN LATEST
A

downturn

end than the cost of
preventing it.
I do not know whether we have

will

collective
to

act

intelligence or the
promptly enough to

minimize such
believe

that

recession.

our

only

But I

hope

avoiding these consequences is for
the

leaders

our

and the committees of

government

Congress to

act with the utmost
promptness in

developing

plan that- can be sub¬
special-session of Con.gress this fall.

mitted to

increased

Despite the increase of seasonal promotional sales, retail volume
slightly the past week, according to Dun & Bradstreet, Inc.,
Very mild weather in many areas was
believed to be chiefly responsible for the decrease.
Retail volume
was moderately higher than that of
the corresponding week a year
ago with consumer interest centering on staple merchandise.
Resist¬
ance to high prices as in past weeks was again in evidence.
Grocery volume increased slightly with the supply of most foods
plentiful. A slight decline in meat prices was reported with demand
for cheaper cuts of meat, fish and poultry
remaining large. Dairy
products were steadily purchased and very large quantities of sugar
and

coffee

was

also substantial.

and

were

The buying of canned and frozen foods

requested.

Fresh fruits and vegetables remained

plentiful

reasonably priced.
consumer

warm

weather in many parts of the country

interest in heavyweight clothing. Furs, Win¬
underwear attracted little attention.
The

coats and woolen

buying of radios and phonographs decreased somewhat. Good qual¬
ity furniture, draperies and floor coverings sold well and there was
some increase in the buying of kitchen utensils.
Automobile supplies
and accessories too, were in steady demand, together with a
large
volume for sporting goods.
for

the

Wednesday of last week

was

that of

volume

year ago.

country in the period ended on
estimated to be from 7 to 11% above
Regional estimates exceeded those of a year

the following percentages:

New England, 5 to 9; East,
15; South, 2 to 6; Middle West, 4 to 8; Northwest, 6 to 10;
Southwest, 8 to 12, and Pacific Coast, 10 to 14.

ago

11 to

A slight increase in wholesale volume occurred during the week.
Buying was at a moderately higher level than that of the corre¬
sponding week a year ago, and retailers were generally confident.
Large orders were placed as retailers anticipated their requirements
on a long-term basis.
The response to showings of Spring merchan¬

dise

was

enthusiastic with re-orders for Winter articles substantial.

The deliveries of

some

goods improved.

Department store sales on a country-wide basis, as taken
the Federal Reserve Board's index for the week ended Oct. 25,

from
1947,
by 7% from the like period of last year. This compared
with an increase of 1% (revised figure) in the preceding week. For
the four weeks ended Oct. 25, 1947, sales increased by 8% and for
the year to date increased by 8%.
increased

With the advent of cooler temperatures, retail trade here in
in

the

opinion, be greater in the

the

declined

WEEK

will,

important foods this week resulted in a
drop of 12 $ in the Dun & Bradstreet wholesale food price index. This
brought the Oct. 28 figure to $6.78, from $6.90 on Oct. 21, or a decline

was

RETAIL AND WHOLESALE TRADE HOLD MODERATELY ABOVE
YEAR AGO IN LATEST WEEK

Retail

Almost

of 1946.

economic

for domestics

Paints, housewares and wallpaper remained in large demand
along with plumbing and building materials which were eagerly
sought. Unknown brands of home appliances were shunned and the

SLIGHTLY

twice the number occurring in this liability class in the compar¬
able week of last year.

failure

demand

which proved popular.

4,270

or more.

in Western Europe and
that this failure will bring about

three times as
only 22 concerns

ized—that

will have

showed

in the preceding week, concerns
numerous as in the corresponding week'of

$5,000 showed

DOWN

losses of $5,000

Western

recover

in the

was steady with hosiery and lin¬
Some increase in the buying of rain coats was
reported. Men's hats, worsted suits and covert topcoats were
steadily purchased as well as boys' sweaters and wool shirts

decline from 81

ing losses of $5,000

and

invasion

were

when

Western Europe, it is my opinion
that Russia's hopes will be real¬
to

FAILURES

The week's decline occurred

Europe will fail to get together on
a plan of action.
If we fail to integrate our action
as

further influence

buying for import into the United States in the Australian auctions.

creditors.

England will

that

demand for fine

Territory States.

gerie selling well.

After a three-week increase, commercial and industrial failures
declined to 70 in the week ending Oct. 30, reports Dun & Bradstreet,

war.

to take action

24,010 trucks, while the Dominion figure

BUSINESS

1946

will

Active

the

and 2,217 trucks.

failing

sidered

activity noted in domestic wools in the Boston

and in

demand for blouses and skirts

output comprised 99,347 vehicles made in this
in Canada.
The U. S. total included 75,337

and

Western

con¬

was

last week.

Texas

Unseasonably

6,487

cars

of action for the reconstruction of

Europe. It is my
opinion that Russia

the textile in¬

wools was also reported
Improvement was attributed
heavy demand for worsted and fine woolens, assuring capacity op¬
erations for top makers and yarn manufacturers well into next year.
in

ter

FROM PREVIOUS WEEK

week's

country and

authority as to details so
that they can meet changing re¬
quirements that will inevitably
pro¬

There
market

retarded

106,159 units in the previous week and 95,427 units in the com¬
parable period of last year, states Ward's. In the corresponding
1941 week the figure was 92,879 units.

ficient

develop under a five-year
gram of this kind.

LARGEST

Estimated output of 105 834 units for the current week made

followed

FORESEEN AS

October the largest postwar month by bringing the year's cumulative
volume to 4,141,382 units, according to Ward's Automotive Reports,

centive to production—as a means

are

PRODUCTION

POSTWAR MONTH

used for relief work in the United

States.

for

in its weekly survey of trade.

accepting
in

factured

year.

outlook

dustry in the coming year and the absence of heavy hedge selling
against new crop movement.
Buying was more active with reported
sales in the 10 spot markets reaching 584,800 bales for the
week, the
largest for any week in several years. Volume for the week compared
with 463,000 bales last week, and with 160,600 for the
corresponding
week a year ago.
Cotton textile markets continued in a strong posi¬
tion with good demand reported for most constructions at firm to
higher prices.

ELECTRIC OUTPUT 8.2% HIGHER THAN A YEAR AGO

that

goods

our

thus

urograms,

taxes levied
lief

kind

than $2 per hundredweight during

Cotton markets showed increasing strength during the first four
days of last week but lost most of the gains on Friday due to uncer¬
tainties over the program to be adopted by Congress.
Following the
break, prices rallied sufficiently to cause a moderate rise in spot quo¬

increase of 12,370 cars, or 1.3% above the corresponding week in
1946 and an increase of 99,848 cars, or 11.7% above the same week

through

the week. Lambs and sheep strengthened while steers held
steady.

Early strength was influenced by active mill
replacement buying and price-fixing against sales of the staple
to the Commodity Credit Corporation.

ened, with prices down

tations for the week.

FOR WEEK AND YEAR

re¬

belt, and the movement

and

with

compares

and 91.1% one year

ago

decrease

and 1,605,500 tons

ago

corn

A late drop in lard prices that wiped out earlier gains re¬
flected fears that the government
woujd recommend reimposition
of controls over packing house products. Live
hog markets weak¬

will be cut below

operating rate is equivalent to 1,681,700 tons of

one

most of the

were

aloof from the market due to current uncertainties.

quotas for sheet steel

beginning

over

to market is believed not far off.

crop

independently strong in early dealings but declined
in sympathy with the reaction in wheat.
Large flour users held

later

de¬

Loadings for the latest week, Oct. 25, 1947, totaled 954,627 cars,
according to the Association of American Railroads.
This was an

by the
to make

for

$85

weather

warm

new

Oats

RAILROAD FREIGHT LOADINGS ADVANCED MODERATELY

repayment

Congress

construction
Pur

between $80 to

range

of the

type of material.

same

The week's

considered

these

some

sonably

was

steel ingots and castings compared to 1,697,400 tons one week ago,

Repayment in Goods

that

ton higher than

0.9% from the preceding week.

for reconstruction.

now

high and at least $50

new

few months ago, a sharp contrast to bonafide

quotations which

tation would not be destructive of
American

extent this

of this week the operating rate of steel companies having
94% of
the steel-making capacity of the industry will be
96.1% of capac¬

period |
moderate impor¬

The American Iron and Steel Institute announced

protective

prohibitive tariff. Over

serious than at any time since

sible.

10% of the physical quantities of
the production of any American
a

Early strength was influenced largely by continued government
buying of cash wheat and flour. Demand for corn fell off and prices
displayed an easier undertone throughout the week. The crop was
said to be practically out of danger of frost due to continued unsea¬

steel

running much larger than had been expected. This means that early
1948 will see the steel industry still faced with the difficult problem
of distributing available supplies in as equitable a manner as pos¬

plan to permit a generalized
quota Of imports, duty free, up to

having

the President would ask for drastic measures in order to combat
the upward trend of commodity prices.

expectations makes for further confusion. Some companies have been
swamped with new steel orders against 1948 quotas, the volume

new

now

News that January

great deal.

Our Congress might consider

livered for the

sible the repayment of these

it is

would

sales of cold-rolled material have been made at

some

ton—a

case

mill

walls

tariff

After reaching new highs for many years, grain prices turned

sharply lower late last week due to liquidation prompted by the
calling of a special session of Congress for Nov. 17 and fears that

distribution

consider the

The gray market is flourishing to such

week that

would go a long way to make pos¬

industry

evidence this week that steel consumers

the war.

other countries to America.

The

the

match for the abilities of industry experts,

shortage at the present time

But the bulk of these loans will

repaid

With

Coincident with the tight scrap situation there is unmistak¬
able

years.

controls.

produce anything but chaos.

channels of foreign trade over fu¬

distribution

strict

picture already

by private investment bank¬
and repaid through the normal

have

under

inconceivable that government control over steel distribution

made

ture

page 5)

they : will protest violently if an attempt is made to put domestic pro¬

can

ers

(1867) V31

many

1.7% in the week.

The latest index compared with $6.34

for the

corresponding date a year ago, or a rise of 6.9%.
Moving upward in the week were wheat, barley, butter, currants,
steers, and lambs. Declines included flour, corn, rye, oats, beef, hams,
bellies, lard, cottonseed oil* eggs, potatoes, and hogs. The index rep¬
resents the sum total of the price per pound of 31 foods in
general
use.

DAILY WHOLESALE COMMODITY PRICE INDEX TURNS
LOWER ON SHARP DROP IN GRAIN PRICES

Influenced largely by the sharp slump in grains, the Dun & Brad¬
street daily wholesale commodity price index turned downward in

New York last week quickened, reflecting an increase in depart¬
ment store volume estimated at close to 50% above the like

period of 1946.'

This increase, however, was tempered somewhat
by the deliverey strike last year which was just coming to an end.
In food lines, wholesale prices veered downward but retail

levels held at recent peaks.

According

the

Federal Reserve Board's index department
City for the weekly period to Oct. 25, 1947,

store sales in New York

increased 30% above the same period last year.
This compared with
an increase of 24%
(revised figure) in the preceding week. In using
year-ago

comparisons for the above weeks allowance should be made

for the fact that in the cities of New York and Newark work

stop¬
in the trucking industry prevailed.
For the four weeks ended
Oct. 25,1947, sales increased 28% and for the year to date rose by 10%.
pages

COMMERCIAL

THE

(1868)

Thursday, November 6, 1947.

FINANCIAL CHRONICLE
order to prevent any
ness

The Investment
offset the shrinkage in shipments or fall of 1947—and yet it has not
(Continued from first page)
come.
A composite forecast of 13
-and everyone, of course, knows to countries not included in the
Two areas not economists published in December
that when any organization of hu¬ Marshall Plan.
of 1946 concluded that industrial
man
beings, in whatever form, included in the Marshall Plan,
ceases
to meet the challenge of namely Latin America and Can¬ production in 1947 would be down
ada, imported far more of our 10% from 1946 and that unem¬
growth, retrogression sets in.
While the thesis of Mr. Toynbee goods in 1946, and so far in 1947, ployment would be relatively high
by midsummer.
And so it has
may
be
unduly pessimistic,
it than all of Western Europe and
several times the goods purchased gone.
grows increasingly clear each day
In the light of the many fore¬
Canada and Latin
that even though the defeat of by England.
America are also running low on casts which have proven to be so
Germany and Italy was a victory
dollar balances, and restrictions far from the facts, one naturally
over the forces of military aggres¬
have
been
placed
on
certain has great reservation in placing
sion, it was not a victory over the
his own views on public record.
basic economic and political prob¬ classes of imports by several im¬
But when one deals with other
lems that have been at the root portant Latin American countries.
The total excess of American people's money, either as advisor
of
Europe's troubles for many
or trustee, he must at least nave
decades.- Quite the contrary, the exports over imports to all coun¬
tries has recently been running at the courage of his convictions and,
tremendous destruction of prop¬
an
annual, rate of approximately beyond that, must have a basis
erty, life and social values has ac¬
18 times our average favorable for his convictions.
centuated the problem until it is
A
careful examination of the
viewed almost with despair by balance for the 1936-38 period,
and not far from twice as large correlation of incoming orders re¬
many observers.
It is almost, as
as
the 1946 balance.
Unless, we ceived by various lines of busi¬
Walt Whitman so pessimistically
are
willing and able to continue ness with their current level of
stated many years ago:
"That from any

matter what, shall come
make a greater

cess,

fruition of suc¬

iorth something to

part

balance

this

finance

large

substantial shrinkage is in¬

dicated.

third fact would seem to

struggle necessary."

period of currency adjust¬
growing pessimism with
ments
impends.
The
English
respect to European recovery and
the possible implications to Amer¬ pound and most of the European
currencies are overvalued in
ica is no doubt one of the serious
that

This

psychological problems confront¬

and must

the dollar

terms

markets. Nor is adjusted. The present official rate
of
about
4.02
for
the
English
reason to wonder at

ing business and
much

there

this.
There

time not so very

ago

years

many

was

when the failure

large Middle European bank
set in motion a chain of events

are

serious repercus¬
markets. But here
confronted with the ap¬

caused

which
sions

our

parent failure of a far flung em¬
pire, and of a continent, em¬
bracing a substantial part of the
This is obviously an

event with¬

parallel in history. It is a
business consideration
of unprecedented magnitude and
one which,
due to the continua¬

out any

term

tion

our

inflationary
people have

internal

boom, the American

black market in francs is
of

ter

wonder that in their
to appraise the effects

any

endeavors

of these events the American peo¬

ple are confused and are becom¬

major

currencies might aid Euro¬
exports, in due course this

pean

adverse reper¬

action could have
cussions

particu¬

prices,

our

larly agricultural, at such time as
other countries achieve a better

supply and de¬

between

balance
mand.

conditions

different

security

and

business

would

markets

Hypochondriacs"
it

gain her export trade.
While a readjustment of Euro¬

American

and

hurdle
front of France's effort to re¬

Under

Nation of Economic

mat¬

knowledge,

common

condition

this

yet to come to grips with.
"A

pound at 4.86 follow¬

ing World War I. French currency
conditions are deplorable and the

pean

peoples of the world.

long

pound is probably even more un¬
realistic than was the reestablishment of the

with

regard

ap¬

prehension the prospect of a de¬
in export trade.
That the

cline

business man or investor
presently more concerned
is doubtless due to the continued

average

not

has termed it, a high level of domestic demand
nation of economic hypochondri¬ stimulated in large part by the
acs?
massive inflation of our purchas¬
And yet, even though the prob¬ ing media.
lem is still too vast to permit of
However, as we are in the sev¬
evaluation, there are some facts enth year of a major inflation, it
ing,

someone

which have
The

erown

fact

first

quite clear.

that

become

accustomed,
for
many
years in the future, to living and
doing business in a world en¬
vironment
which is
continually
subjected

being

and

tensions

As the ocean

shocks from abroad.

continues turbulent long after the

gale has abated, so must we ex¬
pect friction and turmoil for many
years.
However, in our present
impatience with the slowness of
European recovery and the con¬

prices, and with
the ex¬
business, it is very

cellence

difficult to

see

how conditions

can

tinuing political disputes it is well
recall that it took the better

improve much or long continue at
the current satisfactory level.

part of eight years following the
Armistice in 1918 for Europe to

When

reasonable degree of or¬
poltics. At that
time the problem was, of course,
much simpler.
regain

der in finance and

The

will

Come?

Readjustment

question

great

economic

"when

readjustment

us?" This is a question
which has been debated for well

come upon

over

Peak

Have Passed Export

Will

two

years,

and

date

the

prophets have failed to arrive at
A

second

doubtless

fact

that

have

passed the peak of our
For the past

current export trade.
year

our

tween

exports have
and 15% of

10%

run
our

be¬
total

conclusion which has been sup¬

ported

ments.

The

economists
that

subsequent

develop¬

predictions of
in

1945

the

many

effect

V-J

or about twice the prewar
percentage, and, in terms of dol¬
lars, about five times our prewar
export volume. This vast export
business has been
largely sup¬

period

Day would usher in a
of
high
unemployment

proved

ported, as every banker knows, by
gifts or credits, and there is an

that

business

obvious limit to that process.

severity.

output,

Even

under

though the aid requested
the

Marshall

Plan

most
ers

erroneous

unanimous

view

the

observ

in 1946 that agricultural prices

would decline

The
and

this

sharply in 1947 and
inaugurate
a
readjustment of some
would

conference

business

government

economists

held

substantial

which has occurred between gov¬

however, that ernments and municipals in the
over-all
industrial
profits have past 18 months.
reached or passed their peak. With
In
April of 1946 the "Bond
the progressive passing of "sell¬ Buyers Index" indicated a
yield of
ers' markets" in individual lines 1.29% for 20 municipal bonds and
profit margins should return to 1.21% for U. S. Government bank
lower levels and selling and serv¬ eligible 2V2S of 1972/67 after de¬
probable,

There

increase.

should

costs

ice

duction

is also little doubt that inventory

the

present

corporate

income tax.

At the end of September, 1947
have aided earnings in
many cases. The profit experience the yield from municipals had in¬
of most retailers in the first half creased to 1.82% while the
yield

profits

indicates how quickly on governments had only in¬
profits can decline when inven¬ creased to 1.32%, In other words,
tory losses occur and competitive from a point where the yields
of this year

return.

conditions
It

not

cross-current

almost

were

the

surprising that
of uncertainty

bonds

have

identical
declined

municipal

that

the

re¬ !

yield is now almost y2 of 1 %
garding conditions abroad and the more than the yield realized after
prospect for continued excellent
[corporation taxes on long term
business
at
home
should
find
governments.
diverse reflection in our securities I
Investment quality preferred
market.
The

lers

the increased demand for business

two

due to growing junking of
older
models,
more
cars
are
needed now than on V-J Day.

credit.

porting

type

well

fact,

imately 4,000,000 cars and trucks
will be

produced this year—a rec¬

ord only once

indicate

that

eral years of
fore

exceeded—statistics
we

must

have sev¬

balance

during the past

governments

result of

year as a

Corporation

Bonds

Corporation bonds have been in
supply, and another large wave of
financing is scheduled for this fall
and

This

winter.

should

tend

depress further the prices of cor¬

large production be¬ porate
issues, and the old spread

reattain the

same

degree

relationship
between yields
on
transpor¬
corporate high grade issues and
prevailed at the time
governments is gradually being
Harbor.
Furniture is

of available automobile

tation which

Pearl

still

the ending
on

restored.

heavy

Nov. 1

demand, and with

of installment controls
the prospects are

for this line for some

good

time ahead.

costs, and rental

building will not

The recent failure of the offer¬

and the construction of
dwelling units should be good for
a
sustained period.
Based on a

lustrated
of

by the fact that today
major statistical re¬
agencies with large in¬

the

opposite

are

counselling

courses.

However,

one

can

have

any

confidence in the indications that
we

probably will not experience a
readjustment
within the

major

months, and if the old
relationships mean any¬
thing in this hectic world, good
quality
common
stocks
appear
statistical

undervalued.

against

When

rise

the

the ratio of stock to

ing of the Pacific Gas & Electric
bonds
is
a
significant develop¬
ment.
In recent years insurance
companies have been large buyers
of this class of bond and at prices

attractive.

pear

measured

commodities,
bond yields,

the

time

particular

levels
the

case,

prevailing at
In this

offering.

however,

the

price-earnings ratio, and when
change in the na¬
tional income, stocks seem to be

correlated for

When

compared

past selling levels they do not ap¬

cheap.
would

seem,

however,

though the historic selling levels
cannot alone give the answer, as

major insurance companies were
very
light buyers at the issue
price despite the fact that the

the tremendous dilution which has

yield

lar has

in
a

available

excess

was

considerably

prevailing levels.

result the underwriters were, left

really boom until rental controls with
end.
However,
a
great demand issue.
exists,

unlisted markets and is further il¬

vestor distribution

Position

While it is estimated that approx¬

Home appliances, other than smail
approaching an economic radios,
should
be
in
demand
readjustment. With most all seg¬ through 1948, although in a more
ments of industry operating at or competitive market.
near
capacity, with
practically
(3) Construction, heavy indus¬
full
employment
and
at
high tries and raw materials — Indus¬
wages, with prospects that our na¬ trial
and
commercial
building
tional income this year will reach
should do well for many months
a new high at around $190 billion,
ahead.
Home building will con¬
with farm products in great de¬
tinue to be retarded due to high

other indices attesting to

of
In

of activity should do
through 1948.
Automobiles
remain
critically tight and, in

this

ually

mand and at high

amount

this connection it is interesting to
note the relative change in yields

Peak of Profits Reached
It

unsold bonds in dealers' hands.

I stocks are, of
course, highly sensi*
great postwar activity has tive to changes in bond yields,
caused a large increase in com¬ with the added
point that due to
(1)
Consumer
non - durable mercial and industrial borrowings, the fact
that most issues have no
goods—The soft goods lines were and as a result the bond market
sinking funds and, therefore, no
heavily bought by merchants and has been in a slow decline for the
, retirement date they tend to flucthe public during the spring of
past 18 months.
We have com¬
1946, and by midsummer it ap¬ pleted two major bond cycles so ) tuate more widely than bonds. Of
late the preferred stock market
peared that supply was exceeding far in this century, and it is prob¬ has been under
pressure as a re¬
demand, resulting in a reduction able that we entered upon a third
sult of the changing interest rate
of about 30% in new orders by in the
'
spring of 1946.
and the further fact that corpora¬
the fall. With, however, continued
How long the present cycle will tions have been sellers. New isgood domestic and export demand last and how far it will go is, of
jsues of preferred stocks have not
last winter and during the spring
course, tied in with the credit and gone well, and investment bank¬
and summer of this year the sup¬
debt management policies of our ers have become
very cautious in
ply has been well absorbed, and government and, as such, the out¬
bidding for this class of issue.
merchants are now finding them¬
come is unpredictable.
The pres¬
selves short of supplies. As a re¬ ent
Action of Stock Market
downswing should be orderly
sult the non-durables should do
and should not be too pronounced
In the face of record peacetime
well this fall, but it is doubtful so
long as the Federal Reserve business volumes, high earnings
if the present high volume can be
continues
to
provide
adequate
(and inflation the action of the
sustained much into 1948.
support for governments.
As is
jstock market over the past year
well
(2) Consumer durable goods—
known, however, corpora¬
(has puzzled investors. This perThere is still a large unfilled de¬ tions,
insurance companies and plexity is evidenced by low vol¬
mand for most durable items, and banks have been substantial sel¬ umes of transactions on listed
and

activity sheds some light on the
subject.

should be clear that we are grad¬

must

serious busi¬ there

setback at least prior to No¬

vember.

occurred in

as we

enced

This

change

of the
following

closely on the heels of the disap¬
pointing sale of the Duquesne
Power & Light Co. financing, indi¬
cates a major change in point of

the value

of the dol¬

doubt altered the dol¬

lar-price relationship for equities

just

substantial portion

incident,

have doubtless experi¬
permanent

long

term

commodity and
wage levels. As a measure of the
change in the relationship be¬
our

tween stock and commodity prices
projection
of
new
orders, we
it is interesting to note that at the
should begin to catch up on the
view towards the bond market.
peak of the 1932-37 "bull market"
backlog of heavy industrial equip¬
Bureau
of Labor
Statistics
There is considerable talk in in¬ the
ment orders by the spring of 1948
vestment banking circles to the commodity price index stood at
when some slowing down should
of the Dow Jones
effect that good grade corporate around 40%
become
apparent.
The demand
stock index, whereas
bonds are generally headed for at Industrial
for raw materials is so great that
the commodity index is
least a 3% yield basis in the near today
the
steel
industry,
non-ferrous
future. So long as the major in¬ equal to approximately 87% of the
metals,
petroleum, lumber and
stock index.
surance companies continue reluc¬
paper
industries should all bo
tant to buy except at concessions
It is probable that the earnings
busy through 1948.
it is reasonably certain that bond of the stocks
comprising the Dow
Study of other segments of our
prices will be adjusted farther all Jones Industrial average will ap¬
economy reveals promising pros¬
the line. A great deal of the com¬ proximate $18 to
$19 per share for
pects, and it would appear, there¬
ing financing is for new money the current year. If so, this will
fore, that, even though we experi¬
purposes and this will subject the be the highest rate
of earnings
ence
a
reduction in our over-all
bond market to a substantial test. since 1929 when
$19.94 was re¬
export trade and some slowing
corded. The earnings in 1946 were?
So far as private investors are
down in certain lines, the total
concerned there has been no real $13.60,
which in turn exceeded!
domestic demand, buttressed by
demand for high grade bonds for any year subsequent to 1929.
high wages and savings, is such
It is reasonable to
as
to indicate a good degree of many years, and as yet there is no
assume, how¬
visible revival in interest even at
ever, that the earnings of many
activity through all or the greater
the higher yields.
corporations this year include a
part of 1948. In addition, as we

Municipal bonds continue to be substantial amount of non-repeti¬
Congress, under the auspices of the National turn into an election year, we
in large
this support alone will not be suf¬ Industrial Conference in late 1946 may expect the Administration to authorized
volume by tive "froth" in the form of inven¬
ficient to maintain both European was virtually unanimous in ex¬ do all in its power to create a states and municipalities, prices tory profits and low selling costs.
trade at its recent pace and also pecting a recession by the spring favorable business atmosphere in have softened substantially, and After eliminating this froth the
is granted in full by our

real earnings are

$15

per

share.

Even

earning

probably nearer
$18-$19 per

than

this is

stocks

and

year,

have reflected it

fine

net

prices

price of 176.39
total

are,

Jan. 2, and the

variation in

the

Dow

Jones

Industrial average this year either
side of this figure has been less
For

the

six years

1935 to

1940

price-earnings rela¬
tionship was 16.2, and for the six
years 1941 to 1946, inclusive, the
relationship was 13.35.
For the
12-year period
embracing
s i x
average

years when our economy was not

measurably disturbed by war and
six years of preparation and
par¬
ticipation 4 in the war, and the
period since, the average priceearnings relationship was 14.77.
If any of these
relationships are
applied to the prospective earn¬
ings
for
1947,
a
considerably
higher average market value than
.

prevails would result.

now

It is

recognized that many ana¬
lysts feel that the Dow Jones In¬
dustrial

chance of
The
and

average

enough, but for
poses it would

not

broad

illustrative

Considering the advanced
the business cycle only
stocks
with
good earnings and
of

ing

Future

bond

Stock

the better situated

the

spread

some¬

between

stock

bond

yields, the relationship
is still significant when
judged by

past records.
of

Using a correlation
prices
and
individual

stock

liquid

and

resources

come

national

measure

in¬

responded to the great change in
economy flowing
from the

our

Your

speaker

would

emphasize quickly and most em¬
phatically that he is not urging
the

immediate broad purchase of
nor
is
he
endeavoring

stocks,
to

to say,
tistical

soothsayer. He is trying
however, that based on sta¬
relationships the value of

good

stocks has

fully

not

reflected

commodities,

real

a
promising trade future
oils, the autos, the chemi¬
cals, the farm equipments and
electrical equipments. The build¬
ing industry faces excellent pros¬
pects, but the stocks of most of
the older line companies are sell¬
ing at relatively high prices. For
excellent yields and stable earn¬
ing power the better operating
light and power stocks appear
attractive, while for sound under¬
lying asset value the leading in¬

over-all

price

and

lieved

relationships
And

level.

sooner

investment

selected

that,

will

in¬

are

common

from

the

in
with

government

the

leading

above

groups

investment

bonds

and

carefully

chosen medium maturity corpora¬
tion bonds will return a reason¬

ably satisfactory yield and at the
same
time
will provide a
good
measure of protection for income
and principal against either in¬
flation

This

deflation.

middle

the

road

policy which might easily be criti¬
cized for lack of imagination. In
response it might be said that this
is

time

middle

policy and that, more¬
there is plenty of scope for
imagination and managerial abil¬
ity

involved

the

stocks and

common

in choosing and
stocks.

mon

quality

substituting com¬
is

here

that

judgment will

the

adjusted.
from

moreover,

the

investors and

institutions

adopted

"formula

between

stocks.

rigid

plans"

bonds

so-called

partial sub¬

and

rigid plan

common

be sat¬

may

isfactory for certain investors, but

ture with all of its

political, busi¬

and

currency uncertainties,
partnership in leading well en¬

trenched

and

competently
American
businesses

aged

floubtiess

man¬

will

profitable

and sound.
No

one

can

prices will do
of time
a

true

fund

over

not

what

say

and, in
investor

—

short period

the last
such

—

stock

analysis,

concerned

trust

much

with

price

sound

underlying value and in¬
potential. Judged from this

come

point

sound

fluctuations

view

stock

there

values

with

are

many

available

the market today.

Under

the

perplexing

what

should

vestor

experienced investor

trust administrator would

care

gram.

investment

individual

in¬

trust account follow to¬

day?

In considering this question
investors with very high incomes
will be excluded, as for them the
main emphasis must be placed on

blueprint

subject to
istence

plicable to a good many accounts
and, in addition, this speaker does

vestor and for trust funds in states
which have adopted the Prudent

concept

quality bonds

a
—

turities— and

policy of good
with spaced ma¬
stocks

common

this

their

time

prices

high and, if

for
are

not

the

stages

mism

and

still

we are

historically
a

cycle

pessimism

investments

committee,

and,

opti¬
where

handled

are

both

declining

reduce

The Impact of the Grain Short¬

The food situation is the most

age.

serious.

very short corn crop at home,
coinciding with a bad crop year

food

grains

the

though

domestic

Europe.
wheat

for

feeding

large
wheat to livestock.

Al¬
crop

amounts

the

appointed track.
In

this would

summary,

time

dence—a

for

time

appear

cautious

for

while the traffic

ally turning from green to yellow
they are not yet red.

will

be maintained at recent levels.

amount

time, the domestic de¬
for
grains, and for
meat, poultry, and other food con¬
tinues to be
very
high despite
record prices. Food price increases
have already become serious, and
further food price increases would
decrease the

value

tween

The

with

John
La

the

Stock

Financial

ILL.—Everett
become
O'Brien

Salle

New

Chronicle)

low

of each dollar

moderate

the levels set

the

in¬

demand

level,

conservation

for

its

near

the

maintain

fit,
ough

Steel

products
1947

during
at

was

than

contrasted
lion

annual

less

1939.

the

first

half of

steel

enormous

whether

the

well

associated
&

Street,

York

and

Co., 209
members
Chicago

Exchanges.

assure

and

can

even

The

Financial

Chronicle)

well

afford

increase

commodities.

will lessen

(Special

The

Financial

McClellon

ated

with

Nathan

208 Middle Street.

Fay

the

which

heavy

goods

supplies the

make for sales at

long

the

industry
which

wages

the retail level.

heavy industries

prosperous, any correction in
the soft goods industry must be
shallow and of short duration.
are

domestic

These

some

Wrong?

present time, nearly 1&
the

after

stock

involve

measures

for¬

other

simply

made

that, having made
stock

and

levels

Only

future

could

pre¬

happening,
hardly seems likely.

and

this

The

tions

public has

accepted for a
the dire predic¬

half

of foreign political troubles
business depression

domestic

only to find that

bodings
come

seem

from

and

year

and

most

are

demand

the

both

same

American

the

effectively

food

and

uses.
The two types
interrelated, because

£oreign

useg

distribution
necessary
domestic

consequences

can

only

coordination

market.

The

be dealt with
through careful
all

takes

cases

strategic spots

measures

undertaken.
The

cific

relative

shortages

commodities

controls,

require

spe¬

export

now

none

discouragement of misuse or
use, efficient transpor¬
tation and distribution, and the
excessive

curbing of speculation and hoard¬

ing of goods.
The

hand

near

expenditures, stimulation of

sav¬

ing, and the enlargement and ag¬
gressive use of measures to cont r o 1
dangerous
expansion
of
credit.
The

aid

proposal for new foreign
requires that we face with

greater wisdom and courage than
ever
before the dangers to our

Foreign aid to date has been
Co., financed with revenues derived

whole

the

that

time

will be for¬
gotten and stocks will again be
appraised on their earnings, their
asset
A

values

their

and

rise

startling

dividends.

the

price

stocks would then occur,

common

especially in those equities, uuexploited in the 1942-1946 mar¬
ket, which represent ownership m
those
heavy
goods
companies
whose backlog of orders will take
years

to satisfy.

economy

Timberlake Co. Adds
(Special

The

that are now re¬

Financial

Chronicle)

PORTLAND, MAINE—Harry E.
Rowe has become associated with
&

Street.

191
Middle
-formerly with

Co.,

was

Coburn & Middlebrook.

Joins Ketcham &
(Special

The Financial

Nongard
Chronicle)

J.
Arthur
associated
with
Ketcham
&
Nongard, 10>
West Adams Street.
He was for¬
CHICAGO,

Madden

has

ILL.

—

become

merly with Eastman, Dillon & Co.

John R. Richards Dead
John

Richards,

vealing themselves in the form of
,

have

when

of value will over¬
come
present fears, and that a
complete change
of psychology

Timberlake

general inflationary threat

resulting from the combined im¬
pact of foreign and domestic de¬
mand requires the continuance of
tax
revenues
at present
levels,
maximum economy in government

Fiscal Impact of Foreign Aid

of the fore¬

pessimists

the

I believe that the time

true.

allocations for domestic

use,

other

itself

earnings and divi¬
decided recession
in
the
reasonably

present

business

this

correct

commensurate

witnessed.

stock

mistake?

mistake, the

will

market

rise

will

the

commodities

place at

economy

the
a

Is it not equally logical to believe

all the present babble

such

and

case

market

find the business

reason

market

im¬

depending

measures

administration

the

Market

the

pull

the

which

through in-

Was

Domestic

from taxation and not

steel require selective

imports by hastening the revival
of production in Europe.

MAINE —Haroid
has become affili¬

moderate

economy

our

the

this:

continue

for

shadowed
a
decline
in
heavy
goods, not realizing that they were
expecting the tail to wag the dog.

upward

Chronicle)

PORTLAND,

severe

seriously inflationary con¬
sequences that would result from
mismanagement of the situation

The

In the

demand

the

public, during the past year,
the idea that a falling
the soft goods industry fore¬

off of

vent

The

shipments of these

the

into

and

upon

near

Aid

eign aid and related questions of
domestic economic policy.

shortages
INDIANAPOLIS, IND.—Robert
V. Sloan
has become connected are not serious (for coal, the prob¬
lem is mainly one of transporta¬
with Herrick, Waddell &
Co., Inc.,
tion),
while
shipments
abroad
Merchants Bank Building.

With Nathan C. Fay

both

distribution to

restoration, the domestic
to

economy.

foreign aid program will

new

adopt.

But

is a large foreign need to
quicken the process of economic

(Special

The
hit

with

pact

situation

for

markets

tempo olt
the soft goods industry, the only
weak
segment of the economy,
immediately quickened.

dends?

our

upon

translated

fertilizer,

economic reorientation of

have

there

With Herrick, Waddell

to obtain

most urgent uses and to pre¬
vent a spiraling of prices.

coal

an¬

much

food is

Coal and Fertilizer.

wholesale

the

Store buy- £.

so.

therefore, swarmed

ers,

picture about as favorable as when
the top was made.
Is it not, there¬
the economic fore, logical to assume that for

Foreign

for

run.

domestic

however,

weil-balanced

restoration of Europe will bene¬
jjj our own Economy by enabling

which'of

Softening the Impact of

into further increases in the price
of steel and steel products

ing steel

and

sources

restore

increase in

would

wherewithal to do

topped out,

ex¬

and

war.

executives,

chandise in order to satisfy its
long deferred wants and had the

Europe which would be detrimen¬

much prospect of large increase in

may

relation,

buyers' strike, the public was
maintaining its desire to buy mer¬

tal to

1947, the

production in the short

in
ap¬

months

private

| force

steel

situation

Some

faced.

In ,he ,on

using industry, the rela¬
tive steel shortage is of serious
proportions,
and
there
is
not
our

mil¬

available

domestic
consumption
higher than before the

owing to the

must

World trade

half million

Retail
of

rapidly
i

tons,

1939 to

nual rate of six and
tons

short

than

Although

half million tons in

amount

which

rapidly

found that in spite of predictions

and

rate

from about two

rose

coun¬

"more goods by advanProducts.
Our '
tageous trade. On the other hand,
of rolled
steel | a cessation of foreign aid would

million

with

tons

ports

nutritional

the first half of

other

expose

Merchandise

stores

to current sales.

loans from the International Bank

measures

"eeds satisfactorily al-

and

trade

This will

of 1947 buying"
figure which was

minimum

rapidly qualify these countries for

Se7-%

production

is pro¬

sales.

department

outright gifts to meet emergency
demands,
however, will
more

other

not luxuriously.

Steel

export

test

the supply here would
a

that. aid

half

food

and.

healthful

Foreign Aid

extent

American
industry to added competition, a

postwar

With such

be¬

gross

Implications

Long-Range

the

tries.

to regulate use and hold

country.

our

repaid only through restoration of

prices in check will be needed in
this

ranged

vided through loans, these can't be

by foreign need, and

domestic

has

product, and will be less
future, and our general
capacity to support such
program cannot be questioned.

remains

aid

and

first

than

The

them.

use

reduced to

proached

the

Some

inflation¬
ary price-wage spiral which could
adversely affect the whole econ¬
omy. If wheat exports continue at
and threaten

come,

financial

ditional hardships upon American

measures

not

national

of foreign aid extended, work ad¬

families

would

exports financed with

government

both

considerably or
prog¬
resses satisfactorily depends upon
the use of vigorous, affirmative

With John J. O'Brien

same

mand

therefore

and

for still higher taxes
anti-inflationary
measure.

need to

worsens

(Special

program

levels

the

less

foreign aid, such a new
would not increase in¬
flationary pressures above recent

pact

connected with the steel problem.
The general conclusion regard¬

but

(Continued from page 3)
in

was

would be less than the recent im¬

confi¬

deliberations and decisions

keep

certain,

Forecast

while

call

Exports of wheat
the

taxes

Further, since the general impact
of a
new
foreign aid program

record

observing that
lights are gradu¬

face

squarely,

A Stock Market

On the other

should not call for increased taxes.

level, adverse corn
crop developments and high meat
prices have provided incentives
was

level

hand, from the budgetary stand¬
point, a new foreign aid program

The problem stems from

for

the

such pressures exist.

give an additional infla¬
tionary
impetus
to
the
whole
economy. High domestic and for¬
eign demand for industrial and
agricultural machinery is closely

serving

that

they are in relatively
short supply in this country.

ply

suggested

reason

whereas

ent

Straight
investment
preferred stocks without any con¬
are

ex¬

chief danger here is that this sup¬

suggested.

rights

mere

pro forma blueprint,
however, is of great value for its

feel qualified to discuss this
specialized subject.

individual in¬

are

influence in moderating at differ¬

not

average

should

South

ap¬

change. The

most obvious answer. Considera¬
tion of real estate is also omitted
for the reason that it is not

version

forma

pro

blueprints

all

CHICAGO,
Morgan
has

Man

pro¬

should always exist, but

taxes, and spaced maturity munic¬
ipal bonds would seem to be the

For the

ever

automatic

program

current

circumstances

policy

the main it is to be auest.ioned

whether

prove

items

key signifi¬
cance because foreign demand for
these goods is especially urgent

ap¬

standpoint of the longer range fu¬
ness

tilizer

total

Some

problems

have the courage to

creasing the national debt. This
policy should continue so long as
our
own
economy
continues to
operate at high levels and under
inflationary pressure.
Even had
there been a smaller foreign aid
program in the past,
and even
without a new foreign aid pro¬
gram, it would be undesirable to

Food, steel, industrial and agri¬
coal, and fer¬

bonds and

parent.

domestic

Specific

cultural machinery,

changing the percentage invested
in

gram1 compels

remedial and preventive measures
available to us are adequate if we

Commodities

of'\ standards,

problem

stitute
for
judgment in accom¬
plishing the change in percentage

be¬

these

Problem

road

have

The

measures

over,

estate

later

stocks

teresting.

national

wage

that

bank

and

surance

strategic spots in the
The foreign aid proH

economy.

(Continued from page 17)

Il¬

change in
income,

and bonds the enormous
our

companies.

the

war.

time for buy¬
situations but

face

investment

purchasing power, it would ap¬
pear that stocks have not yet fully

ac¬

lustrative of groups which appear

combined

increase

time for cautious confidence in

stocks

Prices

recent

yields has narrowed

what
and

the

marginal

into

companies
While

should

records

quired. This is not

are

pressures at

Foreign Aid Burden

proportion between bonds
stocks naturally must

day.
stage

(1869) : 33

common

according to circumstances,
but it is suggested that between
25% and 40% would be proper to¬

CHRONICLE

Economic Advisory Council Reports on

vary

pur¬

to suffice.

seem

FINANCIAL

term recovery.

near

dividend

than 7.5%.

the

cycle,
substantial capital
shrinkage may occur with little

bond

should

generously.
the average,
however, not far from the closing
Stock

COMMERCIAL

THE

Number 4644

Volume 166

Hill Richards &

relative shortages and inflationary

is dead.

officer of

Co., Los Angeles,

(1870)

M Sound Bank Loan
I

think

must

remember

level

that

(Continued from page 6)
accounts receivable, mort¬
gage loans, etc., but if need be
lines of business as. well. Loaning

drop
this
will
automatically tend to
bring a reduction of volume. Also,

policy should also be able to give

there is almost

concrete

not

should

bank

whether

answer

encourage

itself.

just

the

are

circumstances.

greater obligation on our
part to discuss such matters with
me

This spells out for

clients

some

who

not

may

facilities within their

the
organi¬

have

own

zation to formulate plans against
the time when it might become
essential to

competition. The answer to this
one should depend on the analysis
of our own position, not on "keep¬

From

the

Points

operating statements

and budgets which you and I see

May I

Generalizations

going

eralizations

question

with

would

this
first is

respect

points

ization who has to do with loan¬

ing should know clearly what the
policy is and why it is. Secondly,
loan policy should be the subject
of periodic review based on peri¬
odic

analysis.

jectives.

Third,

Passing
The
of

Upon
second

this

importance of

one

words which
all

nine

those

can

alternative

this

struct

foolish
John

the

nique

on conducting a coal strike.
It might not be amiss to point out,

however, that those of

who had

com¬

1932

sales had

declined

$70 billion or one-half of
All corporations in

y/as

Those

posed to

who

liquidation.

credit

first

ex¬

the

were

work

late

thirties and early to middle forties
-saw
another picture.
There the

underlying

business

strong and
tion

that

required

to make bad loans.
that

tide

clearly in

management

was

real

the

recognize

those two points of view.

keep

genius

seems

must

It must

of balance between

sense

ulcers of the thirties and

vim,

vigor

and

the

vitality

of
breakfast club of the forties.

However,

want

specific

direc¬

one

than

that.

the

sales

than

are

times

currently

are;

rate of substantially
twice

the

1936-39

Corporate profits before
running at about five

the

leverage

'36-'39

The
either above

average.

as we move

below the breakeven point accelerates rapidly. We are not here
or

considering the widely debated
subject of whether business prof¬
its are or
are
not
"too big"—
whatever

that

term

may

mean.

After

and I, or our associates, have
done the all important
analytical
job on a credit up for considera¬

you

tion

I would like to

suggest that
we
put in perspective, take the
long range view of (1) the break¬
even
point of the borrower, (2)
•

the

effect

have

rower's

which

our

loan

may

the safety of the bor¬
equity; and (3) the ef¬

fect which

our

loan may have

the business picture in general.
As I see it, those three points
are

closely inter-related.

On
us

breakeven

think

that

applicable

only

prises

let

agree.

The

the

owner

points, if any of

this

is primarily
large enter¬

respectfully

smaller

the

essential it

dis¬

business

for

the

partners to know what

volume
J, even
v

they must do to break
at a given level of costs, and

what can be done tot reduce vari¬
able expenses should volume
drop.

level.
It

only desired to point out

that when sales do decline profits
go

much

fore

and
all

and

rapidly.

reasonable

seems

done

seen

the

recent

total

the

amount of retained

few

es¬

private
over

20 months and has

despite

Just

investment.
no

appreciably higher

the past 18

substantial

commodities,
has
by about 11 points or

just short of 8%.
It would be

earnings.

straws

indicate

by $6 billion, while

notes

and

our

customers

you

should

ably the highest dollar breakeven
level

record.

portant— what

agement

Even

plans

have

does

im¬

man¬

for

moving the
breakeven point to the left, should
developments make this neces¬
In

other words, we should
present sales, breakeven and

sary.

profit

levels

perspective

and

ask ourselves what

happens, who
happen to and who pays
for
it, should that perspective
change without compensating ad¬
justments.
does

Borrower's

Equity

The next item which I believe
be put in perspective is

should
the

effect

grant may have

which

any

loan which
on

the

bor¬

accounts

almost

amount. Martin

the

cur¬

payable

the

same

Gainsburgh, Chief

Economist of the National Indus¬
trial
of

Conference

Board, is author

speaking of smaller
enterprises, that even be¬
fore the
recent bulge
in prices
starting
in
the
late
summer,

"warning signals of diminishing
liquidity (i.e., in financial state¬
ments) had begun to appear." He
went

excessive

inventories

props

nancing

that, "Thin loans

say

tem¬

short-term

fi¬

where

equity financing
only prescribed
only aggravate the

obviously the

remedy
final

will

solution

for

and

both

its

the

small

financing

During

the

in¬

first

months of this year out of a total
of public security issues for new

capital, amounting to one billion
eight
hundred
million
dollars,
only one-half billion was equity,
the

balance

bonds

notes. It is

probable that since January, 1946
bank loans, excluding loans made
for the purpose of purchasing or
carrying securities, have increased
by some $15 billion — about a
100%

jump.

million. An increase

single

of about

week!

borrower

and

went
was

about $234 million. This

borrower's equity becomes
terially impaired, creditors
grave risks of being hurt.

ma¬
run

The

hurt may come from losses and/or

public ill

will.

not

remember,

and neither do you,
things said about us
during the early thirties, when
loans were
being called, mort¬
gages being foreclosed and other
the

harsh

collateral

being

repossessed.

either

increase

created

loans in the last three

its

will

take

the
time
some
long
evening to trace the move¬
ment of bank loans, physical pro¬
duction, employment and prices
during times when in retrospect
knew that business

were

matter

technique

used
will

for
be

credit
it

our

what

the

borrower will

and

how

and

back.

paid

reasonable

good
make

ascertain

lend to

money we

all

business

conditions

changing, you will draw
interesting conclusions.

some

when

to suggest that

almost 2%

stubborn

are

shrinkage

asset

values. When

and dis¬

collateral

look at

credit

let's put the debt structure in per¬

spective,
well

even

secured

sumably

safe.

though

creditor

may

and

pre¬

Down the road, is

the debt structure of the borrower
such

that

should

volume

fall

values suffer

a setback payments
principal and interest are likely
to imperil the borrower's equity.
If that should happen to enough
people you and I had better ask
the
"Profiteers," "Communists,"
and "Labor Leaders," who now
alternately have a lease on; the
dog house, to. vacate and make
way
for
the
bankers.
Because

that's where

would

be.

Effects of Bank Loans On

Business
I hope too many of you will not
disagree with me too violently
when I say that we must also put
in perspective the? effect which
our loan may have on the business
picture in general. Could you
stand just one or two more fig¬

ures? Individually we all love to
play with figures, financial state¬
ments of course,
for some reason
seem

our

best

a little beyond this and put
problem in perspective? As¬
suming the safety of the advance
under consideration, if our loan

the

will

increase

overall

decrease

people to

costs

work

production,
put

might be said

to be constructive. If the proceeds,

though the loan be safe, will
only enable the borrower to bid
up prices in a scarce market do
even

not

run

the

risk

creating

future problems for ourselves and
for
the
business
community in

general?

This,

but collectively,
or;

boring

friends.

other,
as

Since

they
of

some

last June

have

was

implicit

service.

valuable

staffs

competent

and economists

I, for

believe that they render us

one,

However, are

they tending to atrophy our own
faculties for analyzing the cur¬
rent

for ourselves and then

scene

checking

conclusions against

our

those of the experts?

I wonder if f
myself into thinking

Frequently, too,
do

fool

not

that I have

better "feel" of the

ly because by the nature of the
banking business we have con¬
tacts with
clients

lines

great many different
great many different

These

business.

contacts

undoubtedly place us in a position where we can put our fingers
on
the pulse of business senti¬
ment. Here again though, I won¬
der if it is not a good idea for us
to
check
our
own
impressions
against
the
facts
and
figures
which

constantly improving sta¬
procedure and equipment

tistical

place

readily

Considerations

our

disposal.

Basic

Business

Indicators
It
to

seems

knowing,

that in addition

all do, pretty

accurately what is happening to
the
major lines of business or
commodities

which

communities,

own
a

dominate

our

should keep

reasonably close watch for

selves
few

our¬

what is happening to a
less basic business in¬

more or

dicators.

Not

only in what direc¬

tion but keep currently posted on
the extent of the
of

trend
and

bank

movement.

The

loans, investments,

deposits,

blood

(these are the life
business) interest ^

our

rates, commodity prices, cost of
living, employment, physical pro¬
duction, retail sales, private con¬

struction, and foreign trade all
important implications for
us.
They furnish the broad back¬

have

ground against which our loan¬
ing and investment policies must
be formulated and against which
day
by day decisions must be
made.

pet

do not already have some
of reference for this

source

data

give full consideration to our
responsibilities as well as

Reserve

social

our
traditionally recognized
obligations to our' depositors, our
employees, and our shareholders.

figures
other

worthwhile

and

necessity

ourselves

about

thinking for
that very impor¬
of

fourth

"C"

credit

Here

our

keep

petent

field

physician

the

read

just as incumbent on
with the literature

medical

is for the

com¬

attorney to
journals or the
or

law reviews.

exten¬

today—"Conditions."
I promise both brevity and
plete lack of figures.

information

desk monthly If banking is
the profession which we believe
your

last major point
to be considered in this discussion
the

subscription to the Federal
Bulletin will bring these
as well as a great deal of

it to be it is

The Fourth "C" in Credit

The third

conclusions.^ Since

their

statisticians

first speaker's suggestion, that

cur
we

their-

If you

think,

sion

one,

un¬

just

tant

into

not

way

goods

winter

single week!

agreeable things.
They must be
paid in dollars regardless of what
happens to income accounts or

and

produced, or
more
people at work, but pri¬
marily into higher prices. If you

Debts, like Scotchmen, of which

lender

substantially identical. Cer¬
tainly it is axiomatic that if the

found

Commercial,

Industrial and Agricultural Loans

equity. Our first speaker
correctly pointed out that the in¬
are

our

months

the

escape

part of the

some

you

During the week ending Oct. 15,
the loans of the weekly reporting
banks increased by almost $200
in

that

which

through

statement

rower's

terests

conclusion

business

it is difficult to

ever,

with

the many reputable organizations
who make such digests available

general situation than 1 do, mere¬

great over-simpli¬
and also completely in¬

fication,

money

in which the wind blows. Ac¬

way

It there¬
that

be conscious of what is prob¬

put

much

stitution."

first credit experience in the Nor is there any attempt to preearly to middle thirties may have | diet whether or not there will be
gotten one warped view of bank any appreciable decline from what
is historically a very high sales
lending. There the emphasis
o n

timates

enterprise

our

predominantly

have

porary

Corporate

tech¬

wholesale

8%. Life is not that simple. How¬

equity

While 1

for

short

better

in this

to attempt to in¬

Lewis

estate

taxes

running at

just

moved

correct, to infer that because bank
loans went up 10% and produc¬
tion
and
employment
did
not
change materially, prices went up

the aggregate lost better than $3
billion that year.

The

would

sales excluding

real

Corporate profits be¬

income

7,0%.

importance
thorough
credit

audience

preciation,
and
from
external
i.e., loans of one kind or

sources,
another

the 1929 total.

To even mention the

work

drop.

reported by the De¬
of Commerce at about

average.

and

sales

were

taxes

sound

when

and

context is the long range view of

that

however,

1929 corporate

things.
of

think,

margins

to about

broad

use

i.e., re¬
including
de¬

increased

$10 billion. By 1930
corporate sales had dropped about
15%. Corporate profits were off

the

definitions.

both from internal
sources,
tained
earnings,

tle

things
dictionary lists

that I would like to

one

prices and the high level of phy¬
sical activity. That
money comes

(offsetting the
losses of those enterprises with
losses against the profits of those
with profits) were stated at a lit¬

all

mean

The

men.

nice

any

$140 billion.

tive in passing upon loan applica¬
tions today.
"Perspective" is an¬

other

deal

great

money to do business today than
it did even a year or so
ago. This
is due both to the
high level of

rent

partment

of perspec¬

sense

from

fore

subdivision

suggested

ascertain

panies

Applications

major

discussion

creased

many

financial

new.

Loan

takes

cording to the SEC in 1946 the
holdings of government securities
by all U.
S.
corporations de¬

does

conscientiously recognize ob¬
ligations
to
present
customers.
Fourth, no loaning policy should
discriminate against small or new
4businesses solely because they are
or

for

profit

not

either small

agree

the few following facts furnish an
indication of what can happen to

loaning policy

should be formulated which

entirely.

find.

underlying
should the ob¬

hostile public opinion could be
another matter
an

figures which I have been able to

factors change,

through

difficult

policy.
The
member of the organ¬

that every

live

businesses are
substantially
higher
than
they
were
prewar.
How much higher
for business in the aggregate is

desks, I think we
that
breakeven

across our

gen¬

be permitted four

might

has gone

put them into effect.

Breakeven

ing up with the Jones'."
Four

While

another hailstorm of harsh"
words,
acts of the legislature induced

indebtedness, it is certain that it

part to meet our

on our

The

expense.

capital in relation to

sales, the greater the risk to both

tendency

prices

creditors and owners, under these

scenery

defiled,

being

down

smaller the

at least by the longer hem¬
is there is perfectly human

cases

line,

there

women's dresses.

today

fashions

are

cut

new

There

credit

bank

the

invariably a time
lag between volume decline and

borrowing
accounts or engage in types of
loaning activities which are new
discourage either

should

paper,

the loans of the weekly reporting
banks, ex-security loans, have in¬
creased by somewhat better than
10%. Meanwhile, there has been
no
appreciable change in either
physical production, as measured
by the Federal Reserve Board In¬
dex, or in employment. But some¬
thing else has happened. If the
"little woman" has not already
told you
about it emphatically,
ask her. The level of prices, as
measured by the sensitive index

a com¬

Banking management today, as
does all management, has its share
of problems.
None of these is
important than loaning pol¬
policy must be geared

Some
the

thoughtful

American

fessed

fears

that

transmitting
the

spoken

observers

scene

the

have

words

pro¬

means

written

of
of

word,

and

pictures
have increased in efficiency, there
has been
a
tendency to induce
stereotyped thinking in our coun¬
try. It is their contention that,
with syndicated
newspaper
col¬
umns,
syndicated
political
car¬
toons, moving pictures treating
with
socio-political themes and
radio news analysts talking
si¬
multaneously to
nationwide
audiences, it is too easy for all of
to pick our
listen or look

favorites, and read,

at them regularly.
these observers say, ^ too
many of us drift into the habit of
letting our favorites think for us.
This, they say, has tended over
the years to replace the vigor of
the
town
meeting, just as our
highly
efficient
super-markets
have eliminiated the cracker bar¬
rel and the pot-bellied stove as
a forum for local political debate.

Thus,

Whether

right,

not-these observers

wouldn't know. It
does seem to me, however, that
particularly
since
the
early
are •

thirties

creasing

there

have

number

been

in¬

economic

services, weekly or monthly let¬
ters, etc.,. which digest the current
economic scene for us, and present

icy.
to

The

the

and

capital funds of the bank,

the

same

time

meet

the

legitimate credit requirements of
the community. When formulated
it should be expressed in concrete,
not general terms; it should be

subject

periodic

analysis

and

review it should recognize obliga¬
tions to present customers and it

should

not

discriminate

small

or new

cause

they

businesses

are

It has also

small

against

solely be¬

or new.

been suggested that

under

today's conditions, it is im¬
portant to have a sense of per¬
spective. It is suggested that, we
take the long range point of view,

specifically
towards
breakeven
points; towards the effect which
debts may

have on the borrower's
towards the effect
which bank loans may have on
the business picture in general.
Sales, breakeven points and prof¬
its are historically at very high"
levels.
Should
an
appreciable
drop in sales occur without com¬
pensating
adjustments in
costs
and expenses, profits would der
teriorate rapidly. Also, debts in¬
curred at high levels of prices and
business activity have in the past

equity^

and

imperiled

equities.
stances

wiped out borrower's

Under
even

:such

circum¬

where lenders have-

THE
not

suffered losses they have in¬

curred

the

hostility of the

munity. This has

cycle

bank

stage

increasing
primarily

loans will result

the

an increased
upward pressure
prices rather than in decreased
costs, or maintaining production

sooner or

Lastly,

keep

our

stant

focus

par-,

and

to keep

indices.

move-

important busi¬

While

the

opinions

of great

are

them

use

ourselves

the

of the experts

should

con¬

directly informed

properly ad¬
day by day, it is in¬

ments of the
ness

that

loaning policy in

minister it
cumbent

suggested

value,

check

presidential

election

wished to

who

the

the Forces.

women

Industry had been pil¬

ing up massive liquid resources
for extensions and
rehabilitation.
.

had

approximately

£200

mil¬

lions of Excess
Profits Tax post¬
war credits due
to it. This was the

supply side of the equation.
the

demand

side, six years of
abstinence by individuals and in¬

dustry, the complete cessation of
any house building, a vast
amount
of war
damage to British property
at home and
abroad, the decima¬
tion

our

merchant

marine

—

these
and
other
factors would
have meant in a free
economy that

borrowing

and

have been at

and

spending would
fantastic premium,

saving and lending at
equally fantastic discount.
It is, of
course, certain that
modern government in
~

eumstances

would

face

against

And

these

any

these cir-

have

set

its

that

must

free
economy.
conceded that in

circumstances,

terest

rates

would

rise in in¬

have

been

pretty ineffectual means of chok¬
off much of the excess de¬
mand; faced with such an un¬

ing

paralleled market,

industrialist

worth his salt would
have quibbled

buyers.

true

war-time

that

Britain's

coalition
the

under

Government,
leadership
of
Mr.

Churchill, issued a White Paper
Outlining the post-war policy for
maintaining
full
employment,
which

included

terest

the

bad

thing.

They

talk

scorn

and

"coupon-clippies," maintain-

and derision of rentiers

ing that they
batten

parasites

are

the

upon

Dalton

cared

who

productive

introduce

therefore assured

were

rapturous

slightly uncomprehending

sup-

the consequential results that the
rate on
Treasury Bills

promptly

half

its

(T.D.R.'s have

and

rency

previous
six-months'

Treasury

months')

and

level

Bills

cur-

three

the

banks
were
forced to cut the interest
they allowed on time deposits from 1
to
V2%
and
to
abolish altogether
interest on current accounts. The

step,

issues

taken

1965/75

December,

to shut off the
running

was

Savings

when

any

have

money

not

ticularly

such

since

the

that

dearer

weapon

juncture,

deficit

par¬

financing

still being resorted to
on a
massive scale, and in
consequence
a rise in interest
rates would have
aggravated the problem of financ¬
was

ing the budget deficit.
The

Dalton

Cheap
Campaign

is,

however,

concede

would

that

have

money

phase.

one

any

ruled

this
was

Money

allow

to1

which

reasonable interval

funds

accumulate)
Bonds,
1964/67,

done in May, 1946.
Up
point, it is interesting and

was

to this

instructive to note, the great maof British investors, both
institutional
and
private,
were

government
out

dearer

early
post-war
quite another to

have chosen this precise
moment,
as Mr.
Dalton, Chancellor of the

Exchequer, did, to launch
bus

cheaper

reasons
are

money

for the

not

from his

far

vigorcampaign, The
a

choice, of
seek.

Dalton.

would

too much

they enjoyed the process of
reducing interest rates. But they
obviously thought the policy not

course,

Quite apart

Budgetary problem, Mr.

Dalton happens to
possess among
his back-benchers
quite a number

unreasonable,
all

was

the

particularly since
time forcing all

Mr.

Dalton, in short, at this stage
playing a clever if unortho¬
dox hand; the
unorthdoxy arose
not
only in the timing of the
cheaper money campaign but in
some
of
Mr.
Dalton's publicity
was

The latter savored too
the ring-master's tech¬

nique, with the whip-cracking and
"Roll

tively
tions,

col¬

the
had
of the

inkling

inwardness

the

ever

money policy.)
After the fuel crisis, the market
steadied up on the lower levels

up,

roll

it's

up;

posi¬

last chance" exhorta¬
for
the
liking of some
conservative British investors.
your

But the

indeed,

whip-cracking worked;

times,

worked

well that the
market, lured

the carrot of tax-free
capital

preciation,.

was

several

by
ap¬

points

ahead of the ring-master. Without
much

doubt; these early

went

Mr.

Dalton's

successes

head.

The

devoted

needs, such
term

zero

cent,

per

Somehow, however, that obstinate person, the British investor,
refused to be convinced. Or

exports. The long-

the new bridge
Severn, to cost £9
million, and railway electrifica¬
tion schemes'—is not in
dispute;
But
obviously
these
projects
the River

over

haps

it is fairer to say that he
not allowed time to be con-

was

vinced.

Mr.

Dalton

did

his

providing the right background
faithfully enough, by buying up
in

the

market

lions of his
his

hundreds

mil¬

bonds, financing
by the issue
of

own

purchases

floating debt to
is

the

banks.

familiar

process

and

This

legiti¬

mate, within bounds, in any econ¬
in which "managed" interest

omy

proposed to pay more attention
to the level of floating debt than
to the level of interest rates. The

slump in government bonds en¬
gendered by Britain's dollar crisis
in the late

months showed

summer

that he meant what he

Effect

disclosed
ment

how

bonds

endeavor

2%s at

par.

much

The
and

cheaper

its

and

campaign,

money

recent

severe

Exchange Prices

eclipse,

obvious

has

had

reactions

in
the sphere of investment through
its inflation and deflation of Stock

establish

Budget.

But in the last quar¬

year; dur¬

ing the whole of 1946, they

creased

over

£800

in¬

millions.

Yet

direct

public

one

works

projects is only possible, given a
low interest rate. In the old
days
of a free interest
rate, the high
interest rates which would be in¬
evitable
in
conditions
such
as
those now existing would auto¬
matically choke off public works.
The

low

interest rates which de¬

pression brings would have made
them possible at the time
they
most needed.

were

Truly, it takes

controlled economy to illustrate
the
benefits
of
free
economic
forces.
a

would

of Interest Rates

a
bold man who
would say what the future trend
of interest rates in Britain will
be. Quite recently, Mr. Dalton has

reiterated

his

money, and
est
rate
as

faith

cheap

the long-term inter¬
a
result has fallen

from 3% to about 2.8%. It seems
legitimate to link the Chancellor's
recent

declaration

with

the

fact

edge that intending buyers could
a
cheap entry into govern^,
ment
stocks
through
railway
stocks,
because
the
latter,
in
effect already a government obli¬
gation, stand at substantial dis¬
counts

relative

proper.)

gilt-edged

If the interest rate next

will

face

holders.

falls

before

flood

the

sales

from

interest

rate

January, the cost of

nationalization

will

increased

—an

unpleasant prospect for a
Socialist Chancellor. It is reason¬
ably safe to assume that Mr. Dal¬
ton has had

tion
If

enough of debt

enforce

then

so,

artificial

the

future

investors themselves.
cide that 3% is

lies

crea¬

rate.
with

they deadequate, then 3%
If they consider

the rate will be.

inadequate, rates will rise

whatever

level

But

proper.

investors

even

the

deem

govern¬

——v

about

and "so

spend

little

which

the old restraints have
The Scots have a saying

gone.

"Many

mickle makes

added

crisis.

The

could be taken, I think
people today would regard
3% as a reasonable return, pro¬
vided always that they are con¬
most

incident

teresting

illustration

that

even

economy

the

was

vinced

fuel

the

among

necessities

Formed in

Chicago

CHICAGO, ILL.—John C. Cui¬
bertson, W. O. Olsen and Fred

Great

Freeman
J.
as

the whole economy.

all

former

O'Connor

sors

Nov.

Distorting Results
In

way,
cheap
and
has had distorting
Recently there has been

the

as succes¬

& Co.

money

fact

that

tempting to do too
the
ine

Co., announce,
the formation of

to the investment business of

J. J. O'Connor

another

officers

Cuibertson, Olsen & Co.

cheaper

will

really

Cuibertson, Olsen Go.

things remained
(Electricity and gas
the few household
in

inflation

fact

so-called controlled

unrationed

that

be stayed.

in¬

some

uncontrolled.
are

substantial

cause

power

currency.
For if a con¬
of opinion in investment

circles

muckle."

extravagance in electricity
consumption in 10 million British

contributory

the

sensus

A little

homes

purchasing

it,

over

finance

such

results.

£1,000 millions

the

Three With King Merritt

much criticism in economic circles

over

fact the connection is
—

pre-war
days,
the ment has its face against further
British
householder, debt creation, it can
probably
counting his pence, would keep a | hold the present structure
by the
watchful eye on his electricity oi
VDcl HV1II 0
simple expedient n-f restoring PODof
con¬
bill. Today, with so much money
fidence in the
^

ain

rising at the rate of well

January is unacceptable to rail¬
way stockholders, the Chancellor

ter of 1946 bank deposits in Brit¬
were

campaign.

money

average
a vex

his

Treasury

until

to be cut back—wita the

now

govern¬

purchased in

delayed

resources are

effect

Stock

erted, with resulting distortion of

that

our

cent months has been the knowl¬

office in July, 1945.

by a huge and
rising floating debt. He has never

proclaimed

not disturbed

are

cheap

said. The

Britain.)
On these uncontrolled
items, enormous pressure is ex¬

publicly

better
as

that he faces the
necessity of dis¬
buyer"
has
been
tributing nearly £1,000 millions of
conspicuous by his absence. And,
government bonds to holders of
ironically enough, British govern¬ the
nationalized, railways
next
ment bonds at one time
recently
January. (One of the causes of
v/ere almost
exactly baek to where the weakness
of gilt-edged in re¬
they were when Mr.> Dalton took

He
was

"government

rates

play their part. It was fol¬
lowed, within bounds, by Mr. Dal¬
ton's Tory predecessors. But Mr.
Dalton is (or was) no believer in
doing things by half measures.

would

such time

Mr. Dalton stated in the House of
Commons that from then on he

per-

resources

immediate

include

Future Trend

during
the
crisis.
Significantly, in May this year,

other

labor, at

desirability of such projects

—which

established

Exchange prices. It has also had
closed economy. Do not all the
important repercussions in the
text-books, the latter day writings business
world, although these
of the late Lord Keynes, lay down have
been less widely appreciated.
that if all other investment chan- It may, for example, seem an
nels. .are closed by physical conexaggeration to say that Mr. Dal¬
trols, and if the investment sys- ton bears some
responsibility for
tern is flooded with liquidity, the
the
British
fuel
crisis
of
last
investor must, willy nilly, in the
February. Yet in fact his financial
long run accept any interest rate policy
played some part. Excessive
L—
and any redemption terms which
purchasing power found an outare
offered to him? They
do—,het in widespread buying of elecand Mr. Dalton knew it. Other
trical appliances. Because of the
people knew the theory too. Hard- war-time
'
n
:4-*
inflation of capacity in
boiled stockbrokers
in
London
light
engineering,
such
goods
were
discussing quite seriously were available in
profusion, and
the prospect that the long-term the Purchase Tax on them had
interest rate would fall to 2, 1% been reduced in the
April, 1946

capital values higher—and capital
profits suffer no tax in Britain.

the

who knows from A to Z the
theory of interest rates in
a

or even

to I

say

much

economist

little

—

Savings

methods.

thing

Cabinet

(after

2%%

ities. Mr. Dalton is

and

cheaper

stock, which has been redeemable
since 1923 and subsequently, and
investors now living have seen
Consols fall from 93% to 43% and
rise again to 99%. They had seen

tax (and considerably more
from the surtax payer) investors
to a man decided to shun the

had

financial

The previously mentioned
2% % Consols is a one-way option

come

advisers

earlier

away.

the purchasing power of the net
income from
£ 100
invested
in
Consols fall from £3 in 1914 to

better

impelled,

2%% National War
1954/56 and to offer in-

government*

the
a

came

decided

was

employ at

modern

crumble

valor,

decided

the

„

Bonds,

and

Bonds,

Dalton
was

willing to "play along" with Mr.

that

investment

help in curbing or
stimulating
capital investment. But it is cer¬
point,

Mr.

leagues.
(The majority
of
latter, it is safe to assume,

British investors in fact had "had

Dalton

jority

tain

his

new
issue like the plague.
really got to work
Matters might have more or
October, 1945,' when 'he re- less remained there had Mr. Dalduced
short-term interest rates ton decided to rest
modestly on
by cutting the rate on Treasury his not inconsiderable-laurels. But
Deposit Receipts
(held by
the neither modesty nor repose are
banks) from lYa% to %%, with among Mr. Dalton's varied qual-

Mr.

his

some. »
some

port.

And

in all
probability, by the admonitions of

rise, the lender lacks the protec¬
tion of a fixed redemption date
and will see the capital value of

worker, and so on and so on, under 15 shillings. With such exAny measures designed to reduce periences fresh in their
minds, and
the share of "unearned income" with
the government taking 45%
in the national income which Mr. of
the 2%% interest rate in in-

stead

sellers.

On the other hand if interest rates

who, although they would

with

1945,

irredeemable basis. It

question of standing in the
market
ready
to
take
on
all
a

dissertation

2 %%

was

part

theory
interest rates way beyond them,
are fully
convinced that any in-

fell

matter of supporting the market

stbck; the government can redeem it after the
named date but is under no obligation to* do so. It follows that if'

discretion

option

that

among
the
weapons available for this
purpose
variations in the interest rate
to

would

investment,,would at best have

invest and might be
seller to finance unemployment
benefit payments. It was not then

the market. An "or after"
stock is known in London as a

one-way

gov¬

nothing to

at
the
worst
possible
moment
from the lender's point of view
when interest rates are very low.

of M.Ps.

should be

projects

and

losses; threaten to be
under-employed.
that' the Government Unemploy¬
Very few people, however, have
ment Insurance Board, which for
connected the projected
launching
years had been piling up funds of
these schemes—many of which
for

perplexing it is redeemed, it will be redeemed

fuel

unstuck.

came

over

I am sure we will be able
to point
with pride at the record we
have
mads
during
these

over

paying an extra
1, 2 or
3% for capital which enabled
him
to
put
his
goods
among
the

he would

loan, 2%% Treasury

a new

that Mr. Dalton

ary

dustry would have to sell its

stock, 1975 "or after!"

use
good judgment in viewing
with
alarm those things which
should be viewed with
alarm, then

the

well

ernment bonds to finance its

i7 It was the last two words which
broke Mr. Dalton's magic sway

individually and collectively

times.

until

not

was

That crisis aroused fears that in¬

——

issue

find

Consols

for redemption
our
3%
Local
Loans stock and announced that to

and

2V2%

facilitate the operation

ued from first
page)

the gratuities

were

men

But

crisis hit the country last Febru¬

concluding this discussion, and apply it to our own
jobs today? In the performance
of our daily duties if we
bankers

paid

gerously to the "suppressed infla¬
tion" already existing in Britain.

hoisted

had

materials

time when all British

The process was strongly criti¬
cized by financial journalists and
bank chairmen as adding dan¬

down in history as
and
greater Goschen,

ternately be either "viewing with
alarm" or "pointing with pride."
May I steal a little of the ora-

both

"Suppressed Inflation"

investment

using steel, cement

raw

reaching this ultimate objective,
Mr. Dalton in October, 1946 called

Eclipse of Cheap
Money in Britain

millions. There

are

second

capital

sary

to par, and then
actually repaid
them. As the first step towards

The

(

(1871)

Lord

tor's stuff in

and

ticular.

CHRONICLE

for

be filled with orators who will al-

adversely

community in general
along with it bankers in

name

by you and me going
polls and marking our
secret
ballot as our own
good
conscience
and
our
own
good
judgment dictates. The air will

The cumulative
loans of this sort is
apt
later to affect

the

culminated

employment.

effect of

and

FINANCIAL

A year

followed by restrictive
legislation.
A sense of
perspective will also
some

sub¬

Go?chen—who 50
it.
years or so
ago Converted
3%.
from today we will be Consols (which had been in exist¬
living through the most dramatic ence since 1749) on to a 2%% and
proof of the fact that we are,, then a 2%% basis—will always
thank God, a politically
fr^e peo- be famous in financial circles. Mr.
ple. We will be in the midst of Dalton, if report is to be believed,
stitute

com¬

frequently been

make us realize that at
of the business

thinking, not

own

our

COMMERCIAL

same
same:

time.
uuic.

Britain

many things at
In
V4.V«..».7
particular,
XX*

economists maintain that

MINNEAPOLIS, MINN.—Homer
Chase, Orvin J. Strand, and ('*Carl S. Weppler have become af3.

at¬

unneces-

filiated with King Merritt &

Inc., Pence Building.

Co.$

THE

(1870)

COMMERCIAL

FINANCIAL

CHRONICLE

the loans of the weekly reporting us - With their- conclusions;
Since •
banks, ex-security loans, have in¬ the many -reputable organizations '
who make such digests available
10%. Meanwhile, there has been have on "their staffs competent'
no
appreciable change in either statisticians^and:economists /'l*;for
physical production, as measured one, believe that they render us
by the Federal Reserve Board In¬ a valuable service; However, are
dex, or in employment. But some¬ they tending to;
atrophy our- own
thing else has happened. If the faculties for analyzing the cur-.
"little woman" has not; already rent
scene, fbr ourselves: and: then
told you about it emphatically*
checking our-- conclusions; against
ask her. The level of prices, as
those of the experts?
:
measured by the sensitive index
Frequently, too, 1 wonder if f,

H Sound Bank Loan Policy
f think we must remember that
(Continued from page 6)
accounts receivable; mort¬ should the level of prices drop
tend to
gage. loans* etc., but if need; be this will automatically

paper*

reduction of volume. Also,
invariably a time
a
concrete answer to whether or lag between volume decline and
cut
down in
not a bank should encourage or a
expense.
The
di scourage either new borrowing smaller the capital in relation to

lines of business

well.

as.

bring

Loaning

accounts

engage' in types of sales, the greater the risk to< both

creditors and owners, under these

loaning activities which are new
to

itself.

bank

There

credit

women's

just

there

As the

dresses.

line,

are

circumstances.

me
a
greater obligation on our
part to discuss such matters with

scenery

at; least by; the longer hem-'
is there is perfectly human

tendency on our part to meet our
competition. The answer to this
ohe. should depend on the- analysis
of our own

ing

position, not

with the Jones'."

up,

clients

who

may. not have
the
facilities within their own organi¬
zation

to formulate plans

time

the

it might become
put them into effect.

Breakeven

From the

;

against

when

essential to

"keep¬

This spells out for

fashions

are

today is being defiled,, in some
cases

there is almost

policy should also be able to give

Points

operating statements

and budgets which you and; I see

Four Generalizations

going
gen¬

with

question

respect

policy.

would

this

May I be permitted four
eralizations

points

first

The

desks, I think we
agree
that breakeven
for many businesses are

across our

substantially

higher

than

they

While

might

creased by somewhat better than

live

through

another hailstorm of harsh' words,
acts of the legislature induced by
hostile public opinion could be

another matter
It

entirely.

takes

a
great
deal more
to do business today than
it did even a year or so ago. This
is due both to the high level of
prices and the high level of phy¬
sical activity. That money comes

money

preciation,

from

and

i.e., loans of
or
equity

While I

have

timates

seen

the

It would be

kind

investment.
recent

total

loans

es¬

8%. Life is not that simple. How¬
ever, it is difficult to escape the
conclusion

prewar.
How much higher
business in the aggregate is

were

for

months

in which the wind blows. Ac¬
cording to the SEC in 1946 the

difficult

ascertain

from

ing should know ciearly what the
policy is and why it is. Secondly,
loan policy should be the subject
of periodic review based on peri¬
odic
analysis.
As
underlying
factors change, so should the ob¬
jectives. Third, no loaning policy

happen to
profit margins when sales drop.
In 1929 corporate sales excluding

should be formulated which does

financial

not

panies were reported by the De¬
partment of Commerce at about

conscientiously recognize ob¬

ligations

present

customers.

any

figures which I have been able to
find.

do think, however,
that
following facts furnish an

the few

indication of what

can

real

and

estate

com¬

no loaning policy should $140 billion. Corporate profits be¬
discriminate against small or new fore income taxes (offsetting the
businesses solely because they are losses of those enterprises with
losses against the profits of those
either small or new.

Fourth,

with

Passing
The

Upon

Loan

Applications

second

profits)

stated at a lit¬
tle short of $10 billion.
By 1930
corporate sales had dropped about
15%. Corporate profits were off
were

major subdivision
of this discussion suggested; the
importance of a sense of perspec¬ 70%. In 1932 sales had declined
tive in passing upon loan applica¬ to about $70 billion or one-half of
the 1929 total. All corporations in
tions today. "Perspective" is another

;one

those

words which can

nice

mean

all

'aggregate lost better than $3
things million that year,
broad

all men. The dictionary
alternative definitions.

lists

nine

that I would like to

one

use

The

in this

context is the long range view of

things.
To

mention the importance

even

sound,

and

thorough
credit
work to this audience would be
just as foolish as to attempt to instruct

John

nique

Lewis

conducting

the

tech-

coal strike.

Corporate sales are, currently
running at a rate of Substantially

better

than

twice

the

1936-39
average. Corporate profits before
taxes are running at about, five
times

the

leverage

'36-'39

The
either above

average.

as we move

below the breakeven point ac-

^le„r-

considering the widely debated
subject of whether business prof¬
its are or are not "too big"—

It might not be amiss to point out,
Kowevet, that those of us who had ™hat?v?F that ter™ may mean,
our first credit experience in the! Nor ^ there any attempt to preearly to middle thirties may have l dlct whether or not there will be

gotten

warped view of bank
There the emphasis was

one

lending.

predominantly
Those

who

liquidation.

on
on

first

were

ex¬

any appreciable decline from what

;1® historically a very high sales
level.
is

only desired to point out

posed to credit work in the late

that when sales do decline profits

thirties and early to middle forties
-saw
another picture.
There the

much

fore

seems

rapidly.

reasonable

It there¬
that

you

underlying business: tide was so and I and our customers should
strong and so clearly in one direc¬ all be conscious of what is prob¬
tion that it required real genius ably the highest dollar breakeven
to make bad loans. It seems to me level .on record. Even more, im¬
that management must recognize portant—what plans does man¬
those two points of view. It must agement
have for moving
the
keep a sense of balance between breakeven point to the left, should
the ulcers of the thirties and the developments, make this neces¬
vim,

vigor

breakfast

and

club

vitality

the

However; I

want
specific than

you and

the

forties,

much

that.

After

associates, have
done the all important analytical
job on a credit up for considera¬
or our

tion I would like to suggest that

in perspective, take the
long range view of (1) the break¬
even
point of the borrower, (2)

ask ourselves what

the

effect

have

the

rower's

which

safety

equity;

loan

may

of the

bor¬

our

and

(3)

the ef¬
fect which our loan may have on
the business picture in general.
As I see it, those three points
are closely inter-related.
'

On breakeven
think

that

applicable
prises let
■

volume
even

what

The

agree.

owner

only

points* if any of
is primarily

this

large

enter¬

respectfully

smaller

the

dis¬

business

essentialit is for

the

partners to know what

they must da to break
given level of costs, and

can

be done to reduce vari¬

able expenses should volume drop.

happens, who

does it happen to and who, pays
for it,
should that perspective

change without compensating ad¬
justments.

put

the

In other words, we should
put present sales, breakeven and
profit levels in perspective and
sary.

Borrower's
The
should

next
be

Equity

item which

put

I believe

perspective

the

effect which any loan

grant may have

which

the

bor¬

rower's equity. Our first speaker
correctly pointed out that the in¬

Economist of the National Indus¬
trial Conference Board, is author
of a statement speaking of smaller
business enterprises, that even be¬
the

fore

recent

starting

bulge
the
late

prices

summer,

"warning signals of diminishing
liquidity (i.e., in financial state¬
ments) had begun to appear." He
went
for

say

that, "Thin loans

excessive inventories

tem¬

short-term fi¬
equity financing
is obviously the only prescribed
remedy will only aggravate the
porary

final

props

nancing

where

solution

enterprise

for both the

and

stitution."

its

During

small

financing in¬
the
first
6

months of this year out of a total
of public security issues for new

capital, amounting to one billion
eight
hundred
million
dollars,
only one-half billion was equity,
the

balance

bonds

notes; It is

probable that since January, 1946
bank loans, excluding loans made
for the purpose of purchasing or
carrying securities, have increased
by some $15 billion — about a
100%

jump.

our

found

either

During the week ending Oct. 15,

million. An increase of about 1%
in a single week!
Commercial,

and: I

created

loans in the last three

its

not into
produced, or

way

goods

more
people at work, but pri¬
marily into higher prices. If you

will

take

the

time

move¬

loans, physical pro¬
duction, employment and prices
during times when in retrospect

some

matter

technique
business

all

credit

good

our

what

the

make

ascertain

money we lend to a borrower will
be used for and how and when

will

paid

back.

un¬

reasonable to suggest that we go

just

little beyond this and put
the problem in perspective? As¬
suming the safety of the advance
a

under
will

consideration,

increase
decrease

overall
costs

if our loan
production,
put more

people to work it

paid in dollars regardless of what
happens to income accounts or
shrinkage in asset or collateral
values. When

look at

credit

let's put the debt structure in per¬

spective,
a

well

even

secured

though

we may

creditor and pre¬

sumably safe. Down the road, is
the debt structure of the borrower
such

that

should

volume

values suffer a setback

fall

payments

of principal and interest are

likely
the, borrower's equity*.
If that should happen to enough
people you and I had better ask
the
"Profiteers," "Communists,"
and "Labor Leaders,'* whe now
to imperii

alternately have
!dog
way

house, to
for the

that's where

lease •

vacate

and

bankers.

on;

make

Because

would be.

Effects of Bank Loans On

Business

Here

again though, I won-,
a good idea for us

der if it is not

check

against

impressions
figures'

own

our

the

which

facts

and

improving sta-'
procedure and equipment

constantly

tistical

place

readily at

our

disposal.

Basic

Considerations

Business

Indicators
It

seems

knowing,

that in addition

communities,

own

should keep

reasonably close watch for our¬
selves on what is happening to a
a

few

less basic business in¬

more or

dicators.

Not only> in what direc¬

tion but keep

currently posted

the extent of the movement;

and

The

of bank loans,

trend

investments,
(these are the life
business) interest!

deposits,

blood

our

rates, commodity prices, cost' of
living, employment, physical pro-.
duction, retail sales, private con¬

general?

This,
cur
we

If you do

think,

not already have some
of reference for this
subscription to the Federal

implicit in
first speaker's suggestion, that

pet

give full consideration to

Reserve Bulletin will

social

was

responsibilities

our

well

traditionally recognized
obligations to our depositors, our
employees, and our shareholders.
our

The Fourth "C" in Credit

the

necessity

thinking for
ourselves about: that very impor¬

tant

Debts, like Scotchmen, of which
I am one, are stubborn and dis¬
agreeable things.
They must be

ment.

might be said
struction, and foreign trade all;
proceeds, have
important implications foreven though the loan be safe, will
us.
They furnish the broad back¬
only enable the borrower to bid
ground against* which our loan¬
up prices in a scarce market do
ing and investment policies must.
we not-run the risk of creating
hp6formlliatPd and aeainst which
future problems for ourselves and * ^ ±oi mutated and against .wmcft
day
by day decisions must be
for the- business
community in made.

single week!

dp undoubtedly place us in a posi-.
tion where we can put our lingers
on*
the* pulse: of business senti-J

to be constructive. If the

went up

•

These contacts

all do, pretty
accurately what is happening to
changing, you will draw the
major lines of business or
interesting conclusions.
commodities which dominate our

were

different

great many differentf

lines of business.

knew that business conditions

Industrial and Agricultural Loans
was

clients in

ment of bank

The third and last major point
to be considered in this discussion

about $234 million. This
increase of almost 2% in

general situation than 1 do, mere¬

long

some

winter evening to, trace the

the loans of the weekly reporting
banks increased by almost $200

part of the

some

you

through

way

holdings of government securities
by all U.
S.
corporations de¬
creased by $6 billion, while cur¬
rent notes and accounts payable
increased
by
almost the same
amount. Martin Gainsburgh, Chief

that

which

money

that every member of the organ¬
ization who has to do with loan¬

better "feel" of the

many

and produc¬

and

employment did not
change materially, prices went up

straws- indicate the

few

myself into thinking

that I have

great over-simpli¬

went up < 10%'

tion

private
indebtedness, it is certain that it
has gone appreciably higher over
the; past 18 or- 20?months ancfchas
done
so
despite the substantial
amount of retained earnings.
Just

not fool

ly because by the nature of the
fication, and- also completely in-* banking business we have con-;
correct, to infer that because bank tacts with a. great-

external

one

wholesale

commodities,
has
moved up by about 11 points or
just short of 8%.

both from internal sources, i.e., re¬
tained
earnings*
including de¬

sources;,
another

Thursday, November 6, 1947

fourth

"C"

credit

figures

the

thoughtful

American

fessed

fears

Here
a com¬

observers

scene

that:

have

bring these
great deal of

information

have increased in efficiency, there
has beeri a tendency to induce

stereotyped thinking in our
try; It is their contention

coun¬

that,
syndicated newspaper col¬
umns,
syndicated political car¬
toons, moving pictures treating
with
socio-political themes and
radio news analysts talking si¬

with

to n a t i o n.wi d e
audiences, it is too easy for all of
us to piqk our favorites,; and, read,
Bsten or Ipoi; at. them regularly.
multaneously.

our

petent

field

the

read

it is for the

physician
medical

favorites think for us.
they say, has tended over

letting

our

the years
the town

com¬

attorney to
journals or the
or

law reviews.

Banking management today, as
does all management, has its share
of

problems.

the

and

None

these

important than loaning pol¬
The policy must be geared

icy.

capital funds of the bank,

the

same

time

meet

the

legitimate credit requirements of
the

community. When formulated

it should be expressed in
not

concrete,
terms; it should be
periodic analysis and

general

subject

review it should recognize obliga¬
tions to present customers and it

discriminate

should not
small

or new

cause

they

businesses

are

small

against
solely be¬

or new.

It has also been suggested that

under

today's conditions, it is. im¬
portant tp have: a; sense., ot per¬
spective, ft is suggested; tb at, we

these observers ; say, too takethelong ranged
of; US drift into the> habit of specifically towards

Thus,
many

desk monthly If banking is
the profession which we believe
it to be it is just as incumbent on
us to keep up with the literature
your

pro¬

means

transmitting the written word,
the. spoken words and pictures

This,

as a

worthwhile

other

Some

well

exten¬

sion

today—"Conditions."
I promise both brevity and
plete lack of figures.

source

data

breakeven

points; towards the effect which,
debts may have on

to replace the vigor of equity*

and4

the borrower's
towards the. effect

meetingi - just as. our Which* bank loans •;may heivp pa
efficient
super-markets the business picture in general;
disagree with me too violently have eliminiated the cracker bar¬ Sales* breakeven; points and profborrower's equity becomes
ma¬
when I say that we must also put rel and the pot-bellied stove*-as its are historically at very high
terially-impaired, creditors run in perspective the: effect which: a forum for local political debate. levels.. -Should- an appreciable
grave
risks of being hurt. The cur loan may have on the business
Whether or not-these observers drop in sales occur without com¬
hurt may come from losses and/or
It pensating adjustments in' costs
picture in general^ Goulds yen* are right, I wouldn't know.
public ill will. T do not like to stand just one or two more fig¬ does seem to me, however, that and ■ expenses; profits would der*
remember, and neither do you, ures? Individually we all love to particularly
since
the
early teriorate rapidly. Also, debts in¬
the?barskthings;said about; us play with figures, financial state¬ thirties there have been an in¬ curred at high levels of prices and
during the early thirties, when ments of course, but collectively, creasing- ii u m b e r of economic business activity have in the past
loans
were
being called, mort¬ for some reason or other, they services; weekly or monthly let¬ imperiled or wiped out borrower's
gages being foreclosed and other
equities.
Under
such / circum¬
seem to be as boring as some: of ters, etc., which digest the current
collateral being repossessed. our best friends. Since last June economic scene for us and present stances even where lenders have
terests

borrower

and

lender

substantially identical. Cer¬
tainly it is axiomatic that if the
are

I hope too many of you will not

highly

"Volume 166

Number 4644

THE

not suffered losses
they hsiye in?
turred
the

hostility of the

our

perspective will also
make us realize that at
some stage
of the business
cycle increasing
bank loans will
in

•

the* presidentials electioh

increased upward pressure
prices rather ti\an in decreased
costs, or
maintaining; production

to .be

culminated by* you and me gjding
the/ polls hnd marking our?
secret ballot as
our
own
good
and
employment. The cumulative:! conscience and our own good
effect of loans of this
sort is apt judgment dictates.
The air will'

-on

sooner or

later to affect

community in general
along with it bankers in

ticular.

be filled with orators who will al¬

adversely

the

and
par-,

;

focus

and

properly ad¬
minister it day
by day, it is in¬
cumbent

keep ourselves

direetly informed
irtents of the

indices.

ness

should

the

move-?

opinions

of great

are

them

use

the

important busi¬

While

of the experts
we

value,

check

as a

jobs
of

today?

our

both
use

dis¬
own

performance

daily-duties if

bankers

individually and collectively
good judgment in viewing
•

with

alarm those things which
should be viewed with
alarm, then
I

am sure we

with

pride

made

will be able to point
at the record we have

during

these

perplexing

times.

women

the Forces.

Industry had been pil¬
massiveliquid resources

ing up
for extensions and
rehabilitation.

approximately £200

mil¬

lions of Excess
Profits Tax post¬
war credits due
to it. This was
the
supply side of the equation.
On
the demand
side, six
years

abstinence by individuals and in¬
dustry, the complete cessation of
any house building, a vast
amount

of M.Ps.

find
of

who, although they would
dissertation on the theory

interest rates

beyond them,
are
fully convinced that any in¬
terest is a bad
thing. They talk
way

with

scorn

and

"coupon-clippies," maintain¬

and derision of rentiers

ing that they
batten

parasites who
the
productive

are

upon

the national income which Mf:

damage to British
property Dalton cared to introduce were
abroad, the decima¬ therefore assured of
a rapturous
merchant marine rr-, if
slightly uncomprehending sup¬
and
other
factors

have meant in

would

port.

free

own con¬

are

be famous in financial circles. Mr.

Dalton, if report is to be believed,,

bank

wished to go down in
a
second and greater

gerously to the "suppressed infla¬

who/ had

hoisted

a new

ernment

can

stbek;

the

benefit payments. It was not then
matter of supporting the market

gov¬

part

valor, impelled, in all
probability, by the admonitions of
his

low.

advisers

On the other hand if interest rates

latter,

and

Cabinet

his

investment

crumble

(The majority
of
it is safe to assume,

pretty ineffectual means of chok¬
ing off much of the excess de¬
mand; faced with such an un¬
paralleled market,

industrialist

worth his salt would
have quibbled
over
paying an extra 1, 2 or

3% for capital which enabled
him
put
his
goods
among
the
buyers. It is true that Britain's
to

war-time
under

coalition

Government,
leadership of
Mr,

the

Churchill, issued a White Paper
Outlining the post-war
policy for

maintaining
which

full

employment,

included

among
the
weapons available for this
purpose
variations in the interest
rate to

help

in curbing or
stimulating
capital investment. But it is
cer¬

tain

that

when

point,

any

would

have

money

was

modern
not

the

government

decided

employ at such

ticularly

came

that

the

dearer

weapon

juncture, par¬
deficit
financing

since

still being
resorted to on a
massive scale, and in
consequence
a rise in
interest rates would
have
aggravated the problem
was

ing the budget deficit.
The

Daltnn

is,

however,

concede

would

that

have

money

phase.

Cheap

Campaign

earlier

had

little

inkling

financial inwardness

cheaper

away

the

ever

have

income

from

£100

Consols fall from

£3

proposed

Slump

the

interest rate in in¬
(and considerably more

pay

ruled

: this
was

thing

government

out

dearer

early . post-war
quite another to
,

have chosen this
precise moment,
Mr. Dalton, Chancellor of the

Exchequer, did,

to launch

ous

vigor¬

cheaper money .campaign. The.
Reasons for the choice, of
course,

are

not far

to. seek,

Quite; apart

from his

Budgetary problem, Mr.
happens to possess among
his back-benchers
quite a number
Dalton

rate

who

fell

Treasury Bills promptly

half

theory

its

(T.D.R.'s have

six-months'

level
cur¬

rency and
Treasury Bills three
months')
and
the
banks
were
forced to cut the interest
they al¬
lowed on time

Dalton is

knows

closed

from

interest

rates

ment

government

bonds

free

economic

of Interest Rates
a

bold

what the future trend

interest rates in Britain will
be. Quite recently, Mr. Dalton has
his
faith
in
cheap

money, and
est
rate
as

the long-term inter¬
result

has

fallen

from 3%

bonds at

govern

the

one

business

nationalized, railways next
January. (One of the causes of
the weakness of gilt-edged in re¬
cent months has been the knowl¬

edge that intending buyers could
effect a cheap entry into
govern¬
ment
stocks
through
railway
stocks,
because
the
latter, ■ in
effect

already

gation,

government obli¬

stand

at substantial dis«*
relative to gilt-edged

counts

proper.)

If the interest rate next

January is unacceptable to rail¬
way stockholders, the Chancellor

world,- although these will face a flood of sales
from
widely appreciated. such holders. If the interest rate
may,
for example, seem an falls before
January, the cost of
exaggeration to say that Mr. Dal¬
nationalization will be increased
ton bears some
responsibility for —an unpleasant

Keynes, lay down

have been less
It

nels.,are,jclosed

by physical con¬
trols, and if the investment sys¬
prospect for a
liquidity, the the British fuel crisis, of last
next
Socialist Chancellor. It is reason¬
step, taken in December investor must,
willy nilly, in the February. Yet in fact his financial
1945, was to shut off the running long run accept
ably safe to assume that Mr. Dal¬
any interest rate
policy played some part. Excessive ton has had
issues
of
3%
and any redemption terms which
Savings
Bonds
enough of debt crea¬
purchasing power found an out- tion to enforce an
1965/75 and 2%% National War are offered to U;O rpLn„
artificial rate.
him? They do—
:„^
let in widespread
buying of elec¬ If so, then the future lies with
Bonds, 1954/56 and to offer in¬ and Mr. Dalton knew it.
Other trical
appliances. Because of the investors
stead (after a reasonable interva
themselves. If they depeople knew the theory too. Hardwar-time inflation of capacity in
to
allow
funds
cide that 3% is adequate, then
to
accumulate) boiled stockbrokers in
3%
London
light
engineering,
such
goods the rate will be. If
2V2%
Savings
were
Bonds,
1964/67
they consider
discussing quite seriously were available in
which was done in
profusion, and 3% inadequate, rates will rise to
May, 1946. Up the prospect that the long-term
the Purchase Tax on them had
to this point, it is
whatever
level
investors
deem
interesting and interest rate would fall to 2, 1% been
reduced in the April, 1946
instructive to note, the great ma¬ or even zero
proper.
But even if the govern¬
per cent.
Budget.
In
pre-war
days,
the ment has its face
jority of British investors, both
against further
Somehow, however, that obsti¬
average
British
householder, debt creation, it can
institutional
and
nate person, the British
private,
were
probably
investor, counting his pence, would keep a
hold the present structure
willing to "play along" with Mr refused to be convinced. Or
by the
per¬
watchful eye on his
Dalton. It would be too much to
electricity simple expedient of
haps it is fairer to say that he
restoring con¬
bill. Today, with so much
money fidence in the
say they enjoybd the
purchasing power
process of was not allowed time to be con¬
about and so little on which to
of the currency.
reducing interest rates. But they vinced. Mr. Dalton did his share
For if a con¬
spend it,, the old restraints have sensus of
obviously thought the policy not of providing the right
opinion in investment
background gone. The Scots have a
saying circles could be taken, I think
unreasonable, particularly since faithfully enough, by
buying up "Many a mickle makes a muckle."
it was all the time
most people today would
regard
forcing all in the market hundreds of mil¬ A little
extravagance in electricity 3% as a reasonable
capital values higher—and
lions of his own
return, procapital
bonds, financing consumption in 10 million British
profits suffer no tax in Britain. his purchases
vided always that they are con-?
by the issue of homes added
up to a substantial vinced that inflation
Mr. Dalton, in
short, at this stage floating debt to the banks. This
really will
contributory cause of the fuel [ be stayed.
was
playing a clever if unortho¬ is a process familiar and
legiti¬ crisis. The incident was an in¬
dox hand; the
unorthdoxy arose mate, within bounds, in any econ¬
teresting illustration of the fact
not
only in the timing of the omy in which
"managed" interest that even in a so-called controlled
cheaper money campaign but in rates-play their
part. It was fol¬
economy
some
things remained
some
of
Mr.
Dalton's publicity lowed, within
bounds, by Mr. Dal¬ uncontrolled.
(Electricity and gas
methods.
The latter savored too ton's Tory
predecessors. But Mr. are
among
the few household
much of the
ring-master's tech¬ Dalton is (or was) no believer in
necessities unrationed in
CHICAGO, ILL.—John C. CulGreat
nique* \yith the whip-cracking and doing things by half measures.
Britain.)
On these uncontrolled bertson, W. O. Olsen and Fred
the "Roll
up, roll up; it's posi¬ He publicly proclaimed that he
Freeman
all former
officers of
items, enormous pressure is ex¬
tively your last chance" exhorta¬ was not disturbed
by a huge and
J. J. O'Connor & Co., announce,
tions, for the liking of some rising floating debt. He has never erted, with resulting distortion of
as
of Nov. 1, the formation of
the whole economy.
conservative British investors.
disclosed how much of
govern¬
Cuibertson, Olsen & Co. as succes¬
;
But the wWp-crackipg
ment bonds he
worked;
purchased in his
sors to the investment business of
Distorting Results
indeed, at times, it worked so endeavor to establish
J. J. O'Connor & Co.
Treasury
In
another
well that the
way,
cheap
and
market, lured on by 2V2s at par. But in the last
quar¬
cheaper money has had distorting
the. carrot of tax-^ree
capital ap¬ ter of 1946 bank deposits in Brit¬ results.
Three With King Merritt
Recently there has been
preciation,
was
several
points ain were rising at the rate of well much criticism in economic circles
MINNEAPOLIS, MINN.—Homer
xk%

and

interest

abolish

current

altogether

accounts.

tem is flooded with

The

•'

who

man

Exchange prices. It has also had
important repercussions in the

Do not all the
text-books, the latter day writings
that if all other investment chan-

deposits from 1 to

Trend

would say

floating debt than

severe
and obvious reactions in
the sphere of investment
through
its inflation and deflation of Stock

economy.

of the late Lord

auto¬

•: *'

year

time recently
almost exactly back to where
they were when Mr.> Dalton took

the

He would

were

economist
to

such

would

attrition reiterated

ironically enough, British

from the surtax
payer) investors
to a man decided to
shun the
new issue like the
plague.

ities. Mr.

existing

to about 2.8%. It seems
gendered by Britain's dollar crisis
in the late summer months showed legitimate to link the Chancellor's
recent declaration with the fact
that he meant what he said. The
that he faces the
necessity of dis¬
"government
buyer"
has
been
tributing nearly £1,000 millions of
conspicuous by his absence. And
government bonds to holders of

2%%

tax

come

conditions

benefits

Future

crisis

to the level of interest rates. The

1914

to the level of

seen

of the net

invested

the

Mr. Dalton stated in the House of
that from then on he

qual¬

consequential results that the

would be in¬

during

Commons

seen

They had

power

under-employed.

forces.

Significantly, in May this

Consols fall from 93% to
43% and
rise again to 99 y2.

purchasing

until
are

the finance of public works
projects is only possible, given a

the

established

one-way option

living

delayed

resources

were

policy.)

money

2% % Consols is

stoek, which has been redeemable
since 1923 and
subsequently, and
now

Very few people, however, have
connected the projected
launching
of these
schemes—many of which

After the fuel crisis, the market
steadied up on the lower levels

investors

our

•

...;j

Culberison, Olsen Go.

Money
.......

one

any

pf financ¬

the

threaten

better
as

pression brings would have made
them possible at the time
they
most needed. Truly, it takes
a controlled
economy to illustrate

the

had
of the

British investors in fact had "had
some." The
previously mentioned
a

bridge

matically choke off public works.
The low interest rates which de¬

col¬

leagues.

such time

now

worst

very

new

was a

and

government in these cireumstances would, have
set its
face against that free
economy
And it must be
conceded that in
these
circumstances, a rise in in¬
terest rates would
have been a

would

so.
It follows that if' sellers. And Mr. Dalton decided
evitable
redeemed, it will be redeemed that discretion was the better
those

are

the

Severn, to cost £ 9
million, and railway electrifica¬
tion schemes—is not
ir* dispute,,
But
obviously
these
projects

market

obli¬

rise, the lender lacks the protec¬
tion of a fixed
redemption date
and will see the
capital value of

the

include

the River

2%% irredeemable basis, it
ow interest rate. In the old
days
question of standing in the of a free
interest rate, the high
ready to take
on
all interest
rates which

gation to- do
the

exports. The long-

had been piling up funds
investment,,would at best have are now to be cut
back—witn the
nothing to invest and might be
cheap money campaign. Yet in
a seller to finance
unemployment fact the connection is a direct one
years

after the
no

-which

losses;

for

redeem it

desirability of such projects

over

fuel

Government Unemploy
ment Insurance Board, which for

loan, 2%%/Treasury

named date but is under

itis

the

that the

the last two words which
broke Mr. Dalton's magic
sway
over
the market. An "or aftei*"
stock is known in London as a

option

until

ernment bonds to finance its

was

one-way

term

existing in Britain,
not

was

needs, such

dan¬

ThatT crisis aroused fears that in¬
dustry would have to sell its gov¬

stock, 1975 "or after!"
It

adding

crisis hit the country last Febru¬
ary that Mr. Dalton came unstuck.

repaid

step towards
reaching this ultimate objective,
Mr. Dalton in
October, 1946 called
for
redemption our 3%
Local

issue

already

But

Consols

to par, and then
actually
them. As the first

chairmen

tion"

Goschen,;

2%%

capital investment "projects
using steel, cement and other

materials as well as
labor, at
time when all British resources
should be devoted to immediate

"Suppressed Inflation"
The process was strongly criti¬
cized by financial journalists and

always

history

raw

economy that
Mr. Dalton
really got to work
Mutters might have more* or office in
^uly, 1945.
spending, would in October,
1945,' when 'he re¬ less remained there had Mr. Dal
have been at a
fantastic premium, duced short-term
interest rates ton decided to rest
and
modestly on ! Effect on Stock Exchange Prices
saving and lending at an
by cutting the rate on Treasury Lis not inconsiderable
laurels. But
equally fantastic discount.
The cheaper
money'campaign,
Deposit Receipts
(held by the neither modesty nor repose are
It is, of
■and its recent
course, certain that
eclipse, has had
any banks) from 1%-% to
%%, with among Mr. Dalton's varied
-modern

borrowing

sary

worker, and so on and so on, under 15
shillings. With such ex¬
Any measures designed to reduce periences fresh in their
minds, and
the share of "unearned
income" with the government
taking 45%
in

at home and
tion of. our

these

basis—will

when interest rates

millions. There were the
gratuities
paid to the men and

war

2%%

(1871)

The experts drew their
clusions.
' '

Go$chen—who 50

possible
moment
from the lender's point of view

(Continued from first
page)

then

Eclipse- of Cheap
Money in Britain

had

Lord

or so
ago Converted 3 ~
Consols (which had been in exist¬
ence since 1749) on to a 2%%
and!

the

The

FINANCIAL CHRONICLE

ternately be either "viewing with
alarm" or "pointing with
pride.". Loans stock and announced that to
M&y I steal a little of the ora¬ facilitate the operation he would

Lastly, it is suggested that to tor's stuff in concluding this
keep pur loaning policy in con¬ cussion, and apply it to our
stant

name

years,

year

•

primarily

it.

from today we will be
living through the most dramatic
proof of theriactl that4w.thank God, a politically
fr^e peo¬
ple. We will be in the midst of

result

thinkingf«ii<)t US U suhrv

stitute for

com¬

munity. This has
frequently been
followed by restrictive
legislation.
A sense

own

COMMERCIAL

Formed in Chicago

ahead of the ring-master.
Without

much

went

doubt; these early
to

Mr.

Dalton's

successes

head.

The

over

£-1,000 millions

over

year; dur-

;ing the whole of 1946, they
v

creased

over

£800

in¬

millions.

the

fact

that

Britain

tempting to do too
the

at¬

many

same

time.

things at
particular,

economists maintain that

unneces-

Chase,

Orvin

Strand,

and (a

Carl S. Weppler have become af¬
filiated
1 miaiea

with King met mi ix, Co.
wun rung Merritt &

Inc., Pence Building.

THE

(1872)

COMMERCIAL

Street": Cherne

the

cradle

freedom, was

better off under the
she

then their

was

While

Nazis.

rater

place

his

sent

was

make the forced

reply.

"The Marshall Plan is vital not

arsenal, today

CHRONICLE

consumer

unify

threat.

(Continued from page 19)
I5een

FINANCIAL

want peace, a little comfort
goods, which the
Soviet cannot supply. Thus, she is
faced with an internal disruption
and discontent, and hence seeks
war,
and

"Communists Penetrate Wall
1

creating an outside
addition, she believes

that

capitalism is absolutely in¬
comparable with communism and
when
capitalism
breaks
down,

foreign
but our communism will automatically
domestic affairs. It is failing, not take over.
"At the same time, the United
"United Office and Professional
abroad, but in the White House,
States is in a boom so great that
and
in
Congress.
Truman
is Workers of America in no single
even the most optimistic did not
irritated with it
understand¬ question of policy has deviated
expect it, let alone those who have
ably but not admirably—because from that of the Communist party
been anticipating a slump for two
it is forcing him into fighting tax in the past seven years.
years.
Even the talked-of level¬
"China is
incredibly complex
cuts, into bringing back price con¬
ing off and stabilization never
trol and rationing, and in calling and almost hopeless, but the one
quite developed.
an additional session of Congress,
ray of light is that it is equally
"Even so, the United States is
when he doesn't even want any complex for the Russians. There
worrying about meeting domestic
are no easy victories or decisions
before the next election.
needs and having enough to ex¬
for anyone in China. This is why
"The NAM is no more helpful in
port to keep her markets abroad.
the fight is being carried on in
its trying to say that the European
v'
"Now, when the shake-down
Europe. The Chinese .Nationalist
crisis
is
exaggerated,
and that
comes, it will no longer be a lev¬
Government
is thoroughly
cor¬
eling process, because our levels only one-third of a program is
rupt from top to bottom, and
have spiraled so high.
All of us necessary. There are times when whoever tackles China must deal
know the value of periodic ad¬ Wallace and the NAM are indis¬
with them.
justment and slumps, and leveling tinguishable in Washington. Wal¬
"The Russian police state would
has
called
warmonger
at
off before a new stable but high¬ lace
not be affected by the death of
er level is reached.
Now we have Truman for the Marshall Plan so
decreased purchasing power, but often that Truman is beginning to Stalin, who, in certain cases, is the
only

she does not function at all.

our

—

•

leveling off

to 15% of all
goods are being exported,
there is a tremendous dispropor¬

"Although

tion

among the different goods.
For example 53V2% of freight cars

38%'% of cot¬
ton, 30.7% of lubricating oils, 30%
of tobacco and naval stores, 29%
going abroad,

are

wheat

flour.

and

"Without foreign capacity to pay
for these goods, we are in serious

trouble.

There

kernel

trutn in the fabulous Soviet claim

that

the

Marshall

Plan

months

trying

Europe's

the Soviet

ago,

had acquired more territory

out¬

ride its boundaries than the Nazis
Jtiad amassed up to Pearl Harbor.

St may

longer be possible, no
matter what we do, to save
Italy
and
Austria.
Our
remaining
.stakes today, and the real
issues,
no

are

Germany, France, Belgium,
England, and some portion of the

Middle East.

Most

the

shout¬

Street,

because

Eisenhower

wants

Truman

the

rest

this

President

for

Taft

and

sector of
country,

large

internationalism

the

determined in exact pro¬

portion to the political effect. In
1948, the people may well prefer
tax

cut

the

do.
"Nov. 17, the date called for the

special session of Congress, is too
The State Department asked
for Sept. 1, and that was none too

late.

Jan.

would be

out

of the

question. All of that month would
be spent in committee organiza¬
tion.

February would go to the
Senate, March to the House, and
half of April be spent in ironing
out differences between the

two,

that it would be the end of April
ing has been and continues to be
by the time any action would be
over Greece, but t'nis is
only the
taken
the end of winter, 1948,
.practice ground, as was Spain for
when
the
World War II, for the next
European crisis may
war,
—

the

trot

battleground,

which

^France.
*Tt

yek,to

whether (.Sunday's | victoryB-in
France

was

United

States

victory for the
for the Soviet.

The State Department is not

hap-

4)y about it.

been

to drive

■«ialists

Our effort

has

wedge between the

and

communists

tother

so-

Eu-

both of whom know
thoroughly, respect

,i»pe,

well have been settled

each

"But once the

takes
no

recall

Congress.

occupies, there is

there

over

bill

to get Poland
though there is no

Try

back now, even

country in Europe with
will be

greater

internal revolution. The

revolutionary is taken
long before he can take

care

any

of
ac¬

Marshall

-Weakens the socialist

imited front. Now,
Red vote, which
comes

victory

drive

over
was

Bu¬

for

night, the
30%, be¬

55%.

y "Russian policy has tried to
resent the

tween

conflict

Fascism

and

rep¬

credence

"Until

three

choice.

months

ago,

were

losing so badly that the pic¬
ture was impossible to
discuss, but

then
tire

made

second

the

genius, since the
was

second

piece

move,

American
The

war.

first

ago—the Atomic En¬
ergy Commission proposal by Ber¬
a

year

nard Baruch.

The second

Marshall Plan.
skv.

Listen

crying like

was

lion,

to determine how hard it hit Rus¬
sia,
own

which
orbit.

was

hit

Poland

worst
and

its

Czecho¬

slovakia, knowing well that dol¬
lars

are there for them under the
Marshall Plan, were compelled to

stay

away

from

discussions

their needs under it, and they reRussia bitterly for having to

decline the money. Oscar Lange in
•A3Poland was immobilized by the
-

iiomination

commission

jby Mrs. Roosevelt, and

r„.

would

not,

hate

think

that

Mar¬

shall's threat of resignation would
be necesary to force action on the
Plan.

"Holland

least

danger of

against Russia, but in

the last six

months, the Soviet has

applied

tremendous

pressure, particularly
and Sweden, and if
these

means,

economic

Holland

Norway
by

wins
will

along, too, since it is really part
of

Scandinavia.
may

absorb

all

the

may

not want

countries

Western Europe which she is
try¬
ing to draw into her bloc. But she
"°membprs the aftermath of
World War I,, when both
military
and economic animosity was di¬
rected at her by the United States

(troops in Siberia for long time),
France, and England, and any
country not communist is re¬

garded
sia

does

inimicable to her. Rus¬
not

believe

that

United States wants peace.

second-

her

Vishinsky is
mouthpiece for the Politburo.

ident to the

was

in their fight for recovery, and of
the fundamental requirements for

economic development elsewhere.
This

;

"The Truman Doctrine
best

That

asset.

Rus¬

was

why so
little is heard about it today.
It
antagonized even anti-communist
United

States

when it

people,

the

More-

exhausted

tions both

■

and

our

icy

framework

form to

our

first opera¬

borrower and lender

and have begun to

Russia

its military strength.
against foreign troops
and
foreign occupation by any
country. It wants only to be put

back

itself.

its feet

This

dollars at

job

that it

can

The

build

which

un a

will

pol¬
give

future activities.
Purposes

of that structure is our

core

emphasis

the

re¬

quirement that loans made by the

be done with

can

Constructive

continuing

run

Bank

fraction of the cost of

for

Loans

must

made

productive

must relate to well-designed

and

projects of reconstruction and de¬

occupation."

follows

with

interest, too,
stability are its

What

the

World

Now what

is this

International

It is in reality

velopment?
nance

owned

company

nations

who

have

De¬

and

right to call

the

member

governments

fi¬

subscribed

loan was

repetition, that in the event it is

take effective steps,

needed

meet

the

Bank's

caoital

billion, each in proportion to member nation. Thus,
own size and resources.
Thus, amount, the bonds of

its

the

value

some

the Bank represents an instrument

and

backed by the mem¬
governments, through which
funds
of
private investors,

owned

ber

the

with

appropriate

safeguards

for

their protection, can be channeled
into productive loans to aid in the
reconstruction of its war-devas¬
tated member countries, and into
the
development of sound eco¬
nomic projects in the underdevel¬

There

has

been

much

miscon¬

are

With¬ proceeds of our loans are not di¬
inferring that the verted to purposes other than
obligations of the other members those for which the loan was
will not be effective, we recognize
granted.
This includes not only
the fact that at the present time the meticulous checking of docu¬
the American investor is looking ments of purchase and the like,
primarily at the protection pro¬ but also checking on the end use
vided by the obligation of his own within the borrowing country of
government.
Based on this obli¬ the goods nurchased with money
gation, it is now possible for the advanced by the B?mk.
If we
out in any way

funds

America

make

available for world

ception that the Bank has $8 bil¬

his

lend

recon¬

coal

adequate protection.

these.

paid

Only

20%
will

The facts

this

paid in
for the purpose of making loans,
and of this paid-in capital only
about

ever

$725,000,000

cause,

This

is in U. S.
significant be¬

sure

you

realize,

the present demand is almost

en¬

tirely for dollars to buy goods
primarily in the United States.

Furthermore
capital
the

can lend our
the consent of

we
only with

nation whose

volved.

currency

Today,

are

is in¬

unfortunately,

few countries other than

States in

give such consent.

position to

With the

ex¬

ception of the equivalent of $2,000,000
worth
of
francs
made
available

out

its

subscribed

capital

by Belgium to cover the
purchase of railway equipment by
Luxembourg, all of the loans that
have

made

been in U. S. dollars.

past few

months

date

have

Within the

have

made

such
loans, one each tc
France, Holland, Denmark and
Luxembourg, for a total of ap¬
proximately $500,000,000.

In order for the Bank to obtain

additional dollars for the purposes
of

lending we must sell bonds to

private investors, and under exist¬
ing circumstances, predominantly
to investors in the United States.
As

you

may

first issue of
in

recall, we sold our
$250,000,000 of bonds

July.
The

bonds

the

Bank

have

behind them, of course, all of our

by assets,

including

our

loans

and

itself must
where neces¬

obli¬

credit of the United States.

lion of funds

actually at hand out

It implies that

prospects of its repayment.
to this
In cooperation with the borrow¬
the Bank ing countries we have established
covered by the full faith and mechanisms
to
assure
that the

struction

of which to make loans.

granted.

the borrow;ng countrv

the guarantee is met by any other

investor

oped areas.

nroductive nurneses for which the

sary,
to
remedy any unsound
gations, the U. S. Government is monetary on budgetary practices
committed up to a total of $2V2 which would threaten either the
billion, irrespective of whether productivity of the loan or the

its

borrowing country.

implies that the proceeds of the
loan must be utilized only for the

upon

unpaid 80% capital sub¬
scription. We have tried to make
it abundantly clear, but it bears

Bank?

Bank for Reconstruction

all

nut of the

the unqualified
for

world-wide objectives.

help to finance must
increase in the level
industrial or agricultural out-

promise
of

for recovery and

implies that the project or

program we

and

with

development

the

Board

Bank.

that it is used for that
that

we may

ourselves

satisfy

com¬

parable officials of the 45 member
compose

see

purpose so

The Finance Ministers

nations

money for a railroad, or a
mine, or a power plant, we

wish to

that

be able to

was

emoloyed.
But our technical

Oi'di-

investigations

supervision over the pro¬
narily they meet once each year. ceeds wih prove of little value in
The 13 Executive Directors who assuring that our loans will prove
represent them sit regularly in nroductive unless there is a re¬
Washington..
The management of liable economic base on which to
Governors

the Bank is made up of
men

and our

about 350 build.

and women recruited from 19

Itesponsih:,Rv for Financial

different nations and representing

Reforms

aggregation of varied talents
and experience.
We have former
central bank executives, finance

the

political decisions required for

ministry officials and private

ihe

achievement of the necessary

The

responsibility

for

making

reforms rests with the
service, aonrooriate officials of the indi¬
But we believe
from business and from the uni¬ vidual nations.
versities.
We come from many that the Bank, precisely because
financial

bankers; we have economists who
come

from

government

backgrounds and speak it is a cooperative international
different tongues. But our agency, will prove increas'ngly
whoie ' staff shares, I am con¬ useful as an influence to prompt

different
many

vinced,

deep loyalty to the Bank

and

perhaps to facilitate the

tak¬

ing of the necessarv sieos to bring
was formed.
about economic stability.
Let me make clear that when I
The management of the Bank
has given unstinting support and emphasize the importance that the
assistance in all its efforts by the Bank's loans prove productive, we
and

to the purposes for which it

Executive

Directors.

The

are

Di¬

thinking of the importance of

productive loans from the stand¬
tion to matters of policy and have point of healthy international re¬
There
are
few things
relegated administrative matters lations.
rectors have devoted

their atten¬

The line be¬ which place a greater strain uoori
policy and administration friendship between nations than
is sometimes not too easy to draw, international loans which leave
but suffice it to say the opera¬ behind merely an obligation to
tions of the Bank have been car¬ repay, without, corresponding ben-.
ried out in a spirit of mutual co¬ efits to those who must bear the
In such
operation between the directors burden of repayment.
and the staff which has been most cases, and thev have unfortunately
fortunate and helpful. While the, not been infrequent,- the pepple
-Vho+e on many issues of policy is of the borrowing country are apt
spirited, I think I am correct in to regard the lender as a foreign
to the management.
tween

■a

'V ■'Vvi'V-.l.-'v

document

uses

Europe

and

public

have undertaken

Europe which is equally afraid of
the

be obtained from the Bank
Dy those who are interested.
The year covered by the report
has been an important one in the
development of the Bank's poli¬
It is a year in which we
cies.
may

for its former allegiance.

sia's

by the Pres¬

Board of Governors

port an attempt was made to set
out an analysis, of the problehis
which beset the European nations

—

who

man

September-

assembled in London. In this re¬

that Germany
its leader,
determined
policy,
and
had
formed
the party, and built it.
Stalin is merely an employee of
the State Politburo, which is boss.
He could, and might under ex¬
treme circumstances, be removed
in the same way that Browder was
cast out in 24 hours, after which
the "Daily Worker" berated itself
one

had

voting.

our

eleventh

the

Bank was submitted

"Difference between Russia and

Germany is this

division in

board

our

have, thus far never

he Second Annual Report of the

be the next Premier.

had

before

come

(Continued from page 15)
Bank

four
"Russia
to

the secret police, arid the force be¬
hind the treason trials, might well

Uncle Sam Looks Abroad

the United

absorption into the Soviet bloc of
any of the Western nations. Scan¬
dinavia

(pro¬
nounced beereye), former head of

the

^lg*.that ,onVall matters whicfy

have

Bira

This

there

Questions

tne

Vishin-

wounded

Communism

that

replaceable, but
because there is
man so feared
by the Soviet—
grounds of his ability. Cherne
was

fight be¬

only. The De Gaulle victory gives
some

"Byrnes

date

for violence.

are

velopment.

dollars.

tion.

against communism
lk i .rope. The De Gaulle

Army, which is the
base of Russian isolationism, and

are

traditional hatred of Russia. There

lies

way or

Soviet police state

and

over

other, and hate each others' guts.
The socialists are our
biggest al>

one

another.

be. determined

Red

Marshall

Plan,
and Dewey will advocate it if they

soon.

inclined to moderation,

the

say

Bira

the

policy and the intensity of it

will be

now

but

He is

the
bloc
formed by. Molotov,
Vishinsky, Zhdanov, and Laventky

don't

world, and
Dewey
doesn't
know
what he
likes. He will determine his pol¬
icy at a time when it will have
the most political effect, and both

to force U. S. goods down
throat.

"Three

"Wall

10%

prisoner of the police state.

it himself.

believe

has occurred.

Thursday, November 6, 1947

;o
.

••

•

1-!

COMMERCIAL

THE

Number 4644

Volume 166

ogre of

fullest in this challenging task of

lines—for

ily

development.
It is prepared to
join ,in .working out sound devel¬
opment plans and to grant loans
for carefully selected projejets to
get the wheels moving.
As a
catalyst it hopes to stimulate the
growth
of partnership
between

FINANCIAL

CHRONICLE

ber

whom the worst can read¬
be believed.
The people of
the lending country, on the other
hand, when they discover that
their

often

quite generous
instincts are being interpreted as
avarice, are apt to become dis¬
own

illusioned

and

look

dis¬

with

example, textiles, rub¬

goods, cernent—has shown
great progress.
Millions of indi¬
viduals are toiling. under harsh
conditions to repair and build up
normal life and activities.

However, this record of
struction is

recon¬

uniform.

not

There

are examples of countries torn by
resources and man¬
the
underdeveloped political dissension, unsound fi¬
is
impairment rather than im¬ areas, and the money and the nancial management, and weak or
tempting
provement of relations within the technical and management skills impractical leadership,
the, people
to
seek
salvation
of the better developed nations.
international community.

favor upon further
international field.

ventures in the
The

total

sum

the material

Impediments to Europe's

power

was

United

this pattern

States

that the

developed

and

Recovery

this pattern alone, in our opinion,
three can the present underdeveloped
maj or impediments to Europe's nations assure t h e i r economic
; •
recovery.
They* are shortages of progress.
food, fuel and manpower.
How
Progress Has Been Made
to overcome these impediments is
I have dealt at some length on
a
question engaging the most
grimmer aspects of recon¬
earnest consideration of the lead¬ the
In

opinion there

our

through
the

some

hard

duce

to pro¬
goods which

necessary

the

than

easier

means

work

they desperately need.
.
v
But staring tnem and us in the
face today are the hard facts that
recovery from the devastation of
the war can only come by more
work, not less—by longer hours,
not
shorter
by
sacrifice,
by
in Europe.
Let us not pulling together.
The hopes for
the fact, however, that an easy Way out are dying hard.

are

...

the

ers

and

16 European

vious

ob¬

need, there is nevertheless

real

While

not seem

does

manpower

countries'

of the United States.

shortage of labor in Europe
This

tp perform the urgent tasks.

shortage could be met in part by
efficient utilization of labor,

reduction

the

number

people unnecessarily employed in

governmental
productive

other

and

pursuits,

non¬

and

struction
overlook
much

has

progress

been

made,

—

But there

due both to the efforts of Europe
itself and to foreign grants and

ing

credits.

to be emerg¬

seems

now

efforts

have

Vast

been

arable land

areas of

cleared

mines

and

wreckage
and
restored
to
plow.
Remarkable progress

the

been

made

operation

has

getting back into
heavily damaged

the

railways.

Production

many

the

realization

Atlantic

both sides of

the

tremendous

required; not only of the
need for assistance from America,
but also that this aid

can

use¬

ful, and will be forthcoming, but
only as those who need the help
do their utmost
to help them¬
selves.

greater mobility of manpower, in
part

national

across

borders.

problem must be made by Eurooe
itself;
the
problem
cannot
be
solved by loans from America.
The

requirements

goods

rebuild, modernize and

productive facilities

<exoand

•

capital

for

times

surely

good.

dynamic

and

Carefully
Applications

Loan

the

that

static.

Once

should remind

the

human

unstable

most

factor

all

those

Of course, you will
say, we com¬
pete among ourselves with rdgaid
to the terms granted on all loans

why single out consumer credit?
If I single it out, it is because I
too many bankers seem t«

be upon
into the

think tjiat because each individual
credit is small there can be xu»

stantial

business which will go
fast with any sub¬

red

curtailment

Thus all

today

aware

keenly

are

of the high break¬
developed in recent

point

even

volume.

businessmen

particular risk in taking greater
than prudent chances. While we
may think twice before making
loan

for

years.

They know full well how
uncomfortably small is the dif¬

liberal

equity

ference between profits and losses.

the

$100,000 on terms toorespects the borrowers

.as

•

None of

is gifted with suffi¬

cient

foresight to call the turn
and say now prices have reached
their peak and hereafter will re¬
cede. Here we

are

position

same

precisely the

in when

are

after many years of

prosperity vwe
knpw the chances favor a change.
The question for us is this—do
we

lenders know which of

borrowers
break

our

most vulnerable to

are

prices? If we do, can
go further and judge which
among those that are vulnerable
know they are and have a plan
of; defense when the break comes?
we

Finally,

are

sufficiently

cour¬

ageous both to curb those who

are

obviously speculating and to bacx
up those who deserve support be cause
they are trying to do a
legitimate business and have full

The Marginal Business Enterprise

business

all

never

perhaps,

more,

Examine

that

fear

What

realization

ourselves

for this

Even

bad

just as
it threatens poor times

to follow

con¬

stitute the field in which the Bank
is most concerned.

labor's gains
rigidly by

;

frozen

impact of falling prices is apt, to

(Continued from page 15)
ter

demand.
not

were

labor's great power, we might ex¬
pect labor to make concessions on
the downswing. As it is, the full

realization of their problems?

The Need for Sound Credit

Moves toward the solution of this

tailed

(1873)

about the

marginal busi¬
that is still with

enterprise

ness

too liberal

time

as respects
repayment, it is -m
of the smaller loaa

to say
that after all

easy

only $100 to $303 is

being risked.
Another aspect of installment
credit

consumer
some

present-day

that

concern

causes

the

or
me

impact

advertising

methods

the average man in the str«.eti

Today any man who can read—*
lacking that ability-~can tefcr

his radio, must get the impression
that every one of any number oJT

large

financial

earmarked

institutions

and

use

sum

set

aside

from

has

for his

$100 to $300,

He is entitled to draw it down by

merely showing up to sign
papers, or, if he really is

hurry, by going

some

further tha-m

using his telephone.
Forgive

seem

ex¬

aggerate,
and
in exaggerating,
appear
to take
these problems

lightly, because I don't—I
dead earnest.

gest that

I have only to sug¬

the senior officers and

the directors of those banks

even

in great number? After World
War I we called them "war ba¬

with

bies."

closely and not entrust it entirely
to the direction of junior members

They

lush

the

wartime

but

born

were

economy

credit departments

consumer

should

watch

the

activity

mo e

we
have to deal with and, ac¬ their day of birth in World War II of the staff,
opportunity cordingly, the pessimism of the does not of necessity precede V-J:
Perhaps I have gone far enough,
funds cannot be sufficient to do of
making a significant contribu¬ thirties has all but been forgot¬ Day. Wartime prosperity has car¬ or even too far, in my efforts 1o
more than fill
the most pressing tion toward the continued
ten in the optimism of the forties
ried over for two years since. V-J
healthy
"keynote" today's meeting. But I
needs.
The estimate in the Paris
To break the defeatist philosophy
Day and has continued to spawn sense on this October
functioning of our present eco¬
day in 1941
Report on the Marshall Plan is nomic system. Loan applications of the thirties, the banking fra¬ not a few enterprises that will
that bank credit men have need
that $3.1 billion of industrial cap¬ must be examined more and more ternity
had to be exhorted to have no place in a more highly
carefully and calmly to appraise
ital goods are reauired over the in the
light of social needs. Loan make more loans—to take risks competitive economy.
Surely, the current scene, to recognize
next four years.
Let us hope that we have those bariks which have had much
We have not yet policies must be geared, as never again.
fearlessly their responsibilities iri
experience in the so-called "GI" a troubled
gone far enough in our stud'es to before, to the needs of our econ¬ not gone too far in the opposite
world, to review loan¬
justify an opinion on the reliabil¬ omy as a whole—the need for full direction and so require exhorta¬ business loans know this. Not all
ing policies and reshape tnem
marginal business concerns are where
ity of this estimate, but we are employment and the need for ex¬ tion to curb our optimism.
necessary and be prepared
Are we following some policies doomed. Some, in fact many, may to steer ahead with that
•obviously giving close attention panded production. By these re¬
confi¬
already have carved out an en¬ dence which our economic
to it.
marks I
now, are we indulging in some
do^ not mean to advocate
history
I think we must all realize that the abandonment of sound credit practices now that are apt to cause during place in our economy. Our inspires 'in all those who see it
To the contrary, I trouble? Later in the day an im¬ job, as credit men, is to live very, steadily and as a whole.
the Paris Reoort is merely an eco¬ principles.
mean
to
urge
the extension of pressive array of speakers will very close to all those whose rec¬
nomic prediction.
Covering the
sound credit—credit that is sound deal with this question in a man¬ ords do not go back of 1939 and
period of four years, it is neces¬ for the
borrower, sound for the ner much more authoritative and by doing so learn to sort the sheep
sarily general and lacking in pre- lender and sound for the economy specific than lies within either my from among the goats.
It is a
as
a
whole. Generally speaking, capacity
•ciseness.
The form, the timing,
or
my
province as a delicate, trying task for those wno
are
the interests of the borrower, the "keynote" speaker on this pro¬
ftilly aware of the social re¬
the conditions, the means of im¬
lender and the economy will be gram.
I take it, however, that I sponsibility to which I have pre¬
The 1947 edition of the Stock
plementation, all m«st be worked found to run parallel arid not into have the
privilege of making a viously alluded. We can do fully Exchange
Official
Year - Bookv
•out.
In
Washington and else¬ conflict. In the past, however, it few broad generalizations. In fact, as much harm by failing to discern
made and printed in Great Brit¬
where a tremendous amount of seems to me, all too often only I shall probably make my gen¬ the sheep as by backing up the
ain, has just been released in this
the interests of the borrower and eralization so broad that none of
work is being done on every as¬
country. It contains 3,482 pages,
goats.
the lender have been considered the experts who follow me will
or 280 pages more than its pred¬
Now I come to installment or
pect of this problem and we in the and no thought given to the over¬ be able tb
challenge my state¬
ecessor.
This increase is mainly'consumer
credit.
An old friend,
Bank, in close cooperation with all economic consequences of our ments.
due to the inclusion of notices ol"

•category

requirements

our

You and I have the

London Stock

other agencies,

many

ing

develop

attempt¬

are

Problem

of Undeveloped Areas

the Bank has

scene,

important

task

•economic

The

progress of

the

:any

here

areas

less

part

the

these

peoples
hands.

^nd,

life

the

Bank,

important

The

future

chiefly in their

cases

achieve,

political sta¬

houses

order.

own

Their

people must show, the willingness
to work,

the desire to make the

^effort for the. better, life towards
which

they look.

The Bank wishes to assist to the

exceptional discern¬

that possible trouble
for the future lies in the level and
behavior of prices, in
economic
enterprise

the marginal
borne and
nurtured by the lush economy of
wartime and

sumer

not

contempt.

see

field

the

having

the

hands

but

the

learn

The

emphasis

to the

loaning

bank

careful, painstaking admin¬

istration

credits

now

the

books.

credit

seasoned

with me

when

will

the

say

that

each

their inception—the

sound ones develop

un¬

with the ever-

changing interplay of human and
economic factors:

phasis

power

men

but few loans are unsound on the

day

before,

face of

Most
agree

never

today

intelligent

Therefore,

must be

follow-up

—

em¬

alert,

full

credit

day,

our

labor has had the

force

wages

in the

rising costs of living and

power

advance

labor
in

The "Commercial and Industrial

instated

desire

form.' It

such that

our

system of free

men

conditions.

war

perpetuate

municipal

restatement

capital history omittrd
from editions since 1940 owing to

banks.
skil¬

and

the

once more.

the books.

placed

and

help

more—and

policies pursued in administering

loans

use

one

cies,

look briefly at

the

social

companies enl 31

government

can

ball

the present.

speak

prices in

additional

new

mounting prices.

When

Let

nation's

con¬

policies should now shift from the

not—is obtaining some

greatest

implications yet to

instru¬

218

fully and wisely, it

installment credit.

respect and

details

ment

the

for whom

one

bred

Here is

aggressive acquisition of new loans

loans after they are on
or

immeasurably

such

of loaning poli¬
again let me emphasize, I
refer not only to the policies pur¬
sued in making loans but also the

it is for rais¬

ment

but

say,

familiarity has
no

the factor
problems
of a free economy. Wars do two
things to make a permanently
higher price level inevitable. They
destroy
and
concurrently
they
create a great quantity of pur¬
chasing power. When the market
is not only stripped of goods but
also overstimulated by purchas¬
ing power only one result is pos¬
sible without controls, and that is

other
as

na¬

They must put their

financial

that

mature

the

reasonable degree of

bility.

banks

realize

bank support at

They must maintain

many

currently, I think
speculation
in
markets—either recognized

the

re¬

most

of the task.

in¬

the

themselves.

again

for

other outside agency, cannot

■accomplish

•own

It takes

fraternity has not since fully re¬
covered. While speculation in the
stock market is not being financed
we

these

standards of

undeveloped
But

tions of the world

ing

speculation

support

dictment from which the banking

the

of the world

important

the

areas

development

sources

well

assist

progress

well-developed

the late twenties stands

Turning from the European

might

you

Trouble in Behavior of Prices

Surely the excessive use of bank
credit

questions.

many

decisions.

the

answers

Exchange

Official'Year-Book fat

Classified List" has also been
in

includes

working out their economic desti¬

curities

nies

and

the

re¬

enlarged
names

companies whose

2,700

some

new

of
se¬

itself.

individuals.

ineptly

and

its

can

become

our

permit

dreams.

death

use

abuse

nightmare to haunt

On Nov.

Regulation

1, with the

the

na¬

tion's bankers will be handed the
To me,

this

means

perhaps the last—

The

credit

can

gotiation.

be most wisely left

play of individual
If

ne¬

could but forget

dealt with in the book,

1947

lished by

issue, which is pub¬

Thomas Skinner & Co.

(publishers), Ltd., London, Eng¬
land,

under

the

sanction

of the

Council of the London Stock Ex¬

change, costs $25 per copy in the
United

chance to prove that the granting

to the free

are

The
known

and

States and Canada.

Supplementary Index, now
as

the "Register of Defunct

Other

Companies

from the Stock

Removed

Exchange Official

the direction in which competition

Year-Book," has been further en¬

be frozen into the economy in the

had headed the

larged to 412 pages by the addi¬

form

the

ness

no¬

future with less ominous forebod¬

some

limited

wages

higher

spiral

rises.

body

knows,

costs.

Where

but

tends to

it stops

reaches

1941,

installment busi¬

might face the

ings.

Long- experience- in

ground too high to be held, then

credit

field

the

out the manifold

spiral starts to

reverse

prices melting in the face of

with
cur-

cannot

fail

the

point

dangers inherent

intense competition

tion of details of the past

the

1947

hundreds

number

history

companies.

copies oE *

edition can be obtained

from Thomas Skinner

terms, at £1 per copy.

& Co., Ltd,

38.

COMMERCIAL

THE

(1874)

FINANCIAL CHRONICLE

Thursday, November 6, 1947

(averages about 174) I
thought the market had seen
a
level from which a rally

Tomorrow's

result.

would

Markets

that

Later

said

approached, or
passed the 180-84 level, ob¬
stacles would appear.
Noth¬
ing has happened to change

Waller

Says—

This

that.

sBy WALTER WHYTE=

exists

that there

means

range be¬
tween those two levels. In the

trading

TmI

UUm

-IBacfcltheBoom"
(C<mtmued from page 7)
hand and in bank.

hand consists of currency out¬
side the banks, while the money
on

bank

consists

demand

de¬

transfer

posits

subject

check.

Only these two media cf

million per
1920, $316 million

$237

The money

exchange are money in the strict

point;
per

and
point. '

in, the total money supply has
suited

from

termined

debit of

year

the

country.

Today the

rer

bank credit extended to the Fed¬

Another way of measuring the
relative size of the ifridn£y teupply
is to compare it with the total net

eral Government. This

be de¬

can

fey obtaining for each

the

ratio

public

bank

suply is 27% of this total, "credit lh the form

money

and

exxpanSion

remember

that

included

of bank-held
U. S. Government securities to to¬
tal bank credit and then splitting

for only they can be spent the total debit is the amount owed
directly for goods and services. by the Federal Government 'Whlth i the total money supply into two
Dtading Tatige now about It)
Time deposits, ihsutRtrce, -polities is not pressing because its
repay¬ parts, on the basis of this ratio.
points; 175 low and 185 high. old days such a range was arid securities of all
Here is what has happened to
types must all ment can be indefinitely deferred.
Boii't ofcpect qily action in ideal fqir in and out trading: be first converted into either cur¬ But
against 27% today, in 1941 the portions- of the -total money*
wear Juttire.
>
%
Today,
there
are
doubts. rency or demand deposits before the money supply was 21.4% of supply resulting from the, two
total debt/in 1929 it was
These doubts are based on they can be spent.
13.6%, types of bank CTedlt-^-public and
The futility
private.
The
Where does this money come and in 1920 it was 17.5%:
of buying the fact that the
publicly-initiate 4
majority of from? It comes into
stocks on strength in the curWhen* we relate money to total portion of the money supply has
being or en¬
traders
are
odd-lot
increased from $2.4 billion ih
partici¬ ters circulation, solely as a result private debt
r e n t
market
was
only, excluding the
demon¬
pants and today, with com¬ of the lending and investing op¬ government portion, the relative 1920, $2.6 billion In 1929; and $19 2
strated
billion in 1941, to almost $68 bilu
again
when
they missions
erations of our commercial bank-; growth in the money
up, the. odd-lotter is
supply is
lion at present.
closed
last
*
■
»
Thursday. The in a
ing system. Generally speaking* even more spectacular.
In other
tough spot. After odd lot
On the other hand, thi portion
every time the commercial banks Words, in 1920 the money supply c
Averages were off at one time
of
the
differentials, commissions and expand Credit, either in the form was 22:4% of total
money
supply resulting
private debt,
almost tour points from the
taxes, it costs about point and of security purchases or commer¬ in 1929 it was 16,1%, in 1941 it from the private use of bank
credit which was $21.3 billion in
"high of the day, even if they a half before
any
profits. cial/* Industrial, and agricultural I Was 32.5%, '.and today it is -over
1920, $23.5 billion in 1929, and
closed slightly better than the
That's a lot of profit to pay loans, the money supply increases; 70'% of total private debt.
$26.3 billion in
while every time tho ^
1941, is $40.7 bihlows.
The remainder of the
And finally, in relation to Gross
for the privilege of trying to
lion today.
banking system contracts credit, National
week was equally ineffective,
Product, the money sup¬
In other
make anything.
the money supply decreases.
words, whereas in both
A ply has
grown significantly from
1920 and 1929 the
though the same averages
withdrawal of a demand deposit
sjs
i'fi
money supply
25.1% in 1929 to 36.3% in 1941,
was
or
its conversion into cash does
approximately 10% the result
managed to struggle back a
and 48.2% today.
of
government
It is suggested that to cut not change the size of the money
borrowing
and
few points.
What all. these figures add up to 90% the result of
*
*
:'fi
private borrow¬
It simply changes the
down this
differential that supply.
ratio of deposits to currency in is, of course, that, the economy's ing from the banks, in 1941 it was
Such action is typical of a where
money
possible all buying be the total supply. Similarly, die lative engine is much bigger re¬ 42% public as against 58% pri¬
to the load it has to carry
vate; and today it is 62%% pub¬
market
honeycombed with done in round lots.
If not deposit of currency in a bank does than it was both
right after World lic as against 37% % private.- Per¬
not change the size of the money
guesses and rumors and built
War 1 and at the 1929 and 1941
haps no other single set of figures
possible then a long term ob¬ supply, but only its composition.'
on a base which is
complete¬
Whereas the can so well reflect
the
recent
Also, currency held 'in the vaults prosperity peaks.
a

sense,

It is this base jective must be followed.

ly inflationary.

which leads to hopes and it is
these
these

Having

into

exist is

can

ter

read this

the various local election

re¬

be completely in
Republicans and the

will

and the

Democrats will both compete
with

each

with

More next

the

Thursday.
—Walter

Whyte

expressed^

in thu
article do not necessarily at an%
time coincide with those of tk<
Chronicle. They are presented a>
those of the author onlyJ

views

is, will

veer

Whether

ly.
be

made

UHI tyil

WW!

associated with Wm. L. Burton &

any

its

for

mercial banks

value, virtually every dollar
the money supply would
be

few

often

bloodstream.

the

which

runs

engine

the

case

engine, the
supply is rela¬

money

load

must

carry—

whole—the less

revolve to operate the economy
a

given level of activity.
the

decade

following

even

since the

both the size and character of the
money

Co.,

Broad

Hoblitzell

Street,

City. Mr. Hoblitzell

York

formerly

partner of Bruce C. Hoblitzell &
Co.

and

prior

thereto

been

the

tremendous

size

the

in¬

money

supply—both its absolute size and

New

was

In the first place,

supply.

there has

things looked pretty gloomy

com¬

automobile

the

also be

can

automobile.
the

supply is
the
body's

beginnihg of World War II—there
have been profound changes in

Bruce

when

money

World War I—and

moves

ago

would

account
as

economy's
compared

crease

weeks

The

if by a huge in¬
visible pump, and the economy
would grind to a painful halt.

Since

the outside.
$

cash

siphoned off

rather than from

it,

liquidated at

were

rapidly does it have tq, turn over

reasons

down

com¬

face

bigger the

news

was

its

Pacific Coast

relative

size.

$108.5 billion

totals

today

against $45% bil¬
lion in 1941, $26.1 billion in 1929,
and $23.7 billion in 1920.4/:

with

Stroud & Co. and Dunne & Co.

1856

$26

billion

against $8.2
billion in 1941, $3.6 billion in 1929,
and $4.1 billion in 1920.
as

Executed

Orders

Coast

Exchanges

New
New
New

Schwabacher & Co.

York

Commodity
Chicago

Members
New

Stock

Exchange

Curb

Exchange
Exchange

Exchange,

Board

New Orleans Cotton

York Stock Exchange

Inc.
Trade

Exchange

New York 5, N. Y.

7-4150

San

Francisco

Monterey

—

'■

■■

NEW

YORK

N. Y.

Principal Offices

—

Santa

Oakland

—

Barbara

Sacramento

Fresno

has

DETROIT

PITTSBURGH

'GENEVA, SWITZERLAND

significantly

grown

the

volume

Model
.

increased.
Decline

Circulation

transfer in
mental

the balance of funda¬

economic

Washington!
However, I am not so much
concerned today with the social
and political
implications of this
profound change in the character
implications.

And,

.consequently,
as
the
money -engine
has increased in
size, its rate of usage—its velocity
gotten bigger, the money en¬

gine

has

been

slowly

able

and

much

power

than before to the

This

even

can

total

revolve

deliver

yet

buying

economy.

from

seen

ex¬

amination of the Federal Reserve
Board's figures on the anual turn¬
over
rate
of
demand
deposits,
which

80%

normally

90%

constitute

of the

total

about
money

supply.

Excluding the figures for
New York City, where the picture
is clouded by heavy, purely financial
transactions,
deposits
turned over 37.3 times in 1920,
40.5 times in 1929, 22.4 times in
1933, 22.4 times in 1937, and 19.4

Regardless of whether
-or

almost

$587

circulation.

million
In

only $281 million
while

1929

per

there

money

there

were

index point;
.were

only

the

bank

securities

banks

our

ownership

which

result

means

sold

were

fi¬

nancing the war.
Almost
twothirds of the nation's cash account
exists
fiscal

because
action.

of
In

governmental

other

words, a
significant proportion of the total
national debt has been monetized.
And since the national debt is not

likely to decline materially far
an indefinite,
length of time, there
is

little

likelihood

the portion

of the

reduction

money

sap-

ply

resulting from
commercial
bank holdings of this debt.
Id
short, the method of financing the
war

has in effect frozen in circu-r

supply is

so big that it can support
largest boom in 30 years with
practically
the
lowest
rate
of
turnover or usage
in 30 years.
(The turnover rate was slightly

almost the $70 billion level.

lower in the recent

maining part of the money sup¬
ply—the privately-initiated por¬

$68 billion of the money
supply.
Or, a floor has
oeen
placed Under the money supply at
-■

the

cause

be¬
of rationing, price controls,
war

years

and other artificial restrictions

In size alone, then, the money
supply is far different from what
it was following the last war and
during the years between the two

World'

Relaxation of Reserve
Requirements

Moreover,..the. status

tion—has

wars.

tially
or

Supply

that has taken place in the

funda¬

character

money

the

•

course,

significantly

stable

the

face

full

character,
shrinkage fit
adversity*

economic

explanation

for

this

stability is too long, and

technical

However, of equal significance
to its increase in size is the change
of

re¬

following World

less susceptible to

The

supply.

was

of the

War L. and even at the
beginning
of World War II.
It is substan¬

greater

Change in Character of Money

mental

changed

from what it

spending.)

to
state
here.'
Very
briefly, however, the explanation
bank deposit
reserves
have been considerably
relaxed. Our banking system
op¬
erates on what is basicallyafFac¬

lies in the fact that

tional deposit reserve system. Thai

be extended to two basic

is the banks

are permitted to cre¬
ate deposit money tip tb several
times the amount of their avail¬

the economy—the pub¬
comprising the Federal, able reserves. -Moreover, because
governments, and they normally do. create deposit
private group comprising tall mpney virtually up to the limit

groups in
lic group

State and local
the

business

ers.;. •; *

and
;

individual
v

1...

••

borrow¬
-

the governments of various states
sell bonds to commercial banks,

1941

favors

lation

When the U. S. Government and

every, point on
the Federal
Reserve Board index, there are

two-thirds

supply

the

one

it, the fact remains that

opposes

today

times in 1941, as against their an¬
nual rate today of only about 18
times. In short, the present money

For instance,

production.

from

power

Main Street to

of the money
supply as I am with
its purely economic

Velocity

in¬

for

today
CHICAGO

also

relation

dustrial

N. Y. Cotton Exchange Bldg.

Teletype NY 1-928

Prx. ate Wires to

Chicago Board of Trade
14 Wall Street

population, it has
grown
tremendously.
Thus,
as
against only $223 per capita in
1920, $214 per capita in 1929, and
$342 per capita in 1941, it amounts
today to $770 per capita.

And other Exchanges

New York Curb Exchange I Associate)
San Francisco Stock Exchange

COrtlandt

in 1920.

.Relative

Cotton

York
York

engine.
The
money
power
per
pound
of
economy has been tremendously
a

Commercial bank credit can, of

Members

Pacific

demand deposit portion of
today totals $82% billion as
against $37.3 billion in 1941, $22.5
billion in 1929, and $19.6 billion
it

H. Hentz & Co.

Lincoln

en¬

The currency portion of it today
totals

The

Established

Securities

it is

now

with

Model T

money

tive

gine,
T

formerly analogous

was

Lincoln with

commercial

to ques¬

gets its

within

open

ex¬

has

with

prefer to believe that

market

the

little-known; but

situation

of circulation—has declined. As it

tion.

'upon which the market is ex¬

pected to act is

of the money supply.

the economy as a

In fact

question.

held

the loans and investments of

pared

will

open

banks

tremely significant fact that if all

The

according¬

anything
this

not part

nation's

Brace Hoblitzell With

market, being the barom¬

eter it

commercial

deposit with the Federal Re¬
serve Banks is not a part of the
money
supply/ since it is not
available for spending by an yore.
Such currency is merely a rfeserVe
of substitute money held for de¬
on

withdrawn from circulation.

pointing

quite likely that

of the

positors who may want currency
in place of their deposits. 'Com¬
mercial bank deposit reserves are

Bruce C. Hoblitzell has become

It is

alarm.

that

make

But neither will you

pride and viewing with

other

anything

won't

[The

turns

you

way.

you

Maybe

out.

debat¬

just give the situation, a pass¬
ing nod and go on to other
-things.
By the time

feasible, then bet¬

are

stay

desire
lose.
verbal fracas, I'll

point.

to g

feed

hopes. How long such

situation
able

which

rumors

neither

supply is increased just
as it is when business and indivi¬
duals obtain bank loans.
The im¬

the money

portant

point is that by far the

greatest proportion of the increase

permitted by their reserves, any?thing which reduces their re servvsrequires a* multiple contraction in
deposit money^ either through the
sale of securities,, the
calling of
loans, the refusal to renew loans,
or

any.

combination of these
'
/• * ■

pro¬

cedures.

In days gone

posit

by, when their de¬

reserves were

primarily gold„

Volume'-166 "fWunber 4644

THE

the
he;

FINANCIAL' CHRONICLE

COMMERCIAL &

T187?) ' !3§i;

i)-Ml

economic

slfc^s'iihiaye^e^^

shocks,

should

Observations IfSSS

ariy
possible to make relatively pain¬
riyr F'■ F
•n riflv
In1 moft, the money rSuoDlV to
-earitiy va ri<»d ?t.Viiptfr- ''fnld holdlnps • ' •fn 'p'ko'ft.. t.hf» WorifiV supply To-1 lessly; the transfers and adjust¬
varied their gold holdings.
Today, gold has been pushed fur¬ day -is ^hoiw^trikingly. 'different! ments of productive capacity ••re*
ther and further into the back¬ from what it ever w;as before, in quired to: put the economy into
....

...-H)

•.

ground (if riot Into -the ground— the^degreie4ts
at Fort Knox!) so that it is only ranee i
JtoFrelatiyely
'a

loose limiter of bank re-j
:serves. v'; F '•
I F •'
'• |
In other words, there are now
several ways of varying or con-i
trolling bank -reserves regardless
'of what happens to the nation's'
-gold Stock.
It was because of the
holies and regulations under which:
•he used to have to operate that
•the banker came to be compared
to someone who hands you an'uinbiella when the sun is shining,
very

"and

better balance.
This

•maladjustments'in The

•all

Whereas

economy.

should

that

not

taken

will not continue to

over-;

mean

these

have occasional

shifts

the

de¬

and snatches it back when it starts

rain.
Actually, of course, !he
hanker usually couldn't help him-,
celf and had to contract his credit
and the money

Strains abr -hialadjustmerits fcoul<L mand for individual products. !We

precipitate

supply in order to
his deposits whenever would have precipitated a rather
signs of business hesitation! severe recession or even a major
developed.
Declining sales and- depression, if the money supply
-falling prices in any major seg-j had been as vulnerable as it was

ities needed to correct mere shifts

touched off
tion

usually!

chain

virtual

bank

snd money

economy

credit

reac-j

contraction;

-after

billion.

And

not

shrink

tive.
in

prevented

from

the

price
cumula¬

becoming

Money stayed in circulation

the

hands of business and in¬

even

acid

and test with flying colors at the time

1929

stated

previously, this ap¬
the present monetary

situation is not necessarily an en¬

billion to $20.8 supply passed

between

products.

much

painful process of deflation dividuals, and so the decline in
and depression.
prices soon brought them back
Between June 1920 and June into the market, to an even greater
1921, for instance, the banks had extent than before.
to contract the money supply by
As a matter of fact, the money

1933 they had to reduce the sup*

individual

praisal

The fact that 4t was
less vulnerable and so did

'12%, from $23.7

for

demand

the

back 4n 1920.

supply reduction whi'-h decline

"threw the economy into a tailspin,
out of which it could recover only,

reconversion

from

war

dorsement of the
it

means

achieved.

was

doubt that the

by which
little

There

government's pol¬

$450 billion over the.

'present fig-

if occasion demanded.
The
banks
are
therefore

ure,

"longer under any serious compulsion
to snatch back the
credit
the economic

"umbrella"-when

As a matter of fact,

skies darken.

able to sup¬
plement the umbrella with a rain*
coat, if needed by a customer to
weather an economic squall! The
they shoitfd now be

periodic mad scramble by banks
'for liquidity, which is so fatal to
the money supply, should no long¬
er
be -^necessary.
Also, there is

chase
were

materials

war

hence could not be
to

pur¬

which

retire this money

and

recover

sold in order

from

circulation, was inherently
inflationary.
Bank loans to the
government are not self-liquidat¬
ing as are most of those to private
enterprise. So this governmental
policy unquestionably led to a
more rapid increase in the money

doubt that if accurate fig¬
ures
were
available, they would
show that the average bank loan

.little
'

•

economists.

thing that is really different about
economic

lesson

this
to

learned from these two recent

periences would
if

seem

?em>-

ployment—need not. fall when de¬
to private business or individuals mand eases
temporarily in one
is for a significantly longer term segment 'of the economy.
The
—and hence less
susceptible - to
economic
records
will
rapid

contraction—than was the' show, I believe, that depressions
the twenties! or "even just as .weJknow them redlly date from

*case in
•

before
<

less

.of obtaining

sufficient reserves to

the inception of

dependent

money supply
fractional - re¬
banking. Un¬

serve, deposit-credit

deposits
banks

eral insurance of

are

deposits has un¬

doubtedly made it less necessary
the banks To ^reduce credit

quickly when the .going gets the
tough.;
"
'
Today, then, we have a rnoney

least bit

which

supply

thirds frozen,

action,

roughly

two-

through government

compared to 'only 10%

frozen back in the

twenties. And,

whereas the remaining 90%

Was

in those days extremely vulner¬
able to falling sales,

and

other types

versity, the
today is
ant

falling prices,,

of business ad¬

remaining oneThird

considerably
business;

not

resist¬

adversity,

pri¬

marily because bank deposit re*

present

has

heavy
U.

war,

changes,

any

effected

which

such

reduce

the

inherent

our money

supply

simultaneously reduce the likeli¬
hood of depressions.
here

insulated

ter

then, there is

that

the

would

good chance

remaining

.maladjust¬

ments and strains

existing in the

today ban work

them¬

which

also

greatly

against

money

valid

are

that

the

reasons

present

for

relationship, prescribed
Exchange Act.

under sections 13 and 14 of the Securities and

The

new

who it is that

Whose Interest Is to Be Served?
A b
suit only further obscures all efforts to ascertain
just
our

governing authorities are aiming to protect—the
or bond-holder, the officers of the
issuing corporation,
the insurance company
policy-holder, or the potential or actual pur¬
chaser of the new issue.

existing stock-

For

the

new complaint's major aim to
bring about competitive
generally—although this has not been asked outside the
public utilities field by the SEC—definitely exerts the effect
:of
raising the price to the new investor. In a wholly ill-founded wouldbe analogy, with
ordinary business practice, forced competitive bid¬
ding in securities selling would strip the protection from
the rela¬
tively inexpert buyers which is afforded by the

bidding

bargaining

power

exercised
by the investment banker in possession of discretion
accompanying his knowledge. The abuse to the
community of buyers
from awarding of
newly-created issues on the basis of an auction
price is of course greatly accentuated
during bull periods of greater
demand than supply.
This solicitude of the Justice
Department for the

existing stock¬
is, however, contradicted by the present suit's concurrent
upbraiding of the bankers for using their alleged domination
and
control for
over-merchandising with refunding onerations. For the
taking advantage of declining interest costs
by the
holders

at lower rates likewise

bankers''refunding

materially helps those existing stockholders

while injuring the extirpated bondholder.;
Such contradiction is also found in
the

castigation of the bankers

(section

par. 1) for their being "in cahoots" with
institutional
the insurance companies in the New York
market, to set'
up requirements favorable to them. This
plaint would seem to imply
that the millions of insurance
policyholders should be "soaked"-—
rather than protected—for the benefit of
the capital issuers. On the
other hand,
again, the Government is charging (in section K) that
the banker deprives the
institutional or other investor from freedom
of choice
regarding the security or the setting of its terms.
Again in various sections the Department
complains of the
advisory services which the bankers perform for the

buyers,

issuing corpora¬
tions, through "placing"(?) directors on their boards and
otherwise
Apart from any monopoly-proclivities that
may be suspected there¬
from, should not such continuing expert
advisory functions actually
be considered constructive for the
buyers' 'permanent
interests, in
a
fiduciary way, in lieu of abrupt washing-of-hands after the
com¬
pletion of each flotation?

inevitably

way

are

will

consistently

S. economy

capacity

the aperiodic

without,

major depressions.
there

not

bust.

real grounds for

the belief that the U.

levels,

blight

And,

little

of
any

that

doubt

back of the present boom's record
size

is primarily

of the money
of

the

the record

size

supply, while back

present

doni

at all who is

care

Depart¬

ment.

believing

boom

boom's

record

longevity is primarily the greatly

stability of The money

The vastly changed

con¬

supply? dition of themoney supply is

highly resistant to

groundless by

the prescribed disclosure in
reporting in income or proxy statements
of the minutest details of transactions
Jof any kind with all indi¬
viduals having the least semblance of a dual

economic

its newly acquired strength, there

supply.

ample

"material contract."
Likewise the Attorney General's stated fears over
abuses arising
"banker-client" relationship are rendered

every

from close

hell-bent after the nefarious
investment bankers that
hurt or helved in the process9
Therefore, so long as nothing
Furthermore those who
really should logically be indicted us
is done to suddenly reduce the 'the culprits if the detailed
charges are true, namely the
managers
of the issuing
corporations, are overlooked by the Justice
money
supply or to undermine

serious depression.

As long as we

profit and of the participations he will allot to distributors

finders, preferred lists, the interests of "experts," expenses in
to the underwriting
commissions, and the disclosure of

Are

enhanced

due

selves out without bringing on A

have

also,

shocks.

rate,

out,

seem,

economy

during the recent will henceforth operate much

vulnerability of

From

liberalized bank reserves, far bet¬

Rather, there

those

of bank credit by the

use

result

monetary vulnerability.

supply

S. Government and to

give

Therefore,

supply

money

do.

depressions have been basically a
of

the

only much bigger for the job

now

for

upon

time of til the present, This kind of money
natu¬ supply 'has been inherently vul¬
rally tending to tend money for nerable, despite its many other
longer periods.> Then, too,''Fed¬ obvious advantages!
That is, our
safeguard
stress, the

Being far

War TI.

World

concerned with, the problem

The

that

money supply holds firm,
over-all demand—and hence the

general level of business and

boom

available to finance it.

ex¬

the

won

subsequently destroyed, and

The

tion, the price at which he is to take the securities, Tull details Of
his

addition

the economy rolled merrily in
the
money
supply resulting
along at virtual capacity, with from this
governmental fiscal ac¬
scarcely a tremor. Yet, had the
tion, there is no blinking the fact
money supply been as vulnerable
to swings in demand as formerly, that in the same process we have
a major depression would almost
achieved a considerably less vul¬
certainly have developed at that nerable
money supply.
time, in line with the expectations
To sum up briefly, then, the one
of
Lesson to Be Learned

were constructively
instituted with the passage of the Act
include the gross spread to bankers, full data
regarding the type of
bankers' commitments, the amount of each underwriter's
participa¬

and

banks for the

and

many

basic

which

lars from the

represented

change in the environment of securities distribution" (in the words
of Paul Gourritch, formerly of Kuhn Loeb & Co.
and of the Com¬
mission), in this or any other country.
•
■
\l .*
Items of disclosure concerning investment bankers' participation

icy of borrowing billions of dol¬

iply almost 27%, from $26 1 billion peace. More specifically, between
•to $19.2 billion, all of which, in¬ the first quarter of 1945 and the
cidentally, was in the private por¬ second quarter of 1946 the Federal
tion, which fell 39%, from $23.5 Government's purchasing of goods
'billion to $14.4 billion.
and services was reduced by over supply than the economy could
77%, from an annual rate of $92.2 take, or than was warranted by
Present Bank Lending Situation* billion to
one of $20.9 billion.
Yet the economy's fundamental rate
:Now, fortunately, the situation despite this great reduction in de¬ of growth, which means that this
is quite different.
If need arises, mand in one major segment of the policy was the basic cause of the
the banks can easily increase theif economy, the money supply held recent rapid rise in prices.
On the other hand, the facts
reserves,
and therefore expand firm; and, in fact, actually in¬
their lending potential, or further creased somewhat.
seem to show that in the past the
As a result,
safeguard their deposits, almost at the money basis for converting economy was usually forced to
will. They can do this simply by wants and needs into effective de¬
operate with not only a minimum
selling some of their huge holcl4 mand in the other segments of
or
even
deficient money supply,
•ings of securities to the 12iFederul the economy was not destroyed,
•Reserve banks.
It has been esti- but was even strengthened.
De¬ but also with one which was ex¬
mated that on the basis of the mand in these other segments—
tremely vulnerable to stresses and
$70 billion of U. S. securities now namely, private business and con¬
strains.
Thus, while our economy
held by the banks, they could ex¬ sumer spending—rapidly took up
has undoubtedly suffered to some
pand their loans—and hence the the slack resulting from the de¬
in
"money supply—by approxirnff-u cline
government
spending, extent from a too rapid expansion
,

5) *

supply,

money

'any

«of ' the

page

the Commission's rules and regulations issued thereunder.
Carrying
periodically
contraction of may, for instance,
out its mandate given in Section
9(a)(6) of the Act to resolve this
more
automobiles,
or
which would produce
most complicated problem, the Commission after
lengthy investiga¬
bringi: Cri ^ major depression," more shoes* or more food, or
tion ahd deliberations has issued six detailed rules
(X-9A6-1 to 6)
today the money supply is largely mom houses than the market will
absorb.
But we should not pe¬ governing the notice of intention to 'stabilize transactions while
impervious to them.
I believe -We have already seen riodically find ourselves produc¬ stabilizing, requirements for disclosure, and reporting.
concrete proof of this greater re¬
ing simultaneously more of near¬
Balancing the Picture
sistance. Wholesale prices reached ly
Also outside the technical legal
everything than the market
purview, other existing safe¬
a temporary peak in March of this
will absorb.
We should not again
guards should be mentioned in order to forestall a too-distorted
year, and then turned down sig¬
experience the sickening drops in picture for the public. Basic are the pervading sanctions for disclosure
nificantly in April and May.
It over-all demand which stem from which underlie the entire philosophy of the Securities Act as well as
is entirely; possible That this turh- the - wholesale
destruction
of the balance of the concomitant financial legislation. The
waitingdown in prices, reflecting at least money
and which prevent the period ordered by section 8 (a) of the Act during which the
prescribed
a temporary slackening of demand,
transfers of manpower and facil¬ information can be
disseminated, truly has
then

the

safeguard

ment

<Continued from

Congress, and closely supervising investment banking practices for,
13 years, should have remained decisive. I *
One of the major "reliefs" asked Tor by the Justice
Department,
that regarding market operations Tor stabilizing and price mail*-,
tenance, is specifically covered by The - Securities Exchange Act plus

real basis of the present

the

boom.

tenance and all taxes
except Fed¬
eral income
taxes, gross income

Halsey Stuart Offers

amounted

!VS.tif Indiana Sondsd

$10,763,159;

interest requirements

now

: group

Stuart

headed

Co.

Inc.

outstanding, including
issue, will require $1,968,750.

Halsey,

received

the

$15,000,000 Pub¬
Indiana, Inc.,
mortgage bonds, series G,
3%%_, due Nov. 1, 1977, on its bid
Service iCo.

104%%,

the

first

bonds is being made at 101%%.

Proceeds
are

from
to

the

sale

the

applied to the
construction program

premium

reducing

annually

thereafter, and for Sinking Fund
purposes redemption is permitted

of 101.0799. Public offering of the

bonds

this

The bonds may be redeemed
by
the company initially at

award Nov. 3 of

lic

annual

all bonds

102V2%

and at reduced prices

thereafter.
'

iPublic
Inc.

Service

furnishes

company's
Which it is estimated will require

Indiana,

service

The

approximately $52,000,000.

Co.

electric

cultural

For the

31,

12 months ended Aug.
the company reported
operating revenues of $29,-

1947,

total

603,808. After depreciation, main¬

of the

counties

of Indiana.

territory is residential, agri¬
and widely
diversified
industrially. Among the larger ci¬

ties

served are Terre
Haute, Kokomo, Lafayette, New Albany and
Bloomington.
•,....-n-F

>);•

THE

(1876)

bility is that those funds were
Foreign policy be¬ fugidve from various laws witl)
taxes, requisitioning,
Whether or not men are to be longs to the people. It is a* legiti¬ respect to
mate
subject of partisan contest ana the. like. But the preponder¬
left free to organize their ex¬
if there is deep division.
But I ant reasons for this reluctance,-#®
istence in accordance with their
judgment,....were neither of
own
desires or whether they raise the fervent prayer that we my
may ever strive for an unpartisan these. ' One was that conversion of
are to have their lives arranged
American foreign policy—not Re¬ dollar assets into local currency
and dictated for them by small
publican, ' not
Democratic,
but at the artificial and unrealistic
groups of men who have arro¬
American
which substantially rates presently in force, would re¬
gated to themselves this arbi¬
unites our people at the water's sult in the immediate confiscation
trary power.
edge in behalf of peace, with jus¬ of the bulk of their value. The
In any event, we must take one
tice and liberty under law.
other one was that the surrender

he describes the supreme,

Let's

Speed Up Peace Treaties!

Thursday, November 6, 1947

FINANCIAL CHRONICLE

COMMERCIAL

under¬

(Continued from page 7)

mate

subject of frank debate by

citizens.

our

lying issue as*-follows:

subvert

trust
those

friendly

peace

and

the

restoration

which

relations

rehabiLtation

des¬

give peace-making this
untrammelled, democratic chance.

hesitate to

Acting strictly within the Char¬

the unified Republics of

perately need and Which A

ter,

"will always be found eager to re¬

Western

twoway street. For all our sakes, the
situation needs a heavy dose. of

new

ciprocally

encourage

Hemisphere

aiid glorious

blazed

the
this

—

trail at their're¬

inspiring Pan-American Rio
Conference.
A two-thirds Pantotal truth. If humanly possible, American vote controls all pacific
we
all need a successful attack decisions in this regional arrange¬
ment. There is no "veto" except
upon misunderstanding. We must
toe as ready as others in this con¬ each individual nation's right not
contribute
to. armed forces
nection to face the scriptural" in- to
cent

against its will. Here lies the in¬
viting, enlightened road. Time and
xnight have an honest clinic with events will have to decide ulti¬
all the cards face up before the mately whether any other road
will be worth its upkeep.
world.'
But
the
problem
which the
Wants a "Live and Let Live"
world confronts is not confined to
Wprld
the
United Nations.
Other im¬
junction about motes and beams.
I wish that peace and total truth

of two calculated risks.

There is

the calculated risk if

proceed.

But

American

the

a
"live and let live"
peace-with-justice can
thus be found; and, despite dis¬
couragements, I decline, volun¬
tarily, to give up the quest.
I
want honorable friendship around
the earth. I want global disarma¬

want
if

dependably protected against
toad faith. I want to rely depend¬

perative factors—beset by kindred
difficulties—are indispensable to

destiny

calculated

not

risk

not

proceed. Secretary Marshall cor¬
rectly says it involves—

for

German

tics

civilization

Western

which

tremendous values and is
basis of the world's best

hope.

for

the

German

manner

living

based.

are

this is my final com¬
Foreign policy is a legiti¬

ment.

"To

inheritance

our

dollar and
holdings in
of those needed for effec¬

own

other

hard

excess

tive

currency

reserves,

currency

but

the

currencies, and secu¬
their own nationals

hard

gold,

and

gold

rities held by
there

within its

What

lion.

and

value of

the

are

the

discussing

proportion does it bear to
the size of the problem?
As the

the question points
out, the British requisitioned or
otherwise repatriated during the
war approximately $4% billion of
securities,
not
including
those
pledged as collateral for the RFC
loan.
I accept the questioner's
estimate that a possible $2 billion
of British assets may remain to¬
of

So, as far as Great Britain
concerned, we are talking in
terms of a possible $2 billion in
collateral to be pledged for any
loans additional to existing com¬
day.
is

mitments, including the $3% bil¬
lion

Financial

Agreement.

Europe Holds $2
of

Billion

Securities

assets

Now that

know what

from

we are

Control,

—

"when."

the

Foreign Funds

our

talk

can

These

seed-corn

about

constitute

assets

private

enter¬

which indi¬

prise—the funds by

viduals in these countries

can

re¬

establish their private business re¬
lations in the United States when

private trade again becomes prac¬
ticable.
It is contrary to fact to
that

assume

funds

that

property-holders
would

'round

the

bulk

the

these

at the

time Congress ratified

Control, it

international

"An
an

United

States.

What

are

and

belief

of the United States
Government, that it will protect

tegrity
and

safeguard

and

the

secure

property even of aliens that is
legally
and
lawfully
in
the
United States."

this

initiated

action,

consistent with

process

ception

individual

can

con¬

our

property

terminated

which

he had domiciled himself in

the
con¬

international faith in the in¬

action

the Treasury policy of put¬

intended to

was

firm:

an.

defended

only in the language employed by
adherents

ting it at the disposal of the owner

the

it.

instituted to prevent

"refugee" money has long

since been released in accordance

once

was

money.

world

the

characterize

rights,

"refugee"

prop¬

They would be more likely to re¬
gard it as of a boldness compar¬
able to that displayed by Hitler
in marching into their countries
in an attempt to apply their prop¬
erty to his cause. Foreign Funds

Most

are

enemy

retary of the Treasury to take this
step as "timid."
It is not likely

countries concerned and still to be
released

One

him from attaining that objective.
In the words of Senator Connally,

talking about, i.e., $2,200 million
assets, the bulk of which are still
owned
by the nationals of the

with
Western

tend,

Control

"Seed

Dollar Assets

Corn" of Private Enterprise

col¬
and

what

proponent

that

controls,

been drawn down

now

The ques¬

When?

Foreign

the

opinion.

How?

lateral

to less than $2 billion and consti¬
tutes the bulk of the $2,200 mil¬

What?

are:

which

About
reasonable

can

difference of
tions

relaxation
amount has

ultimately

commentator charac¬
terizes the hesitation of the Sec¬

presently concerned. Through

are

themselves

traders. I do not in¬
outline or discuss the

private

declared

both at home, and abroad.

this

with

reestablish

erty.

outset, aggregated approximately
$3 billion. About one-half were
countries

money

could alone hope to

they

suggested that our Alien Property
Custodian* by* making the violent
assumption that the reluctance to
declare property stems exclusively
from
what is by all
odds the
smallest factor, should vest all un¬

TO US."

the

which

"seed"

the

cerned

technical argument by which it is

say —FORGET NOT;
IT IS
GOD
WHO
POINTED IT OUT

inimical to private property would
the loss to the owners con¬

mean

Can Europe Furnish Collateral?
their

of these assets to countries which
had undertaken national policies

wish

to whom

our successors

entrust

•

areas

Van

And now,

the police-state?

would

that

make

mockery of the assurance of pro¬

to the Western
countries, my guess, dealing with is mainly the assets jection we gave foreign investors,
of the nationals who remained at
who in the past have contributed
upon Department of Com¬
merce
statistics, is that Western home, and it is fair to assume, so much to the development of
that these are funds which they
European holdings of stocks and
#
had accumulated and were using the United States.
bonds, in the United States, are
in their own private dealings in
around $2,200 million. It is guessed
A Better Solution
the United States. For us to en¬
that dollars hoarded in Western
There is a better solution. That
Europe aggregate between $1 and courage the expropriation and use
of these foreign assets in the state solution is to continue the protec¬
$3 billion; gold between $2 and
trading operations of the Western tion we extended in 1940 until not
$4 billion. Unless these nations
can
immediately locate and de¬ European nations, is to encourage simply the period of war but of
a
movement
diametrically
op¬
liver
the
securities, casli, and
With

respect

European
based

It is infinitely pref¬
long as we are talking things out, erable for the Council of Foreign
no
matter how angrily, we are
Ministers to come to united terms.
not
shooting things out.. I ask But I am
saying that disagreement
those Americans who would dis¬
—here or elsewhere—cannot
be
miss the United Nations as a total
allowed to postpone peace, reha¬
loss to remember this.
bilitation
and
self - government
Without the United Nations, the forever. Peace must have priority.
Communist design for a postwar
The Marshall Plan
world would certainly have been
gold, hidden in their own domains
no
less aggressively
belligerent.
I conclude with a quick refer¬
the
total collateral immediately
Without the United Nations the ence to pending fuel-and-famine
available for pledge we are talk¬
design would have matured rela¬ aids to Europe this winter and to
ing
about for Western Europe
tively in the dark. It would not the so-called "Marshall plan." The does not much exceed $2 billion;
stand out where he who runs may former involves elemental human
and the pledge is subject to cer¬
read. It would" not be confronting survival in a free society. Amer¬
tain difficulties which I will pres¬
the organized judgment of man¬ ica will have lost its traditional
ently discuss.
In any event, as.
kind. Without the United Nations character if it refuses such relief
these
countries have
estimated
the Soviet Union and its satellites under
appropriate auspices.
The their needs from us to be in ex¬
i would have gone their own way
latter, the "Marshall Idea" — in¬ cess of $30 billion (and evenvwith
to their own ends.
The greater volves long-range aid to imple¬
the screening to which they have
the
difficulties which surround ment
self-help
and
self-suffi¬ been subjected have not been re¬
i the peace, the greater the need for
ciency.
If self-help and self-suf¬ duced below $20 billion) the col¬
this consultative device, for our
ficiency can be made to work, this lateral we are discussing bears a
sake, for their sakes, for all our objective may well be a bargain.
small proportion to the size of
sakes.
If it does not save the
We must find reasonable promise
the projected loans. As some of
peace, it will fix the crystal-clear of this, success, because we can¬
these countries have other debts
responsibility for its loss.
This not
indefinitely underwrite the to public institutions and private
moral verdict of mankind finally
investors, there
is in¬
world.
We must know the total foreign
is the greatest power on earth.
volved in the use of this collateral
We
should
continue to urge bill, including China.
We must
the question with which we as
curative changes in the Charter.
frankly canvass our own resources bankers are familiar as to the
The "veto" should apply solely to
lest we impair our own economy propriety of one debtor seeking
the use of armed force.
At that
jurisdiction.

Christian

(Continued from first page)

the

Albertus

Raalte,

Government and our

our

peace.

Restoration Core of
European Rehabilitation

German

the United Nations to keep
Germany's restoration to viable
peace.
But pending reliable
evolution
in these
directions, I autonomy is at the core of Eu¬
rehabilitation. * Economic
want a totally adequate American rope's
national defense. Unshared ideals unity of the occupied zones, prom¬
ised at Potsdam, has been frus¬
can be a dangerous delusion.
trated by our Soviet associates.
I am opposed to appeasements
As an unavoidable alternative, we
which aggravate the dangers from
linked
the American and
have
which they vainly seek escape.
British zones—with the door al¬
So are the people of the United
ways wide open for the Soviets
States according to the latest Gal¬
and France to join.
This is the
lup poll. This is a tremendously
nucleus
upon
which we must
important fact lest our attitudes
build.
Germany's twice ravished
toe miscalculated either at home
neighbors
must have complete
or abroad. But I am sure we crave
protection against the re-erection
decent and honorable agreements.
of another Axis threat.
To this
I decline to proceed on the tragic
end
we
have demonstrated our
theory
that war
is inevitable.
World War III might destroy even good faith by offering a 40-year
promise of instant military sup¬
its victors.
Only madmen could
port against the recurrence of a
deliberately want it or neglect
German threat.
France and the
.honorable methods to prevent it.
Low Countries have
I still have patience—vigilant pa¬ contiguous
other vital interests which must
tience.
But I have no patience
be resolved.
with helplessly drifting into the
I am unable to believe that a
prolonged chaos and deliberate
German
peace conference
could
.confusion upon which freedom's
not preponderantly find common
disintegration thrives.
ground. If the Council of Foreign
We should continue vigorously
Ministers still deadlocks this win¬
to, support the United Nations,
ter, it had better adjourn sine die.
taking scrupulous care to respect The peace conference should be
its authority as faithfully as we
called by those Who do agree—
demand respect "from others. ;Deopen
to
all
interested states
spite its birth pangs audits dam¬ whether
they agree or not—to
aged youth, it has demonstrated write a
practical, reasonable peace
still the
ably

nie,

leader of the 1847' pil¬
grimage to Michigan, speaking at
The danger of the actual dis¬ the 25th
Anniversary, which now
appearance of the characteris¬ lengthens to a century:

stability and peace. Among many
such, including a long merited
Austrian peace, my time permits
reference only to the typical need

ment

last word reverts to the

Centennnial which richly
inspires this occasion. I give you
ignore the
challenge of the Dutch domi¬

■.

world

And my

Dutch

honest enough with

let's be

posed to that for which we have
been fighting in Geneva at the
international
Is it not

Conference.

Trade

in keeping

with the

whole philosophy of our program
for economic collaboration with

friendly nations,

to postpone the

utilization of these assets until the

post-v/ar

adjustment

has

pro¬

gressed far enough to permit these
funds

cratic

released

back

processes

channels of private trade.

doing

will

achieve what

most

demo¬

into

the

By so

assuredly

all agree is de¬

time when their employment will

sirable, i.e., the application to
resumption of
rehabilitation of the Western Eu¬
between the busi¬
interests of the countries con¬ ropean economy, in the most ef¬

work

ness

the

toward

private

trade

.*3

and
thus vindicate the sinister security while the others remain
point it is a Constitutional neces¬
unsecured, so long as there is not
sity even with us. But it should hopes of those who expect our
enough collateral to go around.
never anply to pacific means for
economic collapse to end all de¬
Unlike the British assets which
the settlement of situations and
mocracy for keeps.
were not blocked by our Foreign
disputes. It was a mistake, dem¬
We must be sure of sound ad¬ Funds Control, the assets in the
onstrated by events, to do so in
the first place. I have always said ministration and adequate coop¬ United States of nationals of the
that 98% of the Charter's genius
eration.
But within these prac¬ Western European nations were
is in these pacific chapters.
No
tical limitations I agree with Sec¬ included in the Foreign Funds
peace-loving nation—better say,
Control, blocking which, at the
3xo
peace-living nation — should retary Marshall at Boston when

cerned?

fective fashion,

The final question is: How are
these assets to be put to use?

available assets of those countries.

Shall we, as one commentator

has

put it, seize and

"in the

na¬

the

of the remaining

tional

use

the

interest"

assets

^ V|§?

United States of friendly nations?

The

fact

the

identity

that while

these

countries of which the

know

assets,

the

owners are

nationals largely do not. For va¬
rious
reasons
the owners have
been reluctant to report

this

prop¬

to their own governments.
Some small proportion of this re¬

erty

luctance may stem from the fact
that there may be an enemy in¬
terest in them,

which, if disclosed,

would result in their being

vested

by our Government by virtue of
the

provisions of

the

Enemy Act.

our

Trading with

Another possi¬

ir«;

i-if,f iytjw

Indications of Current Business
The following statistical tabulations
shown in first column
tMEPTCAN IRON

AND

(percent

Steel ingots and
castings produced

month ended

Latest

Nov.

Week

capacity)

to—

Week

96.1

97.0

that date,

Month

Ago
96.1

or,

Nov.

1,681,700

1,697,400

1,681,700

Crude

1,605,500

.,lResidual fuel

5,295,350

5,268,400

5,165,000
16,529,000

5,167,000

5,290,000

16,501,000

14,780,000

2,050,000

2,176,000

2,022,000

2,067,000

6,217,000

6,136,000

5,493,000

Slab

8,542,000

8,580,000

7,525,000

Oct. 25

6,638,000

5,196,000

___

Kerosine

j
I

Gas

oil

(bbls.)

and

Residual fuel

oil

(bbls.)

CONSTRUCTION,

RECORD:

ENGINEERING

State

Bituminous

(U.

Shipments

coal

BUREAU

57,776,000

56,777,000

60,759,000

954,627

954,249

937,954

742,077

745,287

729,165

period

CONSTRUCTION—U.

LABOR—Month

New

746,834

$141,719,000

$166,812,000

33,509,000

84,959,000

130,241,000

All

DEPT.

1,262,000,000

950,000,000
475,000,000
276,090,000

nonfarm__

building

nonfarm

75,090,000

48,728,000

56,760,000

36,571,000

34,295,000

44,894,000

50,306,000

24,563,000

30,530,000

3,834,000

6,454,000

12,008,000

3,765,000

12,635,000

*12,645,000

12,300,000

12,760,000

1,230,000

1,223,000

1,278,000

1,292,000

131,700

*133,100

134,400

121,200

All

307

299

316

Nov.

AND

INDUSTRIAL)—DUN

STREET, INC

5,009,286

4,963,816

4,934,851

COTTON
Oct. 30

(per

METAL PRICES

(E.

Oct. 28

M. J.

3 19141c

3.19141c.

2.73011c

$3G 96

$36.96

$36.93

$28.13

Oct. 28

ton)

3.19141c

Oct. 28

ton)

gross

$42.58

$41.83

$37.75

$19.17

QUOTATIONS):

copper—

St.

Oct. 29

21.225c
21.425c

17.425c

80.000c

52.000c

15.000c

8.250c

Oct. 29

14.800c

public

MERCE)—Prior

10.500c

9.250c

MOODY'S BOND PRICES DAILY
AVERAGES:

(DEPT.
to

Nov.

spinning

.Nov. 3
.Nov. 3

1102.62
113.50

1T02.84
113.70

1104.02
114.66

116.61

.Nov. 3

118.60

118.80

119.20

93 000,000
26,000,000

42,000,000
*10,000,000
*201,000,000

171,000,000

*70,000,000
*68,000,000

47,000,000

*63,900,000

55,000,000

3,398,767

4,315,818

29,000,000
3,000,000

69,000,00ft

com¬

(dept.

23,807,000

23,876,286

21,410,000

21,197,000

21,638,73a

9,427,000,000

9,034,000,000

9,037,485,750

396

employment
dept.

and

116.80

117.60

119.20

.Nov. 3

113.31

113.50

114.85

116.22

.Nov. 3

105.86

106.04

107.27

110.15

.Nov. 3

108.16

108.52

109.60

379

373

labor—Month

115.24

115.25

116.02

117.60

.Nov. 3

117.20

117.60

118.20

120.02

August:

mupber of production workers
manufacturing industries—
manufacturing

in
All

,596,000

goods

All

12,276,000

12,101,00a

394,000

6.309,000

6.160,000

,202,000

Non-durable goods
Employment indexes—

5,967,000

5,941,000

manufacturing

153.8

Durable goods
Non-durable goods

177.1

174.7

170.6

135.4

130.3

129.7

Payroll

112.19

.Nov. 3

payroll —u.

Estimated

121.04

.Nov. 3

Baa

*27,000,000

COM-

Spinning spindles in place Sept. 30
Spinning spindles active on Sept. 30
Active spindle hours,
September
i
Average spindle hours per spindle in place

Durable

16,000,000

merce—

8.100c

Oct. 29

9,000,000
26.000,000

14.150c

21.300c

Oct. 29

21.200c

21.375c

Oct. 29

Louis)

21.200c

Oct. 29

2,000,000

*24,900,000
*135,000,000

73,000,000
70,000,000

development

September

Domestic rennery at
Export reiinery at
Straits tin (New
York)
Lead (New York)
at

Louis)

other

GINNING

cotton

54,000,000

*43,000,000

35.000,000

208,000,000

water

Running bales

(per lb.)

*9,000,000
*45,000,000

6,767,485

and

Farm

4,628,353

BRAD-

203,000.000

24,000,000
140,000,000
27,000,000
42,000,000
10,000,000

building repairs
Residential building nonfarm
Nonresidential building nonfarm

COMPOSITE PRICES:
gross

All

287

facilities

Minor

kwh.)

Finished steel
Pig iron (per

naval

Conservation
Oct. 25

*132,000,000

53,000,000
50,000,000
79,000,000
266,000.000

75.000,000

65,000,000

Sewer

SALES INDEX—FEDERAL
RESERVE
AVERAGE=l00

95,000.000

*52,000,000

48,000,000

other

Military and
Highways

167,000,000

*75,000.000

2,000,000
46,000,000

and
Industrial

Oct. 25

315,000,000

*140,000,000

9,000,000

building
(except
naval facilities)

military
Oct. 25

*267,000,000

134.000,000

building

Nonresidential

MINES):

'
"""
1,066,000,000
300,000,000
356,000,000

312,000,000

utilities

construction

Residential

*460,000,000

53,000,000
65,000,000

construction

Public

T,238,000,000
*935,000,000

141,000,000
82,000,000

other

Farm

42,186

58,473

$1,470,000,000*$1,439,000,000 $1,237,000,000

Residential building

$109,385,000

65,927
230,161

40,028

66,852

September:

construction

Nonresidential

$82,237,000

59,653

190,917

38,041

(tons)

construction

Private

195,260

(tons)

construction

STORE

(COMMERCIAL

(St.

BUILDING

942,257

EDISON ELECTRIC
INSTITUTE:
Electric output (in 000

(East

end

67,331,000

and

SYSTEM—1935-39

4,994,3Tf

67,853
63,500

lbs.)..

57,419,000

Oct. 30

(tons)

DEPARTMENT

Zinc

2,000

62,G09,000

Oct. 25

Pennsylvania

Lead

Stock at

Unfilled orders at end of period

Oct. 30

lignite (tons)
anthracite (tons)

Beehive coke

Electrolytic

(tons

86,731,000

Oct. 30

4,974,566

(tens

Commercial

municipal

OUTPUT

Scrap steel

grades

22,047,000

Oct. 30

IRON AGE

all

Industrial

and

FAILURES

output,

lbs.)

82,472,000

Oct. 30

Federal

COAL

smelter

22,829,000
60,406,000

NEWS

construction

6,555,560

....

zinc

2,000

80,912,000

Oct. 25

cars)

*6,982,086

September:

22,516,000
61,312,000

Oct. 25
of

6,775,158

tons)—Month

(net

AMERICAN ZINC INSTITUTE, INC.—Month of

Total

Total U. S. construction
Private construction
I

8,666,000

4,729,800

AMERICAN RAILROADS:

ENGINEERING

Public

stainless

82,003,000

Oct. 25

(number

Ago

5,278,223

and

23,014,000

Oct. 25

Year

Month

for

Oct. 25

oil

Revenue freight loaded (number
of cars)
Revenue freight ree'd from
connections
CIVIL

steel

of August

ASSOCIATION

and

Oct. 25

distillate fuel

4,688,000

16,298,000

Oct. 25

(bbls.)

oil output
(bbls.)
Oct. 25
..Stocks at refineries, at bulk
terminals, in transit and in pipe lines—
Finished and unfinished
gasoline (bbls.) at

ingots

castings pro¬
duced (net tons) —Month of
September
tShipments
of
steel
products,
including

Oct. 25

Gas oil and distillate
fuel oil output

;

Latest
AMERICAN IRON AND STEEL INSTITUTE:

Oct. 25

Gasoline output (bbls.)
Kerosine output (bbls.)

of that date):
Month

91.1

alloy
Oct

are as

Ago

Crude oil

output—daily average (bbls. of 42 gallons
each)
runs to
stills—daily average (bbls.)

month available (

of quotations,

cases

Year

AMERICAN PETROLEUM INSTITUTE:

Steel

(net tons)

Activity

production and other figures for the latest week

either for the week

STEEL INSTITUTE:

Indicated steel operations

Equivalent

are

cover

All

149.9

147.7

indexes—

manufacturing

322.4

Estimated

number

284.4

*350.4

316.1

288.4

goods
Non-durable goods

313.9

357.2

Durable

*278.1

253.4

*15,209,000

14,876,000

employees in manu¬

facturing industries—
MOODY'S BOND YIELD DAILY
AVERAGES:
U.

Govt.

All

Durable

Bonds
Nov. 3

t2.32

12.31

Aaa

Nov. 3

2.98

2.97

Nov. 3

2.72

Nov. 3

2.81

2.77

2.69

Baa

Nov. 3

2.93

2.98

2.91

2.84

Nov. 3

3.41

3.39

3.32

3.16

Average corporate

Railroad

Group

2.71

2.92

2.69

2.60

FACTORY

COMMODITY

NATIONAL

WEEKLY
DEPT.

$50.42

INDEX.

FERTILIZER

ITY

AVERAGE

INDEX

and

ASSOCIATION—WHOLESALE

3.25

2.85

2.77

Durable

2.77

2.74

2.65

All

manufacturing

443.9

All

448.3

440.2

356.4

goods

manufacturing

Durable

40.3

goods

COMMOD¬

All
232.9

235.5

238.6

245.0

280.1

256.7

273.7

265.5

224.0

goods
Non-clurable goods

201.9

Nov. 1

306.4

315.3

290.5

286.4

Nov. 1

238.2

308.3

295.4

246.5

261.3

262.3

222.2

Miscellaneous commodities

Nov. 1

195.0

190.3

154.2

Textiles

Nov. 1

172.9

173.0

169.3

151.1

217.0

217.6

Nov. 1

and

201.0

159.6

159.5

159.1

125.0

Nov. 1

drugs

214.2

Nov. 1

Building materials

232.6

232.7

226.6

184.5

Nov. 1

combined

128.2

135.5

135.6

MALLEABLE

IRON

CASTINGS

136.9

135.7

128.3

127.1

116.6

212.0

217.2

213.2

181.0

COMMERCE—Month

Shipments
For

125.1

received

Orders

(tons)

Oct. 25

DRUG

162,060

180,644

155,140

185,868

183,554

182,173
101

101

102

431,860

445,358

437,550

Building

147.9

146.2

144.5

allied

156.2

190.7

190.9

184.7

178.5

177.6

190.4

143.3

141.2

140.8

126.5

117.4

115.7

115.0

95.0

151.3

151.1

150.4

let. 25

114.4

184.4

184.0

182.0

Dct. 25

134.2

126.9

124.7

let. 25

132.9

132.7

131.9

Jet. 25

products

186.2

142.1

115.9

117.1

116.5

114.9

103.7

123.6

99.5

Oct. 25
let. 25

tFigures

are

farm

for

products

177.0

1 ~

272,571

•p-H"

|]'
289

286

ivinanz
273

grain

218

284

hay

278

297

22ft

327

and

254

302

grain

346

249

244

357

352

41ft

247

252

304

Meat

Dairy

166
crops

154.1

171.1

153.0

152.4

151.3

117.7

)ct. 25
and

foods

taxable securities;

150.6

151.1

150.9

131.7

150.9

150.8

150.0

128.5

Jet. 25

140.2

139.3

138.2

113.1

previous figures given were for non-taxable.

and

2 Oft

179

151

311

255

313

products

315

299

360

products
and

181

238
344

animals

Poultry

367

318

283

282

30ft

251

eggs

246

25T

180

214

Seasonally adjusted:
Fruit

174

Truck

crops

314

253

Dairy

products

270

278

286

227

236

237

Poultry

and

SOFTWOOD

eggs

PLYWOOD

MERCE)—Month

Shipments
176.0

)ct. 25

commodities other than farm
products
than

41,935

234,656

1914—100—

grain

Production

materials

•Revised figure.

190!)-July,

Fruit

169.9

191.3

let. 25

commodities

commodities other

26,591

229,735

261

Feed

170.1

176.2

Dct. 25

Semi-manufactured articles
Manufactured products
All

—-

products

Feed

135.9

Oct. 25

products
materials
and

157.9

Special groups—

All

farm

Livestock

158.0

Oct. 25

Housefurnishings goods

Raw

sale
sale

15:

Truck

Oct. 25

products

metal

Miscellaneous

Oct.

Food

147.1

Oct. 25

lighting materials

Chemicals

for

Crops

DEPT. LABOR—1926—100:

products
and

month,

Cotton

Oct. 25

and

Metal

Oil-bearing crops

leather

26,55ft

Tobacco

.Oct. 31

Foods

Fuel

REPORTER PRICE

products
and

for

41,345

23,429

33,244
end

TURE—August,

572,188

All commodities

Textile

cancellations,

67,903

40,733

24,239

(short tons)

64,162

38,165

use

PRICES RECEIVED BY FARMERS—INDEX
NUMBER—U. S. DEPT. OF AGRICUL¬

101

Dct. 25

62,404

tons)

less

orders,
tons)

(short

175,440

let. 25

AVERAGE=100

WHOLESALE PRICES—U.

tons)

Unfilled

All

169,061

9ct. 25

Percentage of activity
Unfilled orders (tons) at

INDEX—192(5-36

(short

booked,

(short

(DEPT.

August:

Unadjusted—

(tons)

OIL, PAINT AND

sale

tons)

For producers' own

NATIONAL PAPERBOARD
ASSOCIATION:
Production

(short

*1.313
*1.159

122.4

136.9

Nov. 1

machinery
groups

151.5

Nov. 1

Fertilizers

154.5

135.5

Nov. 1

materials

154.5

Nov. 1

Fertilizer

*$1 238

1.332

1.168

215.6

Nov. 1

Metals

*39.5

$1,251

manufacturing

Durable

238.6

__Nov. 1

Chemicals

*40.0

Hourly Earnings—
228.7

Nov. 1

Grains

*39.8

40.5
40.1

Non-durable goods

Nov. 1

Livestock

Hides

*45.75

Sept.—

Non-curable goods

3.05

Fuels

Farm

Earnings—

2.89

GROUP—1935-39—100:

oils

products
Cotton

Orders

*52.56

HOURS

ESTIMATE—U.

LABOR—Month

3.27

..Nov. 3

Farm

All

*$49.21

40.79

AND

2.79

Foods

Farm

7,390,000

53.96

EARNINGS

2.89

3.19

7,486,000

7,515,000

2.82

Nov. 3

*7,694,000

,756,000

Hours—

MOODY'S

781,000

Nov. 3

Utilities Group
Industrials Group

,537,000

goods

Non-durable gcods

12.24

_Nov. 3

Public

Fats

manufacturing

%-in.
Stocks

Aug.

(DEPT.

COM¬

of August:

(M sq. ft., %-in. equivalent)
and
consumption
(M
sq.

137,042

sq.

ft.,

%-in.

equivalent)

126,631

*102,457

124,891

37,995

Consumption of logs (M. ft., log scale)
Log stocks (M ft., leg scale) at Aug. 31
*Revised figure.

*107,574

132,718

ft.,

equivalent)
(M

195

tCorrected statement.

*35,937

33,773

60,554

*48,206

56,527

187,264

*166,896

152,830

& FINANCIAL CHRONICLE

COMMERCIAL

THE

(1878)

purchased or imported. They' compulsory process for obtaining
witnesses in his favor, trial by
are products of time and
of ex¬
jury, the right to counsel—these
perience.
are
among the basic safeguards
My emphasis on the fact that
provided by the Constitution for
our civil rights are our most dis¬
protection of an accused against

not

superiority but

our

regimes by curtailing the
press, by supressing free speech,
by
persecuting
a
minority,
whether racial
or
political. We
must make sure our civil rights
extended

safeguards, and that he who de¬
fends him is likewise suspect.

all

groups,

History has shown that without
procedural
safeguards
neither
judges nor juries can be trusted to

re¬

out

mete

justice,

that injustices

that

had

illustrious history but is found in
their
application in the voting

where
procedural
re¬
quirements
are
relaxed.
Ante¬
dating the Bill of Rights was a
long record of arbitrary action by
courts.

of
by

courts of criminal
suppress

responsibility for making
civil rights an active, potent

force

national

our

life

that the unfettered discretion of

large measure a special responsi¬
bility of the Bar.
A

fairly

western

episode

recent

though it is,
believe, an isolated
haled into

was

hope
A

mean,

one.

court

judge is "the law of tyrants." The
tyrannies which afflicted the ad¬
ministration of justice had been
tyrannies which courts had silent¬
ly approved or actively promoted.

what

illustrates

town

use

punishments to
speech, press, and reli¬
gion, the whisking away of de¬
fendants to far away places for
trial, the use of torture to exact
confessions, and the like.
The
sponsors
of the Bill of Rights
agreed in large measure with the
Whig philosophy of Lord Camden

The
our

the free

was

and
man

Procedure is

minor

than formal¬

charge which could not be proved,
even
though he was not granted
the privilege of having counsel

ity.
Procedure is, indeed, the
great
mainstay
of
substantive
rights.
If accusation and proof

defend

if the right to counsel
denied, if proof were not
subjected to close scrutiny, if the
accused, rather than the prosecu¬
tion, carried the burden — then
racial, religious or political prose¬
cutions could easily become the
order of the day.
Exacting pro¬
cedural
requirements
prevent
prosecutors, judges, and juries
from taking short cuts. They stand
as
a
barrier to hasty, inflamed
community action. They are some
were

him.

But the prosecutor
judge were convinced
that the community should be rid
of
the
man.
Their
prejudice
against him was not color or
Nor

was
no

vagrant. He
gainfully employed and had
police record. But •* he had

race.

was

physical characteristics which
gave him

unwelcome

And

appear¬

his

ungainly,
shuffling walk made him appear
to
be
a
menacing figure. The
judge, the prosecutor and the
ance.

sheriff

judge

some

had

The

conference.

instructed

sheriff

the

take the defendent to the

county

easy,

were

the

and

guarantee that a man s day in
| court be a real and genuine opP°rtunity to defend and not a
m?re ritual to conceal a predeter-

without

and

fear

faced

won

The victories Erskine
freedom of speech and

gave

Even the

vitality.

new

press

Thomas

conviction

spite of Erskine's brilliant de¬
fense, may well have had a sober¬
ing effect on English thought. In
any event, it is plain that as a
consequence of his moving advo¬

money, or

ignorant

man

—

friends, influence,
counsel. He was stripped

his

liberties,

not

by'

Private

citizens but by a court. That was 1 hpinrm<j
primps
those
whose
done not by the standards of law
ideas are despised by the com¬
nor in accordance with
constitu¬
munity, those whose race, color,
tional
procedural
requirements,
religion, or politics make them an
but by totalitarian methods. It is,
unpopular or suspected minority
of course, shocking to everyone
would more likely be victims of
when a court becomes a lawless

neinous

crlmes'

discrimination.

agent of

community. But equally
shocking to me was that in this
a

instance

lawyer in the com¬
munity raised his voice in protest.
We

apt to think of legisla¬
tures, of the police, or of other
agents of the executive, as the
are

tyrants to be feared. But judges
too can be tyrants. And a bar
which is cowed by a lawless judge
is

not worthy

of its great tradi¬

was

the fear of courts, as well

the fear of prosecutors, police,

and

these re¬
straints defeat the ends of justice
by crippling the prosecution and
discouraging
the
detection
of
crime and the conviction of crim¬

All they do defeat are the
habits of those police who
prefer to use a whip rather than
their wits to solve a mystery.

practices. Those freedoms became
the tools whereby the people—
the source of all the powers of

more secure even

for the humblest

citizen.

legislatures, which led to the

the

was

of advo¬

power

Erskine. The

great

the

in the

inclusion in

our

Bill of Rights of

procedural

numerous

safeguards

selves with

trials

protection in criminal

constitutional

those

selves,

posed

cized. They are, in

between

the

people

and

magistrate who exercises the

sovereign

powers."

embedded in
ernment

our

They

were

charter of gov¬

place

them

beyond

legislative reach.

against

jury,

prohibition

ment

for

the

protection

self-incrimination,
against

searches and

trial,

of indictment

the

unreasonable

seizures, the require¬
speedy

necessity

and

that

public
an

ac¬

cused be confronted with the wit-

are

often

severely

criti¬

fact, frequent¬

other

them¬

protect

Communists,

dubbed

travelers,

fellow-

subversive

ironic
be

that such

made,

legal circles.

criticism

especially

For both Commun¬

potent

be cured by
Men

want

food

they

material things alone.
food, of course. And

must

Chinese

wise

have. But as a
philosopher
and

has put it—a full rice

statesman

beginning not the end
of man's struggle. Men also want
freedom. And none has yet de¬

Bill of

road to free¬

more open

suggested by our

that

than

much

lawyer the impor¬

right to counsel. The

right to counsel

tions

felonies

for

whole

Rights.

philosophy of the Bill

Certainly he who main¬

tains that the Bill of Rights should
be enforced with vigor and

full

given

vitality is championing the

what

the

what

local

but

ruled

has

Court

much

make

the

trial
constitu¬

Missouri

the

Supreme

their

that

sure

1945

done

authorities have

Court, acting in conjunction with
steps
to make sure when a prisoner ap¬
its Judicial Conference, took

and

less

fact

before

counsel

have

stands for trial, un¬

intelligent waiver is made.
pleas of guilty and
sentence and judgment, designed
to make the record show precisely
an

New forms of

what

transpired, were also
adopted. The State thus ^protects
itself
against
subsequent
false
claims of denial of the right to
counsel.

And

accused

pro¬

victim
either of his own ignorance or of
the laxity of a trial judge.

tected

being

against

endeavor

statesman¬

satisfy the

con¬

stitutional right to counsel

in fel¬
ony cases.
The -procedure whereever adopted cannot help but have
a wholesome, cleansing effect.
It
additional

America

that

assurance

courts

But its importance was

will

not

become

adjuncts of the police.

It is

not lose by

will

default in our courts;
and the ignorant, as
beneficiaries

the

standards for

Disregard

our

of civil liberties by

private groups is sometimes un¬
derstandable. But courts and their

recognized

have

special responsibil¬
those

maintain

rights.

by the colonies early in the his¬

ities

tory of this country. Thus, in 1669

What

they do sets the tone for the

Colonial Assembly

the

Island
who
an

enacted

was

that

indicted

of Rhode
person

any

might employ

attorney to plead in his behalf.
the

adoption of our con¬

States.

The

importance

of the

several
of

this

Sixth Amend¬

than

Alabama, 287 U. S. 45,

"The right to be heard

would

be, in many cases, of little avail

rooms

in and
of

the

It is

special responsibility of

ministration

constitutional

the

it that the ad¬

Bar to see to

the

shackles

the

The Work of the Bar
The

the

great work of the Bar in
is not to be found in.
which have reached the

field

this

cases

Those cases have

high tribunals.

the light of publicity already on
them and have elicited the ener¬

gies of counsel. The field which
can
most profitably be patrolled
is the local one.
What goes on

in the jails? How
prisoners kept incom¬
municado before being booked?

long

are

Are

they

booked

fictitious

not yet

established? Do third-de¬
practices go on behind the
doors of police
stations?
Are the odious general warrants
reentering the American scene?
Does
the
police system follow
totalitarian lines by putting force

gree

closed

ahead

justice

conforms

standards,
the

law

crime

brains

tion?

prisoners

detec¬

matter

—

wealth, or social
standing—enjoy the right to coun¬
sel?
Are
juries drawn without
what their race,

discrimination?

there

are

that
not

freedom of expression

committees

Some

getting

are

startling answers to some of these
questions. And the information

have obtained is enabling
proceed with intelligent,

they

them to

practical programs of reform.
None of these

questions presents

problems in many com¬
munities. But in many others they
major

do. Some of them

involve

Others
forms.

be corrected

can

changes.

procedural

simple

Some

drastic

re¬

entail a
reeducation of a community. But
whether the particular task is big
even

may

small, it has peculiar challenge

to the

is in keeping with

Bar.

great tradition of the Bar for

it to become the vanguard of

these

reforms.

Madison
Bill

championing

Rights

prescription

stated

favor

that

the

"The'

liberty

against that

greatest dan¬

quarter where the

lies, namely that which pos¬

ger

sesses

the

highest prerogative of

power." And so the Bill of Rights
is not

only

curb

all executive

agencies, on the legislatures, and
cn

the courts. It is in its ultimate

reach

check

people—the

on a

majority of the

source

of all sover¬

eignty—in favor of a minority.
can

reeducate America

in that tradition.

the Bar
that

purpose

when

can

By its advocacy

give added assurance

will not sacrifice the great

of the Bill of Rights even

that seeks
us.

freedom of religion.

censor¬

ship of ideas in the community?

The Bar

is to be found.

68-69.

court

vitality of the Bill of Rights

the

by Mr. Justice Sutherland in placed

Powell

the

land, not in the history books, that

stitution, like provisons appeared
in the constitutions of the

It is

community.

whole

around

practices, there will be re¬
for the administration of

ought to be leveled

fair trial.

rec¬

officers

new

won

government of laws. When
there is integrity in law enforce¬

the

the rich and the educated,

well

prestige

guarantee that justice will

added

Moreover,

charges to conceal another charge

1836.

until

England

ognized

not

obviously

the

before

of the matter here is not

in prosecu¬

was

ment has never been better stated

either

stands for trial.
has had
occasion to pass on several cases
involving the point. The relevance
plea

The Court in recent years

that he poor

Rights.

Perhaps none would appreciate

guarantee

negation

our

counsel

enters his

have

will

for

Our Practices

bowl is the

ism and Fascism, as practiced, are

the

Lax

times,

accused

of the

many

character.

spect

however, we have
practices, and all
often have failed to give an

too

divisive

ment

Missouri's action is

The illness of the world cannot

Before

agents.

should

The requirement

grand

unable

rights

scene

elements and influences which are,

those of feeble

will have eliminated from

justice.

Been

been lax in

world affairs.

full

them¬

performance on our

increasingly

force in

ity groups, including Communists
and Fascists, be given a fair trial,

Madison stated, safeguards inter¬

Rights

concern

part will, indeed, make the Bill of

tance of the

for criminal trials. They were, as

"the

Such

zation.

tutional rights of

actively

can

Courageous
advocacy
by a militant Bar can give us,
through consistent application of
the Bill of Rights, renewed claim
to the decencies of western civili¬

signed

should

liberties

civil

enduring.

dom

who maintain that bar associations

Have

against it.
up to the

ignorant

intellect."

he pleads or

Such
cacy

lazy

champion the consti¬
minorities, who

illiterate,

much

now

of the

true is it

and

government,
as
Thomas Paine
eloquently maintained—could be
pears without counsel in a felony
a
potent, active force in the af¬ case that his
right to counsel is
fairs of state.
They became the
protected. A new revised pro¬
means of curbing a lawless or op¬
cedure was adopted for all such
pressive government, for promot¬ cases to
provide that the prisoner
ing reforms, for making liberty be informed of his
right to counsel

inals.

Those who

of intelligence,

men

conform

insist that members of all minor¬

tions.

that

denies

History

does not know how to establish

his innocence. If that be true of

standards.

field

guilty, he faces the
danger of conviction because he

courts

dural safeguards of

was

knowledge

not

tional

mination of guilt.

without

ment criticize his rulers for their

be jailed if he ever returned to
that county. The sheriff obeyed.
This

line and advise him that he would

man

lacks

and

skill

freedom of speech and of
press became real guarantees that
man could without fear of punish¬
cacy,

rewards of advocacy today

Without proce¬
the character
embodied in our Bill of Rights,
liberty would rest on precarious
ground
and
substantive
rights
would
be
imperiled.
Without
these protections the poor and the
ignorant" those charged with

Paine,

healthy sign to find
Commit¬
tees on the Bill of Rights are in¬
creasing. The realization is grow¬
ing that while our democratic
scneme of life is under mounting,
criticism and challenge by those
who would destroy it, one of the
most important tasks confronting
us is to
eliminate the justifiable
criticisms
which:
are
leveled
a

this attitude changing.

fever

pitch over the spectre of revolu¬
tion, and defended without flinch¬
ing the rights of Thomas Paine
and other 18th century champions
of liberty.

not

American

compro¬

thus

the agenda.

But it is

justice in

For

the

every

18th

government,

aroused

nation

with

his

opposed

mise,

prominent

courts

the

book, "For the Defense." Erskine,

booths, assembly halls, and courts
of the country, in their observ¬
ance throughout the precincts and
county seats of the land, in the
respect which the citizens of our
villages and cities give to them.

Fathers

memory

in the

criminal

step in the proceedings
against him. Without it, though

tory recently brought vividly to
life by
Stryker in his stirring

the

in the

Thomas Erskine

Hall

Westminster

administration of

the

adequately to prepare his de¬
fense, even though he have a
perfect one. He requires the
guiding hand
of
counsel
at

refer to the courageous and pow¬
erful advocacy of

other¬

and

If in practice we live
ideals of the Bill of
Rights, we will have made great
progress in that direction. We will
have brought greater unity and
cohesion into our national lifer

both

century—a crucial chapter in his¬

Fresh

have been written.

never

may

a proper

members in their practice of law.
Most do-not practice criminal law

„

flourish

race,

trial without

inadmissible.

wise

would

of counsel

aid

irrelevant to the issue

the

been

put

charge, and convicted upon in¬
competent evidence, or evidence

AngloAmerican
tradition, one of the
most brilliant chapters in liberty
If

the

out

Anglo-American Tradition of
Liberty

Procedural Safeguards Essential

creed, color or
political faith. We must make
certain that the glory of our civil
rights is not confined to their
gardless

with

unfamiliar

the rules of evidence. Left with¬

even

tarian

are

though the Constitu¬
tion surrounds him with special

law.

our

We must be alert
not emulate totali¬

bad.

de¬

the

crime, he is incapable, gener¬
ally, of determining .for himself
whether the indictment is good

Jefferson, not of Lenin or
of
Hitler.
One
might as well
maintain that he who is charged
have

skill

science of law. If charged with

Thomas

should

and

fender,

government. Life and liberty,
not property alone, thus receive
the protection of due process of

responsibility.
that

sometimes

small

has

layman

his

tinctive characteristic is to under¬
line

cated

Communism or Fascism. He is a
disciple of Thomas Paine and of

with treason

Even

against him, the right to democratic scheme of things, not

nesses

the

comprehend

not

be heard by counsel.
the intelligent and edu¬

right

Implications oi the Bill of Rights
(Continued from page 16)

did

Thursday, November 6, 1947-

can

deal with the minority
to confuse
make

sure

and divide
that neither

is, of course, natural to find

race,

color, religion, nor political

in those sub¬

faith

will

Bar engrossed

jects which occupy the

affect the

time of justice in America.

measure

Volume 166

Number 4644

THE

The Banks Undei Federal
(Continued from page 14)
bank in

town

June

where existing
not assume lia¬

competitors will
bilities and assets

are obvious.
It
is the logical vehicle for depositor

30,

1947.

COMMERCIAL

$750,000,000

six months.

21%

the rate of

ever

during

the

Consumer loans grew

during

and community

six months and

the

protection, in pur
opinion, and will be used wher¬
possible.
years of its opera¬
corporation was forced

tion, the

by circumstances to devote the
major part of its attention to bank

We at

the

trend

Despite the

billion

dollars

than

RFC

one

capital

ominous.

long

rather

We think it

that

banks

than

highly de¬
risks,

assume

they charge rates

this

regard

healthful,

sirable
so

Federal Deposit In¬

Corporation

surance

assets.

growth will accelerate

with the demise of Regulation W
Nov. 1.

In the early

FINANCIAL

CHRONICLE

Deposit Insurance

Commercial and

industrial loans continued to rise,

gaining

com¬

eral

Both Tiue and

Deposit

Insurance Corpora¬
tion examiners. These did not in¬

"There

just

clude irregularities found and re¬
ported by examiners of the other
agencies. They ranged from nom¬

The two principal safeguards
against these peculations are, of
course,
ample fidelity coverage
and a well organized audit con¬
trol designed to discourage em¬
ployees from taking chances. The

Insurance

through

stockholders'

assessments

and deposit waivers
early thirties, there were

the

still

on our

bank's books hundreds
millions of dollars of assets

that

worthless

were

ard when
ance

substand¬

Federal Deposit Insur¬

.Corporation began opera¬
During the first two years

tions.
of

its

existence, after calm ap¬
praisal became possible, the cor¬
poration devoted its energies to
locating and analyzing concentra¬
tions of these
unsatisfactory assets
throughout the banking system.
As

soon

authority
by the Banking Act

corporation

was

moved

granted

1935, the

vision

earnings

at present inflated

urged

that,

for

prices;

have

with the

even

that

aban¬

donment of Regulation
W, banks
continue to require high downpayments and shorter periods of

amortization.

Since

bankers

as¬

sociations

almost
unanimously
have echoed these
sentiments, we

by its

Cor¬

that

subse¬

valuation

allowances

taken

care of

out of current
earnings be¬
fore stockholders' dividends were
declared.
Then; in a series of
conferences culminating in 1938,
supervising
authorities
reached

agreement on improved methods
of asset
appraisal and classifica¬

tion

which

were

designed to

was

made in

supervisory appraisal
investments.
For issues
of investment merit
valuation at
market was abandoned and cost,
less proper
amortization, was sub¬
stituted.
These changes
may

short

fal_

perfection, but they

advances

are

supervisory methods
that will help to make our bank
ing system work in an era of eco
nomic

change.

Then
ward

came

mentioned

pressure

enabled

and

war

prices,

banks

many

its up

which

salvage
something from assets that previ
ously had appeared to be worth
less.

Parenthetically, I

must

say

that the wartime boost in
prices,
in addition to
helping the banks
was

opment
in

dangerous

any

bank assets.

Finally,,

trends

have

for

protection

depositors,

shall cite that record later.

So,

through

through
banks
to

asset

were

and
ance

appreciation,
their

portfolios.

pouches

and

They benefited

at Federal

depositors

con¬

po¬

$4,000,000,000 reservoir
that should allay their fears
about
any
mistakes of judgment you
bankers

Government

might make.
In

short, the bank asset prob¬
brought to check ten
ago, and still is under con¬

was

years

Mistakes

in
the
judgment of
lending officers have be¬
less frequent, but there stil.

bank
come

plentiful supply that "glue
fingers" aspect of human
frailty that makes so important
the

the

work

you

men

your

banks.
Better Auditing
It is not hard to

Federal

Deposit

why

see

Insurance

Cor

poration agree with your associa
lion's
slogan, "The better
auditor, the safer the bank."
many

cases

which

been called upon
tors

the

banks,

ceeded the

surety
direct
assets

bank's

deposi
peculation by
that

capital and its
have been the

of difficulty.
With
good condition and un

supervision,

this

of loss will continue to be

greatest

our

employees of

cause

constant

source

have

amounts

coverage,
in

der

the

to help

past,

concern.

to make anything like
complete audit during the course
of a regular examination.
A cer
is

amount

followed

few deep

breaths in the knowledge that

housecleaning

had

an¬

taken

place.

and,

procedure

rule,

terns of internal audit

control, the

carried.

The examiner's chie

however,

bank management to
quate
every

internal
case

set up ade

controls

where

induce

the

and,

There currently is
trend

banks

"risk assets.
creased

lars

the

sharp

up¬

so-called

Real estate loans in¬

than

between

Dec.

billion dol¬

31,

1946

and

bank

large enough, to establish
Upward Trend of Risk Assets

the

further the bank examiner's audi;

concern,
a

audit

smaller
the
bank
and
the less
chance it has for introducing sys

Deposit Insur¬

Corporation drew

other

the

able to streamline and

modernize

their

and

thorities to sell banks
full

au¬

the wis¬

efforts

during

move

in the

dependent auditing department.

protection

1935,

regularities

prosecuting

more
were

than 1,200 ir
reported

authorities

Fed

much less

likely to be extrava¬

one

are

provided by

else.

Questions Adequacy of Bank Lending Rates

group

Economics Dept. of Bankers Trust
Company points to declining
bank profits in 1947.
Says banking is one business which has
not been able to raise price of its
product.

reasonable

very

In this connection, I recommend

attention the
Safeguards
Against

booklet,

your

the

Government

the increases

months,

recent

Frailty," written by Vance Sailor,

lending
rates have been relatively minor.
Banks are not getting a return

Chief

the Corporation's Divi¬
Examination, sections of
which I have paraphrased above.
Colonel Sailor cites book, chapter,

and

losses which will inevitably come
when a change in the economic

sion

Human

verse

some

the

cases

that have caused the

Corporation
financial
outlay
during
recent
years and suggests remedies that
you, as well as we, should urge
upon

the

banks

have

that

ings with you and that
you for advice.
Your
mirable
work

internal

association
and

has

deal¬

come

ad¬

valuable

extremely

setting

up standards of
control for small

audit

banks that cannot afford

com¬

plete auditing department.
You
be sure that we appreciate

may

your

efforts and that

everything

shall do

help

you

we must urge

that

can

spread the gospel.
In

addition,

fidelity

and

other

insurance

provided in amounts sufficient to

able hazards.

against

all

insur¬

In this connection,

by the Insurance and Protective
Committee of the American Bank¬
ers

Association will be

their loans sufficient to

our

goal.

cover

their increased operating costs, to
build up capital funds, and to pro¬
vide adequate reserves against the

trend leads to business

reversals.

expected

continue

the decline which was evident in<

1946.

Holdings of Government
obligations of the New York City
banks are expected to drop from
$12.6 billion on June 30, 1947 to
approximately $11 billion by the
end of 1948.

that

the

The study

banks

somewhat

earn

will

anticipates
be

higher

able

rates

to
on

their holdings of short-term obli¬

gations but will be unable to re¬
prepared to meet
place redeemed bonds at terms
the legitimate
demands of ex- i
^tractive
enough
to
maintain
Panc!>ng industry but this should their average rate of income orl
be done on terms that will help
Banks must be

to maintain

done

lowing enactment of the Banking the "fair" coverage recommended
Act of

more.

are

rates, espe¬
Net
profits of the New York City banks in 1947 and 1948 are
cially when its cost is shared by expected to be almost 20% lower than in 1946 and about
40% below
the bank and its employees, and the
peak Jh 1945, according to a study prepared by the Economics
its use would certainly remove
Department of Bankers Trust Company, which was made public on
one of the
most common causes Nov. 5.
According to this ana!-<$>
t—
—
for stealing.
ysis of the outlook for earnings
profits on securities.
Losses and
I believe also in the establish¬ of
the
37
central
reserve
city charge-offs are not expected to
in
ment of retirement plans for bank banks
New
York
City, net increase substantially during the
employees.
There are very few profits after income taxes are ex¬
period.
banks where such plans can not pected to decline from $158 mil¬
A steady rise in income from
be financed without too great a lion in 1946 to $129 million in
loans is anticipated, according to
drain on earnings. Equitable pro¬ 1947, and to level off at about
the report, largely as a result of
motion plans are another safe¬ $128 million in 1948.
an expansion, over the two years,
guard against rebellious wrong¬
This decline in net
profits, ac¬ of about $1.3 billion in loans,
doing.
If every employee feels cording to the report, raises a se¬
chiefly business, real estate and
that his chances of promotion are rious question as to the
adequacy consumer loans.
Although
the
just as good as those of his co¬ of bank lending rates.
"Banking study foresees some increase in
workers, he will have much more is one business which has not
lending rates generally, the in¬
incentive to make the bank his been able to
raise the price of its creases are
expected to be rela¬
lifework and much less tempta¬
product in the face of rapidly ris¬
tively modest.
tion to steal what he thinks he
ing costs," the report states.
It
On the other hand, income from
never will be able to get right¬
continues, "Even with some re¬
holdings of U. S. Government se¬
fully.
laxation in the easy money policy
curities is

protect banks

During the ten-year period fol

Left Wingers wish us to
an
all-powerful central

Profligacy is certain when funds
some

be carried

can

our

gant and wasteful if they are dispensing funds they
themselves must provide.

hospitalization for em¬
ployees and their families.
This
sort of

direction of

Communities

overtake salaried people. I am
as

rapidly

Yes, all that and

every
bank should provide its
employees with "shock absorbers"
against the more common finan¬
cial emergencies that are likely
;o

going to wither

are

government."—Governor Thomas E. Dewey.

To further minimize the effects
of "Human Frailty" I believe that

thinking of such things

local governments

our

move

insurance protection

these

strong.

"If

away because of incompetence or because of finan¬
cial control by a central
government then we shall

and group

that makes

fident in their security and

tain

earnings

supervisory

ment

tential

banks,

its outlays

State

health, accident and life insurance

surance

and Federal bank

all

in Federal Deposit Insurance Cor¬
poration both a record of achieve¬

impracticable for a bank
examiner, even
in
very
smal

Corporation

efforts

hat are
carrying inadequate
foresighted planning—all are surety coverage, even at the rea¬
sonable rates prevailing today.
working
against
the
excesses

great factor in the recovery
record of the Federal
Deposit In
a

cooperative

and

trusted officers and

the

and

the

bond

have

ever, not to resort to this expedi¬
ent but rather to rely upon the

sults

factors

trol.

as "slow."
The re¬
vised standards called upon ex¬
aminers to classify assets
basically
in terms of relative credit risk.
In addition, a fundamental
change

cost

past ten years have been gratify¬
ing, but there are too many banks

Those

market fluctuations.

gory of assets

its

job in this country is to bring government
people and to keep its functions where
they can keep their hands on them. Only in that
way can expenses be kept within reason and only in
that way can we
keep the roots of our system firm

Deposit In¬

be¬

banks.

lem

il was common
practice for super¬
to characterize one
cate¬

add

"Our

closer to the

re¬

visors

against all types of losses. The

flect intrinsic worth and to min¬
imize the effect of

day-to-day
Theretofore,

and

our

inflation

Meanwhile, and again in con¬
junction with
supervisory author¬
ities, we Set about preventing de¬
terioration
in
assets
that were
or

own communities.
I do believe very deeply
that the further government
gets away from the
people the worse it gets.

Corporation assessment.
preferred so far, how¬

surance

uncontrolled

which characterized
previous pe¬
riods of banking
difficulty. In ad¬
dition, we have vigorous and
united supervisory
agencies work¬
ing to detect and arrest the devel¬

acceptable

the bank

to the bank's Federal

dom

fore—knowledge of past mistakes,
alertness to
new
developments,

then

for

own

in their

adequate

have little fear of a sudden
flight
the "Never-never Land" of

into

conjunction with state bank
supervisors and the Comptroller
of the Currency to clean
up those
concentrations of deadwood.

quently were to be acquired. We
began, as you, will recall, with
requirements that charge-offs or

tain

re¬

mismanagement. I decline to accept the philosophy
that our people are unable to run their own affairs

fidelity coverage.
portion of the risk which is likely
gives the Ctuporatidtt the
to, materialize.
We have urged right, in the case of a bank which
special care on the part of bank¬ refuses to provide adequate cov¬
ers in
extending real estate loans erage, to purchase such coverage

immediately,

out

municipalities

"Scarcely a day goes by but what some locality
in the state (of New York) wants the state
govern¬
ment to take over the headaches caused

tfoured into the banks and despite mensurate with the risks and so poration is empowered by law to
the millions of dollars that were
ong as they make adequate pro¬ require all insured banks to main¬
absorbed

are on state and national governments.

sponsible and accept its own burdens without run¬
ning constantly to the state and national govern¬
ments for help.

amounts
to
amounts
big
enough to bring about insolvency.

Deposit

there

Timely

increasing burdens

are

But if local government is to exist, it must be

inal

Federal

(1879)

ture

and

bonds.

sound capital struc¬

strong

banking

sys¬

The

report

various

tem."
in
net
profits
1948, the study points
out, is expected to result largely
from an increase in operating ex¬
penses and a sharp reduction in
non-operating
income.
Current
operating expenses are estimated
to increase about $41 million or
over
16% during the two years,
while non-operating income is ex¬
pected to decline throughout the
period.
Non - operating
profits,
which reached a peak of $89 mil¬
lion in 1945, dropped to $27 mil¬
lion in 1946 and are expected to

fall to $8 million in 1947 and to
less than $1 million in 1948. Most

short-term

The

reduction

from 1946 to

of this anticipated decrease, ac-!
cording to the report, will be due
to

lower

recoveries

and

smaller

includes

tables

items of
earnings,
ex¬
and assets of the 37 New

penses

York

City banks.
It also gives
assumptions underlying the
estimates.
The study is based on
the assumption that business will
continue to be relatively active
through 1948, and that there will
be no run-away price rise or se¬
the

rious

price collapse.

assumes

The report

that while the monetary
will try to prevent

authorities

conditions

of great ease in
the
markets, and in keeping
with this policy will permit some
money

further

tions

increase

the

Government

rates

obliga-

they are not likely to em'

vnahiv

iWHctivp

bark on a highly restrictive or.
contractionist credit

policy.

THE

(1880)

COMMERCIAL

Securities
•

Alden

Wonderall Co., Minneapolis, Minn.
(letter of notification) 37,300 shares of common.
Price—$2 a share.
Underwriter—Holley, Dayton &
Gernon, Minneapolis.
To pay liabilities and for work¬
ing capital.

Oct. 31

Allied Gas Co., Paxton, III.
Oct. 9 (letter of notification) 4,020
To be

common.

stockholders.

common

purchased by Merritt H. Taylor,
struction and expansion purposes.

will be

Unsubscribed

President.

For con¬

Allied Van Lines, Inc., Chicago
Oct. 31 (letter of notification) 29,000 shares of ($10 par)
preferred.
Price—$10 a share.
No underwriting.
For
working capital.

FINANCIAL

Now

CHRONICLE

Registration

Unexchanged shares of
be sold

new preferred and common will
Price—By amendment. Proceeds—To
unexchanged shares of old preferred.

publicly.

redeem

California

Water

Service Co,.

Oct. 21 filed $1,500,000 first mortgage 3V4% bonds,

be sold through

shares of

Dean Witter &

mon,

competitive

stock

common

(par $25).
Probable

series
15,652
Underwriter—Com¬
and

bidding,

bidders for bonds:

Co.

Halsey, Stuart & Co. Inc.; Blyth & Co., Inc.; Union Secu¬
rities Corp. and Harris, Hall & Co.
(Inc.) (jointly).
Proceed—Will be used to retire $900,000 bank loans, to
reimburse the treasury for expenditures on construction
and for other corporate purposes.

Camden

(N. J.)

Fire Ins. Association

(11/7)

American Cladmetals

Co.

(11/6-10)

commercial operations.

Under¬
Price—$1.50 q

equipment for

(

American

Fire and Casualty Co., Orlando, Fla.
(letter of notification) 12,500 shares ($10 par)
common.
Price—$24 a share. Stock will be offered for
subscription to stockholders on basis of one new share
Oct.

•

for

each

ern

Securities Corp.,

two

Underwriter—Southeast¬

held.

Jacksonville, Fla.

For investment

in securities.

Furniture,

Inc.,

North

Little

Rock,

Ark.

Oct. 23 filed 100,000 shares of 6% cumulative convertible

preferred (par $5) and 100,000 shares (100 par) common
an additional 285,000 shares common issuable upon
conversion

of preferred

ing—Shares

and exercise of 35,000 common

stock warrants to be sold to underwriters.

are

in the ratio of

•

Corporate Leaders of America, Inc.
30 filed
$10,000,000 of Corporate Leaders Trust
Fund, series B, periodic payment certificates, and 433,528
participation; also $500,000 Corporate Leaders Trust
Fund, series B, single payment certificates, and 22,383
participations. Sales agent is Corporate Leaders Sales
Co., Inc.
Oct.

•

Power & Light Co.
$10,000,000 1st mtge. coll. trust bonds, duG
1977.
Underwriters—To be sold at competitive bidding.
Probable bidders; Halsey, Stuart & Co, Inc.; Kidder,
Peabody & Co.: Harriman Ripley & Co.; The First

new

stock.
Newton

Celotex Corp.,

Chicago

Oct. 31 filed $3,000,000 3V4% debentures, due 1960.

derwriting—Paul
Securities

Corp.,

Un¬
Co., Chicago, and Union
York.
Price by amendment.

Davis

New

Proceeds'—To repay bank loans and for working
•

Central

Beverage Co.,

Scottsdale,

Chicago

(11/19)

130,0000 shares ($2 par) common.
Under¬
writer—The First Boston Corp.. New York.
Offering—
125,000 shares will be offered publicly and 5,000 to

•'

* American Steel

Pro¬

Doughboy Bottling Co., Pittsburgh,
ferred

Ariz.

Pump Corp., New York
Oct. 31 filed 100,000 shares ($1 par) common. Underwrit¬
ing to be filed by amendment.
Price by amendment,
^Proceeds—To pay off indebtedness incurred in the ac¬
quisition of the capital stock of A. D. Cook/ Inc., Lawxenceburg, Ind.
Business—Holding company whose sub¬
sidiaries are engaged in production of
castings.

Appalachian

Electric

Power

Co.,

Roanoke,

Va.

Oct. 29 filed $28,000,000 first
mortgage bonds, due 1977.
.and 75,000 shares of cumulative preferred.
Underwriting
•—The

bonds

will

offered

Proceeds—For

Central

common.

tion

ers

of its

basis of

outstanding-4Vz% cumulative preferred

one

ceeds—For
new

share for each four shares held.

new

retirement of debt

and

the

Pro¬

partial financing of

construction.

Oct.

stockholders

Nov. 17.
•

D
preferred
*fctock (par $20).
Underwriters—Names to be supplied
through competitive bidding.
Probable Bidders—Paine
Webber, Jackson & Curtis; Stone & Webster Securities
•Corp., and Mitchum, Tully & Co. (jointly); White, Weld
& Co.; Kidder, Peabody & Co., and Lazard Freres & Co.
due

1977

and

150,000

cumulative

| {jointly); Halsey, Stuart & Co. Inc. (bonds only).
ceeds—To

reimburse

each

record

9.6

Oct.

held.

ratio

Rights

one

expire

Central
31

and

40,000

Power &

Light Co.

filed $6,000,000 first mortgage bonds,

cumulative

due

Bids—Bids for pur¬

be offered to

tion

Dec. 8.

To develop

mining properties in Wasatch County, Utah,
Business—Mining business.
Electric Steam Sterlizing Co., Inc., N. Y.
Sept. 22 (letter of notification) 65,000 shares of common
stock (par 100).
Price—65 cents per share.
Under¬
writer—Reich & Co., New York.
Purchase of inventory,

Empire Projector Corp., New York
Aug. 21 (letter of notification) 80,000 shares

generating

capacity

par)

common on

share. The 15,000 shares
& Co., New York, the
principal underwriter, at 60 cents a share. The under¬
writing discount for 80,000 shares will be 50 cents a
share.
The company will use its proceeds to increase
working capital.
be

•

sold

Finch

Laboratories,

(par

and

Inc., Newark,

Oct.

series B,

for

due 1967.

Oct.

writers

N. J.

(letter of notification) 140 shares (no par) stock
$3,000 demand notes.
To be sold through H. M.

are

writers—Merrill

Lynch, Pierce, Fenner & Beane, San
Francisco, and E. M. Adams & Co., Portland, Ore. Offer¬
ing—The preferred shares will be exchanged for out¬
standing shares of 6% preferred, series of 1927, on a
share for share basis, with a cash adjustment. Preferred
stock may be exchanged between Nov. 17 and Nov. 29.

100,000 shares ($1 par) common.
Under¬
Campbell, McCarty & Co., and Keane & Co.,

Central

Power

Co.,

Golden,

Colo.

share.

Proceeds—The shares

ton &
•

Co.,

Cleveland

(letter of notification)

10,000 shares ($1 par)
behalf of Wm. H. Miller, a director of the
to be sold at market. Underwriter—Sills, Min-

Co., Chicago.

Gauch &

Browner, Inc., East Orange, N. J.

(11/12)
Nov. 3 (letter of

notification) 250 shares of 8% cumula¬
preferred stock (par $100). Price—$100 per share*
Underwriter, none. Purchase of merchandise, etc.
tive

Consolidated Edison Co. of N. Y., Inc. (11/18)
17 filed $30,000,000 25-year 1st &
refunding mtge.

bonds, Series D. Underwriting to be determined by
competitive bidding. Probable Bidders—Morgan Stan¬
ley & Co., The First Boston Corp., Halsey, Stuart & Co.
Inc.

Proceeds—To redeem $30,000,000 of 3J/2%

20-year

debentures due 1958, at 102. Bids—Bids for purchase of
bonds will be received up to 11 a.m. (EST) Nov. 18 at
.«•

company's office, 4 Irving Place, New York City.

The

Consumers

Cooperative Assoc., Kansas City,

Missouri

FIRST BOSTON

Oct.

filed

$1,000,000 4% non-cumulative common
($25 par); $4,000,000 of 3V2% certificates of in¬
cumulative; and $1,000,000 of \Vi% loan
certificates cumulative. No underwriting.
Offering—To
'the public. Common may be bought only by patrons and
members. Price—At face amount. Proceeds—For acqui¬
sition of additional office and plant facilities.
;f>
stock

CORPORATION
Boston

New York

Chicago and other cities
)r*
/

;

MOKIRS;§i
DEALERS

debtedness

Pittsburgh
.

;

Oct.

Corporate and Public Financing

pro¬
k

Gabriel

Sept. 8

(letter of notification) 9,872 shares ($10 par)
common.
Price—$30 a share.
Company will sell the
stock through investment bankers or security dealers
and pay a commission of $1.25 a share.
Proceeds will
be used to repay a $100,000 loan and to reimburse its
treasury cash.

Price—$7

being sold by 14 stockholders who will receive

company,

Colorado

Co., Detroit, Mich.

ceeds.

common,

Nov. 12.

Products

filed
—

Oct.

Fraser

the sellers.

(PST)

Inc., at par, plus accrued interest,
improvements or investments.

For capital

other

Nov. 3

debenture,

To be sold to Forest Lawn Memo¬

rial-Park Association,

Collins, auctioneer (at auction block of Adrian H. Muller
& Sons), 20 Vesey Street, New
York, for the account of

a.m.

Sherman

Forest Lawn Co., Glendale, Calif.
7 (letter of notification) $295,000 3%

Santa Monica/Calif.,

to 8

Telecommunications, Inc., New York

both Detroit.
Collene

(par $1). Price—$4.50 per share. Underwriter—Little& Co., Providence, R. I., will act as agent.
Pro¬
ceeds—To selling stockholder.

and

Oct. 30 (letter of notification) 500 shares of capital stock

facilities.
•

($1 par)
and 15,000 shares ($1

behalf of officers and stockholders. The

80,000 shares will be sold at $3
will

chase of securities will be received at company's office,

California Oregon Power Co. (12/1)
Oct. 28 filed 42,000 shares ($100 par) 4.70% series
pre¬
ferred and 42,000 shares ($20 par) common.
Under¬

behalf of the company,

common on

Proceeds would be used for construc¬

additional

common stockholders at 300 a share.
Un¬
shares will be offered publicly.
Proceeds—

subscribed

1977,

stock

preferred

$100). Underwriters—To be sold at competitive bid¬
Probable bidders include Halsey, Stuart & Co.
ding.
Inc. (bonds only); The First Boston
Corp.; Kidder, Peabody & Co. The company plans to open bids for the
issues

Salt Lake City

field

Pro¬

treasury for capital expenditures.

Statement became effective Oct. 31.

for

To reimburse company's treasury.

Oct.

Associated Telephone Co., Ltd. (11/12)
Oct. 16 filed $6,000,000 first mortgage bonds series

Inc., Alexandria,

(letter of notification) 11,519 shares ($10 par)
Price—$25.50 a share.
Offered for subscrip¬

new

Mining Co.,

etc.

Helicopters,

Central Louisiana Electric Co.,
La.

ffe Co.

Offering—New preferred will be offered to hold¬

con¬

inventories, and

Inc., Seattle, Wash.
Oct. 9 (letter of notification) $140,000 of 5% notes, due
1957, and 3,800 shares ($1 par) common.
Notes to be
sold at face amount and the common at $1 a share.
Un¬
derwriter—H. P. Pratt and Co., Seattle, Wash.
For re¬
duction of current liabilities and purchase of additional
helicopters.

The First Boston

expansion

property additions.

competitive bidding.
Corp.; Halsey, Stuart
Sz Co. Inc.; Harriman Ripley & Co., Inc.;
Glore, Forgan

Probable bidders:

warehouse,

($5 par).

East Utah

for conversion of

•

Oct. 27 filed 1,075,000 shares (100 par) common.
Under¬
writer—F. Eberstadt & Co., New York.
Offering—To

No underwrit¬
Offering—A portion of the stock will be offered

struction

Pa.

50,000 shares of 6% pre¬
Price—$5.75 a share.
Underwriter-

McLaughlin, MacAfee & Co., Pittsburgh, to acquire and
equip a bottling plant.

Cooperative Wholesale, Superior, Wis.

quarter in which the stock is sold.

Oct. 24 (letter of notification)

capital.

outstanding notes, on a dollar for dollar
basis, and the balance will be offered to members and
patrons eligible to become members.
Price—From $25
to $25.75 from January to
December, depending on the

Dodge Manufacturing Corp., Chicago
Sept. 30 filed $1,500,000 4% 15-year sinking fund debentures.
Underwriter—Central Republic Co.; A. C. Allyn
& Co., and H. M. Byllesby & Co., all of Chicago. Price
—By amendment, Proceeds—To redeem outstanding de¬
bentures, repay bank loans and to increase general funds,

Oct. 13 filed $750,000 of preferred stock.

ing.

Oct. 24 filed

certain executive personnel.
Price by amendment.
ceeds—To finance expansion of operations.

Central

(letter of notification) 500,000 shares (100 par)
Price—Vk cents a share.
Underwriter — H. J.

and A. B. Kamp & Co., both of Denver,
purchase oil and gas leases and drill test well.

Carpenter

Paper Co., Omaha, Neb.
Oct. 27 filed 40,000 shares ($1 par) common.
Under¬
writer—Kirkpatrick-Pettis Co., Omaha. Price by amend¬
ment.
Proceeds—To be added to general funds.

Colorado

—

Co.,

distribution

Denver-Rangely Oil Interests, Inc., Denver,

Oct. 27

Price—$1.15 a share.
Underwriter—E. M. Fitch & Co.,
Inc., Philadelphia.
For paying bank loans and for gen¬
eral corporate purposes.

;American-Marietta

connection

$30,000,000 of additional generating,
facilities up to the end

over

and

which involves

1949.

gram.

York, and Herbert W.
Offering—To be offered
publicly in units of one share of preferred and one share
of common.
Price
$5.10
per
unit.
Proceeds — To
finance completion of its factory and for working capital.

Co., Inc., New
Schaefer & Co., Baltimore. Md.

outlay of

•

Oct. 30 (letter of notification) 125,000 shares of common.

filed

transmission

share for each four shares held.

Underwriters

—Gearhart

Boston Corp.
Proceeds would be used
with the company's construction program

offered to stockholders of record Oct. 22

one

Delaware

Nov.

Rights expire Nov. 6. Unsub'scribed shares, will be sold
publicly. Price—$17 per share to warrant holders. Pro¬
ceeds—To increase capital funds,

•

Americana

Sept. 19 filed 100,000 shares ($5 par) capital stock. Un¬
& Sherrerd, Philadelphia.
Offer¬

derwriter—Butcher

Oct. 10 filed 1,000,000 shares ($1 par) common.
writer—Mercer Hicks & Co., New York.
Proceeds—To buy machinery and

•share.

Thursday, November 6, 194?

INDICATES ADDITIONS SINCE PREVIOUS ISSUE

C, to

shares ($10 par)
offered for subscription at $10 a share

UNDERWRITERS
.

•.

-v-

..i t

Volume 166

Number 4644

THE

COMMERCIAL

Hilo

November 6, 1947
Co

Common

Capital Stock

Wisconsin Public Service Co
November

Associated Telephone
8:00

Hy-Klas Food

par

13, 1947

Heyden Chemical Co

Debentures

Peabody Coal Co
1947

Pref. and Common

filed

ferred.

Common

50.000

Underwriters—To

No underwrit¬

cumulative

December 1,

December 4,

1947
Pref. and Common

•

offered

Common

be filed

Brothers,

by amendment.

New

York.

ing of
Oct.

filed 233.320 shares

writer—Allen &

(SI

Eastern Mutual

Life

stores.

new

common.
Under¬
Price by amendment.

•

working capital.

filed

41.270

ment.

Co., Denver
Sept. 2 (letter of notification) 45.250 shares ($1 par)
capital stock. Price—S2 a share.
To be sold through
officers of the company.
Of the total 13,250 shares will
'be sold for cash and 32,000 will be issued in
exchange
for 32.000 shares of capital stock of Western
Agency Co.
Tin order to acquire all of the latter's assets.

Proceeds

Lock Co..

—

Rockford, 111.,

•

Hanson-Van Winkle-Munning Co.,

Laurel
Oct.

( Md.)

filed

debentures

and

writing

the

The registration said that "the initial public
■offering is being made by Van Winkle Todd, of Matawan, N. J., and Harry P. Barrand, of Stamford, Conn., as
-underwriters by sale on the over-the-counter market of
—

change
offer

any

may be deemed an underwriter as that, term

in the Securities Act of 19331'
lo be

Offering—The shares are
issued upon exercise of warrants issued on June

Price—Warrant holders are entitled to pur¬
chase 21.000 shares of common at $12,875 a share on and
after June 28, 1947 up to June 27.
1948, or $14 per share
4d June 27, 1949. Proceeds—For general corporate pur¬
poses.
Business;—Manufactures products in the electro¬

common.

Boston

7% cumulative preferred,
10 Philippines- pesos per share (currency basis -one
neco -equivalent to. 50 cents).
Underwriting'—No under-writing. Offering—For ■ subscription by common stock¬

•

par

Price—$5 a share.

share for'each

■

program.

Underwriter

additional working capital.
Hickok.

Manufacturing

New York

Inc.,

common.

Under¬

Price—

By amendment.

Proceeds—The shares

are

being" sold;

by 36 stockholders who will receive proceeds.
i

postponed indefinitely.

Offering

•

Maryland

Racing

Oct.

(81

par)

For additional

finance

Boston
No

un¬

convert¬

Underwriter-

working capital,

(11/13)
first mort¬

construction

mines

new

and

modern¬

mining properties in Illinois.

Perfect Circle Corp.
30 (letter of
notification)

5,000 shares

To be sold at market

•

are

($2.50 par>
through A. G. Beck¬
being sold by Maey

Phillips. Petroleum Co., New York

(12/4)
par) common.
Under¬
Corp.. New York.
Offering—For
subscription by common holders of record Nov. 18 in
thewriter—First

ratio of

one

share for

new

each five held.
Rights ex¬
Unsubscribed shares will be offered
pub¬
Price by amendment.
Proceeds.—To repay bank

licly.
Joans

and

for working

capital.

Business—Oil

business.
Publix
3

Shirt

filed

and

gas*"

Corp).,, New York

140,000

shares ($1 par) common.
Under¬
Price by amend¬
The shares are
being sold" by three*
stockholders who will receive proceeds.

writer—Reynolds & Co., New York.

Price—$12.50

per

share.

Proceeds

—

Offering tenta¬
'

•/

Pythian Hall Assoc ration of North America .je
Oct. 31 (letter of
notification) 2,000 shares each ($10*

par)

Investors

Second

Fund1,,

For investment.

common

unit.

Reading;
Oct.

and

($10 par»> preferred.

underwriting.

filed

■

Pa.)

Price—$10

per

To erect building.

Tube Co.,

200.000

(no

par)

50r

cumulative

class A and

participating stock, 50,900 shares (10b par>
class B stock, plus an indeterminable
number of class 1>
stock issuable upon redemption of the
class A stockUnderwriter—Aetna Securities Corp., New York. Offerp
img—Class A stock will be offered
publicly and class 33
.stock will be sold to stockholders.
Price—$6 a share..
Proceeds—To pay bank loans.
%• [

lime,,

Business—Invest-

Rochester

—

Inc., Greensboro,

Price — $10 a> preferred share and
; $6.12%; & common share..'- Proceeds — The securities* are
being* soldby 12 stockholders' who will reeeive-proceeds.
-

.Mutual-Telephone (Co./--Honoluiii

■

($10 par) preferred.
No
Offering—The shares - will be offered for

(Pai.,) Gllass Corp*
(letter of notification) 1,000 shares ($100
oar)
Price
$100 a share.
Underwriter
Kay.
Richards & Co., Pittsburgh, Pa.
To pay off debt arnS
purchase equipment.
Oct.

Ml..

Straus & Blosser and Brailsford &
Co.,,

Oct 24;-filed'.-150;000 shares

(no

Boston

pire Dec. 3.

Proceeds—For expansion of business.

—

of 5%

15-vear series A

Oct. 31 filed 1.007,435 shares

Bonding and Insurance Ccv,

Chemical- Co..,

underwriting.

Inc.,

common.

notification.) $300,000
debentures, due 1957.

Co., Chicago.
The shares
Q. Teetor, of New Orleans.

Proceeds—To develop mining

■

Pro¬

Industries, Inc., Cleveland, Ohio

capital stock.

Commission.

(11/7)

both of Chicago.

Under¬

Co.,

—To

ment business.

Underwriters

Sept. 19" filed 200,000 shares ($1 par)

Co., Cleveland.

ization of

Proceeds

Sept 29 filed 50,000 shares ($10 par)" 5% cumulative con¬
vertible-preferred and 100,000 shares ($1 par) common.

Rochester,

writer—E. H. Koliins& Sons, Inc., New York.

Corp. of America

Proceeds

Huron, S. Dl

common.

sinking fund bonds.
Underwriter—Halsey, Stuart
Inc., Chicago.
Price by amendment.
Proceed*,

gage

inc.

17-

common.

—

Rowe Corp., New York

(11/18)'

Oct". 27 filed 150,000 shares

Munitsing Wood Products €0.,, line.., Chicago
Co.,

108.000

Peabody Coal! Co., Chicago

publicly at $3 a share.
Underwriter—Main Line Investment Co., Merion
Station, Pa. For expansion of "business.

Pro¬

ceeds—To- pay off a bank loan and- for expansion- and-

par)

Price—By amendment.

Oct. 23 filed $12,500,000 of

Oct 1 (letter of notification)
60,830 shares <$1 par) -com¬
mon of which
19(537 shares will be offered to stockhold¬
ers at $2.50 a share and
41,293 shares will be offered

Heyden Chemical Corp* (11/13)
Price by amendment.

being sold by National
subsidiary.
Business—Manu¬

Oct.

publicly.

Merriitt

—A. G. Becker & Co., Inc.

the

Pathe

redeeming 50-

Massachusetts

price.

V4 shares
Proceeds—For rehabilitation

Oct. 22 filed $6,000,000 15-year debentures.

(S3

pro¬

Otis &

are

Nov. 3 filed 400,000 shares of
capital stock.
Underwriter
—Vance, Sanders & Co., Boston.
Price'based on market

one

filed

(letter of
ible subordinated

■per share on the basis of one new share "for each four
held. Rights expire Nov. 6 and
unsubscribed shares will
be sold

"Sept. 24 filed 500,000 shares

the basis of

•

Sept. 19 filed 100,000 shares ($5 par) capital stock., Un¬
derwriter—Geyer & Co., New York. Offering—Offered
for subscription to stockholders of record
Oct. 7 at .$26

ttawaitaiE-Phllippiiie Co., Manila, P. I,

filed

Oct. 31

Under¬

Price by amend¬

100 shares of common.

share.

Massachusetts'

■

owned.

82.000

tively expected this month.

Under¬

California Co., Inc., San Francisco.
Price by amend¬
ment.
Proceeds—To pay off bank loans and to finance
construction of new facilities.

holders

filed

ment

writers—Eastman, Dillon & Co., New York, and First

offered for purchase
by its stockholders.
Price—87.75
share.
Proceeds,—National Research will receive

General corporate purposes.

Hoquiam, Wash. (1.1/2:5)

cumulative pref¬

Republic Co. Inc.,

Northwestern Public Service
Co.,

writer—Hay T„ Haas, Chicago.

plating line, metal polishing line and supplies-for plating
polishing departments.

Oct. 24 filed 538,005 shares ($1 par)

Oct 6 (letter of notification) 24,000 shares of
5% cumu¬
lative convertible preferred stock
(par $12.50). Under¬

and

Harbor Plywood Corp.,

Chicago.

cent preferred.

Lock Nut

Providence, R. I.

Offering—The shares are owned by Nation¬
al Research
Corp., parent of the registrant, and will be

common, reserved for conversion of the preferred.
Un¬
derwriter—Sills, Minion & Co,, Price—$15 a share. Pro¬
ceeds—To reimburse treasury for cost of

28, 1946.

Proceeds—

derwriting.

Liberty Loan Corp.., Chicago (1,1,-17)
Sept 25 filed" 100,000 shares ($10 par) 75-cent cumula¬
tive convertible preferred, and
100,000 shares of Class A

is defined

Co.,

Orange Concentrates Associates,

properties. Business—-Mining.

such warrants for other than investment and
received for public sale, such offerer

registrant.

filed 272,694 shares
($20 par)
stock.
Underwriters—Central

Oct. 21

Legend Gold Mines, Ltd., Toronto, Canada)
t$l par) common treasury
Underwriting — To be supplied by amendment.

the shares

the

ceeds—To be added to general
funds.

June 27 filed 300.,000 shares
a

Butt

for each five shares held.

III.

common.

Harness Racing Association,

Price—50 cents

by amendment.
Offering—For
subscription by shareholders on the basis of one
share

stock.

100 shares each at the market price at the time of sale.
In the- event that any of the holders of the warrants ex¬

England

writing—To

10-year 6% cumulative income
125,000 shares (Id par) common.
No
Price—$1,001 per unit, consisting of $1„-

association

Oct.

publicly

—Proceeds will be put in escrow and will not be used
before definite dates for a meet have been
assigned to

Under¬

division

011
basis of one preferred share
for each,
eight common shares held. Unsubscribed
shares will
offered publicly. Price—$21 a
share. Proceeds—To im¬
prove its public utility
system.

$500,000

underwriting.

Matawan, N. J.

common.

Peoria,

par)

om*

stockholders

facture of steel wire and wire
products.

000 of debentures and

'Oct. 30 filed 21,000 shares ($3.50 par)

(no

writer—Paul H. Davis & Co..

Ins.

for

ceeds.

Keystone Steel & Wire Co.,

Oct.

return

Chicago; The First Boston Corp., and
Blyth & Co. Inc., 1
New
York.
Offering—For subscription by commotx

including the financ¬
Operation of 48 retail

—

Nashville

Ind.

Oct.

Proceeds—To repay bank loans

Business

tc.

the basis

Northern Indiana Public Service
Co., Hammond

stores in 14 states.

10-14)

par)

Co., New York.

Proceeds—To repay bank loans and for

Great

(11

common

Oct. 22 (letter of
notification) 1,000 shares (no par) com¬
Price—$100 a share. Underwriter—Barrett &
Co-,
Providence, R. I.
For purchase of
machinery and equip¬
ment and for
working capital.

and for general corporate
purposes

Graham-Paige Motors Corp., N. Y.

stockholders Nov. 6

Nashville

mon.

pre¬

Price

Underwrit¬

working capital.

Interstate

Underwriter—Lehman

common

shares of

New

Department Stores, Inc. (11/18)
Oct. 30 filed 85,000,000 15-year
sinking fund debentures.

1947

its

For

through Bennett & Co., Hollywood. To purchase equip¬
ment, liquidate indebtedness, and for working capital.
An amended application
may be filed in near future.

Pref. and Common

Phillips Petroleum Co

common.

share of Consolidated common
and $18 cash.
Rights ex¬
pire Nov. 28.
The exchange of common
is part of a
program whereby Consolidated will
transfer the assets?-

supplied by amendment
Proceeds—For new con¬

holders.

Unsubscribed

two

erence

Common

Corp

Oregon Power Co

par)

reduce bank

Offering—The shares will be offered

Consolidated's

Inglewood Gasoline Co., Beverly Hills
July 7 (letter of notification) 100,414.8 shares ($1 par)
capital stock.
Price—$1 r share. To be offered to stock¬

1947

Southwestern Investment Co

for otherwise.

face

Common

November 25,

California

Mo.

struction purposes.

1947

American-Marietta Co

Harbor Plywood

;

($100

(possibly Lehman Brothers).

19,

share.

sold

cumulative

Underwriter

Manufacturing Corp., parent of Consolidated!
Vultee Aircraft Corp.,
which, in turn, is parent of the
registrant, has agreed to purchase shares not subscribed

Indianapolis Power & Light Co.
Oct.

Debenture

Corp
November

(Tenn.) Corp.
filed 820,834 shares ($1
par)

Oct. 7

sellers will

Bonds

Interstate Department Stores, Inc
Rowe

will

share.

er—Avco

Co. and Stickley
Brothers, Inc.,, both Illinois corpo¬
rations, and the Luce Corp. and Stickley Bros. Institu¬
tional Furniture Co., both Michigan
corporations.

18, 1947

(EST)

a.m.

Joseph,

Louisville, Ky. To

capital.

receive in exchange for their
holdings
of four furniture companies to be
merged with the regis¬
trant. The merging companies are Toccoa
Manufacturing

Consolidated Edison Co. of N. Y. Inc.
11

debentures

common at $10
To build bakery building.

the

November

St.

Price—$26.50

Nashville

Price—$9.25 a share.
Proceeds—The shares are being
sold by four stockholders and represent
part of the stock

Bonds

November 17,

preferred ($25 par).

—The Bankers Bond Co.,
loans and for working

Illinois-Rockford Corp., Chicago
July 24 filed 120,000 shares ($1 par) common. Under¬
writers—Brailsford & Co., and Straus &
Blosser, Chicago.

Equip. Trust Ctfs.

Liberty Loan Corp

The

common.

ing.

Bonds and Pref.

November

Inc.,

amount and the

Co. Ltd.

Wheeling & Lake Erie RR-

Products,

Myer-Bridges Co., Louisville, Ky.
24 (letter of
notification) $250,000 6%

Oct.

7,500 shares of $10

12, 1947

(PST)--

a.m.

to common stockholders.
Price
$10 a
Proceeds—To pay off bank loans
used to finance
construction.
Business—Telephone business.

Oct. 17 (letter of notification)
$200,000 of 6% certificates
of debentures, 10-year maturity, and

Bonds

share.

Hungerford Plastics Corp., Murray Hill, N. J.
3 (letter of notification) 5,000 shares of common
stock (par $250). Price
(market)—$4 per share. Under¬
writer—Buckley Brothers, Philadelphia.
Proceeds—To
selling stockholders.

.--Capital Stock

(1881)
subscription

Nov.

7, 1947

Mass. Bonding & Insurance Co

(Hawaii)

•

Equip. Trust Ctfs.
November

CHRONICLE

Proceeds—To repay bank loans and finance
construction.

New York New Haven & Hartford RR.

Camden Fire Ins. Co

FINANCIAL

Electric Light Co.
}
\
Oct. 27 filed 25,000 shares ($20 par) common.
Under¬
writing — None.
Unsubscribed shares will be sold at
auction after Dec. 22, when subscription warrants
expire.
Offering—For subscription to common stockholders on
the basis of one share for each two held.
Price at par.

NEW ISSUE CALENDAR
American Cladmetals

writer—Hayclen,
amendment.

•

Stone

Proceeds

&
—

($1 par) common.
Under*
New York.
Price by
Shares are being sold by two

Co.,

stockholders—145,800 by Robert Z. Greene; (President)
and John F. Moran, of New York.
f>

Sri

Nov. 3

Mary's Groceries Inc.* Leonerdtown, MdLii
(letter of notification)

/cumulative preferred and

4,000 shares each of
par

common.

Price—$13

per unit, consisting of one share of each, to be sohB
through an officer of the company. For working capita^.

(Continued

on page

46)

COMMERCIAL

THE

(1882)

Sherer-Gillett

Co., Marshall, Mich.

(letter of notification) 10,000 shares ($1 par)
common.
Price—$6.50 a share.
Underwriter—First of

Oct.

For construction purposes

Michigan Corp., Detroit.

and

for working capital.

Silver Buckle

;

Y.
Oct. 30
(letter of notification) 120 shares (no par)
capital stock.
Price, $100. No underwriting.
Conuuct

Mines, Inc., Wallace, Idaho
Oct. 28 (letter of notification) 1.345,000 shares of com¬
mon.
Company is selling 1,000,000 of the total and the
balance is being sold by four stockholders.
Price—150
a share.
The company will offer the securities directly
with the aid of L. E. Nicholls & Co. and W. L Anderson,
Si!verore

Wash., as underwriters. The company
proceeds for mining operations.

both of Spokane,
will

its

use

Sligo Housing Corp., Inc., Bethesda, Md.
Oct. 28
(letter of notification) 1,800 shares (no

-•

par)
capital stock.
Price—$23.22 a share. No underwriting.
To purchase equity in apartment house buildings.
Southeastern

Development Corp.,

Jacksonville,

Fla-

July 29 (letter of notification) 8,000 units consisting of
| one share ($10 par) 6% cumulative preferred and one
share ($1 par) common.
Price—$12.50 per unit. Under¬
writer—Southeastern Securities Corp., Jacksonville. For
working capital.
Southwest

Natural

Gas

Co.,

Shreveport, La.

business.

Shreveport, La.
Nov. 5 filed $7,000,000 30-year first mortgage bonds,
series B.
Underwriting—To be determined at competi¬
tive bidding.
Probable Bidders—Halsey, Stuart & Co.
Inc.; The First Boston Corp.; Blyth & Co", Inc.; Glore,
Forgan & Co.; Harriman, Ripley & Co. Proceeds—To
Southwestern Gas & Elec. Co.,

finance construction program.

(11/25)
cumulative sinking fund

Southwestern Investment Co.
Oct. 8 filed 15,000 shares of 5%

(which

Proceeds—The

see).

will

Wickes

into the
•

and 100 shares of
common
of the company and $92 principal amount of
4% TV?-year notes due 1955 and one share of common
(par $1) of Well Service Securities Co. at $1,193 per
unit.
Underwriting—In addition, Well Service Securi¬
ties Co.. an affiliate, will sell 110,000 shares of common
of Spartan to Spartan's officers and employees at par.
Proceeds—To provide working capital.
of

debentures

subordinated

Speer Carbon Co., St. Marys, Pa.
Oct. 28 filed 80,000 shares (no par) common.
Under¬
writer—Lee Higginson Corp., New York.
Offering—To
the

Price—By amendment.
Proceeds—Stockselling 46,234 shares of common and com¬

public.

;-j>holders

are

is selling the remainder.
Company will use its
proceeds to defray part of the cost of purchasing its
leased plant at Punxsutawney, Pa.
pany

Springfield (Mass.) Fire & Marine Insurance Co.
29 filed 200,000 shares
($10 par) capital stock.

Oct.

Underwriters—The First Boston Corp., and Kidder, Pea-

Offering—The shares will be
on the basis of one
share for
Unsubscribed shares will be sold

body & Co., New York.
offered to stockholders
each 2l/2

shares held.

Price—By

publiclv.
added to
•

Proceeds—To

amendment.

purchase

eral corporate purposes.

Public

Wisconsin

Service Corp.

(11/7)

ing at 100%.

Proceeds—To

short-term bank loans.

repay

Suburban Gas Service Co.,
H. Y.

Inc., East Syracuse,

(letter of notification) 2,000 shares ($20 par) 5%
cumulative preferred.
Price—$20 a share.
No under¬

Nov. 3

writing.
To retire indebtedness, expansion of business
and working capital.
•

Syracuse

Suburban

Gas

Co.,

inc.,

Syracuse,

;

(letter of notification) 250 shares ($100 par)

cumulative

writing.

preferred.

Price—100

share.

5%
No under¬

For equipment purchases.

Texas

Eastern Transmission

Corp., Houston,

unspecified amount of (no par) common.
Underwriter
Dillon, Read & Co., New York.
Price
by amendment.
Proceeds — Proceeds from the sale of
the common and $120,000,000 of first mortgage 3J/2% pipe
line bonds, due 1962, which Texas Eastern plans to sell
an

—

privately, simultaneously with the sale of common, will
be used to repay $138,027,000 owed to the United States
Government.
The debt represents the balance due on
the

purchase price of "Big Inch" and "Littie Inch" pipe
Business—Operation of the two pipe lines.

lines.

•

Thornton Lumber Co., Ravalli, Mont,

Oct.

(letter of notification) 1,152 shares ($100 par)
and 1,848 shares ($100 par) 6% cumulative pre¬
To be sold at par.
Underwriter—L. A. Dona¬
hue, Billings, Mont. For payment of liabilities and con¬

Prospective Offerings
•

Central

The

Barge Co.

Truax-Traer

stockholders

its

Coal

entire

planning

interest in

stock

sell to its

Central Barge

wholly owned subsidiary. A registration state¬
ment is expected to be filed shortly.
Co.,

Illinois Public Service Co.

Central

company petitioned the SEC for authority to
competitive bidding $10,000,000 first mortgage
bonds, series B, due Sept. 1, 1977, to finance its con¬
struction program.
Company contemplates additional
electrical facilities to cost about $18,525,000 by the end
of 1948.
Probable bidders include: Halsey, Stuart & Co.

Oct.

sell

Inc.; The First Boston Corp.
•

Central

Maine

Power

SEC has given

The

Co,„(

permission to borrow $7,-

company

000,000 for construction program. Loan will be liquidated
proceeds of $4,000,000 first and general mortgage
bonds, series P, and $3,500,000 ($10 par) common stock
to be sold at competitive bidding.
The common stock
would be offered initially to holders of the comnany's

from

outstanding 6% preferred and common stock. Central
parent, New England Public Service Company,
owns 77.8%
of the company's common, has ad¬

Maine's

which

vised the

subsidiary that it would waive its preemptive

right

Probable

the

Bidders—For

additional

bonds:

Blyth

common stock.
& Co., Inc. and

Kidder, Peabody & Co. (jointly); Halsey, Stuart & Co.
Inc.: Harriman Ripley & Co.; The First Boston Corp. and
& Burr

subsidiary of Electric Power & Light Co.,
common holders the right to purchase
shares (no par) common stock in

additional

Parent, which

owns

716,736

held, at $25

common

shares of

New Orleans, intends to purchase its proportionate share
of new common.
Proceeds of $4,991,050 will be used

by New Orleans in connection with its construction

pro¬

which involves the expenditure of $9,000,000 to
the end of 1948.
New Orleans plans to sell first mortgage
bonds during 1948 to provide additional funds required
gram,

for the program.
•f

New York New Haven & Hartford R. R. (11/6) '
Company will open bids Nov, 6 on $7,500,000 equip¬
ment trust certificates, due in 1 to 15 years, to finance
up to 75% of the cost of equipment estimated at $10,000,000.- Probable bidders: Halsey, Stuart & Co. Inc.;
♦

Salomon Bros.

Sz Hutzler.

•

Telephone Co.

New York

Oct. 31

petitioned New York P. S. Commission
issue $60,000,000 30-year refunding
mortgage bonds to be sold through competitive bidding.
Proceeds for capital expenditures.
Probable bidders:
Morgan Stanley & Co.; Halsey, Stuart & Co. Inc.
company

authority

•

Pet Milk Co.

preferred,

new

junior

underwriter: Kidder,
•

creating 150,000 shares
issue.
Probable

present

Peabody & Co.

Potomac Electric Power Co.

of new bonds
its exnansion
program.
Probable bidders: Halsey, Stuart & Co. Inc.;
The First Boston Corp.
in

the

couple of months to finance

Southern California Edison Co.

Oct.

applied to the California P. U. Com¬
issue and sell at competitive
bidding a new issue of $40,000,000 cumulative .preferred
stock.
Banking groups will be asked to bid on botjh
price and dividend early in December.
Proceeds of the
issue will be used by the company to pay off borrowings
amounting to approximately $30,000,000 drawn against
its $75,000,000 stand-by bank credit agreements entered
into with a group of California and eastern banks last
July. Probable bidders include: The First Boston Corp.,
and Harris Hall & Co. (Inc.) (jointly).
mission

•

company

for permission to

Virginia Electric & Power Co.

Oct.

28
reported
plans for raising

has under consideration
$22,000,000 to finance its con¬
program.
The offering, it is thought, may
include $10,000,000 in bonds and approximately $12,000;000 in preferred stock. The financing plan, it is said,
may be ready for the market by March next.
Sale of
preferred probably will be negotiated with Stone &
Webster Securities Corp. as underwriter.
•

Western Light

Oct.

(jointly).

Chesapeake & Ohio Ry.

company

some

struction

reported

preferred stock
•

offer

share.

•

& Telephone Co.
will

company

sell

10,000

through The First Trust Co.

(par 825)

cf Lincoln, Neb.

^OOJMO
equipment trust certificates, dated Dec. 1, 1947, due
annually Dec. 1, 1943-1957. at 3400 Terminal Tower,
Company will receive bids for the purchase of 61/1

Cleveland, O.,
•

Commonwealth

noon

(EST), Nov. 19.

Edison

Nov. 3 company
and

stock

Co.

discloses that it plans to sell new bonds
to the amount of

convertible debentures

$100,000,000 to finance its five-year expansion program
which will total approximately $186,000,000.
Gull States

Wheeling & Lake Erie Ry.
The company

(11/12)

has issued invitations for bids to be con¬

sidered Nov. 12 for $3,940,000 of equipment trust certifi¬
cates.
The certificates are dated Dec. 1, 1947, and will
mature semi-annually from June 1, 1948, to Dec. 1, 1957.
Probable

bidders:

Halsey,

Stuart & Co. Inc.; Salomon

Bros. & Hutzler.

•

asa

Utilities Co.

Nov. 25 stockholders will vote on amending charter to
increase authorized
common
stock from 1,909.968 to

«»>

UNITED STATES

GOVERNMENT,

5,000.000 shares and create 50,000 shares new preferred
stock ($100 par).
Probable bidders: Stone & Webster

STATE, MUNICIPAL AND

Securities Corp.

CORPORATE SECURITIES

•

Interstate Power Co.

which recently failed to receive SEC
approval of the sale at competitive bidding on a new
bond issue and common stock, has filed an alternative

Nov. 3

company,

S£5»

BlairN> Co.
-INC.

reorgamzaton plan providing for the negotiated sale of
new securities.
To this end the company asked the SEC
exemption from its competitive bidding rule with

common

for

respect to the proposed sale of $20,000,000 of new first
mortgage bonds, $5,000,000 of new debentures and not

$1,000,000

of 3% mortgage

••■'•'V

Oct. 30 company may sell about $5,000,000

Co.

ferred.

struction of mill.

Company,

•

Texas

Oct. 24 filed

of $5,000,000

Nov. 24 stockholders will vote on

N, Y.

Nov. 3

sale
■'

New Orleans Public Service Co.

for

Sept. 30 filed $4,000,000 30-year first mortgage .bonds.
Underwriting—Awarded Nov. 5 to Halsey, Stuart & Co.
Inc. at 100.2099 for a 3% coupon. Bankers plan reoffer-

*'■'

the ratio of 26^ shares for each 100 shares

fnc.

non-transferable rights
not exceeding
2,746 additional shares of common, at $2 per warrant,
will be issued about Nov. 28, 1947 to certain officers
and employees.
Warrants expire March 31, 1952. Gen¬
to

funds will be obtained by borrowing

199,642

Jn addition,

warrants

for

program will require the* sale
of 100,000 shares of common at about $32 a share. Adi-

plans
i

subscription rights (now transferable) to purchase 7,865
shares of stock on basis of one subscription right for

Coffin

company's capital funds.

plication, the financing

(letter of notification) warrants to purchase
10,611 shares of common stock (par $5). Priee—$2 per
warrant.
Stockholders of record Nov. 17 will be given

a par value of $10 to no par common.
present capitalization. consists of '2,000,000 shards,
550,009 of which are outstanding. According to the ap-

bonds.

registrant.

Wilbur-Suchard Chocolate Co.,

$19.63 and

ditional

Company pro¬
stated value

The

from banks and the

Corp., Saginaw,

for

$1,000

Mich.
Oct. 20 filed 770,000 shares ($5 par) common. No under¬
writing.
Offering—To be exchanged for stock of U. S.
Graphite Corp., Wickes Brothers and Wickes Boiler Co.
in connection with a plan to merge the three companies

Neb.; common: Schneider, Bernet & Hickman. Purpose—
To increase working capital.
Offering—To be offered

Spartan Tool & Service Co., Houston, Texas
Sept. 26 filed $1,200,000 of 4% subordinated debentures,
due 1955, and 120,000 shares ($1 par) common. Above
securities to be offered only in combination with certain
securities of Well Service Securities Co., in
units of

White Motor Co.r Cleveland, O.
Oct. 28 filed 275,000 shares ($1 par) stock.
Underwriter
—Hornblower & Weeks, New York.
Offering—For sub¬
scription by stockholders on basis of one share for each
2lk shares held.
Unsubscribed shares will be sold pub¬
licly.
Price—By amendment.
Proceeds—For working
capital.

Light Co.

to change its common stock with

poses

pro¬

use

Power &

company,

tional securities to finance construction.

purchase of 110,000 shares of
Spartan common and for other expenses. The common
is being sold by C. P. Parsons, President of the company.

company

subsidiary of the Electric Bond
Share Co., asked the SEC for permission to sell addi¬

ceeds from the notes for

Minnesota

Oct.

filed $110,400 of 4%
($1 par) common.* No underwriting. Price—The
notes will be sold at face amount and the common at

preferred (par $20) and 21,499 common shares (no par).
Underwriters—Preferred: The First Trust Co. of Lincoln,

subscription to stockholders of record Nov. 8, the
preferred at par and the common at $15 per share.

tion costs.

$1 a share. The securities are to be sold in combination
with securities of the Spartan Tool & Service Co.

to raise

sold

to pay, without premium, $26,035,000 of outstanding first
mortgage bonds and to reimburse treasury for construc¬
•

Oct.

shares will be

common

There will also, be outstanding a minimum
promissory notes. Proceeds from sale of
bonds, debentures and common stock would be used

new

Co., Houston, Texas
7%-year notes and 1,200

Securities

Service

Well

Corp., N.

$3,635,500.

of $1,000,000 of

each 16 shares held.

Co., New York.

•

Mercantile

Transcontinental

Oct.

(letter of notification) 25,000 shares of common
on behalf of R. M. Craigmyle, President of the company.
To be sold at market.
Underwriter—Craigmyle, Pinney
Oct

acquire, expore

•

(letter of notification)

•

Mining Co., Wallace, Idaho

1,500,000 shares of (10c
par) stock. Price—20 cents a share. Underwriters—F.
E. Scott, Pennaluna & Co., J. E. Scott and Morris George
all of Wallace, Idaho, and John Erickson and Harold
Gribble, both of Mullan, Idaho. For mine development.
Oct.

ficient number

2,500 shares ($100 par)
No underwriting as yet.
and develop mining property.

(letter of notification)
common.
Price—$100 a share.
27

Oct.
'

Thursday, November 6, 1947

FINANCIAL CHRONICLE

Development Co., Las Vegas, Nev.

Trade Dollar

•

(Continued from page 45)

than $1,500,000 common

shares (par $3.50). A suf¬

ATLANTA

•

EOSTON

PHILADELPHIA

•

YORK

NEW

BUFFALO

PITTSBURGH

...

•

ST.

CHICAGO
LOUIS

THE

Number 4644

Volume 166

COMMERCIAL & FINANCIAL

debentures, officials informed
the Council group.

CHRONICLE
manufacturers in the United States
are known to be
considering the

Florida Ramie Products

of ramie fibre either alone

use

Stock Placed

Year-End

Busy

Market

(1883)
used

something develops to
Batkin, Jacobs & Co. is offering
the
new
issue
market
pacity is not sufficient to meet
to the public an issue of
100,000
the present demand for its prod¬
seriously, it appears that the re¬ shares of
class A common stock
ucts. Chief among the purchasers
maining weeks of the year will
(par $1) at $3 per share.
The
prove relatively active right up to
is Johns-Manville
Corp., which
prospectus states that the stock is
the holiday season.
.has contracted to purchase twooffered as a

disturb

speculaion.

Despite

Contentions

banking

investment

interests

the new
is not es¬
pecially receptive to equity un¬
dertakings received more than a
that

issue market currently

little

confirmation

other

from

1 There

exceptions to the rule,

are

of course, here as elsewhere,
from time

and

circum¬

when

time

stances surrounding a given situ¬
ation^ are in lin£ .with the ideas
of
the investor a
preferred or

stock

common

moves

circumstances

some

even

of the

well-established industrial

porations
keen

are

about

with

the

•

This

little less than
•
to-? grips

coming

equity market at the

.' moment.
•

cor¬

large firms,

financing is going into registra¬
tion.
Vi.'U'_,
-J'

to the company

Among

applied to the Securities
Exchange Commission
for
authority to withdraw their regis¬
trations covering projected offer¬
tures,

and

Electric
for

Armour
after

example,

Co., for

original

revising its

pro¬

objections of
certain stockholders, moved to
end
registration
of
350,000
shares of new no par cumula¬
tive first preferred stock which
it
had -proposed
to
offer to
holders of its present $6 cumu¬
lative convertible prior prefer¬
posals. to- meet

Republic Pictures Corp. at the
same time would withdraw regis¬

shares of $10
cumulative convertible preferred
and 277,231 shares of 50-cent par
tration

for

184,821

75,000

Both

first

new

$100 preferred stock.
The

bonds

will

new

for
preferred will
put up

well

lish

ramie

and to provide

cheap feed of

ex¬

dairy and beef
cattle, and poultry, thereby en¬
couraging dairying and raising of
livestock

and

poultry throughout

Ramie

roots

after

the

first

planting continue to produce year
year
without
replanting.
Under the

climatic and

rent

per- acre

4 V2

preferred. To round
to pay off $8,668,000 in bank loans and series
A
debentures, and provide for
$64,850,000 construction funds the
company will sell 30,023 shares of
%

program

to American G. & E.

for

$10,000,000.
Clog in Municipals

Municipal
still

far

tions

dealers'

from

built

and

issues in

free

soil

con¬

over

this

are

bit

harvested

the

& Co.,

$3.62^

per

accordingly

de¬

are

The company states

State

week

Louisiana

rejected

all

from

1952

fact

from

interest

Bids

basis

cost

the

BROAD
New

The

Board

share on the
payable December

holders

record

19,

15,

the

1947

to
of

this

issues

utility

public

differences

disclosed

week

banking

opinion which were quite marked
when their tenders were opened
and

c<Mimt"r

fVnv

corporation, payable

share¬

at
O.

experienced

sa'arv

will

man

case

over-the-

NATIONAL

CONTAINER

CORPORATION

Complete facilities, statis¬
department, etc.
Box
K 115,
Financial
Chronicle, 25 Park Place,
tical

1947

10,

November

15,

bid

100.30

was

$7.80

The lowest of the five bids re¬

100.153

ceived

$9.27

was

American

Standard

fjmtjjorl

holders

TRADER

doing order work in

over-the-counter

position.

Box

securities

1023,

000,000
for

081

new

first

record

dividend

desires

Commercial

1,
at

1947,
close

$9.02

thousand above the lowest of

six bids tendered.

business

twenty cents (200 per
special dividend of twenty
share on the Common
Stock have been declared payable De¬
cember 31, 1947, to stockholders of rec¬
ord at close of business December 5,1947.
cents

Indicative

which the

war

the

tered

over

the next

five years

will require financing
of at least $100 million.
This disclosure

renewal

came

program

cussed in the

out

was

the

dis¬

of hearings
utility's fran¬

course

of the

chise.
To

obtain

plans to sell
to

issue

individual.

Commercial

1021.

Financial
8.

funds
new

stock

the

company

bonds and also
or

convertible

record

the

24,

♦

stock¬

1947.

GROUP

mailed

GREGG,

SECURITIES,INC.

The

gains

following regular and

year

end capital

distributions have been declared

Special Stock of the Company, payable

46th

November 25,1947 to stockholders of record
as

of the close of business November

5,1947.

From

Income Profits Total

AMERICAN GAS

The

following dividends

Preferred Stock Dividend

THE regular quarterly dividend of

specializing

utility

and

in¬

cellent
Box

references.

S116,

Contacts.

Commercial

Financial Chronicle, 25 Park

Place, New York 8, N. Y.

.05

.12

Aviation Series..........

.03

—

.03

.10

—

.10

vember 14,

.04

.10

dend meeting

.18

.24

.26

.34

.07

.16

Equip. Series

classes of shares of

1947 at the regular divi¬

of the Board of Directors

held November 5, 1947 at
New

Jersey City,

Jersey:
For Fourth Quarter

Class

Regular

—

.04

—

.05

Agricultural.

Machinery Series

.20

.28

.13

—

Merchandising Series.....

the various

payable November
26, 1947 to shareholders of record No¬

.04

Government Bonds Series.

Group Securities, Inc.

have been declared

Extra

Total

.06

,14

Automobile

.07

.14

.13

Aviation;.,....,

.05

—

.05

*05

.1<

Building.

—

.06

.12

.1?

Chemical

.07

.05

.12

Suarter ending December 31, 1947, on
4H% cumulative Preferred capital

Public

.115

.085

.20
.06

stock of

the Company, issued and out¬
standing in the hands of the public, has

dustrial stocks. Married. Ex¬

.07

Oil Series.

out

of the surplus net

THE regular quarterly dividend for
I the

1947

quorter

ending

December

Twenty-five Cents (25c)

Railroad

31,

and

2/100ths of a share of the Common Stock
of Atlantic City Electric Company on each
share of the Common capital stock of this

.08

Food

—

.19

Fully Admin

055

.045

.10

.04

.11

General Bond...

.09

.07

.16

—

.10

Indust'l Mach...

.07

—

.07

Institute Bond..

.09

—

Investing Co.....

Tobacco Series

.24

.10

Steel Series

.18
.06

.09
*07

Equip. Series....

Elec.

Utility Series

Railroad Series

earn¬

Common Stock Dividend

phases over-counter trading,

$.24

Automobile Series

Metal Series

TRADER
experience. All

$.14

I One Dollar Eighteen and Threequarter Cents ($1.18%) per share for the

ings of the Company, payable January 2,
1948, to holders of such stock or record on
the books of the Company at the close of
business December 4, 1947.

Many years'

$.10

Insurance Stock Series

Agricultural Series

Food Series

AND ELECTRIC COMPANY

CONSECUTIVE

DIVIDEND

Electrical

been declared

City Council committee that its

secretary and
firm.
Regis¬

Twenty-five years
practical experience in manu¬
facturing, mining, finance and secur¬
ities,
in
ell
phases
of
accounting,
taxes, S. E. C. and State regulations
and management in executive capacity.
Well qualified to assume heavy re¬
sponsibilities. " Excellent record.
Box

Edison Co. of Chicago has advised

$186.000 000

investment

retarded the build¬

expansion program

Chemical Series.

JOHN E. KING

Sound

ing programs of utility firms gen¬
erally and the big metropolitan
units in particular. Commonwealth
a

MINTON, Secretary

November 3, 1947.

the

per

Treasurer

Chronicle, 25 Park Place, New York

manner

declared

per

NEW YORK STOCKS, INC.

(20tf)

EXECUTIVE

Big Issues Ahead

$.50

Vice Pres. and Treas.

the

N. Y.

mortgage

bid of the runner-up and $14.21

been

has

Building Supply Series

New York 8,

treasurer

thousand better than the

Checks will be mailed.

24,

A. C.
dividend

Checks will be

stock¬

1947.

Financial Chronicle, 25 Park Place,

Presently employed

was

business,

three o'clock, P. M„ November
17, 1947.

Bank Stock Series........

Co.'s $6,-

314% rate. This

the

November

panv,

PillsbffL

bonds brought a top bid of 102.-

a cash dividend of $2.00
on the capital stock of the Com-'
payable on December 12, 1947, to
stockholders of record at the close of

per

DIVIDEND

December
of

share and

Long experience

of
on

PREFERRED DIVIDEND

payable

bidding for Port¬

land General Electric

business

end

Sanitary

CORPORATION

thousand under the top tender.
Meanwhile

record

CLIFTON W.

Radiator

November 21,

same

dollar piece.

thousand

the

for

difference of about

coupon, or a

year

Treasurer.

A quarterly dividend of $1.75 per share
on the Preferred Stock has been declared

mortgage

price of 101.0799 for a
3%% coupon. The next nearest

pany

dividend

December 10, 1947
of

COMPANY

has this day declared

quarterly

sh*re has heen declared

OIL

(Incorporated in New Jersey)

1947.

stockholders

1947.

GINSBERG,

COMMON

$15,000,000 of
bonds, the
successful bidder paid the com¬
first

new

The Board of Directors of the

business November

stockholders

the National Container Corporation

December

record

SITUATIONS WANTED

of Public Service

©>

the $4

December

the Common Stock of this corpora¬

regular quarterly dividend of thirty cents
per
share
was
declared
on
the
Common
Stock of

per

tion, payable

desirable

contacts.

Philadelphia, Pa.

STANDARD

regular

.--$.50

liberal

offered

Indiana's

Co.

$1.00 per

1947.

♦

with

share,

Common Stock of this corporation,

and

per

extra

JOHNS HOPKINS, Treasurer

Common Stock

compared.

In the

the close of

29,

BELL, Secretary.

business November

established

old

dividend

shcre, and

October 28,1947

1947 to stockholders of record

15,

business

WANTED

basis

per

the capital stock, par value
$13.50 per share, have been
declared, payable Dec. 20,
1947, to stockholders of record Nov. 21,1947.

Cumulative Preferred Stock of this

1947.
C.

share has been declared on

Company has
Twenty (20c)
outstanding capital

per

quarterly dividend

of Directors of this
declared a dividend of

day

TRADER

commission

semi-annual

dividend of 50c

Preferred Stock

STREET

York, October 29, 1947

holders

Wanted

Spreads Widening

Bidding for two medium-sized

$35,318.

November 5,1947

PIPE LINE
COMPANY

payable January 2, 1948

for their actions.

reasons

ended

year

DIVIDEND NOTICES

COMPANY

"unfavorable market conditions"
as

net income of

THEFLINTK0TE

that many

THE BUCKEYE

payable

HELP

1943.

in New

New York 20, N. Y.

HARRY

companies cited "cur¬
conditions" and

are

plant is located

fiscal

economic

rent

the first

part

THE UNITED GAS IMPROVEMENT CO.

$10,-

2.74% basis.

the

that

ranged

latter

30 Rockefeller Plaza,

serially

due

1976.

For

price of

business for

the

65c

early this

bids..,for

bonds,
to

of B.

the

DIVIDEND NOTICES

000,000

Inc., at
share.

DIVIDEND NOTICES

issues at the
the

Proceeds from the sale will be

Glade, Palm Beach Coun¬
ty, on special hauling equipment
developed and owned by the com¬

November

witness

purposes for the domestic
foreign markets. The com¬
entered the manufacturing

at Belle

Cents

wary on new

field

Lemke

stock,

moment

its

con¬

ventories.

cidedly

the

stock

common

pharmaceutical, nu¬
laboratory and indus¬

March 31, 1947, the company te-^
ported net sales of $1,237,892, and

F. R. Lushas & Co., Inc. is
making a public offering today
1 (Nov. 6) of 75,000 shares of 50par

It is engaged

manufacture, distribution,

York City, and
in, Lodi, ,N. J.
•

cent

conducted
under
L. Lemke &
Co.,

of B.

Administrative offices

Offers B. L, Lemke Com.

by the

this

Bidders,

end

| F. R. Lushas & Go. §:gj

new

to move in¬

necessary

and

time

—

own
special
harvester-binders and it is brought
to the company's eight-acre
plant

gested side, with concessions still

seemingly

using

company

period

part of the money

market remains

The green ramie

per year.

the

pany

accumula¬

situation in

the

cuttings

Everglades, the yield
is three to four 10-ton

business

tritional,

the

\9.

name

trial

substantial profit.

was

ates used for

pany.

shelves

believed

Co., Inc.,

•»

ex¬

processing and packaging of fine
and
medicinal
chemicals, drugs
and organic chemical intermedi¬

selling price
will make it possible to. operate
at

after

ditions of the

the

the State.

be offered to holders of the cur¬

but

cellent quality for

established in 1935.

company.

portant foreign companies.
Of¬
ficials estimate there already is a
market for as much ramie fibre
as the
company can produce and

in order to estab¬
a
profitable crop

Lemke

fibre have been received from im¬

the

produced
In addition, pro¬
posals to purchase the company's

by the

company, according
prospectus, to increase its

formed under New Jersey laws on
March 30, 1946, as the successor

• thirds
of the ramie fibre

private growers. Florida
offering every encouragement

cumulative

2.67% down to

common.

registered

which

Co.,

mortgage bonds, due 1977, plus

the

shares.

ence

Electric

$28,000,000

months

ings.

of such
of Ap¬
Power Co.,

largest
is that

subsidiary of American Gas

.field and the other in motion

the

undertakings

the packing
pic¬

one

is purchasing its
green
ramie
from
plantations
operated by the State of Florida
as

common

attested to when two

was

The company

conditions, substantial potential

bids while the

prevailing

under

However,

;

offering

quickly.

away

itself to slightly shifting money

palachian

quarters this week.

unsettlement

recent

the seasoned market adjusts

by the

the

working capital to finance its
panding business.

in combination with other fibres.
The company's manufacturing ca¬

Unless

.075

Diversified Investment
Fund

Equip

.08

.09

.17

Low Priced

Corporate Bond Series...

.07

—

.07

Merchandising..

.12

.04

.16

'J3

—

.13

Diversified Preferred Stock
Fund....

Pacific Coast Investment

.09

Mining

.095

.17

Shs..

Diversified Industry

.10

.14

.06

.09

.15

065

Petroleum......
Railroad Bond.

.06

.015

.08

.05

.11

.05

.03

.02

Equip..

.06

—

hands of the public, has been declared
out of the surplus net earnings of the Com-

Railroad Stock.;.

.06

—

.06

Steel

.04

.10

Bany, to be payable toand distributable
ecember 15, 1947,
the holders of

Tobacco

—

such stock of record

Utilities

Fund.

Railroad

Company, issued and outstanding in the

the books of the

Company at the close of business November
12,1947.
>

.06

.04

.07

By "regular dividend" is meant dividends
from

net

dividends

H. D. ANDERSON, Secretary

November 5, 1947.

investment

WALL STREET,

NEW YORK 5, N. Y.

income.

"Extra"

distribution
from
undistributed
net
profits.

represent

accumulated,

.<•.»

■

•

V >;

■>.

"Vf~

— -"js

•

.f •?%(*%

• '?•

*■?

financial chronicle

the commercial &

Thursday, November 6, 1947
that, due to poor winter wheat
conditions, the 1948 wheat crop
will be no bumper wheat crop
like 1947. 'In proportion as grain
crop prospects deteriorate, it will

BUSINESS BUZZ
%, I,'' '

I'/'i'

,•

Washington...

^ '

k-q

ft '' liV'-V' V

<>.

; '

.''••ifI''1

<f\i

: 1 >1

f/'.

-<•'

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.7; 7 < (•

be harder to get wheat. If

i|// Y/i| f

Behind-the-Scene Interpretations

XaMI/II/

from the Nation's Capital

and eartfi

will not

move wheat, regardless of
price, from farm to export out4

Jets. Then the Luckman
will appear to be a

heavily absorbed in a des¬
perate drive to duck a veto of the income tax cut.
To duck it, he
must try to prevent its passage. All Administration strategy is now
directed to this end.
Even the full foreign aid program must be
President Truman at the, moment is

^risked to achieve this objective.;

vl.

Despite

"shame, shame"
White House

the

Approach

the

—

■'

"' :
cuts

substantial

their current expenditures.

lican

authoritative

these
-

aides

recognise

privately

that the GOP has the bet¬

fiow

ter

to cut income taxes,

political

the

argument.

they do not want to go to the

,
•

country

vember

and

year

taxes

put

So the idea now is

its feet.

maintain high
Europe's industry

-necessary

from this No¬
that it was

argue

to keep the President from hav¬

ing again to veto the tax cut by

keeping, the tax cut from get¬
ting to the White House door.
;

There is

;

the

central device to

one

strategy. That is to push
foreign aid for all it is worth,
end push it fast. That means that
a
four-year program
must be
slapped at Congress immediately.
The program must be large, espe¬
cially in its first year. Congress
must be sold the idea that around
new

full

$7 billion are needed right away,
along with $1 billion for stop-gap
aid.
Approval of this large goal
must be obtained.
*

And

obtained—

must

is top secret.

Why

;

'V:i

be made to look like

Then, according to the strate¬
gists, with such a large expend¬
on

the

books,

Republicans wont have the stom¬
ach to pass the tax cut. Even their
own
consciences
would
rebel.

Then, too, the Administration
recognizes that the government
surplus will be bigger (without
foreign aid) than Mr. Truman
guessed last August.
The $4.7
billion surplus then estimated
based upon revenues $4

higher than
based

was

statistics.

the

bil¬

estimates

mates

July income

Inflation

income

national

carried

has

higher.

have

will

Esti¬

higher,

plans and quietly march away.

This

new

explains

three weeks ago the Admin¬

istration

planning to push

was

stop-gap aid first and Marshall

plan second. That was founded
on
good political sense.
The
Administration knew it was not

the solid back¬
ground information it needed to
"sell" a long-term foreign aid
with

prepared

here

It would be enough of
accomplishment to get passed

its

have

bone."
lion

huge

around to that view.

come

i!i

will

the

Administration
has

done

been

careful, cautious ap¬
to foreign
aid—an ap¬
which
probably
would

Instead

foreign aid

decided

the vehicle

has

of its worst poten¬

one

embarrassments, the potential

veto of the income, tax cut.

the
'

Key

:j:

sj:

this

very

out

how

United
rope
or

was

many

firmly
States

The

Ad¬

pleased to find
ex-isolationists
the

•

should

help

gressmen have got a great deal of
religion in their feeling for for¬
eign aid, Truman might get away
with it. Only time will tell—pro¬

vided

the

again

Administration

"all

out"

not

been

for

This

rather,

Finding

hegemony.
"compromise"

Russian

that

doesn't

look

completely
its
strategy in another week or so.
*

you!"

see

Luckman

day

all

have

could

?>v'

:'fi

supposed to

bared

reach

Eighteen

approve.

Mr. Truman

approved.

few weeks, Mr.

lion bushel limit set

Old

advertising

ballyhoo

"waste less" drive before he
to

Washington.

that not merely "some

front for the Luckman cam¬

paign, disliked approving the pro¬

Luckman

which Mr.

gram

pre¬

platter, after
consulting with himself and be¬
fore consulting with them.-Actu¬
them

sented

majority opposed the pro¬
They argued about it five
days without approving it.
a

gram.

Then,
Mr.

called

Truman

man

worse

White

the

Truman

night,

Saturday

:• *

Mr.

Luck¬
Mr.

House.

reported

much

how

day the European

every

situation had got while the com¬

failed

Mr.

agree

pre-fabricated
drive.

servation

con¬

Besides,

Mr.

Truman had to go on the air
next night and he had
a

specific

program.

inet

aid

thd^

than

Domestic &

sources
man

governmental
Luck¬

that Mr.

declare

upon

which

success.

sta¬

predict

that the food conservation
gram

New Issues

by the Cab¬

has hardly a shred of

tistics

M. S.WlEN & Co.
ESTABLISHED
Members N.
40

because

other

feeds

Trading Markets:

feed¬

demonstrate
feeding cattle

itative figures now
are

Ralston Steel Car

ing to heaviest weights. Author¬
farmers

HA. 2-8780

Teletype N. Y. 1-1397

Provided

present prices discourage

and hogs to lighter

1919

Security Dealers Ast'n

Exchange PI., N. Y. 5

ply will not feed wheat at $3 per
bushel to livestock. It will be a
success

pro-,

present livestock feeding trends
continue, the program will be a
"success" because farmers sim¬

that

Foreign

Securities

It is beside the point that au¬

thoritative

weights, and

Oregon Portland Cement
Riverside Cement A& B

Spokane Portland Cement

culling less productive chickens
and dairy cows.

The grain will

be available—IF—
*

the
The

to have

With the

foreign

committee.

food

also clear
members"

Food committee appointed

of the
as

his

came

readier

propagandizing

Reorganization

gram

foreign

Rails

clear and positive ihat
Charles Luckman set up the en¬

Then, in only

now

to be

frontal, direct appeal.

would achieve its goal. The
goal was to make possible the ex¬
port of 500 million bushels of
wheat (plus 70 millions of other
food grains) versus the 400 mil¬

It is

for

need

proved

able to put it on the air.

Luckman announced that his pro¬

main anonymous.

dramatizing to the

the

phone, and passed the word that
royal command they were

»i*

authoritatively for all to
Unfortunately, the source
of information preferred to re¬

convenient political

for

need

net,

for

device

committee,

been

see.

for

vehicle

the

members

the

committee

was

naked details of

(of course)
the next

called

one

LERNER & CO.
Investment

big "IF" is 1948 crop

10 Post Office

Securities

Square, Boston 9, Mass.

Telephone Hubbard 1990

Teletype Bs 69

prospects. Already it is apparent

Teletype—NY 1-971

HAnover 2-0050

Empire Steel Corp.

Firm Trading Markets

;

FOREIGN SECURITIES
'?■)

.t,/ '* '

••'.'V

Susquehanna Mills

v. 1

playing politics with foreign re¬

promptly.

lief.

And it doesn't sound like a

good method of staving off the

et Director pass the

tax bill. Yet it could

word that

work, If the

f-ARL MARKS & P.O. Inc.

must

rank and file of the touring Con¬

Hill, Thompson & Co., Inc.

FOREIGN SECURITIES
•

C>:*'""C

50 Brood Street
■

special session of Congress, to

millions

greatest reluctance
Mr.

of them

drive

Luckman

good political sense. It looks like

had

agencies

Mr,

later)

(or

government

decision

announced

message

etc.), It

await

necessary

All Issues

Off-hand,

President Truman had the Budg¬

government

doesn't

revolute

economy.

key commodities, reg*

get specific details of proposals.

'sfS

long time to

Another shift is to decide to
go

guessed,

materials, price

Eu¬

the drive.

*. t: •:* '

have

men

to stave off communism—

ministration decided to soup up

the

convinced

legislative

minimum

aid.

foreign aid would probably sell
without compromise, the Ad¬

anteeing

Boss—that Mr. Kelton has been waiting

me,

Luckman's

change

Congressmen.

ministration

were

report,

scarce

provided

Oh, that reminds

doubt the reactions of the trav¬

eling

iie

:[(

Luckman's

mittee

looked like a surer way of guar¬

accomplishment.

(J:

Truman's

abandon the

proach
proach

little more

ulation of grain trading,

top

sis

ported that the State Department
had

commitments.

has

contract authorization — to
give continuity to recovery plans
for the second year. It is even re¬

en¬

"We"

$1 to $3 bil¬
revenues
than last

the

tial

year

control

ally
What

command

flee from

expenditures

ation

until recently there was
-every
indication that following
stop-gap aid there would be a
One-year European recovery pro¬
gram asked,
along with a one-

bill:

tax

Even with

and passed

the

foreign

"sell."

So up

to stop

program

use

quickly an appropri¬
for food and fuel
for Europe this winter.

budget pack¬

anticipated, "we" will have to
forego tax reduction to meet our

pay

the

"cut

program.

the White House will wrap

actment

Presidential pre-oca couple
of
big shifts in thought. Only two
;

cupation

Nourse's

(Allocate

tire

so.
*

age

'''

newspaper

The tawdry,

ent to

publicans
can't accept respon¬
sibility for a return of deficits. So
they would fold up their tax cut

big factor iii
prices, more

Henceforth the

only confirms the objectives whicl)

the

also

can

domestic economy and foreign aid

that they will

Dr.

too.

budget. The timing of this admis¬
sion, however, will be determined
by when it is politically expedi¬

be responsible for
return to deficit financing. Re¬

You

i\i

for

foreign aid, then even those
obtuse gentlemen (as the Admin¬
istration sees them) will realize

wheat.
upon the

:\i

ure

early

Maybe the Administration will
admit officially the higher esti¬
mate
in
the
coming
January

Should they insist upon a tax cut
after approving several billions

substantial economy achievement.
$

careful when and where it buys)
and in what quantities.

can

is known about

department will be

$34 billion spending lim¬
it without foreign aid is some¬
thing to crow about, is hard to
figure out. Certainly some of the
current expenditure programs in
foreign
aid
are
non-recurring.
But anyway it will look like Mr.
Truman has cracked the $37 bil¬
lion floor, which up until now
has been regarded by the White
House, judging by its belligerent
defense of this floor, as something
sacred.
The important point is
that it

summer

than" it admits.

of last January. The August fig¬

commitment

late

knows, that it was
bulling up grain

pro¬

expenditures, to

hold

count

you can

-prospects* that
the. Department of Agriculture

aid.

lion

iture

count

$34 billion, exclusive of foreign

their income tax cut.
*

poses

prospects, particularly ^ for

winter

However, it is re¬

ported that the President

was

pass

1948

Any
as

what these cuts will add up to

passed—before Republicans can
■

information

the

fall) until

below

aides to the prospective Repub¬
move

Incidentally,

half

;—"

achieve

something like^ the present^rela¬
tively reduced scale of govern-*
ment
wheat
allocating
about

-i

program

failure.

it looks

1948 Wheat will fall below a

billion bushels, heaven

QPFPT A T TQT^

Markets

New York 4. N. Y.

AFFILIATE; CARL MARKS & CO. Inc. CHICAGO

=====

120

and Situations

for Dealers

Broadway, New York 8

Tel. REctor 2-2020

Tele. NY 1-2660

Full text of Commercial and Financial Chronicle : November 6, 1947, Vol. 166, No. 4644

FRASER