Full text of Commercial and Financial Chronicle : October 19, 1950, Vol. 172, No. 4952, Section 1

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university

ESTABLISHED 1S39

MICH.CAN

OF

In 2 Sections

-

Section 1]

OCT 23 1
MMlNiSTRAIU

BUSINESS

LIBRARY

Reg. U. S. Pat. Office

Volume 172

Number 4952

New York, N. Y.,

Thursday, October 19, 1950

Price 30 Cents

a

Copy

EDITORIAL

Peak Boll Market

As
Before

We See It

Is Still to Come!

off the deep end in this matter
of the curtailment of consumer
credit, it would
be well to pause
long enough to be sure what
we are
doing. The fact of the matter is, of course,
we

that what

go

known

is

instalment credit,
made

as

who

wish

to

buy

Delafield and Delafield

Lamont

background and technical position of stock
market, Mr. Ward sees, despite contradictory factors in
price trends, a continued upward movement. Explains

of

(2) retention of older
workers; and (3) higher rate of capital investment. Ad¬
vocates no ceilings on general
prices, but upholds indi¬

and limitations of charts in stock market
analysis.
Foresees undiminished attraction for equities because of

ordinary comforts or conveniences of modern
life) may or may not per se be particularly in¬

flationary in its effect. Certainly it may be less
inflationary than some of the other practices

inflationary trend, and contends Dow-Jones averages are
likely to reach a new high between 235 and 240, though
there may be brief setbacks.
Lists desirable stocks.

to pass

seem

of

that the

all,

let

unsuspected.
it

be

enlargement of

carefully remembered

The penalty anyone

credit may not
in any way increase the volume of funds which

the

consumer

express an

be

can

brought to bear upon the markets. If di¬
rectly or indirectly the funds thus placed at the
disposal of the consumer are currency or deposits
brought into being for this purpose in the process
of

commercial bank (to say

Reserve)

other

obligation.

fully

as

the

not

inflationary

as

the other, the chief, if

may

I

Where is the economy headed and how
institutions be affected by current trends?

publicly and

thank you for

was

ever

lost in the wilderness. After

was

period—perhaps

five years,

with such erratic markets and constantly changing
other? I

raise its expenditures on defense and

foreign military aid in the next year
to about $30 billion a year—about

some

some

time

or

longer.

double

happen to be right

tication I expect no credit

in the first instance be felt

be

adequately blamed if

or

even

of

some

Let

note

you

dividing

when the government spends

the proceeds of such

into the hands of the

remarks

borrowing, the funds
general public.

on

those

made

years

ago.

three

parts:

first

Prof. S.

I

tutes

purposes.

am

*A
talk
by Mr. Ward
before the Association
Brokers, New York City, Oct. 17, 1950.

28

CONVENTION

an

OUT

TODAY—Section Two

the

of

Franklin

OFFICES:

Charing Cross, S. W. 1

Burlington Gardens, W. 1
Bond Street, W. 1

etc

interesting

to

Shinwell, British

No

defense

from

now.

one

and

The

to three million

Russia

her

is

spending

national

income

13%
military

knows how much will have to be spent

foreign military aid two or three years
projected increase in the armed forces
men

may turn out to be too small.

42

Continued

Customers'

about
on

on

Fur-

page

24

♦An address

by Dr. Slichter before Fall Management Conference of
the National Savings and Loan
League, New York City, Oct. 16, 1950.

of today's "Chronicle" consti¬

Annual

Convention

of

the

National

Municipal

Custodian

Funds,

600 Branches

inc.

A Mutual Fund

across

COMMON STOCK FUND

Bonds

Canada

Monthly Commercial Letter

PREFERRED STOCK FUND

upon request

Bond

BOND FUND

TOTAL ASSETS
UTILITIES FUND

£156,628,838

INCOME

Associated Banks:

THE NATIONAL CITY BANK

on

OF NEW YORK

request

Glyn, Mills & Co.

FRANKLIN

1116

(BALANCED; FUND

Prospectus sent free

Williams Deacon's Bank, Ltd.

Bond Dept.

Teletype: NY 1-708

New York
Seattle

We

maintain active

markets

Underwriters and
Distributors of

Municipal

and

Corporate Securities

*

Prospectus from authorized dealers

OTIS & CO.
(Incorporated)

Devonshire Street

*

Los

CANADIAN

Established

&

Co.

OF

New York

Chicago

Denver

Cincinnati

Columbus

Toledo

bonds & stocks

New

An interesting

Domdoox Securities
(orpokaxiot!

NEW YORK STOCK EXCH.

40 Exchange Place,
115 BROADWAY
NEW YORK

CITY OF NEW YORK

England

Public Service Co.
workout situation

IRA HAUPT & CO.
Members New York Stock

and

Dallas
Buffalo

THE

Los Angeles

1899

CLEVELAND

Chicago




San Francisco

DEPARTMENT

Goodbody
MEMBERS

Angeles

Agency: 20 Exchange PI.

Portland, Ore.

Bulolo Gold Dredging

ESTABLISHED 1891

BOSTON
New York

Development

or

VANCE, SANDERS 6* CO.

NATIONAL BANK

CANADIAN
Placer

Second Fund

THE CHASE

in

Massachusetts
Investors

Canadian Bank
4€ommme

Department

Head Office: Toronto

DISTRIBUTORS, Inc.

64 Wall Street, New York 5

Ill

is

State and

Bishopsgate, E. C. 2

64 A

ISSUE

80-page special supplement devoted to

brief

page

It

Security Traders Association at Virginia Beach, Va.

West Smithfield, E. C. 1

49

on

that

Slichter

of

comments

some

income.

throughout Scotland

LONDON

8

background; second

H.

of all

some

War.

that Emanuel

OFFICE—Edinburgh

Branches

3

into

Continued

Incorporated by Royal Charter 1727
HEAD

market

pass

page

NSTA

_

on

talk

Purchasing

Continued

Royal Bank of Scotland

this

amount

Minister of Defense, speaking before
Parliament last summer, estimated

I find that the public

reminding

the

Korean

tional

me say

any prosnos-

recognition, but expect to

wrong.

have the unhappy human faculty of

mistakes,

on

The

planned before
Expenditures on
defense and military foreign aid will
be roughly 11% of the net national
product and over 12% of the na¬
the

on

course,

savings

will not admit* to confusion at

at the start that if I

Funds Pass to Public

/But, of

will

The economy is engaged in a
production contest with
Russia that will last for an indefinite

perhaps ten years, or even
quickened contest with
Russia is having the immediate ef¬
fect of causing the United States to

financial tools and yardsticks at my disposal.

different market for the most part.

a

out

audience.

is to be on the
winning, side more often than on the
losing side, and in that connection I need and use all the

is

one

an

certainly am no exception, for nowhere is pride of opinion
more expensive than in the stock market and
any opinion
I express to you today is with the humbleness that has
developed through making many costly mistakes.
My basic hope and motive in forecasting the market

nothing of the
boncF or

Indeed it is obvious that

stick his neck

opinion before

news

government

a

for constantly writing about
forecasting, is that sooner

case

to

years

only, real difference being that the in¬

flationary force
in

buys

as
theoretically effective in keeping prices
Contends, however these controls, under union
domination, cannot be applied drastically. Says keeping
inequities of inflation to a minimum is a major problem.

down.

hesitation he replied, "No I was never lost, but once I was
confused for three days." Who of us during these
past few

of bank credit, the
process is, of
definitely inflationary in nature. It may
well be questioned, however, whether even this
lending is more inflationary than that involved
a

pays

in this

asked

especially for listening.
Recently I felt a little like Daniel Boone when he

asked if he

extension

Federal

or

is

controls

rect

the honor and

course,

when

market,
later he

or

problem is to
(1) need for

greater technological research;

use

First

University Professor, Harvard University

Maintaining most important economic
accelerate production, Dr. Slichter sees:

In reviewing

the

which

Economy

By SUMNER H. SLICHTER*

Members, New York Stock Exchange

(that is

some

A Defense

By KENNETH WARD*

charge accounts, and the like

individuals

to

credit

consumer

Economic Problems of

New York 5, N. Y.

105 W. ADAMS ST.

CHICAGO

other Principal

111

Broadway, N. Y. •

WOrth 4-6000

Teletype NY 1-702-3

,

WHitehall 4-8161

Boston

Exchange
Exchanges

Teletype NY 1 -2700

Telephone: Enterprise 1S20

2

The Commercial and Financial Chronicle

(1486)

MARKETS

TRADING

The

IN

American Maize Co.
Amerex

A continuous forum in

Southern Production Co.
Federal Water & Gas Stubs

nor

THEODORE

H.

President,

Corporation

BIRR,

as

Co.,

the 50%
a

c

t

i

(Bank of America, N. T. & S. A.)

York 5

ments of a

of

ance

In

good security is assur-

security should,

a

de¬

of

is

as

frfePONNELL&rO.
New

120

York Stock Exchange
York

Exchange

Curb

march

of

miles

'

H.

T.

Birr,

is

Jr.

of

the

Capital Stock

security

a

has

Consider H. Willett

I*16

had

cash

Common

behind

Past

seven

dividend

increases

rate

in

split in

1st Floor,

stock

Kentucky Home Life Bldg.

Bell Tele. LS 186

Long Distance 238-9

the
to

in 1945,

increases,

and

stock

split

the end results of good earn-

are

a

in

& 2"f°r_1 stock
dividend

dividends

LOUISVILLE 2, KENTUCKY

f

19540

cash'

The

£»•

Incorporated

si,x

,

addition

stock.dividends of 66%%

BANKERS BOND

the

the Bank of America stock

years

direct

Water

rofiPl?
reflection

Re¬

u. s. thermo

in turn, is
alert and

of

an

in

California

during the past 15 years—particularly the years since 1940.

interesting to note that 100
shares, purchased in January 1940

Analyses

on

Request

$240

★

★

★

®ai/m(mcZ£6o>
148 State St., Boston
Tel.

CA.

7-0425

:

9, Mass.

Teletype BS 259

:

N. Y. Telephone WOrth 4-5000

w

producing cash dividend of
on an annual basis
would

cash dividend of $640.

According-

annual income has increased by 166%%. What is even
more
interesting is the fact that
the adjusted cost of the shares acthe

Rico

during

As

far

the

as

cerned, they
,

the

Power

therefore, that the stock of Bank
of America is an ideal security at
this

for

time

income

growth and

liberal

upon

its

past

per-

formance.

PAUL O. FREDERICK

New York

City

are

Rico Water Resources
Authority Elec. Revenue Bonds)

37

Wall

Street, New York 5

WHitehall 4-2530 Teletype NY 1-3568

Being

a

Resources
increased

from

kilowatt-hours
000,000
Net

system.

this

in tax-exempt
natural that the

dealer
it

is

category.

Water

Puerto

The

Rico

Re-

small:

200,000

in

1950.

ferred

increased

has

from

year ending April, 1950.
The

general

credit

of

Puerto Rico is exceptionally good.

Neither the government

nor any

7 municipalities nor any of

There has

never

nearly $100,000,000

Puerto Rico itself
United

States

Island has

NEW YORK STOCK EXCHANGE

,

—

appoints

Teletype NY 1-953




w

t

the
,

^

Auditor

of

of

in

cream

will

for

admirable

a

Common

relations

the

in

De-

United

States

Supreme

The Island Legislature is

elected
,

by

direct

of

vote

the

to

tually

force

A1! Acts

the

and

power

annul

them;

au¬

a

Federal inState

tion.

Products

prewar

of

standard

them

fered at

yields

living

ranging from
2.25% for 10-year

O.

Frederick

in

to

Street, Boston 9
Teletype BS 328

—

this
never

American Marietta
Central Public Utility

Pub. Service of New Mexico

and

the pat theories of
statisticians, promises sus¬

vital

all

tained : good
Second

for years.
third
generation
better buying po¬

Americans
tential

are

than

attitude

field

of

"Heirloom''

older.

tableware

towards

planted by

sup¬

of

extension

for

substantial.

Progress within company in ef¬

of

rise

in

10 " years,

a

in

almost

.

Buckhill Falls Hotel

Standard

Railway Equipment ?

Penna. Power & Light Common

Philadelphia Electric Common

and decor attitude.

use

operations

ficiency

Pocono Manor Hotel

business

and

5Vis

births,

marriages

upsetting

no

-

prices \ in
veritable

Henry B.Warner & Co., Inc.
Members

Phila.-Balto.

Stock

Exchange

123 South Broad St., Phila. 9, Pa.
Phlla. Telephone
PEnnypacker 5-2857
New

York City Tel.:

Bell System Teletype
PH 771

f

BOwling Green 9-4818

phenomenon in commodities. The
has

company

funded debt and

no

has evidently been able to defray
the
costs
of
improvements and

plants

within

its

and

obviating borrowing
improving the leverage of the
stock

common

Review

compels

though

an

sales

S.

SAVINGS

BONDS

chart

business

conclusion

that

old company it is still

"growth"

a

U.

all the time.

the

of

the

BUY

capital

framework,

net

situation.

in

the

Range

'30s

of

range

Puerto

Rico

will

even¬

its political ties with
therefore,

government.

basis

for

this

,

There

fear

is

the

as

in the '40s

was

from $23 million to

$68.57 million.
The

'50s

Naturally the
ness

is,

with the

...

to

seem

like

course

any

course

...

,

augur

well.

of this busi¬

tied

other,

of the

general

Over-the-Counter

Quotation Services
for 37 Years

in
na¬

tional and international economy.
The last few years the domestic

of

Island

Puerto

from

view; Puerto Ricans
maturities

*

Puget Sound Power & Light

people have expressed the $7.54 million to $17 million;

sever

the

Quoted

has
Amazing in¬

with

to
Paul

—

from

association

of¬

31 Milk

Tel. HUbbard 2-6442

as

the United States is too beneficial

taxa¬

Bonds

Sold

Ralph F. Carr & Co., Inc;

Rise in
absorbed

era.

necessaries.

as

crease

classifiable

were

in

was

foreign

little

and

now

however,

their obligations will be those of

both

come

has,

.the United States and,

exempt

—

the company and the com¬

luxury

of the United States, which

reserved

Bought

munity in which it "lives" (MeriWallingford, Conn.).

new

r

people ]for *our years'

gress

Preferred

be¬

things,

appealed to the Federal Circuit

fear that

Congress
in

a

cisions from the local courts may

Some

of

Acts

the best

Almost

States.

Potentialities

District Federal Judge.

the

Power Co.. Ltd.

products

production has been
continuous, resulting, among other

to

Enterprise 6800'

Mexican Light &

small

a

degree.

United

the

tween

*be Supreme Court of Puerto Rico,
and

Tele. BS 14J

Enterprise 2904

Pre¬

enterprise

an

relations among

paternalism

..

Je£to RlCo and the Justlces of

thority

of

the

are

Phone DIgby 4-4950

The

f

*

under

Bonds

provisions

NEW YORK CURB EXCHANGE

40 EXCHANGE PL., NEW YORK 5, N. Y.

citizens.

government and democratic order.

states

Ins.

common

preferred.

skimming
of

Labor

part of

a

is

the United States, and its people
are

364,792

Dealers

Hartford, Conn.

superb
(1847 Rogers, Holmes & Edwards,
International
Sterling
brands).
Advertising good. Management by
men who have a personal identifi¬
cation with the company to a high
and

Securities

den and

been exercised.

from

>.

loans

outstanding,

Revenue

are

WEMBER5

such

of

the

Good

in

Authority loan in the Island, and
are

•

of

Open End Phone to New York Canml 6-1613

averaging $60,000,000 annual sales

foreclos-

a

ure °t a smgle Federal Housing

authority

now

Shaskan &Cp.

or

.

Electric

Securities

been

„

sources

Over-The-Counter

defaulted

ever

Assn.

for the last four years.

better than two times bond
charges.

Nat'l

pays

amount

This was

*

Portland, Me.

$1.75, presenting total
burden of $350,000. This requires
but

Quoted

Tel. HUbbard 2-5500

probability of mainte¬
$6 annual rate. Capitali¬

of

nance

$2,412,000 in 1942 to $5,725,000 for

has

Authority
Primary Markets In

have

—

75 Federal St., Boston 10, Mass.

months they
paid $26.50 cash dividends.

shares;

to

Inter¬

is

and 9

years

404,-

1942

best

like

Reasonable

Sales

17-3,000,000

kilowatt-hours

income

3

Sold

—

J. B. Magnire & Co., Inc.
I!embers

Silver because:

national
In

I

zation

in

Bought

Exchange

Other Exchanges

stock

.,

,

Stock

(International Silver)

con-

Passod by the Legislature are resecurity I like best would fall in quired to be reported to the Consecurities,

branch offices '

Manufacturing

City, Members of

York

and

pled2e of the "venues of the
have

York

New

amply secured by

are

.

.

Court.

(Puerto

CO., Inc.

New
<

The

bonds

Court in Boston and, in last resort,

Partner, Paul Frederick & Co.,
Bought—Sold—Quoted

our

Co.,

&

be

based

Direct wires to

Stevens,

GARFIELD

Garfield

,

Common Stock

V0GELL &

GEORGE

Partner,

15

past

quired in 1939, after giving effect While previously the Governor
to
the
rights received
in 1950, was appointed by the President
would be $3,400; whereas, the apf th
United stafPS
ho
is now
proximate market value of the
*ne Umted btates' he 1S now
shares
today would be $10,600. elected by the people of Puerto
The original investment has, Rico.
The President of the United
therefore, increased by 211.7%.
The conclusion is inescapable,

Central Maine

H.

NY 1-1557

Birmingham, Ala.
Mobile, Ala.

Bates

story in itself.

a

have grown to 400 shares by October 1950 with a current annual

ly,

HAnover 2-0700

New Orleans, La. -

Analytical
Depart¬
Tripp & Co., New York
City. (Page 35)

The growth and
economy of

its agencies has

and

simplex paper

Dell

—

Exchange-

York 4, N. Y.

ment,

the

been delinquent in its obligations.

population

It is

control

York Curb

Manager,

of 3,435 square
population of over

a

try

and

York

Medium and Lower Medium Grade

organized

was

aggressive management taking advantage of the growth of indus-

V

Silver—George Gar¬
Garfield & Co.,
City. (Page 2)

Partner,

New

have been extraordinary and

Water

facts

Churchill-Downs Inc.

™

Amer-

suited to the times.
are

field,

York Stock Exchange

Members New

area

an

Puerto

light of

Here

Members New

It owns most of the

and

years

capital stock of Bank
ica, N.T. & S.A., as

Common

International

these

by Act of the Puerto Rico

our

foregoing
background, this writer selects the
American Air Filter Co.

Rico

Authority

2,200,000 people.
improvement of

Viewed

in the

Tel. REctor 2-7815

Steiner,Rouse&Co!
25 Broad St., New

Municipals

Puerto

serving

the

time.

exemp-

generating
and
dis¬
tributing properties on the Island,

inflation

sands

Revenue

exempt by Act of Con¬

are

1941

Electric

electrical

leaves its ugly
on

even

that

Bought—Sold—Quoted

York

increasingly valufact

Louisiana Securities

Resources

Paul Frederick & Co., New
City. (Page 2)

ner,

might be important at some

Legislature.

economic

BROADWAY, NEW YORK 5

be

the

and

The

espe¬

imprint

Members
New

tion should

in

requi¬

the

therefore, tax

so,

sources

site these days
of

be

Water

Bonds—Paul O. Frederick, Part¬

later date.

power.

cially

will

taxes

ahle,
gress

purchas¬

ing

that

are

higher

invest¬

the

or's

This

nGw

Rico

Authority

bracket would have

tax

Alabama &

and

America, N. T. & S. A.—

Puerto

to
invest
in taxable securities
yielding 5.5o%#
All indications

bonds

afford

aintenance

m

Since 1917

require-

regular income payments,

some

gree,

Rights & Scrip

foremost

addition, such

to

Specialists in

the

of

One

return,

Thursday, October 19, 1950

Selections

Jr., President
of
First
California
Co.,
San
Francisco, Calif. (Page 2)

maturities. To
an investor in

for 30-year

this

.

H. Theodore Birr,

offer to sell the securities

an

equal

Francisco, Calif.
v

Teletype NY 1-583

Bank of

.

Week's

Participants

Their

intended to be,

not

are

group

2.75%

JR.

California

First

San

1920

in this forum

they to be regarded,

are

different

a

discussed.)

New York Hanseatic

BArclay 7-5660

which, each week,

(The articles contained

Electric Bond & Share $4.20 Stubs

120 Broadway, New

This
Forum

of experts
in the investment and advisory field from all sections of the country
participate and give their reasons for favoring a particular security.

Holding Corp.

Established.

Secnrity I Like Best

.

Rico

an

are

economic
proud

their United States citizenship.

of

has not

company

Canadian

even

earnings

Continued

National Quotation Bureau
Incorporated
Established

included its

in

its

state-

46 Front Street
CHICAGO

on

page

35

1913

New York 4, N. Y.
SAN

FRANCISCO

Number 4952

Volume 172

.

The Commercial and Financial Chronicle

.

.

INDEX

Is the Bull Market

Articles and News

Coining to

Pause?

a

Peak

By ALFRED HECHT

Economic Problems of

Partner of Hecht & Co., Members New York

Cover

Defense Economy

a

—Sumner H. Slichter

Y

:

Stock Exchange

Page

Bull Market Is Still to Come!—Kenneth
Ward:

Cover

Is the Bull Market Coming to a
Pause?—Alfred Hecht

CALL ME,

3

What's Ahead for

Mr. Hecht contends that stock prices will experience a setback.
Later a firm base will be established not to be broken for a

4

Business?—Q. Forrest Walker

Any

lady

solete

long time.
The

so-called

Says it might take

"public,"

is

move,

tal

ventories

of

Such

of

next

bear

a

base

inventory

after

move,

might

intervention

taxation

in

should

the

excesses

y

normal

conditions

on

ments

more

which

of
is

industrial

the

1951

will

be

and

19

Taxes and More Taxes!—Roger W. Babson

19

threat of retroactive

Equity Investments for Savings Banks—Alfred C. Middlebrook 21

Cedar Point Field Trust
U. S. Will Arm to Fight Aggression, Says President Truman__

Hatlgarten &

profit
higher personal income
might cause a more con¬

taxes

servative

dividend

Higher

business

(

MORE
Section

taxes

are

in

the

profit taxes will

in

by

business

since

crisis

is

spfee

started

the

an

boom.

feel

goods, nylons and sheets;
men
bought tires, ordered auto¬
mobiles, home freezers, refrigera¬

and

are

stiffer

credit

till Mr.

caught

Mrs.

and
up

porate buying

has

and

power.

and

All

this

does

motive

ex¬

to

like

a.

normal
ness

in

to

generally

Stock

next

these

inventories,

markets

discount

new

averages

expected
a

As We
Bank

10

12
13

May____

—_

;

Tele-Tone Radio Corp. A
Tele-Tone Radio

14

Regular Features

.

to

on

Insurance

and

Dealer-Broker

but it would

peace,

inflation,

or

Stocks

35

NSTA

Our

Notes

He

is

a

securities

iiiiiiimiiiiiimiiiiiiiiiiiiiiimiiiiii!

*

:—

:____

Trading Markets

Alabama-Tennessee

40

Natural Gas Co.

Offerings

Security

Utility

Securities

15

Securities

.Dan River Mills

36
-

33

Salesman's Corner__.

Securities Now in Registration

Rich., Fred. & Pot. D. 0.

38

The Security I Like Best

2

The State of Trade and Industry

Eddy Opens
in

May

16

Securities

Scott, Horner &
Mason, Inc.

5

34

(Walter Whyte Says)

Washington and You

—

44

Lynchburg, Va..

Nev.- -Thomas H. Eddy

engaging

8
22

Report

Tomorrow's Markets

T. H.

v

Exchange PL, N. Y.

**

Railroad

merly with Tripp & Co.

RENO,

40

Prospective

for¬

was

.

Teletype NY 1-1825 & NY 1-1826

Our Reporter on Governments

.

West.

Wilfred

HAnover 2-0270

14

-

Reporter's

6
37

News About Banks and Bankers

unprecedented highs.

Street,

23

—-

Observations—A.

Request

Singer, Bean
& MACKIE, Inc.

8

—

News—Carlisle Bargeron—_

Funds

on

9

Recommendations

Investment

Prospectuses

20

-

From Washington Ahead of the

Mutual

J

Teco, Inc., Com.

18

Indications of Business Activity

prosperity,
change of

Corp. Com.

.Cover

Einzig—"Will Britain Free Sterling From Control"

Whitney Curry Opens

18th

Corp. Com.'

Hytron Radio &

Muntz TV

It (Editorial)

See

Business Man's Bookshelf.

,

of this year
be surpassed.

year

Teletype NY 1-3370

8
._

Shadow-Boxing—Melchior Palyi

..

advance

Public

es¬

good

BO 9-5133

Electronics Com.

that it is

year

Broadway, New York 6

Direct Phone to Philadelphia

Barbour

—A., Wilfred

business from offices at 224 North

pecially with employment at such
high gear, stockpiling, and a busy
armament industry.
„

market

the

extent

pickup

61

;

Responsibilities of Investment Trust Management

es¬

a

year. But things get used
and it will not take too long

absorb

Financial

someday

of busi¬
experienced later

seasonal

Quoted

J.F.Reilly&Co.

7

•

Investments in Present Inflation

as

,—Eugene M. Zuckert, Assistant Secretary of Air Force

stock

beginning of a very big
market. Possibly this market

the

up,

a

BRADENTOWN, Fla.—Whitney
Curry is engaging in a securities

considerable

—

Scope of Our Rearmament Program

pros¬

ahead, but when the 1950
highs are eventually surpassed, it
surely will mean that the infla¬
tionary spiral of the market is on
again and the market will ascend

Our produc¬

look

not

—Phillips

far

cor¬

of an exist¬
ing boom. The panic buying of
last July and August anticipated
to

be

currency

top

on

1

.

The Television Industry—R. A. Graver

Administration. Nobody can see so

preparedness program.

bull

again

might take

bull

personal

—Senator Harry F. Byrd

Municipal Bonds

mark the

tion capacity can amply take care
of the implements of war under

the

the

will be based

situation

much

Sold

6

Coming Events in the Investment Field.

can

Consumer have

—

Incorporated

Canadian Securities

It

power

again.

inventory

articles:

Free Enterprise System—Our Best Security!

Dow-Jones

terms

This hoarding and advance buy¬
ing made for an entirely artificial
hausted

of

—

Maybe

Virginia Beach, Va., includes the following

pending reaction the highs of the

loaded up with debt which

delays the normal buying

Bought

;—Harry A. McDonald, SEC Chairman—

on

unwarranted,
forgetting normal
growth conditions. After the im¬

tors and washing machines. Many
beat

boom.

when

starts

canned

to

elements
and

at

It is an old story that
people
shy away from buying in declin¬
ing markets and some people will

Housewives hoarded sugar, coffee,

tried

SECTION TWO

IN

••

buying

artificial

ARTICLES

of

tablished.

Korean

that

absorbed;

tion

forward

the

Two

Regulation Is Here to Stay!

with teeth in it wili be

peace

buying done

scare

Request

on

"

period.

a

inflation

market

be raised. Normal business cannot
start until the

itself

perity,

somewhat, taxes must

ease

such tech¬

of

high level. All this carries with¬

a

the rearmament program. Even if
the complicated foreign situation

should

advantage

setbacks, the investor might

keep employment and taxation

making. Special
pay for part of

29

-

today's "Chronicle," devoted to the recent
Annual Convention of the National Security Traders Associa-

buying
place. The neces¬
sity for military preparedness and
a
big standing army will help to

personal

^Canadian Superior Oil

26

__

^Prospectus

which has taken

policy.
and

take

unwarranted

and

taxes

16

i

Wall Street Riding Club Elects Miss Cambridge

strong economy and full em¬
ployment will in time absorb the

combined

13

Co. Celebrate 100th Anniversary

Good Questions! (Boxed)

A

excess

Aberdeen Petroleum

stockholders. While the short

nical

substantially
the

Argo Oil

only

wait out such

This

17

:___

Needed: A Tough Policy to Stop Inflation—Marriner S. Eccles

properties

It is likely that in many cases 1951

earnings

Schmidt

18

swing speculator and trader wants
to

^

WHitehall 4-6551

rule

might bring on
heavy profit-taking during the rest
of this year in the stock market.

lower.

—Orvis A.

beginning to show
in increased earnings, and a more
liberal
dividend
poiicy towards

plus

Tax-Exempt Bonds—Curtis ter Kuile

care

will

as

this

STREET, NEW YORK

Telephone:

Advertising of Securities—Louis Engel__,

continue.

taken

are

at

12

normal

by marty corporations since 1940,
rehabilitation
and improve¬

to stop runa¬
The fear of higher

markets.

reaction,
call it,

the

intended

measures

way

advance

ob¬

an

treated

11

to

the

and

over

be

ambassadress

Guideposts and Procedures in WTorld Bank Loans

again. The market has hardly re¬
flected the accumulation of assets

this in

bring
sharply increased taxes and
government

of,

infla¬

turn

Hecht

prefer

WALL

99

10

Tax Increases and

might be consoled by the idea that

are

created by the

Alfred

normal

or

you

will

sale
an

as

office.

8

Defense Economy—A. W. Zelomek__

a

for

royally

7

Frear, Jr

Economic Outlook for Retailing—Jules Backman

be broken for

to

Industry—Admiral Ben Moreell__

Frear Bill"—Senator J. Allen

International Trade in

Investors who depend on and do
not
wish
to
lose
their
income,

year

and

not

move

be

growth

re¬

cession.

tionary

The

this

firm

will

present

will

During

year.

6

The Prospect for American

long time. Then the short-lived

whichever

big

bottom

5

Pros and Cons of Direct Placement—Frazar B. Wilde

I

a

bears in itself

profits

market

a

the seeds for

This

If

advance.

a

over-

technical

Building Outlook and Loanable Funds—August Ihlefeld

,

period security prices should find

fidence

c o n

ball,

June

alarming
size,
thus
driving prices
an

up.

in

news

'

loom in early spring and a double
bottom may be attained again in

accumulating in¬

are

highs.

new

allowed to look into the crys¬

were

buyer of securities.

now a

Businessmen

bad

and

which

cautious during the past bull

was

for

a year

MADAM!

investor who has

*See Mr. May's article

busi-

on

14 in today's Second Section.

page

Tele.

**Column not available this week.

LY

LD

83

33

llllllllllllllllllllllllllilllllllllllllllll

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offerings of

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U. S.

Reg.

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Park

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The Commercial and Financial Chronicle
4

.

.

Thursday, October 19, 1950

.

(1488)

Whafs Ahead lor Business?
By Q. FORREST

WALKER*

at

main features of business

retail economist predicts,

expenditures will not exceed

10% of

conditions, sound

Under present

appraisal of the business outlook
is
exceptionally difficult.
Com¬
plex

political,

psychological and

the Federal

Eleven months later,
index was about 21% higher.

forces

this

are

shaping

now

thefuture
of busi¬

trend

We can¬

ness.

not now assess

combined

the

effect of these

forces

great de-

any
,~.

with

.gree of assur¬
ance.

The mass

production was 163, the
monthly figure siace Feb¬

1946.

ruary

During the first half of 1950, and

particularly in the second".quar¬
revival rapidly picked up
momentum,
due
principally
to

ter, the

after

the

Korean

landings

Q. Forrest Walker

about

doubts

deepening

by

has

followed

been

the

We have been ex¬
posed to a deluge of private and
official
opinion
about business
longer future.

prospects. Much of this opinion has
been of a highly emotive charac¬
ter.
It has contributed substan¬

could

needs.

future

list

of

over

materials;

critical

a

steps

priority
orders; Regulation W

has

estate

real

vanced

about

store

6%; and

sales ad¬
wholesale

endeavor

prospective

of

basic

our

in¬

cur¬

they will probably average mod¬
erately higher than prior to Ko¬
rea.
Credit controls should ease
inflationary

current

pressures.

Retail trade should register a

quarter

of

and

1951

sub¬

last quarter,
in the first

gain in the
slacken
moderately

stantial

improve

little in the second quarter

threaten

a

of 1951.

Howard Buffett Runs

to

For U. S.

larger and larger.

grow

Congress

"Some

people look upon direct
controls as a practically painless
of meeting the emergency fi¬

way

nancial problem.

No more serious
There is

could be made.

error

no

painless way of controlling infla¬
tionary pressures. Either we meet
them head on and overcome them
we

or

action

ahead,

a

against
is

controls

direct

Con¬

wage

inflation

of

expenditures

attention.

which

deficits

ment

losing rear guard
them. If the fuel
provided, all that
do is

can

to drive

fense

under
has more than doubled de¬ ground and to postpone some of
appropriations; but we are their effect.
business observers were disturbed told that defense spending may
"Therefore, even if direct con¬
about
the
general character of not reach a $30 billion annual rate trols
eventually become necessary,
this revival, particularly the lav¬ before next June. If this estimate
broad
basic monetary and fiscal
ish use of credit to finance resi¬ proves to be correct, perhaps we
measures will be essential to make
dential building and the rising to¬ cannot expect much more than a
many

the

inflationary

them effective.

tal

of

consumer

credit

used

to

pressures

.

J'1

.

$6 to $8 billion increase in direct

automobiles, television defense outlays during the bal¬ Will Experience Some Shortages
appliances and other goods. ance of fiscal 1951. Very proba¬
On
the
physical side, present
There was growing doubt about bly, the main impact of increased
defense plans appear unlikely to
our
ability to maintain the then defense spending will come in the
our
perspective is dimmed. It is
reduce the normal supply of ci¬
current rates of expansion for any second quarter of 1951.
It now
not easy to maintain an objective
vilian
goods
very
substantially
appears
likely that the Federal
point of view.
We know that protracted period. The average
over
the near future. There will
cash budget will show a large sur¬
purely random factors may upset citizen, riding around in a newly
be. particular shortages here and
the most carefully considered busi¬ acquired automobile, could per¬ plus in the first quarter of 1951
and we may possibly still be in there, but, by usual standards, the
ness judgments.
But businessmen sonally view the residential boom.
aggregate supply of civilian goods
It was tangible evidence of the the black next June.
must make judgments and some¬
will remain very large.
In mon¬
where between the extremes of business prosperity he heard about
National Income Increase May Be etary terms, defense expenditures
on the radio or read about in the
current opinion we must find a
will probably not reach an annual
Moderate
newspapers.
If there were scat¬
prudent course.
When we consider the magni¬ rate of 10% of our gross national
tered signs of pending readjust¬
To analyze business prospects,
tude of the tax bite and the pros¬ product until toward the middle
we
must make certain assump¬ ments to more normal levels, they
of next year.
were not ordinarily deemed
increase in defense ex¬
very pective
tions.
For purposes of this dis¬
Moreover, consumers are now
cussion, it has been assumed: that significant. Then came Korea and penditures, the net addition td the
received a fresh income stream may be less than well stocked, heavily in debt for
there will not be a World War III; the expansion
recent
we have generally expected. Nat¬
purchases
and
supernu¬
that the grand strategy of our impetus.
ural
corrective
forces,
supple¬ merary income appears to have
enemies will be to pursue, with
Hysterical Buying
mented by credit controls, suggest been somewhat reduced. If we can
patience and cunning, various tac¬
What has happened since June
the early return of more normal trust the figures, liquid assets in
tics designed to undermine our
24, 1950, is now familiar history rates of
automobile
production private hands are still very large;
strength at home and abroad; and and typical of all such periods.
and new residential construction. but these resources will doubtless
that we will have the wisdom to
Frightened consumers rushed out The momentum
of the present ex¬ be handled more prudently than
plan and execute effective counter- to buy items which were in short
pansion indicates that
business they have been in the very recent
offensives without destroying our
supply in World War II. For the will be
good during the balance of past.
basic freedoms,
or the primary four weeks ended July 1, 1950,
the year, but we may experience
Retail sales normally move in
sources
of our great moral and
department store sales were about
some
intermediate slackening in relation to
economic strength.
changes in disposable
It is further 5% greater than in the corre¬
the rate of business activity dur¬
assumed that the direct monetary
personal income. On this basis, a
sponding period of 1949, and in ing the first
quarter of 1951. It is very conservative guess for the
outlay for this program will not the succeeding four weeks, the
important to remember that we fourth quarter would be an in¬
greatly exceed the projected an¬ gain was 30%.
Thereafter, the are not now confronted with the
crease
of about 7 to 8%
in de¬
nual rate of $30 billion by June
rate of increase slowed down; and
situation we had in 1940 when the
1951. Until our defense plans are
partment store sales. Some fore¬
the most recent four-week period
official
statistics
showed
about casters foresee much larger in¬
more definitely matured, nothing
shows a gain of 10%. To replace
8,000,000 unemployed and produc¬ creases. For the first half of 1951,
more than a qualified, short-range
depleted stocks, merchants bought tion
was some 35% less than it is
the gains In disposable income are
judgment can be attempted.
heavily and outstanding
orders at the
present time.
In physical likely to be moderate and sales
rose sharply.
Similarly, manufac¬
Main Features of Business Trend
terms, expansion possibilities ap¬ may show only small gains com¬
turers of hard and soft consumer
tially to our fears and anxieties.
The initial shock still lingers and

as

corrected, but

gress

break of Korean hostilities,

look

to

defense
first

command

prices advanced about 4%.
Several months before the out¬

cause

to curb in¬ flationary problem :is continuing
Some restraints rapid credit and monetary expan¬
credit have been sion, abetted by current govern¬

and others are. in the
making. Efforts are being made
to curtail the speculative use of
bank credit.
Congress has acted

an

with

not

The basic

buying.

approved

In

and

effects

somewhat

decline

reinvoked

been

stalment
on

with

good

rent distortions are

be

causes.

business should continue
during the balance of this
year, ease moderately in the first
quarter of 1951 and pick up a lit¬
tle in the second quarter. Prices
general

should

mechanism

adequate

summary,

for

if the establish¬

Even

an

quarter.

then, and subject
the assumptions we have made,

In
to

the second quar¬

in

the first

not

does

present answer to our immediate
inflation problem. They deal only

have been taken to ensure

defense

of

controls

of

accomplished within a
to meet present reasonable period of time, I do not
Inventory con¬ believe that direct controls are the

established

been

set

however,

mechanism

adequate

exist.

ment

has

of

a

now

promptly to pass a new tax bill;
phenomenal increases in new con¬
struction and automobile output. but, in the face of a great national
emergency, it has showed no com¬
From January to July 15 (on desensonalized basis), personal in¬ parable zeal to eliminate unneces¬
come payments, supplemented
by sary public spending,, reduce or
non-defense' ex¬
the veterans' insurance dividend, postpone other
increased moderately; retail sales penditures and divert 'these bil¬
lions to urgent defense needs.
>
including automobiles rose about

.hysteria which
developed so 8%;; department
quickly

such

to invoke

trol

of in¬

an

economic controls as may be

deemed necessary

and

dustrial
lowest

that

Passage of the Defense Produc¬
1950 armed the Presi¬

such

this

of

ration controls as fol¬

'"It is relevant to note,

1.6%.

dent with broad powers

article

lows:

15,
ad¬

index

price

brilliant

a

June price and

on

tion Act of

In July of that year,
Reserve index

higher than

consumer

vanced

national product.

1949.

of

mer

economic
,

gross

7.8%

the

be good during balance of year, but may
slackening in first quarter of 1951.
Holds sharp rise in prices since Korean hostilities, though dis¬
turbing, may be partially curbed, and if our economic affairs
are managed properly, no dangerous inflation appears likely in
foreseeable future. Looks for some shortages, but says defense
experience intermediate

tains

ter than in

of

problem. This study comments on

20, 1950. From June 15 to Aug.

sion, business will

issue

current

is now

wholesale prices

of

about

trends, prominent

due to momentum of present expan¬

The

expansion.

restrain

to

measures

the Federal Reserve Bulletin con¬

index

After reviewing

credit

and

a

eased

have

ably do better

emphasis which
given to monetary

being

now

large advances, but lately
moderately. The BLS

scored

Economist, R. H. Macy & Co., Inc.

1950.

is

record-breaking pace.
Prices of sensitive raw materials

tinued

The retail trades will prob¬

note the increased

third quarter, automobile produc¬
tion and new construction con¬

purchase

Howard

Buffett

OMAHA,
Neb.—Howard
Buf¬
fett, President of Buffett & Co., is

running for Congress on the Re¬
publican ticket.

sets,

R. S. Dickson Adds
(Special to The Financial Chronicle)

:
,:

CHARLOTTE, N. C.—Walter L.

Hogan, Jr. has been added to the
staff of R. S. Dickson & Company,
Wilder Building.

Inc.,

Joins

Blyth Staff

(Special to The Financial Chronicle)

,

It is desirable to review briefly
some

of the

general

main

business

features of the

trend

prior

to

the opening of hostilities in Korea.
Revival started in the mid-sum-

goods and capital equipment hur¬
ried

to

finished

Discussion

of

of

Mr.
the

Walker

Boston

at

the

Panel

Conference

on

Distribution, Boston, Mass., Oct. 17, 1950.
i

and

their

raw

inventories.

materials, semi¬

finished

goods

more

limited.

sharp rise in commodity
prices since the beginning of Ko¬

1894

persist

for

disturb¬

STATE AND MUNICIPAL BONDS
CORPORATE BONDS
LOCAL STOCKS

in

period

same

If we-manage
affairs
properly,

has

been

Plastic Store

Display Fixtures
Precision &

Grey Iron

Castings

Moreland & Co.
Members:
Midwest
Detroit

1051

Stock

Stock

Bay

Exchange
Exchange

Penobscot

DETROIT
City

—

Building

26, MICH.

Lansing

—

Muskegon

Szyinczak: "Monetary Policy in
Economy," Federal Reserve Bulle¬
1950, p. 1116.
S.

We

appears

no

Established

our

As

real

(

stocks

are

are

of

New

worked off and current

that customer

be keen

and

|

re¬

New

Orleans
And

buying

Exchange

of

Cotton

other

and

for

Exchange

N.

paid prices that are too high
profitable conversion and re¬
"V
■

It is

*'v«i

'

Y. Cotton

Exchange

NEW YORK 4,

.

CHICAGO

DETROIT

Bldg.

N. Y.
PITTSBURGH

-

')

in.

:

v.*.

particularly encouraging to

your own
,

Exchanges

or

,

GENEVA, "SWITZERLAND

Share

executed by

investment dea er

the

undersigned

Phone or

are likely to find
they have bought too much

Stock

Cents per

Orders

Trade

distributors

sale."

Price 25

Inc.

Exchange,
Board

highly selective. Many' producers
and

COUPCommon

Exchange

Cotton

Commodity
Chicago

Exchange

Curb

York
York

New

i

Stock

York

New

reflected in selling prices.

sistance will

CA8INCT

Members

yet,

test

Otter

TRAD

1856

H. Hentz & Co.

no

likely

acceptability of the higher prices

that
ATLANTA 1, GEORGIA

Darling

Metal &

tin, Sept.

that must be asked when low-cost

We may expect

Long Distance 421 and 422

L. A.

in

consider¬

the foreseeable future.

there

costs

(< The Robinson-JHumphrexj Company

a

period.

economic

dangerous inflation




the

rapidly.

able
ESTABLISHED

142

1 M.

Free

a

hostilities is deeply

rean

doubtless

Teletypes—AT 288 and AT

with

rose,

{

RHODES HAVERTY BLDG.

pared

.

The

Our production ing. Very probably, many of these
extreme, advances
will
be
cor¬
and, in September, it
rected, but somewhat higher prices
was at the highest level since the
mid-summer of 1945. During the than prevailed before Korea will
mounted
index

*Remarks

rebuild

Backlogs for

pear

PORTLAND, Oreg.—Reuben D.
is now with Blyth & Co.,

Getz

Inc., Pacific Building.

write

Volume

172f Number 4952

.

The Commercial and Financial Chronicle

.

.

the
Steel

The

and

Production

Carloadings

pected pace.

Loanable Funds

Retail Trade

y

A

Auto

Industry

Production

President, Savings Banks Trust Company

Business Failures

I hi ef eld

foresees

reduced

supply of

"

held to the postwar high

Steel output continued to rise last
week,
having attained another all-time high record in the
industry's
long history, and it is scheduled the present week to

able for thrift institutions and
-

evitable with any such contraction

mortgages

new

as

in building activity.
In the first six months

.

A

slight recession in automotive production occurred the
past
week, but Ward's Automotive Reports state that most auto makers
have assured themselves of sufficient steel to
continue unhindered
operation for the remainder of the year, with
only two producers
suffering from acute shortages of the metal.
■ •
Further steps were taken last
Friday by the Federal Reserve
Board to tighten instalment credit restrictions
and

credit curbs went into effect

new

were

accompanied

government's action.

saying it

taken

was

unabated."

by

protests

Chairman

because

businessmen

McCabe

savings banks to make joint loans

against

was

primary

a

home

building
objective of the

Government's economic policy bethe outbreak of the Korean

fore

A

war.

the

down

payment

balance

21 months.

will

to

be

paid

will

off

remain

in

The down payment on television

15

at

instead

to

living

from

10% to

15%

and

the

payoff limit

working weekly
a

heels

for

the

25

in

"Steel."'

The

metal-

steel

prices will follow hard on
wages.
The United Steelworkers will get'
boost although it will be considerably less

says

a

increased

of

substantial

than

rise

early increase in

wage

cents

bargaining

hour

an

The magazine

purposes.

happy to settle for

15

that its leaders

cents

said

are

says

the

to

be

union

asking
will

be

hour, or slightly less than* 10%
pf present hourly earnings. Under today's conditions, the maga¬
zine states, the producers are not going to
haggle too long over.
the amount of wage boosts.
If the union is at all reasonable, an :
early settlement is likely.
an

on

adding

a

10%

"Steel," all producers agree that a price in¬
is bound to follow the wage increase,

says

steel

products

wage

boost would cost producers close to $250,000,000

'

a

year.

On

I
CIO

Monday of this

steelworkers

and

week, during

officials

of

the

three-hour session

United

States

with

Steel

Corp.,
"healthy
increase. John A. Stephens, Vice-President
of United States Steel, who led his delegation, made the comment
Philip Murray, union head, in his

'

a

own

words asked for

a

and substantial" wage

that

"we

»

talk

under

the

used

steel-union

contract.

The.y

started

in

advance

of

the

Of interest

dividend

to shareholders

disbursements

and

August

thus

far

public alike is the
this

year

are

news

averaging

approximately 8% above the payments of 1949. With the year-,
hand in which heavy final declarations are made, the
prospects appear reasonably certain that total stockholders' pay¬
ments this year will be lifted to the highest level on record.
end close at

A current release from the U. S.

Department of Labor reveals

that non-farrn employment in mid-September reached the highest
level in United States history with the probability of higher levels

Continued

on

page

32

ular

the

payments

buyers.

re-

Under

mortgage prolow-priced
small
homes

bought with a down payonly 5%. Under the VA

of

sible

it

program,

finance

to

small

cash

reg-

insured

guarantee
a

and

home

payment

the

was

pos-

purchase

without

whatever.

of

initial

any

In

the

of

multifamily
properties
lowering of interest rates and
lengthening of the mortgage term

case

the stimulants applied.

were

This policy of reducing or elim-

inating
and

the

cash

spreading

down payment
amortization over

increasingly long period of
was outstandingly success¬
in stimulating residential con¬

years

ful

struction. In the first eight months
of this year, 988,000 new dwelling
units

started

were

States.

This

was

almost

of

the

rate

dwellings,

than

more

United

annual

an

1,500,000

nearly 50%
vious

in

the

pre¬

high record reached in 1949.

A

rearmament

it

brought

has

about

Members New York Stock

Co.

of

the

ability

get

during

and

...

vided
entire
.

Production

Defense

still

Act

further

and

restrict

new

be

the

has been

850,000

as

fi

lessen

to

and

labor

cut

in

demand
in

now

this

For

incomes

curbs

now

withdraw
higher

more

curbs

a

increases

in

the

ONE

being
building

are

home

cash

down

HUNDRED

required, a shortening
maturities, and the

maximum

setting of minimum amortization
requirements for new building.
of

Board

Federal

Governors

Reserve

System

of

has

YEARS

the

al¬

ready established restrictions ap¬

Exchange

plicable to 1 and 2 family homes,
Oct.
12.
Regulation X

effective
115

BROADWAY, NEW YORK

6,

N.Y.

Telephone WOrth 4-7913

a

general brokerage business

specializing in portfolio management.

BRADBURY K. THURLOW

20 and 25 years for one

and two family houses
after Aug.

commenced

3.

Established 1850

insured and guaranteed
mortgages since July 19 by the VA
and FHA, and other steps taken to
on

tighten mortgage lending, did not
reduce

the

volume

of

new

con-

October It), 19rj0




Hallgarten & Co.

Larger cash down payments re¬

quired

JOHN D. TALMAGE

down

payments
ranging from 5% to
50% and limits the term of mort¬
gages to

To conduct

cash

minimum

specifies

•An address

by Mr. Ihlefeld before the
Savings Banks'

Annual Convention of the

Connecticut.
Whitefield,
Hampshire, Oct. 16, 1950.

Association
New

of

'■

f

1

1;'
r

.

•

'

-

Van*-1

October Seventeenth

I

effect

down

Continued

be

building

that

new

in

may

funds to make the

reauired

expenditures.

chief

per-

considerably

navments

niSner required down payments

is
scheduled
to
play an important
part in combating inflation dur¬
ing a period of greatly expanded
armament

thing,

one

are

buying of costly dur¬
able items. True, some savers will

sought,
Such

field.

home

new

with¬

savings institutions will

materials

for

^

'

substan¬

A

"rrv

discourage

Reserve authorities. It

units should

of

resumed.

credit

more,

suggested that 800,000 to

dwelling

thp

from

even after
allowing for
higher taxes. Secondly, some con¬
sumers
goods may be in reduced
supply, and the new consumer

results fues^!? ky

+2 P£°^UCei
the Federal

than the

greater,

other provisions

building

more

_

1950,

of mortgage loans tightened so

ae-

the

deposit gain.

sources

Under

of

of

savings accounts
that
accompanied
the
summer
scare buying wave, it is
quite like+.
^
ly that the upward trend in re¬

be increased

payments can

alone

mini0n

outlet for

an

rwnitp

^sonal
struction credit authorized by the
down

$8|7

mortgage loans
first eight months of

the

:
drawals

.

inadequate.

Investment fu»ds

by $570 million during this period,
obviously mortgages have pro¬

authorities are in
position to force such a decline
later, even if steps taken so far
prove

8

1950. Since deposits in the mutual
savings banks of the country rose

governmental

should

hv

countecl tor *aa7 million of the
net
increase
in

is in prospect. The various
,,

commerdal

caving banks

for

counted

will be available to thrift institu.

and

< aosoi Dea a large pan

Mutual"

construction, and consequently in
the supply of new mortgages that

,

pf

companies,

P°br"011°s ^ ^

"'"on-

A decline in the volume of new

tions,

far

half

nnrtfnlins

available

,

'

8

t

gf"

equipment on time to avoid costly delays in completing building projects.
supplies

their

so

first

insurance

tial decline in the volume of resi¬

dential construction is

The

&

reversal

a

have

rise,

to

as

needed

•

th

should the current regulations fail

to

program

given

construction.

payments

Talmage

to

all

life

the

looked
as

mutual'Vavinerbanks savings'and

uncer-

tainties

In

^an associatfons
banks ^

the period
be inprices
for

building materials and by

have

mortgages
investment outlet

year.

1950,

may

higher

by

institutions
estate

Government's policy towards resi¬

dential

of

the formation of

Sought

The Korean war, and the largescale

are

announce

tensified

to

Decline in Building

decline

real

this

insurance of home mortgages did
decline sharply in September, and
it is generally anticipated that we
shall see a substantial drop in new
The

pro¬

major

applications for VA guarantees and FHA

ahead.

pos¬

and

Thrift

home building. However,

residential building in

is also

a

to

sired reduction in the volume of

the whit-

will

the

employment and of
personal incomes may swell mort¬
gage amortization payments and
payoffs to some extent.

other steps
lending

and

residential

restrictions

and

duction

taken to tighten mortgage

objective

tling down of

home

of

FHA

used to reduce

to

payments

the

decline in the vol¬

a

new

sibility that the high level of

terms and achievement of the de-

Ihlefeld

amortization

The

We wish

down

com¬

in such
1949 of $3.7

mortgage supply will

will be built. There

affected,

not

were

This

building
bring
larger down payments required on the homes that

time

achieve

cash

which
the

A

of

about

pending

applications and

of

current

increase

an

both

that

back-

was

them."

contract date at the union's request.

that

chief

got

about

logs

with

ume

requirements applied only
mortgage loans covered by applications received on and after
Large

the

of almost $3 billion

1-4-family homes.

A smaller

surprising, considering

specified dates.

of

reflect

But

to

the

half

billion.

of

this

their proposals and were coming back on Oct. 27
Negotiations were recessed until Oct. 27, a
few days before the Nov. 1 date when talks could have started
to

rate

lag occurs, therefore,
between the increase in required

to

an

However,
crease

record

loans

prosper-

The

ment
an

full

assure

stimulus

could be

With respect to the steel wage
situation,
steel wages is predicted by the magazine

and

ity.

gram,

boosted

the

employment

furniture will

be

close to

very

units

and

quired

the

im-

to

standards

household appliances will be increased from 15% to
25% and the
payoff time cut from 18 months to 15. The down payment on
slashed from 18 months to 15.

started in August, which was

other

sought,

both

of

sets, radios and major

141,000

were

dwelling

first

esti¬

increase

net

debt for the full year

that

new

a

the

pared

was

33V3%, but

months

Bureports

that the higher down payment and

are

buying regulation, the mini¬

automobiles

on

have

The

Statistics

construction

the

Haller, President of the National Automobile Dealers Association,
asked the board to rescind its new regulation on autos
because
car sales "arc
already suffering severe curtailment as a result of
previous Regulation W terms."
instalment

immediately.
Labor

of

reau

was

in the mortgage debt outstanding

this is not

credit control Regulation W, "showed an
amazing lack of judgment
in view of facts as they exist in retail business
today." Fred O.

stiffened

struction

this

Board

Reserve

there

calendar year

residential

Maury L. Nee, Chairman of the Department of Commerce's i
Retail Industry Advisory
Committee, said the Federal Reserve
Board, which on Friday announced a stiffening of its consumer

the

in

large structures.

on

Federal

mates

the preceding three months.

prove

mum

rec-

.

Under

The

ord volume of

explained the action by

"underlying inflationary forces

was

up

on

of

imposed on Sept. 18.
Monday of this week

on

of

sion to

Stimulation

of

the supply of new mortgages
of unprecedented proportions.

year,

mortgage lending.
Advocates widening geographical areas
for mortgage investments for savings banks as well as permis¬

it.

surpass

savings banks to step

urges

new

able to financial institutions is in¬

on mortgage credits.
Holds mortgage
investments, because of higher income yields are more desir¬

of the week before.

Supply.

Mortgage

.

result of recent curbs

^
Nation-wide industrial production
level

Diminishing

mortgages that will become avail¬

AUGUST IHLEFELD*

By

Mr.

These

ex¬

f'

A decline in the volume of

Commodity Price Index
Food Price Index

<

annual.rate, while

proceeds at the

Electric Output

State of Trade
and

maximum

rearmament

■:!!*■

A
r

*1

*

on page

36

•6

The Commercial and Financial Chronicle

(1490)

Pros and Cons of Direct Placement
j-

ji

as

standing

Points our direct placement gives some
encouragement to over-borrowing by corporations, and esti¬
mates in 1949, twenty-two life insurance companies purchased
directly about three-fourths of corporate bonds issued.

j,

economy.

The subject of direct placement
•of

securities

audience.

is

not

this

to

new

Literature in the financial

group.

in

and

veloped

other

has

areas

de¬

points of view

numerous

concerning

this

relatively
new
system of raising capital funds.
Talking about this

method

new

justify our time and attention
today only because it has grown to
large proportions. Within the

-can

.such

last

15 years this system of chan¬

neling capital funds from lenders
to

borrowers

without

of

use

traditional mechanism of the
ket

place

developed
from
involving a few hun¬

1199347562840

millions

to

present annual
aggregates exceeding $2 billion.

Most direct placement financing
Jhas been developed with the co¬

operation of life insurance com¬
panies. This naturally has raised
questions from institutions and in¬
dividuals who have not been par¬
ticipants. This group includes the
-other

types

insurance

of

com¬

panies, college endowments, hos¬
pitals, trust departments of banks,
pension funds, etc., but it also in¬
cludes

most

a

the

important segment

reach

to

1900 and 1933 about $1

tween

lion

of

bil¬

bonds out of a
nearly $37 billion were
by direct placement.

corporate

of

total

Placements

been estimated 1 that be¬

It has

distributed
This

about

is

3%

of

the

1934, however, there have
been only two years in which the
proportion placed directly fell be¬
low 20%
(see Table I) and for
1948 and 1949 the proportion was
50%.

to

is

the

enactment
that

doubt

of

the

There

the

Se¬
be

can

registration

procedure with its elaborate re¬
quirements of audited figures and
complete disclosures made a very
bad

impression
of

cost

on

corporate treas¬

and boards of directors.

urers

The

compliance with the reg¬
procedure, when added
charge
the
investment

istration
the

to

banker had to

tion

impose for distribu¬
further problem of

the

and

seemed

these

of

obviated the necessity of the

ing himself

What is
impact of the
various segments

the

of the economy.

the Issuer

on

Certainly to the issuer the econ¬
simplicity and speed of di¬
placement are most important.

omy,

rect

factors.

Underwriting commissions

eliminated

completely,
al¬
instances a fee
is paid to an investment banker
or some other agent for his advice
and for
bringing the parties to¬
gether.
The cost of registration,
which includes not only the reg¬

are

though

in

fee

torneys,

accountants

but

substantial

and

is avoided.

the

fees

of

and

the

life

insurance industry it¬
self—the smaller companies. It is

sales

negotiated

ties.

through

in¬

bankers, that business

whole

ground

has

as

lost

as

considerable

distributor of securi¬

a

Naturally, then, the invest¬

ment
end

bankers

result

wonder

will

what

be for their

the

busi¬

While

it

is

to

be

im¬

ments, this
treat

the

.shall

not

will attempt to

paper

subject objectively.

try

to

place

evaluation upon it.
to

highlight

this

new

present

have

1950

they

final

the

from

tape,

legal

delay,

which

have

by

Mr.

Wilde

of

the

at

be

they

di¬

what

a

appeared to
minimum of
red

could

and

expense

deal

with

marketing

an

issue

other

principal

reason

change

16

which

took

place

in

Fraine, Direct Sale of Security Issues,
Jour, of Amer. Assoc. of Univ. Teach¬
of

Insurance, No. 1,

p.

40 (Mar. 1949).

at

Oct. 6,

2 See

the

Reeves,

Slamming the Door on
Investor, Nation's Business,

Small

Nov. 1940, p. 17.

TABLE

I

(Millions of Dollars)
All

Percent

Bond

Placed

Offered

Offerings

Directly

Publicly

Placed

Directly

mitment,

small group, and

very

final

The

decision

in

to

son

condition

obtain

can

short

lending institution has
its

order.
no rea¬

commitment

the behavior of the market be¬

on

unlike

cause,

banker,

it

issue to

The

the

expects

direct

hold

to

placement

flexibility that is
The

investment'
the

maturity.

terms

provisions

of

the

offers

a

attractive.

very

deal

and

the

indenture

the

of

tween

borrower

are

and

be tailor-made

can

cumstances.

If at

lender

to

a

later date

unforeseen
a

and

fit the cir¬
an

condi¬

modification

of

the covenants, the issuer will have
the advantage of dealing with a

financially experienced investor
whose self-interest can be counted
upon to

promote expeditious treat¬

ment and

an

92

280

24.7

385

17.3

in

369

1,840
3,660

327

1,291

20.2

691

1,353

33.8

1,979

703

35.5

equitable agreement.

On the other

9.2

2,386

758

1,276
1,628

2.389

811

1,578

33.9

917

411

506

44.8

990

369

621

37.3

2.670

778

29.1

4,855

1.004

1,892
3,851

•

31.8

20.7

4.882
4^882

1,863

3.019

38.2

5,036

2,147

2,889

42.6

5.973

3,008

2,965

50.4

2,453

2.437

50.2

4,890
entures.

Financial Analysis
Section, SEC.

engaged in
It

hand, the difficulties
obtaining consents from scat¬

tered

holders

tributed

of

publicly

securities

are

dis¬

The

borrower

Fraine

contended

reason

for

that

(see

note

this

was

1,

supra)

the

chief

the rise in

private placements.
comparisons in this para¬
graph are taken from his paper but more
recent
figures
have
been
substituted.
The

statistical

Debt

figures

Almanac
assets

are

and

from

time

I

ground.

returned from
with

travelled

sampli.

some

week's

a

the

visit out there,
as he
loured

Senator

of voters.

g

conviction

my

he

that

will

win

easily,

by

more

the

from

I:fe
1950

the

1950

insurance
Life

may

run

not accustomed to day dreaming, think his

are

There is

200,000.

over

none

of the pessimism

his entourage, none of the uneasiness which is felt by his

among

well wishers in the East.

I may be wrong,

they may be wrong, but

this is the most honest report I can give.

Jumping Joe Fergu on, Tail's opponent, is not making the
campaign that was expected of him. His success in the past, one
gave him the reputation as an ur beatable vote-gctter, rests

that
*

his unpretentiousness, his getting around and shaking hands
kissing babies. He ma^e no pretense of discussing issues.

upon

and

But in this campaign, the CIO has taken over his campaign
lock, stock.and barrel and they are trying to take him out of char¬
acter and put him up on a high statesmanlike plane. After ail, he
isn't
he

running for auditor

doesn't

when I

understand

now.

and

it

They write speeches for him which
seemed to be generally apparent

out

there, that the people know he doesn't understand
principal
peec.i
writer, the CIO has employed
Charlie West, who was in Congress in the early New Deal and per¬
mitted himself 1o be prevailed upon to run for the'Senate against
Honest Vic Donahey.
them.

was

the

As

.

When Honest Vic washed him up, Roosevelt gave him a job in
Harold Ickes' Interior Department. Ickes summarily dismissed him
and Roosevelt tried to place him elsewhere. He didn't seem to fit
in

and

presently he disappeared from the Washington scene, a
lot of us felt, to the backbiting that characterizes the
Washington gang. Seemingly, he has been working for the CIO
ever since,
giving, as an ex-college "professor, some polish to its
casual y, a

guttural voice.
Anyway, Jumping Joe under these aucpices, has not been
averaging more than three spaeches a week and he gives the im¬
pression of having lost heart in his work.
let's

So

fight.

It

himself.
there is

mean

handsomely

said, in fact, that he will not be

a

not

preclude Irs frien

But his

s

that regardless of whether he is the Presidential

nominee

on

page

30

or

not,

his voice will have to be harkened to.
In

this

situation,

the pre-Ccnvention fight

have been

of

him and Dewey.

the

next.two

would

seem,

quite clearly, that it is between him and Eisenhower.

not

look, therefore,
a

upon

his

wrote to

"If I
over

say

as

between

if Dewey and St?s

en

good turn by jumping to him so soon.

might well ponder
famous
a

a

statement

refusal

to

once

run

Now

the

It does

have done the Gen¬

The General, in fact,

made by Sherman.

for

it would

Presidency

Elaborating
in

1834, he

relative:

ran

for President I'd wake up some

the newspapers

know I

Continued

own

ly to deadlock with Dewey and have
In 1948 he went after the nomina¬

o

Willkie.

organizing a campaign for
him and doing their darnde-1. Ar d if he proves in Ohio that he is
a
vote-getter, you can rest a sured that Middle Western and
Southern delegations will tumble to his barner like duck-pins, so

Insurance Fact

Book.

his

candidate and

In 1940 he spent his

again only to have Dewey fairly walk away with it.

attitude does

in

he will seek the nomination

doubt of his sincerity on this.

the nomination go to
tion

through

coming

This does not

and worked hard

money

is

that the Eisenhower promoters have got to reckon

1952.

He has
no

Taft

assume

means

with him in

World

company

than

Some of his closest advisers, men who keep their feet on

majority

eral
3 Professor

better nesting

a

years

may also be at¬
tracted by the opportunity the di¬
rect sale
offers to avoid
public

has

is

100,000.

common

knowledge.

other State, it has the agricultural group.

any

the ground and v/ho

subjects of direct negotiation be¬

2,044




mar¬

ment,, the issuer deals diiectly
with a single buyer, or at most a

1,618

1943_

is,

of adverse changes in

mercy

as

ket conditions. In the direct place¬

4,029

•

it be¬

the

2,225

-

date

for all.

and

through the autumn countryside. During the trip, I sought to learn
from people who should know, what the ou.come will be, and also

trus¬

with a market
underwriting com¬
places the issuer at the

in

372

1939____

Source:

sometimes

clause

emergency or
tions warrant

Corporate Bonds* Placed Directly and Offered
Publicly, 1934-1949

Tear—

it

the

and

of which

part

Other economies arise

filed

that question once

answer

anywhere else; Ohio has all the racial and

as

This writer has just

at¬

effective, when coupled,

for

the growth of direct placements is
the

is

comes

one

certain price on a certain
day.

a

ment

a

hazard,

or one company and
close
transaction without regard to

The

American

Convtntion» Chica«o, III.,

The fact

another

agent
the

ers

paper
presented
Financial
Section

With

to

1

arguments

in

and

the hazards of

of

some

flowed

went

of

part

justified,

was

developed the direct
placement route. This method, in
contrast with SEC registration and
public offering, was so simple that
corporate
treasurers
were
de¬

method of finance and to

♦A
■the

that

rection

We do propose

briefly

which

any

We

the

on

ever

but this is not the point.

is

them

difficult

partial in discussing direct
place¬

results

attitude

an

should

race

he country as a whole; all of the elements
which figure in a national election are present in the State's Sena¬
torial campaign.. The Stale is highly industrialized, the CIO has as

expense,

during the life of the issue:

Senate, genuine and of undoubted integ¬

composite of

a

So there could not be

of

businessmen

lighted.

ness.

'

and

such

are

vestment
a

delay

years.

vote-get. er."

a

power there
minority groups of

others

printing

His Ohio

Ohio is

intervening two

in the

man

much

many

istration

General's declar¬

discussing the matter at all in

or

have been pitched headlong into the arena

rity, but he is not

tees' fees may be lower; there is
timing the sale of not
necessity for listing on the
securities, made many corpora¬ stock
exchanges; transfers and ex¬
•a fact that the
overwhelming bulk tions unwilling to register, and
changes and the publication of
of direct purchases, in dollar vol¬
they sought other methods of rais¬
redemption notices are practically
ume, has been made by the big
ing funds.2
eliminated.
companies.'
It is doubtful whether registra¬
SEC registration is not only ex¬
Another group
that is vitally tion is currently a serious deter¬
pensive;
it is cumbersome and
concerned is the investment bank¬ rent
to
public offerings and it
time-consuming. The waiting pe¬
ing fraternity. While many direct may even be questioned whether riod between the time the state¬

of

the

)f

for

ably is not too important.

Impact

the

Now, he seems to
and
pre-Convention politics, for the next two
years, will center arou'd him.
The strategy which I have discussed deCarlisle Bargeron
pendeJ, of course, upon Tafts winning his
fight for reelection in Ohio next month and in
such a way as to make him again a Presidential contender. A tell¬
ing argument against him nas long been that "Oh, undoubtedly he

growth of the device should
be given the greater weight prob¬

on

ior

ing tr.e Convention and bringing about, Eisen¬
draft.
This
machinery would have

the

important is
phenomenon

Republican

candidate

hower's

un¬

reasons

the

to

a

as

invest¬

to

two

come

1952

nomination but with the purpose of deadlock¬

the

Hence the increased
popularity of the direct placement.
While

in

the

race

be

of

services

bankers

pulled back into

would

he

that

Convention

is the ablest

curities Act in 1933.
little

securities;

was

gubernatorial

was

necessary.

for

crease
in
popularity
of
direct
placements. Two reasons seem the
most important to mention here.

One

their

sell

distributive
ment

explanations have been
the phenomenal
in¬

Many
offered

.

in

investors

small

the

Dewey

York

large institutions would take vir¬
tually all they could get; and the

total.

Since

over

Governor

com¬

panies, in relation to their assets,
a
very
sizable diminuThe resulting seller's market
meant that issuers of high-grade
corporate bonds no longer needed

order
The Growth of Direct

the New
understanding
has been in Washington political circles that
the purpose was not to run him again for the
Presidency but to use him to head off Taft.
The thought in these same political circles

since

Ever

•

tion.

of

support

life

the

to

in the Dewey-Stassen-Eisenhower play
The only surprise is in the

subtlety

no

it should occasion little surprise.

timing.

suffered

practice and in criticism of it.

the

mar¬

has

transactions
dred

in

offered

available

bonds

Several

presentations
have
been
made
by
previous
-speakers who have addressed this
field

been

high-grade

is

There
and

Thus the
corporate

indebtedness.
of

of the News

By CARLISLE BARGERON

than the total amount of such out¬

supply

ful to the

j,

Thursday, October 19, 1950

Washington

Ahead

outstanding

the end of
1948 the debt figure' had dropped
to $49.6 billion, while life insur¬
ance company assets had jumped
to $55.5 billion, or $6 billion more

injure present investment machinery and be extremely harm-

»

•

insur¬

about $18.9
with long-

were

compared
term corporate
debt
of $51.1
billion.
By

After tracing trend toward greater private placement of cor¬
porate bonds, life insurance executive holds test of its advantages will come in next serious business depression. Cites current advantages and disadvantages of direct borrowing, and
contends continued upward trend of private placement will

)*

life

all

of

assets

companies

billion,

From

At the end of 1930 the /

available.3

ance

President, Connecticut General Life Insurance Company

.

the demand for high-grade corpo¬
rate bonds and the supply of them
admitted

By FRAZAR B. WILDE*

.

.

never

saw

that I'd poiso

my

I killed her and

morning and find all

ed my grandmother.

Now you

mothers mother, but the newspapers would

prove

it."

Volume 172

Number 4952

.

.

.

The Commercial and Financial Chronicle

(1491)

that

The

Prospects for

citizens not only have
but they are called upon to

our

more,

exert less energy

The

American

Industry

scrap

old
lived

to

President, Jones & Laughlin Steel Corporation

Britain

in

of

intervention

government

to

fields.

replacements and higher costs.

cover

social

look

at

we

the

this

Itis

the

The founders of

known
of

American

define

to

Industrial

times,
adapted

the

s

wonder

and

envy

the

world.

Starting
scratch,

of

sixteenth
and
of

an

of

the

the

labor

the

What

world's

force,

are

those

and

United

over

one-

made

wnat

still

extent

present?

What

the

factors

those

is

has

been

said

been

blessed

account

there

are

which
than

are

natural

Id

wo

But

progress.

richly

more

endowed

Our

are.

lieve, have

great

parts of the world

many

we

ligence

our

have

we

this, in itself,

for

people, I be¬
more innate intel¬

no

than

the

people

the

of

countries whence they came. Nor
do we work harder.
Many other

peoples
expend

work

longer

hours

and

energy

human

more

than

do.

we

I

believe

there is

basic factor

a

which

largely accounts for
superior industrial progress
well

being

difficult

of

the
and

people.

our

It

is

define

it precisely.
I
"philosophy of
living"; or, wnat mignt be called
"the things we believe in."
think

to

of

We

it

a

as

have

had

in

"climate"

which

progress.

By

conditions

ship

our

do

he

it

under

his

pursue

freedom

for

maximum
so¬

the

full

with

indi¬

ual

or

of his

own

for worse,

his

own

mate

is

establishment

was

clear

who

no

earl.y

accident.

that

most

days

of

this

to

came

of

did

and

which

to

cli¬

The record

the

people

in

the

escape

the

country

so

coercions
freedoms

this

restraints

existed

on

their

in

their

mother countries.

And the record

is

that

equally

founding

clear

fathers

when

the

established

our

government they did
intent

and

take

to

the great power to

lies

in

each
active

comes

of

achieve which
he

growth

were

lib¬

individual

be

sions.

And

to do this most
banded
together

so,

effectively

he

with

to

others

port

organize and sup¬
common
force to protect

a

those

rights.

This common force
"government."
And,
certain limited func¬

they called

for

except

tions intended to benefit everyone

equally, they limited government
this

basic

follows, then, that in a free
power of government
is a provisional trust granted by
the individual, and is revocable
at will.
It follows, too, that rep¬
responsible

the

gov¬

of

creature

the

Its powers should be lim¬

people.

♦An

address

and

is

be¬

allowed

Admiral Moreell be¬
Technical Meeting of
the American
Industrial Steel
Institute,
Pittsburgh, Pa., Oct. 11, 1950.
the

London "Economist"

on

to

ven¬

turn

was

carried

nanced

.

Perhaps
to

it

examine

in

Great

of

the

great

a

century
industrial

the

to

far

by

British

corners

bottoms, fi¬

banks

and

in¬

by British underwriters. But

astation

of

two

human

greatly

to

the

But

these

losses

in

the

to

contributed

spirit

decay.
from

recover

due

was

and

wars

industrial

failure

blows

cline

world

the

to

of

the

de¬

enterprise,

accompanied
by
the
restrictive
policies of labor, management and

has

management

to

prone

two

seek

sistance of government in

the

as¬

dividing

the market, holding up prices
and "holding an umbrella" over

en¬

little

very

in

of

drift

The

at

now

left.

It

has

removed

rewards

of

the

success

merely been shrivelled,
have been poisoned, since

commercial

success

itself has been

of wide circles

eyes

society, into

least

efficient.

"Economist"

in

The

London

October,

1945,

stated:

"British

industrialists,

been

with

a

notable

never

exceptions,
have
're-equipment minded.'

The general attitude towards plant

replacement
to

scrap

could

no

it

Only

is a conspiracy of labor,
capital and the state to deny en¬
terprise its reward.
.

"The

cumstances of

both

has

cul¬

extraordinary cir¬
today. Shrunken as

pletely.
from

Nobody

inactivity.

flavor

of

why the

And

.

.

or

yet

donkey

trot.

a

gains

carrot

stick.

asked

whether

a

say,

question

new

a

the job

volving,

it

the

machine

was

economically than
or

was

do the job for
originally designed.

whether
do

war

better and
an

more

existing

one;

plant layout in¬
two new machines

new

three, would do the job
economically."

The

for

most

plausible explanation
lack of British response

this

to

developing
technology, not¬
withstanding British eminence in
the natural

sciences,

John

was given by
economist, Professor
Jewkes, in an article en¬

titled

"Is

the

"In

1939

anything

a

shadow of

wonder

we

does not

rarity to find

was

British

basically

which

those

to

to fulfill its basic

must have

it

British

mis¬

sion.

break

extreme

an

manufacturing in¬
dustry where anything approach¬
a

sale

and

—

existed
bound
end.

such

before
to

have

exceptions

the

will

war

be¬

by

Regional




the market than they"

Use of Power of Taxation

The intervention of government
to

protect

destroyed

faltering
industries
competitive urge.

the

Government

of

group

only

at

protection
to
one
citizens can be granted
the expense of another

group, and in order to do
ernment

must

must

the power

use

exercise

Our

Government,

a

founding

benefit of those
who want

With respect
of

incentive

excessive

who have

in

taxation

deficient

Britain

mechanism,

mechanism

to

with

dividual

as

e.,

any

up
as

ity

on

those

sections

freedom

ment,

and

incomes.

...

"Apart from its erosion of
ings and incentives through
cessive

rates,

the

tax

"The British businessman has in
the

last

quarter-century

ways

and

stick

from

means

his

found

The

growth

associations, or price-fix¬
ing and market-sharing devices—
the whole apparatus of

protection,
inspired by nothing so
by the desire to prevent
the bankruptcy of the inefficient
—even if, thereby, the
progress of
in fact—is

the

as

efficient is also

A recent

impeded."

report by an American
on the nationaliza¬

correspondent
tion

of

the

British

steel

industry

states:

"The

depreciation

buildings
was

govern¬

established the practice
competition in industry.

In this

respect

with

our economy,

From

The

1918

1%

industrial

markedly

from

and

annum.

pete in
held

result

of

but the

industry

for

"know-how"
Yet

these

new

a

cooperating

the Marshall Plan

no

was

favors.

that of

free

a

throng!*

with Ame' tcan

their

part nullified and

are

steel

There's

industry

another

policies

of

constriction

nationalizatio)
.

of

investmei

Continued

thing

Notes due October 1, 1975

The notes evidence loans which have been arranged

is attested by the

privately.

not offered for sale and this announcement
appears as a

by and large, our system has been
successful

matter of record only.

great

growth of individual business en¬

terprises
which

and

anyone

the facility
with
could enter a new

business.
As

a

result

climate,

the

of

this

innate

favorable

talents

of

Goldman, Sachs & Co.

individuals with ambition,
resourcefulness, inventive genius

many

ingenuity have been released.

We

have

man's

been

able

to

multiply

productivity by the utiliza¬
tion of machines, with the result

October 13, 1950

in

threatened by their governmental
British

2.80% Promissory

are

cur

be

continually

on

McKesson & Robbins, Incorporated

They

of'..

proU-*ms.

have

$22,000,000

The fact that,

spirL of

adaptation
to

efforts

has

in this

emergence

postwar period of

enterprise,

This

markets.

the

the

general pattern of Ameri¬

industry

these

policies

government

world

until

There have been abuses, of course;

can

In

has been the accumulated impaiiment of Britain's ability to com¬

economies of most other countries.

field and

there

1945

to

per

inevitable

private

allowance

no

of

raised to 2%.

was

its aversion to cartels and monop¬

differs

ex¬

structure

permitted in the tax:

was

allowed

1945 it

of removing the

back.

of trade

much

From 1896 to 1918
for

we

free

of

individual

with

sav¬

has

other individual

responsible

na¬

its risk capital—namely, corporate
earnings and the larger personal

group.

Coincident'

the

of

tional income that supply the cap¬
ital funds of industry—especially

a

in¬

recent

follows:

a

interfer¬

prevent

liberties of the

the

by

i.

a

summed

developments

of

course

has

looked

fathers

preventive

from

results
and

technological stagnation

on

Great

the

or

to the destruction

which

depreciation policies, etc.,
report

not

than they have.

more

Preventive

government essentially

upon

It

of taxation to

Mechanism
Our

it, gov¬

force.

take from those who have for the

return.

...

standards.

lagged

concerned about

more

up

about 'new markets'."

are

as

be

disappeared at its

is
reasonably efficient by European

industries

goes

point. The

long hampered re-mechaniza¬
ing genuine competition prevailed, tion by its treatment of allowanced
where no control was exercised for depreciation. The recognition
over either prices or the scale of
of obsolescence has been grudging
production or the conditions of and inadequate."

Industry Ineffi¬
cient?", when he says: "It is true
some

are

dividing

partner. It all

a

fundamental

"Ever since World War I, taxa¬

.

it

as
a

tion has fallen with extreme grav¬

suffers anything
There is hardly

or

on

now,

they have
being, vanished

activity

tariff

big

a

for
1932.

or

com¬

days,

prewar

the

stick

the incentives and sanctions

for the time

into

the

and

minated in the

of

of removing

process

the carrot

for

cried

1931

.

.

longer
was

rarely

could

the

machine only when

a

which

before

British

positive disgrace.

a

up

the

business

There

were

asked

is

equality—excellent

turned, in the
of

past

stick, until
is

industry

around

people's steel. In return,
let the government in the

back to

British

not

they

They
they

activity.

of

since

ever

stick

a

generations

either

itself—that

have

requires
or

into

whittle away both

to

the passion for

a

industrial

been

whole

for

been

from

government.
British

it

goad

The

.

society

began to slip. The economic dev¬
the

to

the carrot and the

before World War I, England

even

.

donkey

carrot in front

a

behind

has

of the earth in British

sured

human

basis of indi¬

a

editorial

titled "The Carrot and the
Stick,"
published in June, 1946:
either

have

giant. The output of her factories
was

popular version of the
explanation is found in the

same

back

other

more

that

ited

and
fore

A

free competi¬

a

happened

the

It

and

our

instead of

purpose.

is

cient.".

carrot.

Britain

society the

ernment

freedom

profitable

has

more

resentative

of

did not have

we

responsibility.

be

few

concept each person

tbis

the

and

ineffi¬

with clear

so

advantage

individual
when

essential

The

the

olies,

acts.

The

exercise

to

of maximum

right to be protected in
his life, his liberty and his posses¬

own

for the effects

decisions and

durable

responsibility.

Under

to

economy

At

corresponding individ¬

with

erty

similar

a

other individ¬

every

liberty.

freedom

life in his

own

permitted

to

stronger,

more

condition

a

considered

ence

that

have

dividual
better

best
be¬

They

grow

and

to

the

of

industry

steel

a

to

We believed, too, that the in¬
must be responsible, for

ual.

by the

governs

factors for maximum

Here in America

consistent

way,

our

Jefferson:

least."

would

were

not

economic and

believed

should

if

or

to

es¬

of

conveyed

Thomas

resilient

more

relation¬

promote

of

have

I

fibre

moral

I refer to those

human

cial institutions.

vidual

country

conducive

climate

of

which

progress

we

this

is

the weather.

mean

of

governs

had

that

with

and

resources

the

philosophy

best

and
new

Britain.

honorable conduct and that his

to

will

continue into the future?
It

believe

government

personal

factors

factors

that

people

the

to

important:

prospect

one-

goods.

governing

possiole

is

"Jeffersonian

as

I

the

refer

lieved that the individual had the

proportion

well

world's

this

More

With

smaller

produces
of

political

power

help

maintenance

what would

individual

what

strength of character to guide him

giant.

even

States

third

Moreell

become

industrial

an

of

that
Ben

state

themselves

"That

hundred

the

moment, as, for ex¬
when modern proponents

statement

econ¬

in recent
definition

the

meet

in?

attempts

the

founders

omy, we have,
d u r i n g the

years,

of

sence

complete agri¬

past

find

Democrats."

with

cultural

What

believe

many

Often,

centralized

to

from

almost

an

it.

to

ample,

of

been

we

needs

wonders

vidual

did

colleagues

have

structure

i

government

our

"liberals."

as

liberalism

their

and

There

that

secret

God-given

Washing¬
ton, Jefferson, Madison, Franklin

reasons

for it.

his

of

by restriction of output

the

establish

all

steel

ties

"The

ture and to risk in

will

kind

of

the

the depression of the thirties. The
British

industrial

worked

been the result if

Defends steel

exercise

were

has

which

government has really had a hand
in

alike, to meet their difficul¬

The Case of Britain

gifts.

we

and

the

free

should

to determine, if
been accom¬

past

what

plished

for

prospects

industry,

can,

no

the

appraise

to

people in America overlook: The

tive

into

dynamic

advantage

One

tive
To

able

were

by

government, Labor and Conserva¬

people.

industry's pricing policies.
American

We

vigorous,

useful

go

seduced

were

to

methods

to

dealing with their prob¬
the main they were

they
lives,

before

new

in

lems but in

industries which

com¬

willing

us

their

and

economy,

fal'.ering industries destroyed competitive urge, and resulted
in inabilty to compete in world markets. Sees as cloud in our
outlook: (1) inadequate replacements; and (2) insufficient
prices to

out

introduce

a

protect

made

machines

processes

Steel leader, ascribing America's industrial progress to "favor¬
able climate" and urge of free, fair and dynamic economy,
maintains

has

have

By ADMIRAL BEN MOREELL*

of free and fair

urge

petition

to produce it.

hind

7

j:

and
;

ge

and

26

8

The Commercial and Financial Chronicle

(1492)

is

The Frear Bill
By

After describing provisions

of his bill, introduced in Senate
on Aug. 8, 1949
(S. 2408), which would require large corpo¬
rations whose securities are not listed on exchanges to make

pools

sponsored

of

tion

let¬

a

vised

"Chronicle"

the

intention

the

reintroduce

to

early

gress

next

amount of
ment

the

"Be¬

year.

im¬

and

be¬

the Committee l'elt this leg¬

islation

so-called "Frear Bill" in Con¬

another,

after

his

of

national

tremendous

of

cause

required

free

important

as

with

case

such

as was

legislation

as

rent

tor

wrote, "it was not possible

production control, it was decided
the Subcommittee should further

to

have

by

the

bill

this

memberships

full

session

On

other

Aug.

of Congress.

1949,

8,

I

introduced

I

bill—S. 2408—designed to

a

com¬

pel the adoption of certain basic
standards
for
the protection of
investors

in

large corpora¬
tions.

Briefly,

that bill would

apply to all
large, corpora¬
tion

with

s

action

to

of

the House and Senate" in the
recent

price

housing,

control,

study the legislation with

considered

subs tantial

it

on

one

measure

should

way

the

as

next

In the meantime,
discuss

to

brought

certain

light

to

the hearings as well as by

independent

during
various
I
have

inquiries
made, so that there may be ade¬
quate opportunity, in the interval
before the next Congress meets, to
consider and discuss the legisla¬
tion

in

the

light of this informa¬

The

"corporation"

is

today

—defined

as

well established instrument of

those

with

at

economy.

least

$3

lion

of

mil¬
assets

300

and

secu¬

invest

disclosures I of

jority of corporate officials

Consequently,

the
in¬
is

a

the

im¬

is

his

and

designed

Even

experienced,

among

analysts there appears to be
luctance

the

to commit

large

re¬

a

sums

which

favorite stocks, which represented

36% of their entire

stock

common

portfolio, were all stocks of com¬
panies subject to the requirements
of

the

Of

course,

Securities

Exchange Act.
large portion of the
remaining portfolio also consisted
of

the

a

stocks

of

panies, leaving
fraction
tered

registered

a

securities.

the

com¬

relatively minor
holdings of unregis¬

of

The

testimony

representative

of

Association

the

Na¬

former

Governor

William

T.

to confirm my

Of

de¬
is

in

this

Maine,
appears

be those nominated

that the confidence of investors be

recommended

ing

maintained and corporate respon¬

has

code of listed and specially
regulated companies for many
under

years

the

Securities

change Act of 1934

Ex¬

and other acts.

sibility
land.

picture

financial

the

of

condition of the business to be
filed annually with the Securities
and Exchange
Commission; they
require proxy solicitations to dis¬

close

the

essential

matters

information

to

be

voted

about

made

2408

complish this

the

Dearth

of

There must be

of

such

capital if

we

expansion,

do in their company's securi¬

back to the com¬
any short-term profits made
such trading. Purely because

pany

from

of

to

pay

historical

an

which

I

duced

the

described

inadvertence,
when

I

intro¬

present

to

are

dynamic

with

its

bus¬

conse¬

quent prosperity for all segments
the population.
Nevertheless,

of
in

spite

of

liquid

savings
vestment, only
the

billion

available

for

of

in¬

small portion is

a

used to purchase

In

$200

some

equity securities.

popular

Securities

Exchange Act, the Public Utility
Holding Company Act, or the In¬

with speculative risk—and
indeed,
as
to those companies which are

vestment Company Act, are today
required to comply with those

operated

subject

to

either

provisions.
remedy
all

to

S.

this

and

ence

only corporations
the

2408

historical

extend

inadvert¬

these

companies

to

proposes

situ¬

ated.

When
invited
ested
this

I

introduced

comments

invitation

ing.

which

reaching
merits

of the bill.

inter¬

response

assisted

conclusion

the'

all

I
to

most gratify¬
thousands of let¬

have

a

of

2408,

was

I received

ters

from

The

persons.

S.

various

me

upon

in

the

provisions

These letters, and the

testimony presented

at

the

hear¬

ings

which

were

upon

the

bill,

toward

rency

Committee,

with
*

one

as

everyone

continuously

was

piece

faced

of urgent legisla-

Address by Sen. Frear in U. S.
Senate,
19, 1950

Sept.

.




a

Members of the committee in charge of the party are Edward
Morfeld, Morfeld, Moss & Hartnett, Chairman; Ernest D. Willers, Boatmen's National Bank of St. Louis; Vincent C. Weber,
V. C. Weber & Co.; and L. Jay Tenenbaum, Peltason. TenenH.

the

of

funds
to

care

securities

&

might

committed

include

in

baum

companies

Co.

to

bonds

and

veil

of

non¬

Dealer-Broker Investment
Recommendations and Literature

do

require, however,

bonds

other

than

It

that

understood that

is
to

railroad

send

the

interested

firms mentioned will he pleased

finance

following literature:

parlies the

bonds, which are exempt from the
registration provisions of the Se¬
curities and Exchange Commission
because
their
issuance must be

approved by

the Interstate Com¬

Commission, must be obli¬

merce

gations

which

have

registered

securities with the SEC. The

reason

for this provision is not that
regis¬
tration with the SEC guarantees

quality, but that it does insure the

availability

and

release

of

ade¬

quate information."

Canada

ments

of

Canada

state¬

condensed

the

of

Government

the

and

fiscal year

Provinces—

the

and

Comparative

Provinces

for

1948-1949—A. E. Ames

&

Co., Ltd., 320 Bay
ronto, Ont., Canada.

To¬

Street,

Over-the-Counter Index—Book¬
let

showing an up-to-date com¬
parison between the thirty listed
industrial stocks used in the DowJones

five

Averages

Would

Remove

stocks used

William

Situation—Analysis—

Blair & Co., 135 South
Street, Chicago 3, 111.

Investors

Application of Present Laws
I

our

believe

that

all

Iron

Curtain

illustrated

responsible

in

the

thirty-

industrial

National Quo¬

tation

Canadian

La Salle

Unequal

the

and

over-the-counter

Bureau Averages, both as
yield and market performance
over
an
eleven-year period—Na¬
tional Quotation Bureau, Inc., 46
to

Front

gambling instinct
only impelling force

cannot

we

booklet

containing

charts

—

Street, New York 4, N. Y.

Brief

Preliminary

for 1 investors

illustrating

a

economy with the equity capitalpeople's money
it needs by appeals to the
must agree with the basic aims of
gam¬
bler's instinct. It seems to me as the
legislation.
There
may
be

few of the varied problems of

plain

New

York

Bank

Earnings—Nine months of 1950—
New

York

years—United States Trust Co. of

ital

there
that

not

its

persons

will

does,

be

unless

assurances

the

kept informed

as

circumstances,

manage¬

and in many instances
ignore its 'stewardship obli¬
may,

gation

to

the

render

business
off

portant
terest

supplied

who furnish

Yet, at present under

use.

certain
ment

be

reasonable

are

the

money
to

pikestaff that such cap¬

as a

will

closes

knows,

Treasurer:

It

which

adopted

list

trust

trustees

of

However, the Banking and Cur¬

been

the

of

"We

all

equity investment.

But

tion

legisla¬
imperative.

1949.

the

be the

may

held in February, have convinced
me that the need for
such
is clear and

behind

disclosure,

standards

similarly

begun

was

report states:

con¬

mind,
common
stocks, especially of lesser known
enterprises, are often associated

bill,

vision

continuous flow

a

iness

and

study

'legislation,

Newhard, Cook & Co.
C. F. Corley, C. J. Devine & Co.
Elliot H. Stein, Mark C. Steinberg & Co.
Eugene V. Koch, St. Louis Union Trust Co.

Third Vice-President:

Secretary:

by the
New York Legislature, for the re¬

their

Capital

This

since

which

Venture

meeting; and they require in¬
siders to report any trading they

may

ac¬

sociation.

Second Vice-President: B. L. Schlueter,

the

our

ties

the

by the
Study Commit¬

stocks "listed for trading upon an
Executive,
and
exchange registered with the Se¬
members of this Congress have all
curities and Exchange Commission
repeatedly expressed concern over
as a national securities
exchange."
the
dearth
of
venture
capital. The

Industry,

tinue

the

law

purpose.

at

upon

of

designed to

is

prepared

in 1946 and completed in

place

These provisions require finan¬
cial statements
reflecting an ac¬
curate

be

S.

report

Investment

by the nominating committee:

President: Edward H. Morfeld, Morfeld, Moss & Hartnett.
First Vice-President: W. T. Kitchen, Scherck, Richter Co.

connection

which have been part of the work¬

sider-trading

Trust

Eugene V. Koch

Security Traders Club of St. Louis is holding its annual
election party this evening at the Tower Room of the Congress
Hotel. Since no opposition slates were filed, the new officers will

observation.

interest

the

of

Gardiner,

Elliot H. Stein

Corley

The

Companies in support of S. 2408,

provisions

•

C. F.

Investment

of

proxy, and in¬
Frear, Jr.

B. L. Schlueter

stocks held

common

tee of the New York Bankers As¬

A

Kitchen

by investment companies. The 50

large supplies of capital to further
business enterprise.
If it is to re¬
main such, I believe it essential

J.

T.

I recently saw a com¬

vice is today a legitimate and ef¬
fective instrument for obtaining

Sen.

W.

imum complete disclosures I have

mentioned.

holders—
the disclosure,

rity

Morfeld

H.

Edward

to

of corporate management
does
not
make the
min¬

Mr.

corporate

so¬

care

ma¬

recog¬

to

corporation.

phisticated financial advisers and

a

our

atmosphere of

an

2408

these barriers between the

investor

tional

public trusts.

are

the

S.

the

I believe the great

nize their offices

in

breed

remove

of

tion.

public interest

SECURITY TRADERS CLUB OF ST. LOUIS

Re¬

stocks

common

pilation of the

sson

as

like

matters

view
or the

a

plan to reintroduce

Congress meets.
I

and

session.

next

therefore

the

Federal

Distrust and reluctance to

secrecy.

study and the time ele¬
not

was

considerable

a

cause

of the pressure of other
legislative matters," the Sena¬

the

portant factors affecting financial

portance

his address, Senator Frear ad¬

consumer

by the Board

familiarity.
Familiarity
acheived only by open

be

may

health.

accompanying the text of

in

vestment

lack

and

of

System disclosed that
important deterrent to

most

small business.

of

Governors

serve

unequal application of present securities laws. Says bill
would curb corporate practices which depart from business
norm, and claims fears that measure means more bureaucratic
government controls are unwarranted. Denies bill will burden

Notes

significance

1949 survey

finances

move

EDITOR'S NOTE: In

without

not

that the

of

NSTA

public capital.

of
is

It

public reports and to be subject to disclosure, proxy, and
insider-trading rules, Sen. Frear maintains measure would
increase venture capital investment.
Claims bill would re¬

ter

the

largely unrestricted when

pen to be subject to the Securities
Exchange Act, the Public Utility
Holding Company Act, or the In¬
vestment Company Act.
S. 2408
is designed to provide the assur¬
ances necessary to keep open the

Senator from Delaware

S.

U.

Thursday, October 19, 1950

.

company's securities do not hap¬

FREAK, JR.*

HON. J. ALLEN

.

.

one

means

in

the

a

and

of
of

it

the

the

Except when
expensive

litigation, management's freedom
to

follow

purely selfish

I

adjust where necessary—
have heard no
attempt to

justify the random character and
unequal application of the present
laws.

to

If it is in the public interest

impulses

the business

highlighting

New

York,

York

in¬

some

of the

trends

of

last

5, N. Y.

45

Wall

Street,

Marginal'

security holders about such
as

their present financial

condition, the background
persons
as

proposed

directors,

securities

of

by management

and

the

the

corporation

management, it
this

the

of

seems

trading

to

me

in

should

Continued

on

also

page

be

*

120

#

American Cyanamid Co.—Mem¬

orandum—Hirsch & Co., 25 Broad

Street, New York 4, N. Y.

Stocks—List

of

low-

priced highly speculative issues—
Bache & Co., 16 Wall Street, New
York 5, N\ Y.

American

port—J.

R.

Cyanamid
Williston

Co.
&

—

Co.,

Re¬

115

Broadway, New York 6. N. Y.
Also

available

is

a

bulletin

on

Georgia-Pacific Plywood & Lum¬
New

York

Comparison
New York

City
on

an

Bank

Stocks—

ber Co.

analysis of 19

City Bank Stocks

as

of

Sept. 30, 1950—Laird, Bissell &
Meeds, 120 Broadway, New York
5, N. Y.

Bank

titled
of

of

America—Folder

en¬

"Growing Yield from Bank

America

fornia Co., 300
San

Stock"—First

Cali¬

Montgomery Street,

Francisco, Cal.

New

York

City

Bank

Comparative

figures

1950

information

♦

New

by
that

Hanseatic

Corp.,
Broadway, New York 5. N. Y.

80

require corporations to inform

matters

im¬

development of

to

but

vestment and

to

thereby

in¬

resort

tend

their

most

other

some
differences of opinion con¬
cerning the scope of the bill and
its precise language—these I in¬

account

stimulating

business—publicity.
stockholders

true

of

Boston

—

First

28 Broadway,

Stocks—

Sept. 30,
Corp.,
100

at

New York 5, N. Y.

Christiana

Securities

Co.—An¬

alysis—Francis I. du Pont & Co.,
1 Wall
Street, New York 5, N. Y.

Volume

172

Number 4952

Cleveland

Cliffs

.

The Commercial and Financial Chronicle

.

.

Co.—An¬

Iron

Oct.

alysis—Walston, Hoffman & Good¬

win, 35 Wall Street, New York 5,

•

COMING

available

Also

A i

of

analyses

are

Lines,

r

McDonnell

Investment

Railway
Manufacturing Co.
1

York City)

June

Astoria

Hotel.

Nov. 3-4, 1950

Inc.—Newburger & Co., 1342 Wal¬
nut Street, Philadelphia 7, Pa.

ciation

(New York City)

(Baltimore, Md.)

Southeastern

Group

MacFadden-Deauville
Nov. 26-Dec. 1, 1950

Tellier

(Hollywood,

Fla.)

of

Invest¬

ment Bankers Association

at the

Holly¬

wood Beach Hotel.

Annual

Flying

(New York City)

Co.,

65

Line,

from

will

be

per

the

of

and

equipment, and for the
of

additional

pur¬

land.

Cabinet

Corp.

Trad

of

Cabinet

this

Corp.,

and

association,

the

will be assured, at

least for the present, of selling its
entire

output.

Nebraska Bankers
Annual Convention
OMAHA,
Bankers

r

Trad

was

or¬

ganized to help meet the demand

Neb.—The

Association

annual convention

New

-

York

at

Hotel, Oct. 11 and 12.

&

6,

N. Y.

Heyden Chemical
letin

Gerstley,

—

Corp.

Sunstein

120 South Broad

—

Bul¬

&

Co.,

Street, Philadel¬

phia 7, Pa.
Hickok Oil Corp.—Bulletin

(for

security

dealers only)—John C.
Co., 1108 16th Street, N. W.,
Washington 6, D. C.
Kahn

Kroy

Oils

Ltd.—Bulletin—Nes-

bitt, Thomson & Co., Ltd., 355 St.
James Street, West,
Montreal,
Que., Canada.
Placer

Development,

formation—John
1006

Second

R.

Ltd.—In¬

Lewis,

Avenue,

Inc.,

Seattle

4,

Wash.

Also available

data

are

U. S.

on

Finishing Co. and Washington Gas
& Electric Co.

Riley
Cohon

Stoker—Circular—Morris
&

Co., 42 Broadway, New

York 4, N. Y.

Riverside
Card

Cement

memorandum

Company—
Lerner

—

Co.,

10 Post Office Square,
ton 9, Mass.
Schwarz

Engineering

&

Bos¬

Co.—An-"

alysis—Shafft,
Snook
&
Cahn,
Russ Bldg., San Francisco 4, Cal.
Simmons

Co.

Dillon

man,

Analysis—East¬

—

&

Co.,

15

Broad

Street, New York 5, N. Y.
Standard

Oil

Co.

Indiana—

of

Memorandum—Sutro Bros. & Co.,
120

Broadway, New York 5, N. Y.
Merit

The

Insurance

cluding
lected

—

pertinent
companies

body & Co.,
York

Fire

of

Stocks

&

Casualty

Brochure

facts

of

25

in¬
se¬

— Kidder,
PeaWall Street, New

17

5, N. Y.

Trailmobile
—Stifel.

Co.—Brief

analysis
105

ITS

Nicolaus & Co., Inc.,

West Adams Street, Chicago 3, 111.
U. S. Thermo
—

Raymond

VALUE

Control—Analysis

&

Co.,

148

ITS

State

Street. Boston 9, Mass.
Also

available is

an

Ira

The United States, with

Maryland—Bulletin—

Haupt & Co.,

Ill

Broadway,

New York 6, N. Y.

its

Maryland

Railway

—

Analysis—Vilas & Hickey, 49 Wall
Street. New York 5, N. Y.
Also
current

available

Railroad

is

a

leaflet

only ahout 6%

world's

population, has 60% of

telephones.

Bell System service is

of the

superior to that of
Western

and the
There

cost

are

any

other country

is low.

developments.

phones in the United States—an increase

E. E. Mathews Adds

87% since 1941.

being added

every

Thousands more are

working day.

(Special to The Financial Chronicle)

Donovan
with

Mass.

has

Edward

Growth and
—

become
E.

George

State Street.




W.

connected

Mathews

Co.

increasing value of the service at

53

expansion like this reflect

a

price within the reach of millions of

people. Telephone service is still
your

one

of

biggest bargains.

The

34,800,000 Bell tele¬

now

the

needs

value and

telephone

BELL

of defense

necessity of

of

of

BOSTON,

EXPANDS

analysis of

Simplex Paper.
Western

GROWS...
USE

company.

emphasize the

a strong,

healthy

For the quantity and

quality of telephone service

are among

Nation's greatest assets

in time of

the

emergency.

TELEPHONE
SYSTEM

Nebraska

held

PROMISE

GREAT

HOLDS

George

The
these

for

working
capital, for the payment of obli¬

chase

inch

Cabinet

share.

sale

used

21

Television

and

Inc.—Sup¬

report—Fahnestock

Broadway,

FUTURE

THE

—

Tiger

proceeds
shares

Trad

Trad

Corp.-^-Card

Smith, Burris &
Co., 120 South La Salle Street,
Chicago 3, 111.

plemental

is offering as a
1,198,000
shares
of
of

of

particu¬

19 and
Trad

9

the principal stockhold¬

latter company

Co.

stock

cabinets,

16,

Victor

are

because

gations for the purchase of plant
Dee. 8, 1950

Consolidated Paper Corp. Ltd.—

Finance

common

Corp. at 25 cents

Oct. 26, 1950 (New York City)
New York Security Dealers As¬
Analysis — James Richardson
&
New York Group of Investment sociation Silver Anniversary Din¬
Sons, 347 Main Street, Winnipeg,
Bankers Association Annual Meet¬ ner at the Waldorf-Astoria Hotel
Man., Canada, and 80 King Street,
ing at the Hotel Pierre.
(Starlight Roof).
West, Toronto, Ont., Canada.
Domestic

&

speculation

the

tubes.

picture

ers

Offered by Tellier

Hotel.

for

Corp.,

Trad Cabinet Slock

(Miami, Fla.)

Security Dealers Asso¬
Annual
Meeting at the

Annual Convention

Meeting at the Maryland Club.

memorandum

television

for

larly

;

Investment Bankers Association
Oct. 24, 1950

Park

Canada).

Investment Dealers Association

—

System,

(Jasper

of Canada Annual Convention.

Florida

New York Security Dealers As¬
Cinecolor
Corp.
Analysis —
Walston, Hoffman & Goodwin, 265 sociation General Dinner Meeting
Montgomery Street, San Francisco at 5 p.m. at the Hotel Gramercy
Park Roof Garden.
4, Cal.

Columbia Broadcasting

1951

Trad

Equipment
Oct. 19, 1950

11-14,

Lodge, Alberta,

(University of

Field

Aircraft Corp., Rayonier, Inc., and

Standard

(New

School

Bernard F. Gimbel at the Waldorf-

EVENTS
In

30, 1950

Wharton

Pennsylvania) Dinner in honor of

N. Y.

Eastern

(1493)

the

its

53d

Paxtofc

The Commercial and Financial Chronicle
10

create

A Defense

Sometimes

picture

most

a

aid

ican

has

scene

changed

United States.

tically—not because of Korea, but

cision

i

stop

expan¬

and

o n

war

to

for

prepare

a

emer¬

gency.

Before

that,

there
been

had

a

num¬

ber of Russian

in

moves

ellite

sat¬

coun¬

tries,

which

areas

the Russian

W. Zelomek

A.

Empire
wanted

to

incorporate

its

into

"sphere." We called this the "cold
war."
It was fought only
with
propaganda
Moscow
to

happen

and
thing
march into
same

the

when

started.

however,
all

Now,
know

diplomacy,

or

expected the

South Korea

Moscow
must
doubt that it

beyond

plays with fire, that the United
States is rearming, that it will not
continue its economy on a "busi¬
ness

we

The great questions are:
Will

United

States

and

the

ter

prepared

is

Western

right

are

wait

Moscow

until

fully

the

Or

now?

strike while the United States
maments

ar¬

is still largely

program

It is certain that the

of

1965,

a

stockholders of Chase

ferred

nine-month

most desirable.

ago,

Barnes,

earnings

matter of fact, British exports
been a secondary factor in

a

have

two

the improvement of

Britain's dol¬

war

British Controls to Continue

be

will

reluctant

to

immediate

in

act

provoke

future.

without

all-cut

I

war.

war

But

of

number

a

where he believes that he
successes

to

he

areas

win

can

provoking

an

refer in particular

Indo-China,

Burma

Iran.

and

Germany,

however, will be the
last and most important link in a
chain of actions

ably planned
I

which

of

real

a

these

is most unlikely.
be

prob¬

are

now.

afraid that

am

settlement

to

possible

peaceful
issues

great

It does not

to

agree

seem

com¬

on

promises with Moscow which will
be

kept

would

by

Moscow,

create

and

which

"balance

new

a

power" system similar to the

I

Will Escape

Uncertainties
We shall therefore live for some

of

one

will

Other markets

be

free, or almost free, to
operate "as usual." But even the
least affected activities, the most
normal

Approximately 85% of the com¬
stock of United Brick & Tile

wrong, and

am

tainly believe that
better

chance

ultimate

these

longer

cannot
a

I

cer¬

have

preventing
we

But

term

be

now

we now

of

than

war

few months ago.

a

an

had only a

even

though

uncertainties

predicted,

we

conclusion that will

can

have

immediate value.
We

now

enter

armaments
war

*An

bef-r-t

York

*

Consolidated net sales of Dazey

mon

Co.,

City,

Kansas

has

been

Louis, for
the year
1950 were $2,494,-

St.

Corp.,

ac¬

ended June 30,

538, which compared with $1,817,266 for the 11 months ended June
amounted

after

Profit

1949.

30,

$257,208,

to

taxes

or

$1.22

common

per

markets,

will

be

subject

will

*be

preparations

change

address

City,

period in which
conditions

for
of

cannot

Fvnort

Oct.

Manners'

10,

1950.




Club

New

be

the United

which

and

unable

to supply

States will

in sufficient

in

the

$80,000

503 OLIVE

to

probably sold

be

to

INVESTMENT SECURITIES

and

leaving

treasury

some

stockholders

by

taken

was

peacetime
products
which
are friends,
competitive with dollar products

be fulfilled.

But the great

These

uncertainties

affect

will

practically all contracts with pri¬
vate enterprises for private con¬
sumption, particularly in indus¬
tries whose products have a po¬
tential strategic importance, which
may
be ordered by the govern¬
ment, or where productive ca-.
pacities may suddenly be needed
for

which
with

St. Louis LMo.

Roger

dealer in one block.

MEMBERS

Defense Difficulties

wish

the

to

be

difficulties

will

have

outspoken
the

with

its

United

pro¬

0514
SL-80

TELETYPE:

compared with $13,734,328

industries,

rely

Black, Sivalls & Bryson

on

complete

new

nomic

British

Texas

Delhi Oil
themselves

cannot
1

such

we can.

a

Utilities

Mississippi River Fuel

eco¬

forces?

The

shift of world

question,

Tennessee

any more

Meanwhile, however,

Texas

the shift of American production
about in response to the new demand for
States armaments puts British competi¬

defense

GARFIELD

TELEPHONE:

slightly in excess of $13,000,-

as

unique and temporary advantages
unless a third world war brings
a

MIDWEST STOCK EXCHANGE

especially competitive
American
(and
also
with

German)

than

I

000

STREET

are

answer

contracts.

sales

question is:

How long can British industries

the fulfilment of government

tive producers in a position

Gas Transmission

Eastern Transmission

Rockwell Mfg.
Southern Union Gas

where

Southwest

in a world which does not they will have another' period of
consist merely of. two "blocs"— profitable easy sales.

Gas

Producing

gram.

Bought

the East and the West.
Price Inflation Aided from Abroad
The Eastern bloc is
trolled

by

satellite
with

one
and

totally

power

center.

political

countries

con¬

All

in

trends

must

conform

But

Washington

cannot

The democratic
tion

or

moral

power

of

ever

was

not

:

.

Large
acquire

dollar

■

Sold

—

Quoted

i

SCHERCk, RICHTER COMPANY

again become worth what

worth

a

persua-

—

■

price spiral which inflates

dollar values cannot continue. But
it is most unlikely that the

it

play

influence will

The

will

policies made in Moscow.

similar role in the Western world.
by Mr. Zelomek delivered

large-scale production of

on

quantities. Thus Britain may ex¬ W. Babson and family are said to
many
uncertainties, possible
pect to recover a great deal of its be the largest stockholders.
The
switching to controls, and to con¬
former competitive
losses.
This
ditions where old supply channels
Crown
Drug Co. for the fiscal
may help the balance of payments
will be shut off, or where orders
Sept. 30, 1950, had
and the dollar reserves of Britain. year ended

economic

a

and

insist

Stix & Co.

to

before the first World War.

hope I

draw

capital.

share, as against
$28,648, or three cents per share,
that
foreign exchange
controls ing less than 8,000 shares in the for the 1949
period. At June 30,
should not be removed, even if hands of the public.
1950, the company had paid off
dollar and gold reserves should
$214,500 of its RFC loan, leaving
continue
to
increase.
Britain's
Of the $300,000 of 4V2% con¬

which produced several decades of
peace

working

Kansas City Power &

brought total holdings of
This may be the real reason This
why British financial experts are United Brick stock to 92% of the
118,125 shares outstanding, leav¬
almost unanimous in their opinion

period.

peace

ment intervention.

My personal view is that Stalin
the

its

^

now

be avoided.

can

will

for subscrip¬

per

,

quired b,y American-Marietta Co.
through issuance of shares of the
latter on a share-for-share basis.

balance.

lar

markets will be subect to govern¬

in

$2.50

advising

provoke

if it

at

crease

were

equal to $2.08 per share on 1,447,506 shares of common stock out¬

trade position, in fact, has de¬ vertible debenture notes due Oct.
Stalin, some to time under conditions for which
pended on a continuous dollar 1, 1962, which were offered to the
and others to there is no precedent.
scarcity within the sterling bloc, common stockholders of Crown
continue with "policies as usual"
Some spheres of activity will and on strict
foreign exchange Drug Co., Kansas City, of record
—cold wars, inner political pene¬
be completely dominated or con¬
controls.
tration of border areas, but no
Aug. 31, 1950, at par and accrued
trolled by the government. Some
British industrialists will now interest, $220,000 principal amount
direct war with the United States

factions

Yantis & Co.)

share and are
part of a block of 200,000 shares
purchased from the company on
June 29, 1949 by the underwrit¬
ers
at $2.50 per share,
the pro¬
ceeds being used by Chase to in¬
tion

according to Donald
President, after pre¬
dividend requirements, the

latest

S.

F.

$3,230,561, compared with $2,881,375 in the corresponding period
year

Louis, at

147,861 shares offered to common
(other than

short-term notes
Net earn¬

commercial paper.

ings of the company in the nine
30, 1950 were

L.

Candy Co., St.

Chase

$2.75 per share. These represented
the unsubscribed portion of the

months ended Sept.

remain "at peace" for

may

No Markets

Kremlin will debate this problem.
There will no doubt be different

economy,

long time.

of the

men

war

ourselves to make

But the act of main¬
taining "war readiness" will make
our
economy different from that
either of a real war period or a

a

true

•uncompleted?

full

a

We

than they
will Russia

war

a

prepare

transition within one,
three months.

or

bet¬

are

now

such

rearmed

powers

for

to

convert

usual" basis.

as

think

sinking

3%

of which will be used
like principal amount

outstanding

and

may

we

6, F. S. Yantis & Co.,
Inc.
publicly
offered
134,416
shares of common stock (par $1)
Oct.

On

.

in

or

This will not be an

the policies

time

15-year

*

*

*

of¬

Light Co.
war economy. As a matter
standing,
compared
with
$2.13 reports for the 12 months ended
Changing Dollar Position
fact, the amount of additional
per share on 1,203,805 shares out¬ Aug. 31, 1950 total operating rev¬
It is true that the dollar deficits
defense spending at the current
standing at Sept. 30, 1949.
The enues of $30,502,640, and net in¬
Western
rate is not overwhelming—not in of
European
countries,
company
announced
that two- come after taxes of $4,455,413,
America and even less in Western especially of Britain, have disap¬
thirds of its convertible
prefer¬ compared
with $29,362,188
and
Europe.
But
spending will
be peared. Britain has been able to ence stock had been converted
$4617,109, respectively, for the
stepped up, and government con¬ build up large gold and dollar re¬ into common shares
prior to Sept. preceding 12 months' period. After
These reserves are twice
trols or priority ratings will chan¬ serves.
30, 1950, the date on which the deducting dividend requirements
nel production and investments as great now as tney were before
conversion
rights
on
the
two on the preferred stock, the bal¬
into
those spheres
which con¬ the run that almost emptied Brit¬
series were reduced from 1V2 and ance applicable to the
common
tribute to defense and to arma¬ ain's dollar funds last Fall.
U/4 shares for one to a share-for- stock was $3,755,413 for the year
The dollar gap in the trade bal¬
ments.
share basis. Of the original 168,- ended Aug. 31, 1950, against $3,ance
was
closed some time ago.
425 shares of series A $1.25 con¬ 934,887 for the 12 months ended
Economic Situation Has No
But we should note an interesting
vertible
preference stock,
only Aug. 31, 1949.
Precedent
fact:
f.:
s':
#
i-c-Cr-'-t'86,674 shares remained.
This kind of "defense economy,"
Britain's increase in dollar and
The stockholders of Ilussmann
wmcn is some kind of partial war
gold reserves has come largely
Refrigerator Co., St.
Louis, on
Charles W. Metcalf, President
economy,
where elements of a from the price increase for inter¬
Oct. 6 approved a proposal to cre¬
peacetime economy still survive national commodities, which hap¬ of Clinton Foods, Inc., St. Louis,
ate an authorized issue of 50,000
on
Oct.
10 announced that
his
but where the "normal business
pen to
be largely sterling com¬
shares of new preferred stock, par
cycle" cannot become effective, modities. Great Britain has been company has sold for investment
$100 each.
Of this issue, 16,000
may continue for some time.
It and still is able to control most to Wm. E. Levis, industrialist and
shares with a 4% dividend rate,
may, in fact, last for years.
But of the dollar or hard currency chairman of the executive com¬
will be sold to the Penn Mutual
mittee of the Owens-Illinois Glass
we can never be sure during this
receipts of sterling raw material
Life Insurance Co. The Hussmann
Co., Toledo, Ohio, an issue of 10,period when some incident may producers.
I refer especially to
000 shares of 4V2%
cumulative- company will use the proceeds to
necessitate immediate conversion the
Malayas, Ceylon and Africa.
redeem on Nov. 15, next, all of
convertible preferred stock at par,.
to
a
total war economy.
Pre¬ The
higher dollar price American
the 14,840 outstanding shares of
paredness for this uncertainty will producers are now paying for im¬ $100 per share, with an option to
be
an
an
additional
40,000 $2.25 cumulative preferred stock
important factor in the ported raw materials is the main purchase
at $53 per share, plus accrued div¬
economy. Where before it would reason for the "solution of the shares at par.
idend of 56 % cents per share.
T
have required 6 to 12 months to dollar
*
*
'•••
problem" for Britain. As

Rus¬

sian

peace

retire

of

individual countries will follow in

the

loan

of

de¬

to

/urlher

to

all-out

because of the

American

the

over

riod.

the proceeds

even
this
guarantee that,

all

particular in

a

of

000.000

And

"goodwill" is not

consumer

fund debentures due Sept. 1,

a

"goodwill."

and

in

and

In

gladly accepted.

methods

situations

market

world,

dras¬

are

fact, such help almost becomes a
for

nomic

though the benefits of Amer^ '

even

of

preceding 12 months' pe¬

for the

of

nation¬

a

of institutional buyers, $15,-

group

tribute the United States must pay

marketing

trade,

During the last few months, the
international
political and
eco¬

achieve¬

the

of

fices, has placed privately with a

other countries—there is a
undercurrent in favor of
"neutrality," of an attempt to stay
out of an
East-Western conflict,

trade.

increase in future world

and

Co.

Investment

operators

chain

wide

the

strong

indefinitely. Holds
and that there will be a marked

basically strong

of

unity

Illinois,

a

many

no

is

rosy

plan, or of
Western defense planning.
In Western Europe—and also in

abroad, but price spiral cannot continue
dollar

world

too

get

the

about

Wes.ern

precedent and no markets will escape uncertainties.
Says despite changing dollar position, British exchange con¬
trols will continue, and holds price inflation is aided from
tion has

we

ments of the Marshall

real peaceful settlement of international issues is
unlikely, Mr. Zelomek contends current economic situa¬

Predicting

American

aggression.

Economy

Statistical Bureau, Inc.

International

Economist,

Missouri Brevities

is

present less united or unified
than it was at the time of Nazi

at

By A. W. ZELOMEK*

ds

Thursday, October 19, 1950

.

As a mat¬

complete unity.

fact, the Western world

of

ter

International Trade in

,

.

.

(1494)

Landreth Building

before.

funds will be used to
strategic
commodities.
Continued

on

page

20

Bell

Teletype

SL 456

Garfield 0225
St.

Louis 2,

Mo.

L. D.

123

Volume

172

Number 4952

.

The Commercial and Financial Chronicle

.

.

(1495)

$100,000
bank

which

at

carried

is

reduced

a

by

of

rate

its

est, completely releasing the RFC
three years

prior to the final ma¬
the loan. The $100,000

of

turity

subordinated

loan

to

also

paid

in

ers

was

full.

tended

the

to

Dazey Corp.

credit

volving

School

amounts

to

not

at

21/2%.
75

a

a

total

ernment

sen¬

than

more

retail

or

prices.

(b) Wholesale price index. This
measures price changes for

Commerce, Accounts and Finance

almost

will

continue

dominant home-front

incomes will

sumer

of
of

ally

problem.

Forecasts

One

of

the

important
the large

to

The

Price

It

than

more

will

for

that

taken

duction

off

(c)

Consumers'

price
index.
changes in the

costs
of
food,
clothing,
housefurnishings, etc.

The

Picture

facts

may

be

rent,

will

be

pro¬

liberalized,
are

However, these steps do not go
enough.
We need a further

far

enues

excise

in

taxes.

It

is

of

some

im¬

not

these

rev¬

will be derived from higher
taxes
along with higher

income
taxes.

summarized

cotton produc¬

other

probable that

This measures the

controls

and that the

year,

goals

all

commodities, all
steps in the right direction.

usu¬

retail

be

tion next

increase

con¬

expand and hence entail higher retail sales
and profit margins.

most

contributing

commodities.

fluctuates

the

announcement

spot commodities.

per

factors

900

holdings by the government,

prices, but less than the index of

spending itself, Dr. Backman predicts price inflation

of

share was paid
29, 1950 on the preferred
against accumulations,
to

Sept.

other wholesale

com¬

highly

a

material prices

which fluctuates much

Maintaining that the stimulus in third quarter business activity
reflected anticipations of government spending rather than
gov¬

re¬

rate
distribution

is

raw

index

the

interest

cash

A

cents

exceed

an

of

This

sitive index of

ex¬

corporation can borrow from time
to
time
through June 30, 1952,
$200,000

modities.

Professor of Economics, New York University,

The

which

under

Retailing

By DR. JULES BACKMAN *

stockhold¬

Boatmen's National Bank also

(a) Daily index of 28 spot

Economic Outlook for

inter¬

11

and

higher

There

is

corporation
required ail

also

additional

tightening up of instal¬
credit, a liberalization of the

ment

as follows:
conditions under which the Com¬
stockholders of record Sept.
15. upsurge in sales immediately after happened and what is happening
(1) From June to the middle of
the Korean invasion, was the fear
modity Credit Corporation
caifc
This was exactly one-half of the
to
prices, incomes, and business September, these indexes rose as
sell surplus farm
that this war
products, and an
total accrual to Oct. 1, 1950.
It is
activity as the starting point in shown below:
intensive
stock

It is

useful to

review what has

'

that

expected

the

balance

would

will

u

Oberman

clothing

°

*

$6,197,000

for

reports

the

si!

™ e r s

business-

com¬

remem-

men,

n

oering

pared with $6,476,000 for the same
period in 1949.
*

0 n

and

wiagw
world war

%

rusnea

Edison

Bros.

Stores,

for

Inc.

meil

September reported sales of $6,983,680, compared
with $6,491,the

353 for

same

For the first nine months of

Sales

Co.

of

Western

food

Auto

Supply

(Mo.) during September, 1950,

$14,253,000,

were

compared

with

goods
meet
or

$114,301,000

against

corresponding
1949 period, a gain of 29.5%.
The
•company in September this year
had 268 retail units, while whole¬
sale accounts numbered 2,586.
in

$48,253,000

the

as

possibly next

after,

before

items

month

the
net

of

August

adjustment

after

profit,

reported

Federal income tax accruals to the

higher rates provided in the new
Revenue Act, of $32,215 compared
with

$35,417 for the same month

last

For the eight months
Aug.
31,
1950,
net was

year.

ended

$220,089, as against $227,456 for
the corresponding period of last

spending
billion

*

*

Anheuser-Busch, Inc., St. Louis,
has declared an extra

dividend of

the usual

share in addition to
quarterly dividend of 25

cents per

share, both payable Dec.

.30

^var

for

and

points,

cents

per

1 to stockholders of record Nov. 2.

starting
possible

as

to

as

what

weeks

rolled

by, and it

became

increasingly apparent that
Russia was not joining the fray
on a full scale
basis, so that total
war

might be avoided at this time,

the

pressure

chases

for

immediate

reduced

was

sharply. Thus,

example,
department
store
sales, which ran more than 40%
a

In

light of the fact that the

cession

of

Manganese Securities
Offered by

Greenfield

Greenfield & Co., Inc., N. Y. C.,
next

will

offer

€%

income

week

sinking

$150,000

fund

of

that

and

less.

its

be

failure

to

to

As

many

not

were

War

result,

a

the

war

in

Korea,

they

II, will continue to be

in units of

duced.

face value

siding of the

The effect has been
pressures

the

The recent increases

1948-1949

fact

after

V I

the

S.

Bureau

of

Spot

prices

Wholesale

a

cause

™

prices

.

.

wage

„

to

5.7

is

—

0.1

lem.

173.0

—

0.9

trol

(2) Jhe 3>ot Ande* fel! ™uch spending for
r1101'?

reduction in
exes spending by the Veterans Admin-

0 i
m the 1948-1949 recession.
DesPlte the recent publicity, it has
n

war

a

istration, and a moderate increase
budgetary

in

receipts,

had

the

not/isen

close to the earlier effect of enabling the government
P°?twar Peaks I as ha ve wholesale to operate in the black to the exprices
retail prices.
~
tent of approximately $300 mil(3) It is particularly important lion during this same period,
to note that the general wholesale These figures make it clear that
index

has

risen

only

8%.

Consumers' prices usually increase much less than wholesale
Prices and hence an overall rise
of modest proportions is indicated for retail prices on the basis

(4)

Food

about

orices

two-fifths

account

of

the

for

cost

oi

living.

All

authorities

food
we

are

greed

supplies

are

ample

face

significant

no

the stimulus in business activity

supply problems in this area. This
is a very important fact when
changes in living costs are being
considered. This latter fact is par-

ticularly important to music
chants since large rises in

mer-

food
prices tend to reduce the amounts

available to buy less essential
items, including the products handied by your stores.
/

Current Level of Economic
Activity

sub-

erating at boom levels.

This is

an

important distinction from the sit-

solution

in¬

be

control-

for

our prob¬
price con¬
effective in the

I don't think that

be

can

very

of

the

powerful

compulsion

and

emotional

sures

morab
pres¬

attending an all-out
fixing doesn't attack

Price

of

causes

inflation.

It

deals

war.

the

only

with the effects.
Outlook

for

Disposable Income

It is against the
foregoing back¬
ground that the outlook for re¬

tailing must

Where did the funds
available

oral

sources.

«es

E

come

from?

indicate

data

sev-

Redemptions of Se-

bonds increased

substan-

tially to almost $400 million in
August. This was $124 million

income.

It

posable

be

considered.

seems

income

increase.

The

this

expansion

ized

as

The

(1)

clear

will

main
may

that

dis¬

continue

to

elements

int

be

summar¬

follows:

Rising

employment, longer
sales. In the
hours of work and higher wage
three months, July to September, rates will mean
an
increase in.
redemptions exceeded new sales labor
income. Workers in manu¬
by $278 million. Consumer credit
facturing industries averaged less
was also expanded with the July
than $55 weekly in
1949, about
increase, the largest in the post$57 in the first half of 1950, and
war period. Finally, there were
above $60 a week now.
Further
undoubtedly some unspent balincreases are certain under the
ances of the G.I. insurance refunds
impact of higher wage rates and'
which were spent,
greater than

new

As our thinking is modified
from the fear of total war to the
impact of a 10 to 15% war economy, the nature of this third quarter business rise takes on a new

complexion in terms of its signififor the future. It is becoming increasingly probable that part

longer

of this activity represented a bor-

rowing from

business activity

in

the months ahead,

diate delivery and

at

premium

pay.

which went
act

withholding taxes,
into effect Oct. 1, will

partial offset to this ex¬
in labor income.
How¬
ever, it will not fully offset it.
as

a

pansion

(2)

Government

spending

will

be

increasing steadily during the
next year.
War spending, which
at the annual rate of less than
$14 billion in the third quarter oi
1950, will reach a rate of Spending
was

uation prevaling in 1940, when we
To sum up the present situation:
began preparing for World War Even before spending for war of approximately $30 billion by
framework of the presently con- II. Thus, total industrial produc- purposes has shown any signifi- next June.
•on the debentures, 3% is fixed and
3% will be contingent upon pro¬ templated
expenditures.
In my tion by June had reached a new cant change, we find ourselves at
(3) Agricultural incomes have
duction.
analysis, I shall assume that we postwar peak, total national in- the peak of the biggest peacetime once more begun to
expand under
The company was incorporated will' spend between $30 and $40 come was close to peak rates of boom-boom we have ever experi- the
impact of good crops and
in Arizona on Jan. 17, 1950, and is billion a year on our armaments 1948, and total salaries and wages enced. Clearly, any expansion in
higher prices.
Thus, during the
principally engaged in the busi¬ program, and that this rate of were at a new high level for the war production will mean reduc- first half of 1950, cash
receipts of
ness of mining and milling man¬
spending will be continued after postwar period.
Only farm in- tions in other types of production farmers were 9% below the
same
the final completion of the Ko- come was significantly below the fr0m the
ganese ores. It also engages in the
present level.
It will period of last year. Since the Ko¬
purchase and sale of manganese rean episode. As part of this as- peaks reached earlier in the post- mean a reduction below the level rean War, they have been
running;
and tungsten ores.
sumption, it must be recognized war period. It was on top of this 0f june in many fields, including
equal to or more than last yean
The
corporation owns mining that this rate of spending will not boom-time level of business ac- some in which you have a vital The liberalization of
crop produc¬
be achieved until the middle of tivity, that our new war economy
interest, including television, ra- tion goals in an environment of
rights in five properties, namely,
next year or later, and that its had to be superimposed.
di0> and various types of musical high consumer incomes is bound
Steamboat,
Turner,
Branch, direct
impact upon supplies and
During the third quarter, busi- instruments,
to be reflected in
higher farm in¬
Buzan-Beard and Manganese King prices will not be felt immedi- ness activity continued to expand.
comes, if Mother Nature cooper¬
Mines in Arizona, which have a ately. I recognize, of course, that However, this expansion was not
The Inflation Problem
ates in the production of
larger
the development of new war in- due to an increase in war spendin the months ahead, price in¬
total of 29 unpatented lode mining
crops.
This means a significant
cidents could change this picture ing. It may come as a surprise to fiation will continue to be the
and

$100 per unit.

Of the 6% interest

appraise

the need to reproblem within the

hours,

The increase in

cance

pro-

will
Price

pear.

in the third quarter reflected pri- most important single factor de-marily the anticipations of gov- termining the level of retail salesernment spending, rather than is the income after taxes available
government spending itself.
to consumers, so-called disposable
The

experience to date,

next

the

not

prices

on

absence

...

these measures, the-

adopt

creased

—

„

\

adopt the

suggested, the pressure
prices will be reduced. If we

169.7

.

we

measures

332.8

174.5
,

.

(3) reducing the
the government be¬
dollars (pay
lower

and

to

taxes than do profit dollars.

169.8

At the outbreak of the Korean
war, the economy was already op-

for imme-

develops;
tax yield

353.0

prices

Consumers'

% Change

and.
infla¬

decrease is required;

a

To the extent that

peaks.
Recent Peaks

demanded
three-fold

that pressure for price increases-

so

Z

In

.

1947-1948 Peak

realize

types of products which
available during World

debenture of $100

They

from

more

the

(2) increasing manufacturers' costs

pressure

our

that if there is to be all out

time.

Qf

distin-

it will not take place at this

war,

far

have

time when

on

that

beginning to be-

are

than other prices.

declined

being

now

fail

and

of that

summer

success

people

many

lieve

our

the

of

Statistics:

that

situation.
With

more

also

to

tionary effects of: (1) increasing
consumer
spending power at a;

1948

Labor

re-

business

contributed

in

spot
prices and wholesale prices has
taken place since the middle of
September.
Spot prices, in line
far

are

have returned close to the 1947-

low

activity
was
already moving sharply upward before the Korean war, it
is apparent that all of this gain
year,

U. S. Manganese Corp.

10 shares of common stock at

and

reached

point in the late

deben¬ that

tures, due Dec. 31, 1960, and 15,000
shares of $1 par common stock of

to

1949

be

June.

July,
10

and

couple
have subsided
a

gains

in

nominally,

15%

for

weeks

of

only

According to the Bureau
of Labor Statistics,
retail food
prices
have
risen
1.3%
since

earlier

year

reduction

savings.
keep within
increases which

have

bounds the wage

recen^ mcreases, the three indexes

pur-

for

over

moderate

also

which

guish between three price indexes

price

involved.

the

cannot

one

$30

billion,

$40

appraisals
be

be

mere

than

tntal

our

would

as

rather

would

As

and the year

possibly

viewed

were

A

We

reported by the U

attempted to

of
#

-

because

hard

to

year.
7

risen

rush

a

of

that

1-7

ample

production of these

aminiinrpmpntc

OIK

a

of

this

discontinued. The vari-

was

+

have largely reversed the decline

many

types

year

+

__

of the confusion
concerning the
magnitude of price changes arises

had

consumers

South Korea,

about in line with what would

-

all

___

Wholesale prices
Consumers' prices

since

costs. Actually, living costs with past experience, have risen

have

their demands for this year,

overall

Mid-Continent Airlines, Inc. for

for

in

prices

Many
persons,
including
labor
leaders, have been identifying this
rise in spot prices with a
rise in

•

increase of 20%. For the
nine months ended Sept. 30, 1950,
totaled

the Red invasion of

for many foods developed. Orders

poured

commodity

26.1
8.0

+

1948 peaks.

Despite

e

we

Spot prices

given

many Persons to the sharp rise
SpQt

drive for

Percent

Consid-

been

expected during this period. Much

supplies, for example,

$11,874,000 in the same month last
year, an

sales

that

statements
v

has

them-

time.
t h

emphasis

pro-

ages
Jules Backman

corresponding

V

li,

against
similar short-

1950,

period in 1949.

tt

selves

sales totaled $53,318,393, as against

$54,263,374 for the

e

pell

to

tect

month last year.

erable

jn

nine

1950,

months ended Aug. 31,

C

effort to look ahead.

0ur

ai\/r
!?y
Many

war.,

Co., Jefferson City,

manufacturers,

of

sales

&

develop

promptly

be cleared up.

soon

our

pick-up of business in the rural

claims.

and

The net proceeds

of

the

1,500

units

result

from the sale
will

provide

teria,

—

additional working and

capital.




operating

plated

o

*An

as

states

of

hys-

sharp accelera,

,,

e

expansion of milling

facilities, increased production and

new

as'well

,

ions

funds for the

in

presen

y

con em-

by

of you to find out that from dominant problem

Dr.

Backman

before

total

war

million

the

National Association of Music

Merchants,
New York City, Oct. 17, 1950..

ago.

spen(jjng
less

corresponding
The

the home

fr0nt- Expanding incomes and de-

period
of

,

(4)

of

credit controls for instalment pur-

earlier this year and the demands

lower

chases and housing, sale of cotton

was

a

areas.

year

creasing

supplies

of

goods

will

actually create inflationary pressures. The

was

than it

combination

on

Business spending on new
plant and equipment has been in¬
creasing under the stimulas of the
expansion
in
business
activity

months of the current fiscal year,

$278

program.
address

rnany

in

increase

in

taxes,

imposition

Continued

on

page

Jfe

12

The Commercial and Financial Chronicle

(1496)

the

of

Tax Increases and
By CURTIS ter KUILE*

analyst

start

United

of

the

Government would

States

heavy

has

addi¬

cial

tion

of

such

prices

of

tax-ex¬

many

bonds
have
risen,

will

resulting in

be

empt

the

of

20-year

that

it discloses clearly

rise
War

II;

rose

mu¬
ter

Kuile

It

when

tax

taxes

tends

also

raised

once

are

that

show

to

to

a

high level it is exceedingly diffi¬
cult to bring about any substan¬
tial reductions.
The most impor¬

in Connecticut,

is obtainable

tion
Curtis

example the

this

$2,070 in 1939 to $10,in 1944, or almost five times

150

empt from Federal but also State
income taxes.
This same exemp¬

20

the Worid

disclosure

tant

produced

by

a

other States
comparison of the first and second
are imposed.
graphs has to do with the evident
Moreover municipal bonds issued
about 1.90% at present.
lag between the time of an income
Congress has now passed the in Alaska, Hawaii, also Puerto
tax boost and the final effect of
new
tax bill.
The new rates for Rico are exempt from Federal ana,
such a boost on the average prices
individuals are
not
very
much State income tax, no matter in
of municipal bonds. It is easy to
higher for the balance of 1950 but which State the holder resides.
recognize from these graphs that
There is shown herewith two
increase about 14% for the year
municipal bond prices did not at¬
1951, which is the year for which graphs. On the first one the writer tain their
highest levels for any
taxpayers will have to make care¬ has
plotted
the
(Dow Jones)
particular move until a year or
ful provision. In that year a single monthly
average
of 20 20-year
possibly two years after the tax
person with no dependents and in municipal bond yields for the pe¬
increase
which
produced
that
the $25,000 bracket v/ill have to riod from January, 1939 to date.
move.
from

2.20%

July

on

Pennsylvania

income

where

15 to

and

taxes

$9,796, whereas he This chart shows the action of the
would have to pay only $3,600 un¬ municipal
bond
market during
der the present law.
Under the certain critical times. It will be
same
conditions a person in the noted
that
the
average
yield
pay

tax of

a

$100,000 bracket will have to pay
In

where

cases

portion of
derived

a

taxpayer's income is
it

investments

from

is

War II. An abrupt rise from

1.92%

to

ment of
*The

who is connected with
Hailgarten & Co., New York City, is a
graduate
mechanical
engineer,
Cornell
University. He has been engaged in en¬
writer,

and the investment business
years and
is a member of the
Engineering Society and the New
York Society of Security Analysts.
gineering

for

many

Cornell

the

Then

curve

after

2.82%

each increase in income tax rates.

the

curve

1.40%

Har¬

there

dropped rapidly to
to an all-time

up

in

April,

1946,

this

If

1950

1940 L941

1942

1943

L944

tax

After

1946

1948

1947

1949

1950

for doubt

room

in taxbonds as a result of the
bill has only just begun.
upward

move

hypothetical

our

payer is going

1945.

then

admitted

be little

all,

which the realization that the end

factory

tax¬

to have to pay $10,-

bond

yield

the

average

municipal

stands at 1.97%

curve

a 1.40%
following the 1944-1945 tax

basis

Corp.

feet of floor

time

the

television

sories in
about

A

1

ft

A

/

I

2,3

ditions

l.S

:

2%

u

«

j/%

due

AVERAC E OF « 'WEIJTY

perhaps

but

than

On
Co.

important
to

up

a

figure which

be

A. N. McGeoch, Jr.

call

B

and

A,
of

amount

proceeds

with

ated

•

the

Milwaukee

207

East

Michigan

bonds

>.

McGeoch

Mr.

,

manager
SI RTAX

was

Holo-Krome

subsidiary

TJIITG".

M.

DLFLi

the

between the

merger

If approved by stock¬

shares of First

20

$300 in cash for each

would

of

be

First

operated

This

during the past

year.

Co. will meet Oct. 20

recommendation

of

to vote on

the

ment

war

he

was

capital from $700,$1,000,000. If approved, the
company plans to issue 12,000 new
shares, $25 par, at S50 a share.
Recently the bank acquired the

its

a

Inc.,

$80,000 addition
Holo-

an

in

plant

Corp.,

Home

Elmwood.

Krome

manufactures

and set

and

Trust

Co.

cap

*

bank

will

he

operated

as

United Aircraft Corp. has taken

the government-owned plant

over

at

Southington

the

Pratt

that

used

was

Rejoins First Boston

by

(Special

and

Whitney Division
during World War II.
The plant

had

been

clared

idle

since

surplus
is

It

war.

facture

it

the

at

expected

that

of engine parts

The

Financial

Chronicle)

de¬

ton has

rejoined the staff of First

the

was

end

to

CHICAGO, 111—William D. Hil¬
Boston

Corp., 231 South La Salie

of

Street.

He has recently been with
Coffin & Burr, Inc.

manu¬

will begin

in several months.

With E. W.
On Sept. 30, Jenkins Bros, called
for

redemption
at

$105

its

dividends.

equity

7%
The

facturing

quisition

with

of

Edward

30 State

stock.

Co.

Sept.

on

of

of

Ackley

Financial

Chronicle)

W.

Ackley

&

Co.,

Street.

sk

meeting

a

to The

BOSTON, Mass. — J. Parnell
Thomas, Jr. has become associated

ac¬

consists

common

#

At

and

remaining

capitalization

two classes of

preferred

share

per

(Special

Manu¬

authorized

the

With Hamilton Managem't

the

22

Capewell

the

business

(Special

to The

Financial

Chronicle)

ac¬

DENVER,

Col—Blan

P.
Dysart, Jr., Clara C. Lievens, Blanche

The

of

Armstrong Manufacturing Co. and
the company has since exercised
its option to purchase.
It is be¬

Sink

Frank

Tester

have

joined the staff of Hamilton

Man¬

that

the

and

agement

acquisition of the

Armstrong-Bridgeport pipe
tools will strengthen the manu¬
facturing and selling position of
Capewell.

W.

New

has

Haven

taken
to

liens,

Clock

down

PRIMARY

Watch

&

used for

for

release

of

of

its

Connecticut Securities

mortgage
in

debts

$300,000

TlFFT BltOTHERS

the

increase

and

Established,

has

months

of

yet

for

Operations

not

the

1950

York

&

New

York

Curb

Boston

i

Stock

Hartford 4

Tel. 7-3191

New York: Bflrclay 7-3542
Bell

Teletype HF 365

a

co-

We

maintain:

Prior to

Primary Markets
r

in the invest¬

Connecticut Securities

City.

Exchange Member

t

*
■

♦2070

♦
-




'

|

Committee of

1
t

Exchange
.

CURTIS TER

the

KUILE".

elected

to

CHAS.W. SCR ANTON

ijc-

lU

MEMBERS

;

of

A.

M:

Law

&

Company,

Spartanburg, South Carolina.

NEW

New
York:

New
'*

;

> 1

CO.

&

!■

.

memr^

bership Henry J. Blackford, part¬
ner

9/24/50

has

Executive
^tock

Mid west,

...

.

(

Exchange*
(Associate)

Exchange

9 Lewis St.

been
first

showed

1907

Members

New

plant modernization and

improvements,
used.

IN

Hartford and

Co.

$1,055,000 of

payment
of

MARKETS

off $455,000 to bank

pay

amount

Corp., Boston Bldg.

❖

•t

working capital by $300,000.
The
remaining $745,000, which is to be

Com¬

formerly

CHICAGO,; 111.—The

a

branch.

Street.

business in New York

Midwest

If.-

of

through purchase of its
4,000 shares at $260 a share.
The
new

#

Bank

Darien

screws.

hollow

*

;3487

a

directors

in

the last

a

as

National.

to increase the

Veeder-Root,

serving in the U. S. Navy during

ILULlU'a

and

agreed

Stockholders of Stamford Trust

the

*

Screw

of

plans to build
to

of the Milwaukee office

of Harris, Upham & Co.

IRACKE C

have

000 to
*

1

-

2

Bridgeport

After the merger the Shel¬

banks

and for the

$7,030,000

*

seven

pany,

TAAl AfEK

of

in

Nov.

on

C

of
of

cost

will be the ninth merger that has
taken place between Connecticut

due
will

F,

a

or

bank

branch

construction program.

current

creditors

MILWAUKEE, Wis.—Arthur N.

[9268

3912

000

The

to

used

series

used

McGeoch, Jr. has become associ¬

$25,

share.

Power

series

of

be offered

National

$1,800,000 RFC loan, which it has

500

•

bonds,

a

holders, holders of Shelton Trust
will

more

issue

at

Trust Co.

two banks.

produc¬

an

Co.

of

to terms

Locks,

Connecticut

1980.

1,

lieved

With Milwaukee Go.

TAX

acces¬

❖

privately

mortgage

interest

10%

obtained

line of

CSpecial to The Financial Chronicle)

INCOME

*

3,

placed

Oct.

Trust

of Shelton

$10,000,000 first and general 2%%

are

3w2Q, ;

FE )ERAL.

and

ton

Oct.

The
was

£

tion rate.

the

obtained in the spring of 1946.

♦ 1 0,150

*3

and

current

sii

a

Directors of First National Bank

present
producing

is

Windsor

the

double

that

20 YE AR

E OND Y ;elds

$893C

was

At the

antennas

to

to

$120,000.

that

will be possible to

it

Canada

by

plant at Unionville. In
days operations will be

transferred
where

bonds

even

be down to the 1.40%
was

MUMIC IPAL

gradual

a

is

Locks

area.

point where the average yield will

-2.6a:

WO JTHLY

for

writer

opinion

tax-exempt

of

advance,

m

2.52.3

the

of

prices

2.2C

1

{tJ

firmly

\f

the

nevertheless

ket,

v

.97^

2.82,3

of

course
•

arise to alter the
the municipal bond mar¬

may

Scovill

a

60

being

rights in this

in

and

Metal-

company

the

own

was

for continuous casting of

metals.

company

stockholders

is always possible
that other entirely unforeseen con¬
it

to

process

Medlicott
The plant contains 105,000

boost.

Although

formed

new

a

Co.

purchasing

Continuous

in

Corp.,

Corp.

occupied

today, while it got up to

1.403

cast

three-story fac¬

a

Windsor

in

formerly

crued

Yet

interest

an

tt

Plascomold

—

purchased

year

1945.

for

*

Pointe

La

1951, against $10,150 for the

L951.

taxes

cur¬

reaching

country
«

stock

income

people

the companies

among

the year-end and possibly

*

Manufacturing

450 to 500 later.

year

in

260

anticipates

but

*

*

Scovill

purchased in

was

employs

1949,
300 by

Potter

space.

Johnson, which

the

783

1939

the

exempt

high
after

is

theory

can

that

2.52%. Additional taxation pushed
of

period of years after

a

and

rates

of
tax-exempt
Also that municipal bond

drop, for

announce¬

Pearl

tax

yields

in many years.

of

re¬

prices tend to rise, and their yields

heavy Federal income tax

increases.
bor

the

followed

definite

a

income

between

the

bonds.

ber, due to the outbreak of World

substantial

a

lation
and

it

to be reasonable to

that there is

assume

dropped from 2.62% in June, 1939
to 3.20% in the following Septem¬

$66,798 instead of $58,762.

discussion

above

the

From

would appear

$228,000, well

the

feet

tory

con¬

from

in

Johnson

includes about 265,000 square

has

the tremendous

due to

in taxation

tucket,

of

factors

its

by

and

of

below that
corresponding period of
1949, but September was expected
to show the first operating profit

subsidiary. The
Co., in PawRhode Island.
The plant

Potter

surtax

be ob¬
a
close inspection of
graph. To begin with,

this second

issued

bonds

$25,OCX)

importance may

by

occupied

dependents and

no

the

Certain

served

tax-exempt

Fed¬

loss

of

the land and buildings

single

a

bracket.

yield of from 2.40%

overlooked

by

The Niles-Bement Pond Co. has

purchased

rently,

the

of

dollars

paid

tax

in

shows

graph

siderable

New

by municipalities or authorities in
New York State are not only ex¬

bonds

nicipal

a

of

is

over.

average

yield

having

a

de¬

a

yield.

average

of actual

income

who

In addition it should not

to 2.90%.

a

of

decrease

State

to

second

taxpayer with

present

exchange of the 2.50%

provide

broadcasting

1.92%

a

number

eral

yield of 1.80% a net gain of 0.60%
may
be obtained.
Carefully se¬
lected tax-exempt revenue bonds

increase

the

the

under

bonds

bonds

York

a

to

The

after tax of only

return

an

taxable

level

to
As

in the $50,2.50% bond

person

a

Then suddenly

higher taxes. This caused
curve
to
rise from a 2.20%

the

by

Connecticut Brevities

yield.

mand for

holding

even

By

law.

burden.

anticipa¬

an

net

a

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finan¬

tional

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000 bracket

the

meet

to

example:

an

be forced to raise income tax rates

President

the

possible
to
effect savings
switching
taxable
securities
bonds which are tax-exempt.

Korean

evident that the

2.50%

a

the Korean War followed by

came

of hike in Federal income tax rates.
the

to

Thursday, October 19, 1950

.

a

the

in taxation.

crease

contends the course of municipal bond
prices, barring unforeseen conditions, will be upwards, because

Since

force

Marshall Plan ex¬
penditures, subsidies for farmers
and other heavy demands on the
Treasury caused the curve to fore¬
tell the possibility of another in¬

Tax-Exempt Bonds

War it has been

surely

steadily pushed the

down

curve

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Security

would

war

reduction

tax

.

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7-2669
*

Volume 172

Number 4952

.

.

.

The Commercial and Financial Chronicle

(1497)

fering

Fight
Aggression: Truman

President, in San Francisco address,
cause

President
San

at

address

Francisco,

conference

Wake

his

It

furnish

to

The

of

for

the

the

crease

t h

to

and

their

launched

also
the

banner,

in

history
have
under the banner
peace

bitter

a

imperialistic

attack

policies

of

Soviet Russia.

just returned from Wake
Island, where 1 had a very satis¬
factory
conference
witn
Gen.
Douglas MacArthur.
I

understand

that

speculation

there

about

has

why

I

made this

trip. There is really no
mystery about it. I went because
I

wanted

talk

to

Gen.

to

Mac-

Arthur.
There
sonal

is

substitute

no

conversation

mander

in

the

with

field

who

com¬

of

people

have

San

Francisco

that

shown

they appreci¬
the importance of United Na¬

ate

tions

as

give

strong

our

United
and

Nations

be started.

its

ao

free,

the

a

soon

real

very

fairs.

I

alone

71

that

told

am

in

this

organizations

area

cele¬

are

The

Nations

United

in

here

this

five years ago.
itie

It

estab¬

building

very

founded in
belief that

was

in

and

nope

was

the

mankind
could
have
just
and
lasting peace.
Today as a result of the Korean

the United
than it has

struggle
stronger
We know

tions

that the United Na¬

now

create

can

Nations
is
ever been.
in¬

of

system

a

ternational order with the author¬

build

in

the unity of
meeting the
result

I

went

When

I

Arthur

met

with

Gen.

discussed

we

Mac-

plans

for

see

Gen.

Wake

to

MacArthur

Island

to

because

great

moving
I

and

did

feel

not

there

over

are

should

he

be

have

conference

with

been

World

policy

our

War

II

ever

achieve

to

tries then

From

the

over

years.

"United Nations"

that

was

to put down an¬

day

until

this,

the

strength¬

active policy of coop¬
eration among the free nations. It

by chance but as a result of
steady policy that 53 mem¬
United Nations rallied

immediately to
voked

the

meet

unpro¬

aggression against the Re¬

public of Korea.
It

has

been

that

have

we

common

joined

purpose

during

the

past five years in building up the

strength of the peace-loving forces
the

world.

We

have

contrib¬

uted to this end through the Mar¬
shall Plan in Europe and through
economic assistance in many other

increased

this

Our

sole

con¬

purpose

establish

to

the
,

in

United
We

Far

our

Eastern

relationship
world

situation

its

of

asked

I

peace.

and

problem

the

to

Gen.

have

for

that

place

Far

the

in

East

else¬

or

Mac-

No

to

world which

cooperate in this effort

lasting

a

peace.
Communist
Imperialism

But
would

have

not

it

Instead

so.

of

working with

other governments
in mutual respect and cooperation,
the Soviet Union attempted to ex¬
tend its control

embarked

nialism

over

other peoples.
a

upon

taining

his

ideas

the

on

and

security
throughout the Pacific area.
We

peace

discussed
for

need

with

of

us

confidence

which

will

and

early Japanese

an

Both

treaty.

Japan

be

to

look
a

the

peace

forward

Japan

new

peaceful and

pros¬

McArthur

Gen.
the

fighting

scribed
ments

forces

Korea

is

not

the
of

in

told

He

magnificent

all

the

serving

United

under

about

me

Korea.

Nations

making

are

in

spectacular

the fighting there
over.
The North Ko¬

yet

Communists

rean

forces

But

progress.

still

refuse

Soviet

new

stubborn,

up

but

futile,

re¬

Nations

forces

are

sistance.

com¬

still

oppose

Korean

them.

The

Communists

mand.

the

the

effectively will

Along with the soldiers of
Republic of Korea these forces

soon

power

to

be at

of

resist

an

end.

have

now turned back the tide of
However, the job of the United
aggression. More fighting men are Nations in Korea will not end
coming from free nations all over when the fighting stops. There is

the

world.

these
peace

I

forces

am

will

confident
soon

that

restore

to the whole of Korea.

a

big task of rehabilitation to be

operate

As

to

has

refused

to

allowed

not

cooperate

co¬

Obstructions
In

viet

the

Americans

naturally take
the
superb




posed

in

and

in

Charter.

For

Nations
end it

social

even

Russia

the So¬

in

ob¬

These

to share

spiritual

the

tactics

of

months

of

world

and

threats

and

abetted

the

of

have

or

it

nations

on

Soviet

freedom

human

political

idea

ary

We

contrast

an

to

their

own

know

They

system.

strength

it produces

because

intolerable

that

our

comes from the freedom
well-being of our citizens.

because

strong

are

never

we

and

people, for fair wages
living conditions, for
opportune ies for business
our

better

pro¬

"uniting

for

lives

better

We are strong

cial

security
labor

our

for

farmers.

our

because of
system,

unions,

so¬

our

of

because

because

of

our

agricultural

strong because we use our demo¬

ther outbreak
In

our

of

own

aggression.

cratic

co¬

clear that aggression will not pay.
Our military
establishment
the

supplies
in

away,

necessary

into

Korea.

and

men

miles

5,000

amazingly brief

an

riod of time.

This remarkable

complishment

should

pe¬

This

We

equipped than

which

gers

still face
continue

to

We

forces

strength of
Army,
Navy

—

We

to

our resources

less

and

will

We

more

difficult, and it
sacrifices. But

Let

no

free

and
to

life

of

way

that. We
and our

this country

in

will give all that we have

we

We

them.

preserve

are

going

ahead in dead earnest to build
defenses.

our

will

There

because

letdown

the

of

we

go

Communist

the

sysr

must

be

no

successes

let

us

re¬

When

nized

armed strength because

Soviet

policies leave us no other choice.
The Soviet Union can change this
It has only to give con¬

positive proof of its in¬
work for peace. If the
Soviet Union really wants peace,
it must prove

it—not by glittering

promises and false propaganda,
by living up to the principles
of the United Nations Charter.

but

Wants Proof of Soviet Peace Aims

it

can

prove

it—and could
any day since

proved it on
25—by joining the rest
the United Nations in calling

have

of

the

North

upon

the fab¬

down

their

arms

Koreans

the

free

upon

and

really wants

can prove it by lifting
Curtain and permitting

it

Iron

terrible

lay

at once.

If the Soviet Union

peace,

to

exchange of information
If the
Soviet Union

ideas.

peace, it can prove
joining in the efforts of the

really wants
it by

United

Nations

to

establish

a

system of collective se¬
curity—a system which will per¬

X
of

recog4

we

thart

more

peoples of the Far
peoples in other

the

Today,

well

as

as

parts of the world,

struggling

are

the false revolution of

com¬

munism. Soviet communism makes

false
it

claim

to

these

for

stands

human

to

into

colonial slaves of a new

ism.

In

the

of

the
we

us as

them. We

the

imperial¬

this time of crisis

peoples

and

Actually, it

them

turn

peopled

progress

advancement.

seeks

ask;

we

Far East tQ
try to under¬

not trying to
push
blueprints upon them
as
ready-made answers for all their
complicated problems. Every
people must develop according to
its
own
particular
genius
and
must express its own moral and

cultural

We
in

are

values in its

believe that
with

common

own

we

the

way.

have

•

much

peoples

ot

the Far East. Their older civiliza^
tions

have

hope

our

be

much

new

to

teach

We

Asia

know

cherish

We,

us.

developments may

helpful to them.
that

*

the

their

•

peoples

freedom

of

and

independence. We sympathize with!
that desire and will help.them

to

attain and defend their independ¬
ence. Our

entire history proclaim^

our
are

policy oh that point. Our men
fighting now in Asia to help

secure

workable

and

problem

that

East,

If the Soviet Union really wants
peace,

1

military problem.

that

our

whole

the

in the Far East,
this is far

peace

a

MacArthur

Gen.

discussed

because

increasing

Military

Problem

armed strength
are

East More Than

Far

ing

We

in

be supreme.

the

to.

that

nations,

tern it is Soviet Russia which

increas¬

our

other

of

Communist

not

want

freedom

because

that

we

the state

system

It is equally opposed

supreme.

member

are

men.

Communist

violently opposed to the free¬
individual, because in

with

forward,
we

all

international

dom of the

that

up

achieved in Korea.
As

own

our

We

aggressor

independence

our

We have

in

dangers we

make any mistake about
value

Air

and

is

going to be prepared

are

them.

meet

work

far from being revo¬
lutionary, is the most reactionary
movement in the world today. It

to

of the

to the tyranny of in¬

idea

progress for

The

military purposes,
consumption.

many

aware

this

know that it ac¬
knowledges no barriers of race, or
nation, or creed. We know that it

is

will be

exact
are

we

armed

civilian

to

All this

our

devote

held out to all nations

we

answer

country.

of

must

our

movement,
increase

military pur¬
continue to in¬

must

the

crease

the

means

production for

poses.

of

source

And this idea—this end¬

ternational communism.

we

us.

must

We
our

to

today if

are

we

is what
as

to be protected from the dan¬

are

the

lessly revolutionary idea of human
freedom and political equality-

ac¬

into any false sense of security.
must
be
better
armed
and

us

the

is

strength.

seen

delude

not

to

for- all

people of our country.

we

are

continuing
to
build armed
forces strong enough to make it

are

continually
life

better

a

We

program.

institutions

achieve

country, and in

operation with other countries,

upon

Aggression
aggression, aided

and

equality. We have been guided by
the light of that idea down to this
day. * The forces of Communist
imperialism dread this revolution¬

more

Assembly to act quickly
effectively in case of any fur¬

increas¬

peace.

history began with

revolutionary idea—the idea of

and

for

nation.

conquest

military glory.
Our national

a

for

for all

are

Secre¬

has

desire

stop working for better education

together.
Acheson

militaristic

a

no

to¬

undertake

Nations,

we

not

and

the

.

to

plan

an

imposed

are

the

for

last June

have

choice

a

it

But it is
have made gladly.

General

United

boycotted the Security

ingly greater strain
ric

task

a

the great

Council.

Union

not

we

made

resolutely.

and

understand

to

recognized

causes

firmly

have

We

made.

stand

It has refused

economic,

have

tention to

persisted

activities devoted

remain free.

the free

State

a

one

strength with

is

United

of

but

This is the choice

free world.

crete and

by obstructionism in
destruction.
Thousands the United
Nations, have caused
thousands of
people
are grave concern among the nations
special
pride
in
and
there is» serious which are honestly seeking peace.
achievements
of
our
own
sol¬ homeless,
diers, sailors, Marines and air¬ danger of famine and disease iri Th'e response of the free world to
the coming winter months.
.
men.
the aggression in Korea has given
They have written a glori¬
ous page
The United Nations is already those nations new confidence. But
in military history. We
can all be proud of them.
extending relief to ease the suf-; events in Korea have also made it
We

tary

until it gives real
peaceful intentions, we
are
determined to build up the
common defensive strength of the

with those

Nations,

has

It

arms

of

situation.

Soviet

of

United

Union

and

task for the United

a

reduction

things,

proof

and tne

And

the

these

its

nations it could not control.

result of the Commun¬

a

style.

has

and

satellites

aggression Korea has suffered

done.

ist

Union

struction.

United

The

de¬

In

colo¬

to

achieve¬ growing in strength and are now
Nations far superior to the forces which

his

Soviet

acknowledge the authority of the
United Nations.
They continue to
put

perous.

United

The

—

have

oppose

undertaking

face.

hoped that the Soviet Un¬

build

It

country in the

the So¬

Here in San Francisco five years

purpose.

where.

recognize

opposition from

ion would

world

nations

gether.

Force.

viet Union.

ago we

no

to

that, as
steadily along in
postwar years, our policy of
building a peaceful world has met

and

are

have

This new
ways
really wants peace-has any rea¬ colonialism has already brought
in which
the United States can
son
to fear the United States.
under
its complete control and
most effectively assist the United
The
only victory
we
seek is exploitation many countries which
Nations in promoting and main¬
the victory of peace.
used
to be free.
Moreover, the

Arthur for

free

the

is

independ¬
stay only
needed by the

nations

free

have moved

we

will

Nations

seek

the

end

gaining strength.

peace

they

as

Korea

We have also

this

to

world

the

troops

Our

long

so

in

territory or special
Jong-range ability
privilege. Let this be crystal clear
to maintain world peace.
to all—we have no aggressive de¬
At Wake Island we talked over
signs in Korea or in any other

fidence

parts of the world.
contributed

the

moved

that

of

part

a

as

policy and

same

of

They must
strength.

is not

bers of the

size

peace," to make it possible for the

ened by an

that

great

choice if they are to

This is not

of peace has been

cause

its colo¬

threat to world peace.

States alone.

free nations have

allied

of

drastic

and armed forces.

maintaining

In both Europe and Asia
armies pose a constant

their vast

sup¬

other aggression.

constant

Peace and Rehabilitation in Korea

ence.

from

back

come

strength.

and

are

the

regulation of all other

We

Armies

Union

forces

pur¬

in the dark days of the
World War by the coun¬

second

Vast

satellites

to

purpose

together

name

We

Nations.

has

since

the

of

these results for Korea.

now,

from his post too long.

away

I

Events

success.

swiftly

It

Assembly

operations

important

very

with

General

United

I

did not want to take him far away
from Korea, where he is conduct¬

ing

peace

the

out

The Soviet

freedom—a

been

first¬

Russia's

and

elimination of the atomic

and

We

timidate other countries, the free

sense

firmly held

The

of
peace.

knows

from

nity.

a

help

in Korea is the
and

indeed,

—

purpose are prepared to back it to
the limit with
every device, in¬

men

nations

free

life

self-supporting

and

republic.

aggression
a

the

will

hope of

every

free

and

demo¬

our

So long as
they persist in maintaining these
forces and in using them to in¬

to

part

united

In

that

to

of relief

The United States will

full

Korean

of

support

program

reconstruction

and

bomb

But until the Soviet Union does

violent

concept of human dig¬
Those who support this evil

armed

will

critical times.

there

decent

mit the

danger.

a

upon

upon

as

upon every

tne immediate emergency. We

vital force in world af¬

a

faith,

of

resources

through
military aid to countries threat¬
ened
by aggression.
All around

problems

cratic

face

attack

long

all faced with

present

we

cynical

is. still

So

cluding military force.

completing the task of bringing
to Korea. We talked about
the plans for establishing a "uni¬
fied, independent and democratic"
be of help to all of us in deciding
government
in that country
in
upon
the right policies in these accordance with the resolution of
the

hand experience. He has informa¬
tion at his fingertips which can

Today,

world.

we are

and

that the

ever

aggression

the

true,

clear

a

of

in

this is

first used

per¬

the

the

which the

ity to maintain

for

abroad

nial

pursued

lished

I have

al¬

being

apparent than

spirit

our
Army and our Economic Co¬
operation Administration to meet

pose

text of the Presi¬

dents address follows:

has

are

Our Resources

use

peace

brating United Nations Week.
The complete

been

will

We

port

Nations, they are succeed¬
This is a tremendous step

The

independence,
particularly those in the Far East,
on

in

organization
aggression.
Under
the banner of the

down

Railroads

Use All

world.

President Truman

nations

maintain

is
we

international

an

put

Will

forward in the age-old struggle to
establish the rule of law in the

in the struggle
to

time

in which the

reconstruction

ing.

e

States

all

It

that

actions

want

vivid

a

bridges are being re¬
built, and public utilities are be¬
ginning to function.

importance
peoples of the world.
first

of

me

way

United

support of the
United

Nations

arms

up

that

istic

aggression. He
pledged

the

to

fight

commun

troops.

restore

restored,

supreme

nations who

of

arma¬

ments to

of

the

taken

in¬

to

is

For

plans
United

States

United

all

of the

commander

world

gave

process

the

Korea

will

alter

present

the

Muccio

ready begun.

right man for this pur¬
pose—a man who is a very great
soldier—Gen. Douglas MacArthur.

the UN forces

not

Nations'
for

and

evil

a

asked

was

first

homes

picture

pride to

source; of

country

the

United

had

that

Korea

a

their

more

General MacArthur and Ambas¬

sador

Assures Asiatic

our

fortunate

victory of

in

also

is

that

us

Douglas of

Gen.

at

Island,

asserted
the

17,

following

with

MacArthur

Oct.

on

in¬

their factories.

designs by U. S.

Harry S. Truman, in

broadcast

a

Communist

brought about, and it
preparing to nelp the Koreans

rebuild

free nations of full support against Communist aggression and
denounces imperialistic tactics of Soviet Russia. Denies any
territorial

has

is

victory in Korea will

says

relaxation of rearmament program.

no

which the

vasion

Will Aim to

13

thp freedom and independCcntinued

on

page

16

T

14

The Commercial and Financial Chronicle

(1498)

ing the acceptance of capital gains

Leavitt & Bry to Admit
Leavitt

&

Bry,

New

York

City,

2few

York

Stock

61

distributions
of

Broadway,

Mutual Funds

members of the

admit Eugene V.

Exchange,

will

NATIONAL
STgcK Series

your

request

upon

investment dealer,

NATIONAL

or

from
from

SECURITIES

RESEARCH

&

CORPORATION

^OCK

The

ratio

Directors

record

states,

scale

your

living only by placing your
ings in the kind of things
can

in

advance

eral

price

of

sav¬

that

of

level advances.
Such
are
goods and
services

value

whose

fixed in rela¬

not

is

tionship to the dollar.
Cash and
bonds, contracts for the payment
of stated

amounts

of dollars,

will

retain
their
quoted
values
in
dollars, but the buying power is
what you use your dollars for.

stocks

represent owner¬

ship of goods and services.

Of all

as

of

Octo¬

the

since
Assets

Fund

Group:

Repurchases, by Quarters *
2nd

3rd

1st

the

offer

offsetting,

investor

tion.
1st

2nd

4th

3rd

Quarter

Quarter

Quarter

Quarter

Quarter

1950

1950

1950

1949

1949

1949

1949

1.34

2.58

3.71

6.39

6.12

4.23

3.17

4.54

5.10

7.05

5.74

1.10

1.43

1.61

2.38

1.58

Quarte

in Group

they

marketable

of

over

securities

best

a

important

problem

Quarter

alike

than

that

non-

infla¬

of

His

prewar

savings of war and
years, his investments in

44

2.12

28

4.32

Specialty

28

.39

Balanced
&

♦Figures

.

to

275,162

share

1.72

in

the

effect

of

Corporation,

inflation

with

in

its letter,

demonstrated

the

insidious

sample family food

bill. Comparisons
were made in a table with the average price of 15 staples in 193941 and for every year since. The price jump from $8.85 in 1939-41
to $19.80 in 1949 is an effective story for every breadwinner and
a

short-term,

the

performance

of

pointed out that "over the

stocks,

or

for

that matter any
deviate substan¬

that

antee

shares

price

the

will

rise

value

that

of

with

the

there

level—as

guarantee

is

the

the

rise

term, and in
light of the historical record,
funds'

lesser

a

investments

obligations

.

one

in

the

Kondratiel'f cycle.

values and

^►nim

report to shareholders dated Sept.
30, 1950, shows assets at a new

dividends

which

far

increase in commodity prices.
"prospectus from
investment dealer
or

PHILADELPHIA 2, PA

outstripped the rather moderate

"Nevertheless, history shows that over a long period of time,
acquired at a reasonable average cost by making purchases at
different levels of the stock market, representative common stock
values and dividends have constituted an effective hedge against
reductions in the purchasing power of the dollar."
Taking 100 as a base, Vance Sanders illustrates that since 1933
the cost of living index has ri^ep to 178.38, the rate of income re¬
on

Balanced

Fund

Reports

Eaton & Howard Balanced Fund

Massachusetts Investors Trust has risen to

194.52,

high of $59,285,133,
$8,660,795 since
the year,.

an

beginning of
Shares outstanding total

assum-

Stock

44

Common
Balanced

26

Bond

98

Funds
INVESTMENT FUNDS
investing their capital

IN

&

12-31-49

9-30-49

$1,000,665

$942,952
540,932

Common

Stock

558,557

506,917

489,663

440,259

$2,115,919

$1,973,547

$1,755,160

28

Balanced

Funds

26

Bond

98

&

Funds—

2nd Quarter
1950

42,055

1st 9 Mos.

'

499,865,

an

from $7,increase of 81% from

$13,560,000,

the low of the market last year to
Oct.

7,

1950.

Commonwealth Up
As

of

Investment

90%

Commonwealth

Sept. 30,

Comp any's

net assets

reflec.ing a
growth of 90% since the beginning
were

$21,692 618

—

of the year.

Sales

nine months

for the first
amounted

1950

of

$10,533,400,

to

a

gain of 189%;.

Commonwealth's

Sept.
302

30

was

different

tributed

as

Common

portfolio

among
ar.d dis¬

follows:

stocks,

ferred

stocks,

bonds,

4.3%;

63.5%;

19.7%(;
U.

S.

Investment Managers

Government

|

Lord, Abbett & Co
New

York

—

Chicago

—

Atlanta

—

Los

Angeles

$110,284
88,532

43,540

132,395

32,217

91,480

60,860

$119,667

Total

$123,416

$383,439

$259,676

Repurchases
3rd Quarter
1950
44

Common

Stock

Balanced

Funds

26

Bond & Specialty

Funds

2nd Quarter

1950,

1st 9 Mos.
1950

1st 9 Mos.
1949

$24,187

$35,458

$83,155

9,727

13,734

33,780

14,568

29,611

29,214

81,027

32,389

$63,525

•

$78,406

$197,962

$66,936

2nd Quarter

1st 9 Mos.

Funds

Total

$19,979

INVESTORS
EE

Net Sales
3rd Quarter
Common

Stock

28

Balanced

Funds

26

Bond & Specialty

98

Funds.,
—

Funds

Volume

dollars;

Stock

$90,304

98,615

73,965

3,083

10.453

28.471

$45,010

$185,477

—

(No.

ooo's

1950

Exchange

1949

$76,409

29,806

$56,142

Total

York

1950

$12,121

32,328
3,344

3rd Quarter
New

1950

1st 9 Mos.

$27,158

—

2nd Quarter 1st 9 Mos.
1950

1950

A

121,616

135,496

373,505

may

be obtained from

investment dealer

1949

200

of shares—not

omitted)

Diversified Investment Company

Prospectus

$192,740
1st 9 Mos.

or

The Parker

your local
Corporation,

Berkeley St., Boston 16, Mass.

176,775

Boston 9, Massachusetts

21

*Figures compiled

Companies.

by National Association of Investment

Ei

TWENTY-FIFTH

ANNIVERSARY

YEAR

pre¬

corporate

Fund, Inc.

|

on

diversified
securi ies

1949

$159,564

26,267

Specialty Funds

1950




to

1st 9 Mos.

1950

$47,579

$51,345

_.

44

Congress Street

vanced

479,752

1950

44

CSeries S1-S2-S3-S4)

TLe Keystone Company
of Boston

has ad¬

that Knickerbocker Fund

Sales

98

be obtained from

Up 81%

Pettit, President, reports

Pros pectus upon request

(Series KI-K2)

COMMON STOCKS

Knickerbocker
Karl D.

$835,149

608,337

$2,354,340

28

PREFERRED STOCKS

6-30-50

$1,120,465

Specialty Funds

Total

BONDS
(Series B1-B2-B3-B4)

trade, and insurance
industries. Holdings in these in¬
dustries total 43.6% of the Fund.

LORD, ABBETT & CO.

675,318

Funds—

Funds.

3rd Quarter

Certificates of Participation in

natural

textile,

and

rayon

Total Net Assets

28

stock

retail

gas,

Open-End Funds
(000's omitted)
9-30-50

Custodian

common

in the oil, power and

Affiliated

Open-End Statistics—Sept, 30,1950'

Keystone

light,

Largest
are

increase of

the

f
98

cash.

representing

Eaton & Howard

...

if

turn

stocks, 2% in corporate bonds
17.5%
is invested in U. S.
Government securities or is held

compared with sales of $3,645,700
in the first nine months of 1949,

value, may
tially from the trend of the cost of living. One of the reasons for
this is, of course, that common stock values are more sensitive to
general business conditions and prospects than are the costs of
goods and services. The long bull market from 1923 to 1929, for
instance, was characterized by a large increase in common stock

investment subject to fluctuations in

to

and

fixed

despite

.

.

the

risk
in

than

per

$18.22

mon

real

long

demonstrate

from

80.5%
of
this
rapidly
growing Fund is invested in com¬

general
no

will

sun

value

asset

funds'

tomorrow—but, "on balance," and
over

can

Vance Sanders, in its latest Brevits,

become

Of course, there is no real guar¬

forthright and imaginative fashion, three funds this week
attacked the problem of inflation and the investor.
a

Parker

have

a

Funds Tackle Inflation Story
In

decade

profound problem in the rapid
disintegration ol' their worth.

number of times sales exceed repurchases.

are

past

and

increased

$19.99.

a

5.48

present income that may not
have kept pace with rising prices

year.
com¬

pared with $3,189,671 at the be¬
ginning of the year. Shares out¬
standing
increased
during
the
nine-month period
from 175,057

fixed obligations, the higher taxes
on

Stock__

beginning of the
total $5,501,862

now

more

forms

today faces the investor and

housewife.

50

assets

No

Ratios of Sales to

Investors Syndicate

WELLINGTON

report to shareholders
increased over 70%

30

in

No. of

Minneapolis, Minnesota

may

Sept.
shows

Reports

Stock Fund

Howard

&

Eatjon

holdings

to

Fund

Stock

price

things

common

are

Eaton & Howard

care."

Funds

Investors

INVESTORS DIVERSIFIED SERVICES

Prospectus

ural

they must be selected with

jumped

January 1, 1949, to September 30, 1950

Principal Underwriter and
Investment Manager

your

and

the gen¬

as

18.0% vin

in the power
light, oil, insurance and nat¬
gas industries.
holdings

great

BRADFORD, President

as

pamphlet

protect

can

Government

Largest

cash.

in

held
stock

ever,

Bond

Established 1894

"You

is simple,
conclusion,

accepting these figures, since they apply only

1950.
K.

excellent

the

In

cogent.

19.8% of the

in

preferred stocks, and 60.8% is in¬
vested in common stocks; 1.4% is

aggregate and therefore cannot be accepted as represen¬
tative of the behavior of any particular specialty or bond fund.

to shareholders

H.

has

the

Common

on

funds

pamphlet, "Infla¬
explanation
of
the

at the be¬

bonds,

corporate

and

$28.93

is

snare

per

with $27.14

invested

is

Fund

prospect of
period of years,
advances in
the price level of
the things you have to buy. How¬

Stock Fund has declared a
quarterly
dividend
of
thirty-seven
cents
per
share
payable
on
October
30.
1950

16,

and

Common

balanced

for

clear

value

Asset

compared

4.32 this last
quarter compared with 3.17 in the second quarter of 1950.
The bond and specialty group, which contains 26 funds, have
failed to reverse the decline in sales-repurchase ratios which be¬
gan in the third quarter of 1949.
The ratio this last quarter
was .89, compared with 1.10 in the second quarter.
However, one

Dividend Notice

ber

stronger than ever, with new

second quarter of 1950.

FUND, INC.
of

is

high records in total assets and sales of shares, according to fig¬
ures just released by the National Association of Investment Com¬
panies. Total assets, which have increased every year since 1941,
reached a record of $2,354,340,000, an increase of $380,793,000 over
Dec. 31, 1949, and $599,180,000 since Sept. 30, 1949.
Sales of new shares amounted to $383,439,000 for the first nine
months of 1950, while net sales, after redemptions, were $185,477,000. Gross and net sales for the same period last year were $259,676,000 and $192,740,000, respectively.
Both the common stock funds' group and balanced funds'
group reversed a nine-month decline in the ratios of sales to re¬
purchases. The ratio for the 44 common stock funds of sales to
repurchases was 2.12 this last quarter, compared with 1.34 for the

to

INVESTORS STOCK

Board

Sales-Repurchases Ratios Mixed
funds

Its

popular

II

inflationary process

$2,049,163 compared with 1,865,204.

ginning of the year.

releasing

its

of

Thursday, October 19, 1950

.

must be cautious in

120 BROADWAY, NEW YORK 5, N. Y.

The

of mutual

march

The

War

tion."

High

Group is

edition

revised

World

member¬

But

Prospectus

Distributors

By ROBERT R, RICH

Assets of Mutual Funds at Record

the asset value of

stocks, and

a

will

Fox

shares

MIT shares has risen to 169.55.

Fox to partner¬

ship on Oct. 26.
Mr.
acquire the Exchange
ship of Francis S. Page.

additional

in

.

.

[Z

Number 4952

Volume 172

.

The Commercial and Financial Chronicle

.

rent

receiv¬

3.2%; net cash and
9.3%.

ben 's,

ables,

.

year

gain

a

of

16%

available for

was

reductions

registered.

for

from 25 to 100%

previous

reveals asset
per
share of $4.36 as of
Sept. 30, 1950, compared with $3.80
per share as of Sept. 30, 1949. Net
fiscal

pany s

year

of the Fund, as of

1950,

the

tiaie

the

Total

Chemical Fund Income
Rises

cnenucil

sented

the

comp.nies,

represented

port olio

of

Chemical FunJ, Inc.,

show

average

an

dividend

in

gain of

declarations

during

first ni..e months of 1950
similar

period

20%

shares.

the

close

summarized

1949

(1)

The

Chemical

from

30,

Sept.

problem

1950,

$33,764,087

repre¬

the

15%

factors

change

in

Northern States Power
Company of Minnesota and its subsid¬
iaries furnish electric service
at retail to 489 cities and
towns, and
at wholesale
(directly or indirectly) to 114 additional communities.

be

may

act

to

to

10

a

reduce

Net

these

The total population
nual revenues of
$79

the

served

is about

located

are

in

and 44 in ooutxi

1,840,000.

With

value

asset

the

at

Principal business activities in the areas served are
agricul¬
ture, dairying, milling, meat packing, and
manufacturing, the last
being very well diversified, principally in the
lighter lines.
Approximately 89% of revenues reflect electric sales, 8% gas,
and
3%
heating, water, telephone, and miscellaneous.
About'

basic materials in response to this

taking

quarter,

situation.

(2) Part of the buying during
with the third
quarter clearly was of
months the
anticipatory type. In the ab¬

82%

of electric

Continued

from

11

page

sence

share

per

$16.03

three

earlier.

-

output is generated from steam, and the balance
with a small amount purchased.
Of the electric
revenues, 40% is residential and rural, 27% small commercial and

industrial, 21% large commercial

compared

share

per

t

is

the

framework of

war

Retailing

economy,

tinue

to

of

point. Today, however, there is
another problem which must be

electrical

is

considered. Will we have the goods
to meet consumers' demands?

comes

peak

will

and

support
which

reaching its postwar

more

provide important
in an area

to

This

brief

indicates

summary
incomes

consumer

will

con-

tinue to expand and hence provide
the basis for higher retail sales,
Under

ordinary circumstances, we
rest
our
analysis at this

could

I

should

give

like

credit

ports of certain basic commodities

the

in 1949, and in 1944 when the

That

this

is

Source:

942,000

1,024,000

tion

690,000

767,000

1,000,000

pated

690,000

900,000

the

96,000

118,000

tion forced

Business,"

September,

1950,

emerge

civilian purposes,

the

products

than

peak of World

Tne spread

(steel,

produce,

was

with

pared

are

no

War II.

wider

even

1949

we

three

for

and alu-

copper,

minum)

Since'so

The situation is similar for other
commodities.

is

suggest

these

The

Although

ments

What

clear.

cutbacks below recent output

aeeot sieei let us examine briefly
us examine
age ot steel,
briefly

that

in
^

81In :ycunUenrat^ot produe"
is

than

more

of

exc ess

iiifr

the

?

million
Tt

1944

k

above

uns

million

10

rate

and

in/in

the

has heen estimated

tons

.

1949

that the

if

15
+

rate.
war

^
^
fnn ual ou )1 e^u
Iw!,
° +?
P^t or ess than 5 milifestimate turns
«
MCplJr
™ W
5
IS or civilian
?nmore steel
available
+u

,

♦

in

]

n

consumption

than
5

l ad

we

million

for

sizable

all

1949

in

tons

more

than

during the

purposes

sPending

/

some

been

has

as

quarters,

close to

there will

record

a

estimated

nize, of

course,

cial

types

will

be

cated

that for
steel

of

nnch

some spe-

the

tighter

situation

than

these overall
Nevertheless, these data
by

suggest

significant

a

supplies.

indi-

figures,
do

not

in

cut

steel

In

addition, it must be
kept in mind that the steel indusis

try

10

capacity
million

destired

the

next

the process

in

new

pandirg
some

ror

of

ex-

ingots

of

tons,

by

a

program

completion

two

during

years.

One other point should be noted

in

connection

ation.
29

with the steel situ-

During the past four

million

tons

of steel

because

of

strikes.

average

of

almost 8

a

We

year.

substantial

could
part

requireirrnls
much

steel

as

of

and
wie

years,

This

was

million

meet
our

still
have




lost

were

all

an

tons
or

a

defense

have
had

as

for

255,600,000,000

the

projected increase in government
spending
would
still
be

its
a

the

than

close to the

presents

least

1949

1948 total.

the

favorable

further

increase

and

total
This

com-

situation

light,
in

high levels
mean

retail

rec¬

sales.

year

where

areas

the

curtailment of

supplies,

the

a

is

tnere

anticipate

be

little

these
a

experience

overall

that

any

basis

conditions.

long and
in

suc¬

adjusting

mark-ups

to

During such

on

balance

meet
a pe¬

the future

retailers

Jan.

can

with considerable

because

reductions

in

E, F. Hulton & Co.
CHICAGO,

govern-

etc. Tnis latter development would

Board

larger value of goods and

bv

cated
course,

part,

civilians than

the

indi-

Schmidt

has

E. .F.

111.

Edwin

P.

associated

&

Company,

Hutton

Trade

of

—

become

Building.

Mr.

Schmidt since 1913 has been asso¬
ciated with

Clement, Curtis & Co.

figures.
Of
this difference reflects, in
overall

make

1940-47, the number

years

the

dissolution

the

of

of

holding

reclmsicompany,

nercentage

down

the

to

balance

with

compared

as

for

stock, a
large com¬

common

other

some

non-contributory funded pension plan effective
Of the total contributions to be made during 1950?

a

is chargeable to
taxes

state

rates specified

at

in

the

1950

Revenue

Act, together with

income

taxes, the net operating cost for this calendar year,
will be $1,137,000 (of which about $700,000 was incurred in the 12;
months ended July 31).
This amount is equivalent to about 10c
Current

the 11,083,000 shares of common stock now outstanding.
preferred stock financing, and the retirement of $10 mil-t

lion 2%

Notes, will

common

stock by about $600,000 a year, or about 5c

a

share

on

Dividends

mean

have

been

net increase in charges ahead of the!

a

paid

on

of 70c per annum

since the stock

about

ago.

two

years

the

came

common

share.

a

stock

the

at

rate

into the hands of the public.

It has been selling recently on

it

abundantly clear that in the aggregate there can be fairly close
to
a
record
quantity of goods

Philadelphia

Jury Rules that
Chester de Willers Died

Mr.

Keizer Co. Adds

BOSTON,

lay

has

Keizer &

Mass.—Marshal

become

connected

Mo-

with

Co., 19 Congress Street.

did

Willers

take his own life in a Stony

cottage

last

not

Brook

winter a jury ruled

in a Mineola Supreme
Court at Long Island, N. Y., and
his widow, Mrs.
Mildred H. de

yesterday

Willers

of
to

life

(Special to The Financial Chronicle)

;

de

Ei

the

on

Centre,
his

is

$20,000

the Clock

,

deliberating

panel

cision

of

ten

returned

last

Willers

a

Neck,

a

men

half hour,

and

two

unanimous de¬

night in favor of Mrs.
in her suit against a

insurance

Willers, 50,
of

was

5

Clent

comparer.

and

then

Road,

a

Gre t

found dead of illumi¬

nating gas poisoning Jan. 4 in the
kitchen of his

cottage oft

summer

Oakfield

Road, Stony Brook.

The

firm

insurance

j

refused

to

the cash to Mrs. de Wilier^,
beneficiary in the policy which

pay

her

husband

citing

policy

insurance policy.

women

de

Rockville
collect

de

resident

A Natural Death

After
data

carried

was

of

entitled

total

rising prices.

These

the

with

Delaware.

expense 6.3%, or a total of 15.3%—abou': an
In the 12 months ended July 31, 1950 14.6% of gross

1950.

1,

Chester

with

services for

of

(Special to The Financial Chronicle)

expenditures for agriculture,
housing, veterans' administration,
a

connection

Exchange around 10% (range this year 13-10) to yield about 6%%.J

Edwin P. Schmidt With

na-

ment

mean

.69

in

government spendbe smaller than indicated

of

in

Power

ratio.

net increase in
may

7.9

(amounts in future years will be somewhat less) some $2,075,000:
operating expenses. Considering Federal income

to

retail

optimism.

tional product above the $282 billion seems certain. Moreover, the

ing

.69

40.0

maintenance

adoption
us

curtailment in

under

ex¬

price cutting may be ex¬
pected to decrease, thus contribu¬
ting to the overall margin.
In
light of these factors, it seems to
lace

.52

7.9

panies such as Consolidated Edison, Public Service Electric
Gas, Consolidated Gas of Baltimore, Detroit Edison, etc.
Earnings this year have been somewhat handicapped by the

In other

may

provides

past

guidance,

me

6.4

Complete 1950 figures are not available, but in the calendar
1949 depreciation allowance approximated 9% of revenues

revenues

fall¬

some

issued

States

favorable

in

results

ing off must be expected.

departments, increases
pected.

In

encroach¬

production

war

sales.

record

shares in

9,527,000

on

shares

average

those

because

gross

of

riod,

national product less

.52
.54

42.6

'

_

♦Based

and

these

in

If

6.4
6.5

44.0

_

_

1940

fied

.50

49.1

1941

Northern

.93

6.2

46.6

_

1942

the

share

their

255 600 000 000

1949___._

parison

levels

such situations.

Total gross

greater

high

cessful
n

in

90

*

10.1

53.1

_

.91

9.6
f

55.1

1944

going to be

disposable incomes

ing

1.04

10.0

60.9

_

1943

clear

seems

taxes

Record

Retailers have had

nAA

'nnn'n

gIq"""

be

I recog-

use.

J

It

after

incomes.

margins

recent

}947

quantity of steel

available for civilian

j

}^?

in

still

billion

$25

develop¬

However, not all departments will

uimnn

co*

to

war.

Even if the requirements are dou-

bled,

en;

$15

by

of this figure emerges when it is
compared with the gross national

had

we

of

war

would still leave $257 to $267 billion available to meet the various
othe government, consumer, and
business demands. The magnitude

these

13.4

67.9

_

1945

high levels. Retail sales
closely related to the level of

ord

consumers.

An increase in

of

$1.04

75.6

_

1946

retailers will depend
largely upon the types of

income

such

[fMe *TaVannual Kterf
running at an annual rate of
$282 billion.
*

1948

at record

Lel me state U di«erently- Cur"

about

and

supplies lor

healthy for

hands of consumers is

by aI1 past standards> wil1 provide

nrnhnhi.

„

impact

Earn ngs*

$13.4

-

1947

goods they handle.

e^s ^or some products will be substantial, we face a moderate re¬
duction in total civilian supplies
from the amount available at the

Peak ot th,e5950 boo(mt'. We w"h
have available quantities which

emphasis

be

(Millions)

Share

$78.6

_

upon

pretty

lev-

has

much

should

July 31, 1950_

1949

Conclusion

are

.

which

months to

Net Income

Calendar Years:

the economy.

strikes.

basic

these

of

if there

12

by our war production,
will provide a correc¬

•'

•

Revenues

these areas, apart from
Korean situation.
A reduc¬

tive

points

table:

10O

(.Millions)

in

therefore,

12.

p.

27

The consolidated earnings record in the
past decade has been

to be antici¬

was

24

73

(11,083,000 shares)*-

follows:

as

activity

49

66

♦Excluding all reported intangibles.

students
in

Percentage

$133

Totals

have

of this problem, includ¬
ing myself, felt that some reduc¬

data

net

sales

1,600,000

each

tion

housing

1

Stock

Common Stock Equity

stratospheric levels. Many

73,600,000

primary

interesting

con

and

been at

1,204,000

—

"Survey of Current

this

(2)

(Annual Rate)

Debt

$272

Preferred

as

58,400,000

(1) Except for copper, we now
have available larger supplies for

as

mooiie

2nd Quar. 1950

for growth characteristics,
gained 50% in the post¬
has more than doubled.

have

Millions

Long-Term

involved.

calamitous

as

noted

revenues

lower

mean

products
not

in¬

of

Power's

Capitalization of the company and its susbidiaries is as fol¬
lows, adjusted for pending sale of $17.5 million new preferred
stock and the proposed payment of
$10 million bank loans:

sounds, will become apparent
when it is remembered that auto-

(in tons):

194!)

will

not especially

was

States

period, and system net income

war

it

wartime peak usually was reached
in most instances,

Northern

housing

on

types

44,000

Aiuh.inum

at

various

of

Tin

did

and

877,000

Refined lead

Two

Tighter controls

934,000

copper
lflab zinc

from

(3)
credit

63,300,000
1.713,000

Refined

•

to

days

prewar

buy, and hence in the volume

sales

19-14

products

outset

average figure.
The high percentage of residential ard.
sales helps to stabilize the
company's operations. However,
the area served is
heavily agricultural in character and in

while

reduced urgency

a

*

national
rural

increasingly clear, it should

stallment

now,

15%
con¬

substantial

a

industrial, and 12% whole¬

parent Minnesota company is free of state-wide
regula¬
tion, there being no commission in that state. System residential '
revenues per kwh.
(2.92c) approximate the national average, and
the average residential use
(2103 kwh. per annum) exceeds the

houses,
appliances and
other
goods.
As this fact be¬

the rate of production and net im-

.

Steel

the

at

few figures concerning

you a

to

still

and

The

of current sales.

Outlook for Supplies

important contrib-

an

will

hydro,

sale and miscellaneous.

automobiles,

be reflected in

incomes

to

was

uting factor to the 1949 recession.
that

durable

10%

a

we

produce

volume

arising since the start of the Korean
War.
Spending in this area
once

from

of any new war
incidents,
logical to expect that this
buying represented in part a bor¬
rowing from future sales. Within

Economic Outlook for

.

area.

it

$17.14

>

an¬

million, the system is the largest in the west

central

4

compares

the portfolio at market value, was

to
the
Fund's
quarterly
report
issued to shareholders today (Oct.
16). In the first half of tne cil-

of

Dakota.

to

1,969,053

the third

of

420

(including the Twin Cities)
Minnesota, 118 in Wisconsin, 21 in North
Dakota,

the

to

war

adjusting

will

Some

psychology

fear of total

war

few

follows:

as

of

Northern States Power
Company

mod-

a

next

tne

in

These

By OWEN ELY

are

affect

may

situation adversely to

Utility Securities

fa¬

a

outstanding amount of forward buying and
with net hoarding by business and
by con¬
of $31,554 236 on June 30, sumers.
Already, there has been
represen ed
by
1,967,975 some easing of wholesale prices of

1950,

1949, according

of

to

This

assets

the

over

of

of

asse.s

on

by

shares.

in

months

which

ucgiee

Public

Factors

However, there

factors

months.

for

$617,736.

Inc.,

amounted

sales

on

income

Net

nine
to

net

Fund,

Sharply

leading

Thirty-six

lirst.

amounted

loss

or

inves ments.

of

Sept. 30,

gain

Unfavorable

one.

several

clusive

of

although sharp

take place for par¬

can

analysis presented is

vorable

year.

nine months totaled $836,543, ex¬

$106,474,631.

were

The

than in the

more

Net income of the Fund for the

value

assets

Some

12 paid amounts ranging

montns,

Affiliated Fund Inc.
quarter of the com¬

of

last

tne

companies which paid
larger dividends in the first nine

Fund Reports

Affiliated
Report

sale

1U

ticular items.

Of the 20

,

<1499)

a

took

out

clause which

if

Mr.

de

in

1949,

voided

Willers

the

conv-

mitted suicide within two years.

She insisted the death

dental,

a

was

acci¬

viewpoint upheld by the

jury which heard the case before
Justice Cortland A. Johnson.

'

*16

The Commercial and Financial Chronicle

(1500)

Celebrate

Goldman, Sachs & Go.
Our

Arranges McKesson &

Reporter

Bobbins Private Loan
McKesson & Kobbins, Inc. con¬
the

summated

000,000

from

13

Oct.

borrowing of $22,-

institutions

ten

loan

under

on

arrangements

made through

Goldman, Sachs &
year.
The notes
evidencing the loan have a final
maturity on Oct. 1, 1975 and an
Co.

earlier

this

interest rate of 2.80%.
The proceeds are

being used to
company's $15,000,000
issue of $4 cumulative preferred
the

retire

stock, which was called for re¬
demption on Oct. 15, and for addi¬
tional working capital.

Stockholders

J. Herbert Case,
Lucius D. Clay, I. J. Harvey, Jr.,
Thomas A. Morgan, B. Earl PuckE.

tis

Calder,

Alexander Sachs,

ett,

Harold V.

Smith and the following six part¬
ners

of Lehman Brothers:

Robert

Lehman, Allan S. Lehman, Mon¬
roe

C.

Gutman, Wm. J. Hammer-

John

slough,

Hancock,

M.

and

Paul M. Mazur.

Alvin

W.

and

Dorsey

Richardson, Vice-Presidents of the
corporation, were also reelected
directors.

as

The appointment of Price, Waterhouse & Co. as Auditors of the

corporation for the current fiscal
year was also ratified.

Hamilton Management
(Special to The Financial Chronicle)

the

up

immediate

near-term

or

outlook

for

obliga¬

Treasury

not generally made ior sizable operations by

either bank or nonDespite the uncertainty over higher interest rates
larger reserve requirements, many money market followers
believe quotations of certain eligible issues have quite fully dis¬
bank investors.

and

these developments.
being carefully watched for
counted

1952/54s and the 1956/59s

The

buying spot when,

a

and

as

are

if the

aforementioned

events should take place.
The near-term bank
selling below 100 are attracting some buying from
those that have been doing tax loss selling.

issues that

are

The ineligibles continue to move in a very narrow range but
somewhat reduced volume. Sellers are in the majority, but are

making too much progress in getting rid of their bonds.

Short-Term
The

attitude

because the

same

Trend

Rate

continues

market

government

uncertainties

Upward
a

defensive

present in

the situa¬

to
are

assume

tion, which have been there since the split between the two
authorities, over the level of interest rates. The recent refunding
(September-October) brought this disagreement out into the open,
and it resulted in the early fall operation being one of the greatest
"flops" in our financial history. Federal, because of the need to
the

curb

forces

inflation

in
the interim period, before more
effect, has been'raising;'interest rates.
assuming in no uncertain way their re¬
sponsibilities to defeat the inflationary trend and this may even
bring about higher interest rates, especially in the short-term

direct

The

controls

Central

of

into

go

Banks

are

Maurice Newton

far, slightly firmer short-term rates have not affected
loans, which are still in an uptrend, partly due to seasonal factors
and partly because of higher costs, which creates a need for
larger working capital. Will a 1 Vz% yearly rate retard the demand
for loanable funds? A certificate rate of Vk%. is the highest that
is looked for by most followers of the money markets.
There is
considerable question as to whether or not another Vs% rise in the

Lucile

Colo. —Mrs.

Co.

and

the

to

staff

of

Management Corporation, Boston
Building.

has

dock

affiliated

become

further

W

action

seems

to

be

taken
no

these

under

reason

to

and

believe

other

the

regulations

authorities

of

Stock

Midwest

the

(Special to The Financial Chronicle)

Street.

will

from

ence

likely to continue to firm.

It is quite possible the money
which was in vogue during the
war period.
There might even be an easing in rates and institu¬
tions would again be seeking the government market as an outlet
for surplus funds.

of

farmers to

this should eventually be the case, the Central Banks
again be sellers of Treasuries, especially the longs, to in¬
surance companies, savings banks and others.
The usual charges
would no doubt be exacted by Federal from these institutions,
in the form of higher prices (maybe a point or more) collected for
the trouble of acting as safekeeper of the bonds which they sold
them usually at the bottom of the market.

the

of

that

know

PHILADELPHIA,

'

"

•

'

*

'

15 Broad Street
>

45 Milk Street

HEW YORK 5

BOSTON 9

WHitehell 3-1200

HAncock 6-6463

*




Laird,
of the
New
York
a n d
Philadelphia Baltimore Stock Exchanges, an¬
Pa.

—

Bissell & Meeds, members

nounce

the association with them

WILMINGTON,
Co.,

peoples

of

work-

other peoples, in the defense and

standards

of

i
■
peoples

'

that

of

That is the basis
society in this
the

ideals

which

we

I have spoken to you tonight
about some of the things which
all of us are thinking about as

jwe
of

oL the

and they have written into the
Charter of the United Nations,
This is the partnership of peace,

in

press ahead to finish our job
Korea.

At

a

time

when

our

understand

others
which
own

the

we can

make

productive

a spe-

with

techniques

have discovered

we

in

our

experience.

We

not strangers to

are

East. For

more

than

a

the Far

century our

enemy,

it

is

essential for us to
what our broad pur-

poses are and see clearly the kind

of

world we seek to build. As
President, I realize what it
means to the homes of America to
have the youth of our land called
to meet aggression. These are the
your

missionaries, doctors, teachers,

most

solemn

traders and businessmen have knit

pose

the

&

the New York and Midwest Stock

admit Hugh ^C;

Wallace and Hugh R. Morrison J to

in
their,, Philadelphia
office, partnership onf Nov. 1.
On the
Lincoln-Liberty Bldg., of Herbert same date, E. C. Stollenwerck,
M. Weiner as a registered repre¬ limited partner,
will become a
sentative.
general partner. ^
- - v.
»

decisions

heaviest

and

im-

responsibility

those who must make them,
I have told you tonight why we
must do what we are doing. We
those who
hate war, but we love our liberEconomic
Cooperation Adminis- ties. We will not see them detration, Point TV and in many stroyed. We want peace, but it
other ways we are trying to help must be a peace founded upon
theiipeoples of other countries to justice. That American policy is
improve their living standards. We as old as our republic, and it is
.will continue these programs in stronger today. than ever before
cooperation with the United Na- in. our history. We intend to keep
tions. Even as we undertake, the it that way.
"
>
ties

If

we

to

us.

Admit

Nemours Bldg., members of

Exchanges, -will

we.

measure

cial contribution by sharing

of

Del.—Laird

......

forces under Gen. MacArthur are
locked in combat with a stubborn

ready

to

rising

know

many

Laird & Co.

+

this field that

by the Central Banks. There are sizable amounts of
seeking a home, but Federal, the main
large-scale buyer, has not yet seen fit to do very much about
eliminating these securities from the market.

With Laird, Bissell

f

,

problems of production;
they need to produce more food
and clothing and shelter. It is in

ited support

<*

the

their full

and

industrial

our

We

the tap issues which are

:

govern-

their industrial

want

to have

country.

some temporary selling into the longer eligible sector
market because a great many deposit banks just do not
care

,

support

freedom

The ineligibles continue to be stable under selective and lim¬

,

of

form

our

ment.
We

to dispose of in order to take
requirements.

have little value,

We seek full partnership with
the peoples of Asia, as with all

influenced

Then there is the uncertainty
requirements which may be upped any time.
This

reserve

defense

ily-size farm. That is the basis, of
our agriculture
and has strongly

bring

increased

of

ciples also. We believe in the fam-

Asia have

reserve

burdens

Seeks Full Partnership With
Asiatic Peoples

Asia

have the necessary shorts

& Co.

their land and to

own

living. So do

over

necessary

enjoy the fruits of their toil. That
is one of our great national prin-

ers

of

INCORPORATED

13

page

against aggression, we will help
We know that the peoples of to
expand the work of aiding
Asia have problems of social in- human
progress.
Otherwise,
justice to solve. They want their measures of defense alone will

If

would

•:

offices in London and Geneva.

small nation which was

a

discounted higher near-term rates.

•

Harry

Pierre

brutally attacked.

elections) the money markets continue to be nervous, under com¬
plete domination by Federal. The fear of higher short-term rates
keeps the intermediate and long bank issues on the defensive.
This is in spite of the feeling that some issues have fairly well

Aubrey G. Lanston

Newborg,

Fight
Aggression: Truman

While the economy is getting ready for more stringent regu¬
lations which will be coming quite soon (very shortly after the

SECURITIES

D.

Wm Arm to

Market Uncertainty Continues

MUNICIPAL

Leonard

the "Chronicle's" editorial department.

member of

a

in

u. s.

STATE and

Stralem,

S.

maintains European

Continued

be

would

TREASURY

six partners, a majority of whom
of | the early partners of the

and

markets may revert to the status

NEWNAN, Ga. — Thomas M.
Johnson, Jr. has become affiliated
with Courts & Co., 22 Greenville

Donald

was

The firm

Putting all of them together, that is, the direct controls,
there will be less need for higher interest rates as a
retarding the inflationary spiral. If direct controls are
used properly there should be less demand for loans and mort¬
gages.
Likewise state, municipal and corporate flotations would
probably be decreased. Under such conditions, money rates are

not

Joins Courts & Co.

one

Stralem and Frederick M. Peyser who in his early years in Wall

may mean

force

Exchange.

Stock

financial, industrial,

Partners of the firm include: Maurice Newton,

Moore,

Street

forces.

rated, 209 South La
members

exchange

York

heslitant about doing such a thing. Higher taxes, allocations and
other measures should be effective in controlling the inflationary

Sills, Fairman & Harris, Incorpo¬

Salle Street,

New

of the country's great industrial and

of

descendants

direct

founders.

Regulation

been

there

with

and

of the

companies.

At the present the firm has

a greater limiting of the credit which
going into housing and durable consumers' goods. Al¬
though it is still early to indicate there may even have to be more

has

(Special to The Financial Chronicle)

CHICAGO, 111.—LeRoy B. Mur-

force

member

railroad and commercial fields.

strengthened there should be

restrictive

Sills, Fairman Adds

in

X

a

modest foreign

a

of the firm were hosts to leaders in the

ners

more than a little talk

H.

Regulation

became

as

The centenary was marked by a reception
at the Waldorf-Astoria Hotel Tuesday afternoon at which part¬

Credit Reduction Measures
With

1850,

17,

development of many

are

Hamilton

firm

The

railroad

A.

added

Oct.

Exchange in 1881, and has been a major factor in the financing

this being done.

about

founded

was

business.

they intend to use all the forces at their disposal to curb the in¬
flationary trend, More credit can be neutralized by an increase in

Bibin, Arnold J. Mosbek and
Eldridge S. Norton have been

States, Hallgarten &

the oldest investment houses in the United

yearly rate will have any appreciable effect upon loans. Nonethe¬
less, the upping of near-term rates is a warning by Federal that

requirements, and there has been

(right), senior partner of the firm of Hall¬

garten & Co., investment bankers, receives congratulations from
Emil
Schram, President of the New/York Stock Exchange,
on the firm's commemoration
of its 100th anniversary.
One of

So

reserve

DENVER,

Hallgarten Centenary

Governments

on

sector.

Pearson

Thursday, October 19, 1950

tions. As has been the case, Federal continues to completely domi¬
nate the money markets in its fight against inflation, and this has

Lehman

The

of

Corp. at their annual meeting held
in New York today, elected as
directors: Arthur H. Bunker, Cur¬

.

An irregular iparket with indecisive price movements and
light volume seems to be the way traders and investors are sizing

•not

Elects

.

By JOHN T. CHIPPENDALE, JR.

on

Lehman Corp.

.

of friendship

between
of help, we are
it—but only to
want it. Through the

can

be

offer

upon

Volume 172

Number 4952

.

The Commercial and Financial Chronicle.

.

.

even

Gnideposls and Procedures

attractive, because one
objectives of the

or

try to bring about con¬

long."

more

the

of

broad

Bank is to

ital

doubt

pointed

that

out

liance

Bank

is

an

international

cooperative

lending

money

tution
s

i

t i

s

n

con-

ferent
ber

in

its

capital

not

fully

must, therefore, be far
of the standards

The Bank

hence

are

'

paid in, the Bank must raise most
of its funds in the private market.

mem¬

nations.

We

with

lished

dif¬

48

some

in the market.

Since the Bank has been estab¬

of

g

conscious

more

slightly

applied in the private market than

different

organization would have to if
it were merely lending out money
that had been given to it by gov¬
ernmental appropriation. And the

a

Orvis

other

lending

A.

Schmidt

or¬

ganizations in that

primarily

with

dealing
stock¬

we are

our

own

holders.
Our position as an

international
at an ad¬
vantage in comparison
with a
national organization.
The inter¬
organization

national

by

the

Bank

technical

the

of

the
Bank's
and the 14 mem¬

48

Directors

of

Board

all

represent

No

members.

country need feel that there are
political implications attached to
its dealings with the International
Bank.
We
to
and

therefore, well

are,

placed

inquire objectively, to assess
weigh the merits of proposals

submitted to us.

the

Secondly,

of

guarantors

the

the capital

members

losses—enhances
the

Bank

to

of

may

subscribed by

the

adopt

impartiality,

Bank

make

to

effect,

obligations

Bank—since
on

in

are,

all

the
call

all

that

fact

countries

member

all

promoting

good

any

of

ability

attitude of

an

weighing the

of

it in

healthy international

a

flow of capital.

is

among

staff,

willing to work with

more

Some

there

that

fact

private market, in turn, is going
to
watch the operations of the
Bank
far
more
closely and be

Bank

The

30 different nationalities

some

represented
bers

us

character of the

indicated
are

puts

the

Guideposts

has

set

been

up

for

of assisting countries
to finance worthy projects, and to
do so in a manner that will stim¬
purpose

flow

the

ulate

private

of

capital

and contribute to the development

The character of

of its members.
the Bank's

from

some

were

set

charter

apparent

become

of the guideposts that
down

—

is

Bank

operations and its ob¬

will

jectives

the

in

instructed

Bank's

which

guideposts
to

the

follow

in

its loan policy.
The
following are the more important
of such guideposts:
developing

The Bank's loans must be
productive purposes.
As the
Bank's title indicates, it was de¬
(1)

of the individual

assist the war - torn
countries in reconstructing and the
underdeveloped countries in de¬

projects,

Mr. Sommers has explained the

capital structure of the Bank, and

small part
capital structure

pointed out that only
of

has
in

Bank's

the

been

2%

and

This
lend

not

in

of

our

gold

that

means

18%

in;, namely,

paid

currencies

the

bers

a

we

merely the profitabilty of a proj¬
ect. A project may be submitted to
the Bank which the sponsors can
show

would be profitable, would

to

off, but if it does not meet the
further test of contributing to the

currency

country's reconstruction or devel¬

or

able

are

in the

merely

mem¬

dollars.

such, the Bank must apply
somewhat^ broader test than

As
a

of any one particular country, but
in the currency of many mem¬

pay

the
Bank would
not
consider financing such a project.
ber countries.
There are some For example, somebody might be
limitations that Mr. Sommers has able
to
show that a gambling
casino might be a very profitable
already explained.
The

that

fact

80%

I

to

want

the

of

touch

capital

on

is

is

not

paid in but consists, in effect, of
a

the

by

guarantee

countries

member

to

put up that much if
it should ever be needed to make

good any losses of the Bank.
In

setting

vision

up

the

have

could

Bank,
been

pro¬

made

whereby its loans would be made
*A

talk

by Mr. Schmidt on Aug. 1,
following the tenth lecture by Mr. Som¬
mers

in

a

Securities

series

of 17

Markets

on

and

The

their

by the New York Se¬
and the University of
Department of Commerce &

sponsored jointly
curities Industry
Vermont's

New York

operations

Economics.




broader

be

to

country
that

That

does

can

organization, and

or

lent

companies.

the

lend only to
We can lend to any

we

private group
have

central

which

in

located.

are

governments.
we

the

comparable agency
the Bank, of the

some

mean

guaranteed

directly

It

does

to

private

how¬

mean,

that when a loan is made to
a
private company, or a private
group, the government must guar¬

ever,

antee the loan.

The

two

next

guideposts

are

interesting, particularly when you
consider them together. The third
is that there must be reasonable
for

prospects

loan,

and

the fourth

the

of

repayment

opment,

venture,

might

and

pay

handsome dividends, yet

the kind of project

very

it is not

that the Bank

would consider financing.

the projects which
the
Bank
considers
are
those
which will contributed to the de¬
Generally,

country in two
ways:
(1) the project in itself
must be productive, must produce
something that is needed, or en¬
velopment

of

a

something

to

be

consortia
You

may,

Everybody agrees it will
produce coal, and that it is in an
where there is

it.

But

is that the

in

order

market for

a

to

get

coal

a

have a
railroad and a port.
And for the
coal to be mined you have to do
not
just a coal-mining project,
but

you

have to

may

coal-mining-railroad-port
Such a type of project

a

project.

fall into both categories, in

may

that it may

not only take

lot of

a

Sometimes they are more.
The

have

what

that

is

seems

in

contradiction

to be

the

two,

vanishes, however, when
give the matter a little

thought.

the

Turning

first

the

to

of

able

these

reason¬

prospects of repayment"
that

not

give¬
away organization; we are lending
money in the expectation that it
will be repaid, and that the inter¬
est and other charges on it will
be paid.
Consequently, we have
means

examine

to

of

the

a

merits

each

of

consider the ability not only

case,

the

for

are

we

country to service a loan
purpose, but also of the

that

borrower to carry out

the project

successfully.

for

prospects

loan,
the

how

If

you

List

a long period of time.
Thus, as you see, the require¬
ment of reasonable prospects of
repayment is not inconsistent with

first

the

needed to repay

over

requirement

the

that

unable

be

rower

bor¬
the

finance

to

project on reasonable terms in the
private market.
latter

The

to

up

compete with private lending,
rather to supplement it.
If

but

somebody

comes

to the Bank and

Thus, projects'
successfully pass the
stage may nevertheless give
currency.

which

the

inability to acquire with local
the foreign exchange
the loan.

currency

Loans

you

of

criterion

the

that
satisfied,

be
is

sure

terms?

answer

which

bear,

but

is that in the world

are

many

the

World

are

finance

which

risks of
Bank

private

not

willing, to bear.

or

sound

in

a

a

can

lending
position,

And it was to
projects,
from

private capital is deterred
of such
risks, that the

because
Bank

amount

make

was

First,
herent

created.

risks in¬
in international lending as
there

such—risks

of

are

loss

the

through

take

private

lending—to
a way that

loans in such

forth

Articles

the

in

of

Agree¬

ment is that the Bank is to' finance

foreign exchange costs
project, except in "excep¬

only
of

the

a

tional

The

circumstances."

circumstances"

ceptional

"ex¬

are

in

think the

I

give is the
the

first

means

we

To make it

give

divide the costs into two main

Take

hydroelectric plant, for

a

You've got to buy the

example.

the land or water
rights, which would ordinarily be
paid for in the currency of the
country.
You will have to pay
for the services of local labor.
Men

is

that

who

are

work

in

conscious

of these types
of
is in a better position
than
most
private investors to
evaluate them and to protect it¬

it

by and large, the loans were
cessful

most

vate lender.

the kind of

thing that takes

a

20-

of

stage;

able

were

namely,

were

to

suc¬

passing
a

the particular

that

prises

suc¬

enter-v

operate

as

going businesses in Germany and
to earn enough reichsmarks to pay
the

interest

the

loans

amortization

and

that

all

when

these

of

on

made.

But

various

bor-

were

*

the

to

foreign ex¬
change market to buy the dollars,

rowers

the

came

sterling,

that

the

or

Swiss francs
in

needed

were

order

to \

these

service

loans, the foreign
exchange wasn't there, the loans
went into
marks

default, and the reichs¬
deposited in various

were

going to build the
are
going to do

who

the

general

policy

of lending

only the foreign ex-,
change costs tends to limit the
size of the country's foreign debt
and make it easier for the country
to service the foreign obligations
cover

it

undertakes.

Looking at it in another way,
if a country's ability to service
debt is less in terms of foreign
currency

that

in

currency,

it

can

terms of local
finance more
projects if it restricts the borrow¬
ing for each project to as small
amount of foreign currency as

an

construction

of

the

be paid in local cur¬
Possibly the country has

There is, of course,

the "excep¬

circumstance"

tional

clause.

As

Bank has not done any
local
currency
financing under
this clause, but it is a possibility
the

yet

that is not to be ruled out.

will

be

in

cases

There

which the Bank

decides it is justified in not limit¬

its

ing

loan

to

foreign

the

ex¬

change costs of the project.
The

of these

last

plant will

which I

rency.

guideposts to
going to refer is one

that

plant that can furnish
the cement that you are going to
need.
Those are the local cur¬
a

cement

rency

costs of the project.

On

the

other hand,

with

cured

in

used

rise

produce the turbines, the
transformers, the insulators, the

wire,
Those

and things of
will all have

ported.
have

to

that
to

be

type.
im¬

Furthermore, they may
import technical skills

am

requires the Bank to satisfy
itself
that the
equipment pro¬

to

Secondly, there are many kinds
projects which are deserving,
which are sound, which look as

they will pay off, but
take a long time be¬
will begin to yield
enough returns to satisfy the pri¬

critical

the projects

of

in

cess

extent

the

to

first

The

may

pur¬

you exam¬

ferred

they

sub¬
were

ine the record you will find that,

if it is an

though

Very
capital

projects, and I think if

cannot

fore

of

individual

undeveloped country, it probably

which

war.

financing

self against them.

of

can

is necessary.

procured locally.

property, inability
to
transfer funds,
or
(in some
areas) of the outbreak of war.
Bank must also

an
example.
In
kind of project you

you

any

and

While the World

absolutely clear, let

categories: (1) the costs of im¬
ported goods, materials and serv¬
ices; and (2) the costs of goods,
materials and
services that are

site,

example I

of Germany after

world

of

that

to raise it locally.

or

best

case

poured into Germany for the

to

that, as a general
require the sponsor of
the project (the borrower) either
to provide the local currency him¬
This

self

World

After

I

amounts

stantial

The

rule,

Germany

blocked accounts.

Provision of Local Currency

roads

be

to

contrary, we try, at

of

our

na¬

tionalization of

risks,

not

they will increase the amount of
capital the private market is
willing to lend,
The fifth of the guideposts set

can

Investment

which

institutions

try

a

every stage, to handle operations
in such a way as to increase the

me

national

type

We

On the

almost

Difficulties in Private Inter¬

today there

have

we

to

War

satis¬

namely, that the borrower is un¬
able to finance the project in the
private market on reasonable

The

"Look,

says,

may

rise to defaulted loans because of

also

requirement

shows that the Bank is not set

reasonable

are

repayment

can

next

are

is locally

have to meet only the
stage; namely, acquiring the
you

local

quotes.

You may ask:
fied
that
there

that capital

extent

raised,

capital but may also be the kind
of project that will only pay off

ers.

two, that "there must be

of

foreign exchange that is
needea to service ti.e loan.
To
the

business away from private lend¬

At first blush there
some

private

reasonable terms.

on

The first stage
the local cur¬

earning

of

chase with that local currency

undertake.

the

fi¬

to

and the second is the pur¬

rency

you

project in

to

require¬
come

you

international loan you
you might regard as

an

two critical stages.

which

market

unable

when

that

off

pay

this

for

reason

is

ment

the

the

nance

be

done

productive projects, that makes it

Very often the foreign ex¬
change costs are half, or less, of
the
costs of the entire
project.

pose

must

In discussions I have had with
that representatives of the private cap¬
ought to be done to advance the ital market, they have often re¬
country's development; and (2) if ferred to a project and said: "Yes,
a
It
project tends to stimulate pri¬ it is a very good project.
vate capital to undertake other ought to go forward.
But that is
able

invest.

to

private

good proj¬
ect, and we can get financing in
the private market, but we would
rather do it with you," why, that
isn't the kind of thing we would

borrower

to

veloping their economies. That is
and of applying by and large the how we get the name, Interna¬
same objective standards to all of tional Bank for Reconstruction and
Development.
our prospective borrowers.

merits

not

for

signed

which will

this

government,

projects

an

position
than

the

member

done, the Bank would have been
relieved of
the task of raising

insti¬

in

Loans not made to member

acceptable

re¬

most

private

any

or

want

may

that

larger

groups

mine

bank, or

might have diminished the Bank's
independence.
Had
that
been

the

in

succeed

we

is

cess

area

productive

by

funds

government

upon

capital

project.

(2)

complete

the

But

market.

no

if

flow

governments must

thority to borrow in the private

Development, Mr. Som-

has

mers

of

amount

for the costs of tne site, the

pay

for example, have a coal mine as a

can

sense.

tion and

organi¬

the

may

needed to make the project a suc¬

be

only out of funds subscribed by
its
member governments and
with
the
Bank
having no au¬

basic

rials.

can

although

attempt to find those

as

the

where

Bank

which

enlisting the aid of private capital.
Thus, in looking at projects, we

zation and capital structure of the
International Bank for Reconstruc¬

regards

labor, the locally procured mate¬

but

Bank

that

procedures in investigating, granting and supervision of loans.
As

of

operation
undertake,
private capital is

the

apparently large
when you recite it as a figure, is
relatively small when you com¬
pare it with the amount of capital

principal guideposts in making loans: (1)
loans must be for productive purposes; (2) loans to private
enterprises must be guaranteed by a government, or central
bank, or other comparable agency; (3) there must be reasonable prospects for repayment; and (4) borrower must be
unable to finance in private market on reasonable terms.
Points out risks inherent in international banking, and describes

•

kind

the costs of the im¬

cover

ported material and services—the
turbines, the generators, the wire
—and
require the borrower to
raise the local currency needed to

reluctant to undertake is the kind

The amount that the

ability of World Bank to adopt an
impartial attitude by weighing merits of individual projects
and applying same objective standards to prospective borrow¬

-

Another

lend to

which

can

lend,

Mr. Schmidt, in stressing

lays down

a

opment of the country.

Assistant to Director, Loan Dept.,
International Bank for Reconstruction and Development

ers,

in

participate along with
Bank loans in fostering the devel¬

By OR VIS A. SCHMIDT*

<

operation,
and
we
position to wait that

25-year

aren't

ditions under which private cap¬

In World Bank Loans

17

(1501)

this

our

to

as

the

is

loan

project.

actually

This

gives
policy commonly re¬
end use supervision.

actual

policy

many

in

the

is

implementation
as

follows:

of
Unlike

loans that have been made
our loans do not re¬

the past,

sult

the

in

rower

in

transfer

cash of

to

the

the

bor¬

amount

of

money loaned.
Instead, the Bank
build the dam and agrees to finance the procurement
supervise the installation of the of a "list of goods" needed in the
equipment.
Those would be re¬ project.
garded as the foreign exchange
This "list of goods" is a list of

necessary

to

costs of the

project.

Now, if the Bank were to con¬
sider making a loan to finance

project of the type I have just
referred to. we would ordinarily
a

materials, equipment, and services
that

are

Bank's

to be financed out of the

loan.

The funds lent

Continued

on

page

by

22

I

*■

18

The Commercial and, Financial Chronicle

(1502)

those

Advertising of Securities

bulk

of

what

Advertising Manager, Merrill Lynch, Pierce, Fenner & Beane

Board

lies

having per¬
sonal, political, social and economic importance, Mr. Engel
places as primary objective in advertising more securities own¬
ers, and selling by dealers for gain as secondary consideration.
Stressing widespread ownership of securities

as

Refers to redistribution of wealth due to progressive rates

I

premise:

believe

We

is

it

desirable from

point of

every

view

per¬

—

sonal, politi¬
cal, social, and
economic—for
to

everyone

securities

own

who

can

af¬

ford

it.

We

believe

such

people should
have

direct

a

h i p

own e r s

in

interest

Acerican

bus¬

First, for instance, let's go back
the
this

in

income

of

what has

country, and see exactly

self-evident

«o

In

it

$50,000

a

money

this

yeai;

the

more, .and

or

left after

had

group

their taxes—what you
might call their spendable income
—aggregated a little over $5 bil¬
paid

they

no

that

unless

Business
America
-stocks

the

in

we

securities

induce the people of

can

invest their funds

to

bonds,

and

in

is

industry

likely to find itself hard up for
new capital
in a not too distant
This

is

of

result

one

the

eco¬

nomic revolution which has taken

place in this country—a revolu¬
tion which has in no sense of the
word

yet

its

run

Partly

course.

because of the application of the
and

laws

tax

the rise of

partly

of

because

rrjiilitant labor move¬

a

ment that has demanded a larger

«hare of the national income, there
has

been,

knows,

everyone

as

vital redistribution of wealth.

the

Even

American.

number

of

moderately rich or "well off" has
declined drastically.

the number of
over-$50,000 cate¬

income,

people in the

actually increased—from

presumably rich people had
payment of taxes had
declined by 60%. It dropped from
$5 billion down to $1% billion.
left

f As

a

consequence

there

few

are

which

business

can

expect to tap

in raising the risk capital it needs

for continued growth and expan¬
sion. Instead, business must look
for

after

picture.

Now
let's look at what happened to the
people of moderate income—those
in the $5,000 to $10,000 income
bracket.

1929, they numbered some
650,000 and their aggregate in¬
come
after taxes was about $4J/2
billion.

its

capital

the

to

income

moderate

—

people

of

hundreds

of

thousands of them.
And

cannot

you

individuals

$10,000 income bracket had almost

tripled, rising from 650,000 to 1,800,000. And, most dramatic of all,

these

people to put their money at risk
unless they have first become fa¬

from

$4% billion to $10Vz billion.

That's

why
of

vestors

I

have

tomorrow

be drawn

from

a

the

that

say

wholly

to

in¬

new

class. Business will

come

got

have to

its

capital not from a few
people of great wealth but from

get

great many people of moderate

wealth.

the

And

busi¬

securities

is

going to have to
operations to that concept
ness

its

gear

dele¬

or

—the securities
tions

ownership of
outstanding

now

of

Electric, General
Motors,. U. S. Steel, du Pont and
others listed

the

hundreds

the

big exchanges.

.

of

on

45o the primary objective of all
advertising is to sell the idea

of

owning

Mipmmon
are

securities,

stocks.

one

far

as

for

as

the

health

it

would
would

our

concerned,
that a sharp

mean

be

Problem

of

fields. In

effect, there would
capital.

venture

more

no

How well is the securities busi¬

doing in meeting the chal¬
lenge of the times—in getting the

ness

in

man

the

street, the average
to invest in securities?

The
word:

answer

can

be

put in

one

Badly.

The evidence of that failure has

Only secondarily

been supplied by the Federal Re¬
serve Board in its
continuing sur¬

interested

we

be

in

selling

the

of the ownership of consumer
assets, which shows that only 9%
vey

Reaching

New

Class

of the income units of this

try—meaning

"

of Investors

either

The

problem

of

interesting

a

l^ew class of potential investors in
the ownership of securities is a
problem

of

ions.

you

If

statistics

I

impressive

proport¬

will indulge

should

like

to

few

or

bonds.

units
78%

own

own

It

In

Annual

by Mr. Engel

try to

at the 33rd

Meeting of the National Associa¬

tion of Securities

Mich., Oct. 11,

Administrators, Detroit,

1950.




For

because

the

it is
is

large

a

unin¬

so

public's

of in¬

lack

undertook

Board

may

annual

more

need

not

be

too

much

nor

probably should

But

we

concerned

should
about

own

be
the

can

stocks.

very

much

showing

of

operating earnings, the results indicated by changes in
profits account and dividend payments showed a

undivided

Securities profits among

those institutions which report them
Although there was no marked trend a con¬
siderable number of the banks showed modest gains in this cate¬
considerably.

of profits.

Summarized below

third

either

for not

reasons

retained

it

Claude

Dr.

Gallup

Chase

Robinson

and
and

They

about

low

the

in¬

pub¬

dividing

line

possible by decid¬
classify
as
"informed"

as

to

as

those who knew enough about the
Stock
Exchange
to
know
that
were

even

the

bought and sold there.
barely two-thirds of

so,

public—68%
able

were

to

to

be

exact—

qualify

"in¬

as

formed."
To

get

idea

popular

these

people,

the

just

bonds

stocks

among
search

of

and

some

Public

Opinion

cash, and to make the problem

as

possible it listed six possi¬

add

100%.. Here
vestment

types

2.15

0.29

0.17

2.50

2.32

X

X
X

National

t

t

+

Guaranty Trust
Irving Trust

New

York

S.
*

Savings banks

to

discrimination

agency

then

____

put

be

the
its

2.40

0.32

0.09

2.84

2.49

0.01

0.05

5.17

4.76

3.32

3.08

0.58

0.03

3.90

3.11

$

X

t

Trust----

$

Indicated earnings,

tlncludes City Bank

past nine months and

*30.3.0 *31.45

Farmers Trust Co.

in

the

$Not reported.

banking field during

the difficulties of bringing part of
an

the

increase

so

showing made by banks so far is relatively favorable.
Although there has been a sharp increase in commercial loans
far this year, a considerable proportion of the
gain has occurred

during the last few months.

larger volume has not

as

Consequently, the full benefit of the
yet been reflected in the income account.

There is also the fact that higher interest rates which
fective in August and September did not help the

became ef¬

earnings reported

at the end of September.
For these reasons

of

ter

the

to

would expect results for the final quar¬

we

show

a
substantial improvement.
While the
imposition of credit restrictions, including higher reserve require¬
ments, may limit the gain, final comparisons are expected to

be

.year

generally favorable.

Street Club Holds
Luncheon

Appointed Manager of

Meeting

111. —The

Street
of young bankers
investment men, will hold its

CHICAGO,
Club, a group
and

luncheon

1950-51

the

season

Georgian

Pirie

Scott

&

meeting

of

today,

Oct.

Room

of

Co.,

with

of

Secretary

wealth Edison Co., as

A

comparison
an

the

19,

in

Carson,

Harris

Common¬
speaker.

on

analysis

Paine, Webber Depti
MILWAUKEE, Wis.—Gilbert M.
Vonier

has

been

O.

F.

and

ager

appointed

man¬

Breitengross

as¬

sistant manager of the investment

department
Jackson

of

&

Broadway.

Paine,

Curtis,
Mr.

Vonier

the late W. Brock

Webber,

605

North

succeeds

Fuller.

NATIONAL BANK
ol INDIA, LIMITED
Bankers

1950

September 30,
Will be sent

Head

the

Office:

Government

request

Laird, Bissell & Meeds
just

behind

research

Members New .York Stock Exchange

Members New Yofk Curb Exchange
120

BROADWAY, NEW YORK 5, N. Y.
Telephone:
Bell

page

34

26,

in

Bishopsgate,

London, E. C.
on

Branches In India,

Colony,

question in
on

to

Kenya Colony and Uganda

BArclay 7-3500

Teletype—NY

1-1248-49

(L. A. Gibbs, Manager Trading Dept.)

Specialists in Bank

Continued

14.75

4.71

BANK STOCKS

13

determine

might

J

11.77

2.52

19 NEW YORK CITY

information and

selections,

X

X

5.16

_______

Trust

16

solid

4.20

13.59

t

in taxes, the

42

Corporate bonds

%

12.90

increase in gross through to net earnings in the face of

43

effort

0.32

3.48

67

Real estate

an

10.55

3.79

Considering the forces at work

83%

__

insurance

how much

X
$

Trust-

Public National
U.

0.08

1.02

$

i

X
X

13.51

1.07

11.45

tNational City

$

*59.00 *53.16

0.15

12.75
—

Morgan, J. P

of

the people who favored each.

Life

1.86

2.21

2.42

of in¬

proportion

Government bonds

2.40
*4.50

than

more

the

the

1.88
*4.50

four—the

or

to

up

are

and

2.06

3.85

Ward,

three

0.17

2.17

Since those questioned were not
restricted to a single choice —

of

picked

0.28

1

3.88

first

answers

1.69

$

$0.14
t "

Exchange-

investment—gov¬
ernment bonds, corporate bonds,
stocks, life insurance, real estate,
and savings banks.

many

*15.76 *14.94

$0.01
X

Re¬

Corporation asked them
how
they
would
invest
if they had some extra

ble channels

t

X

$2.2-3
'%

1.78

Bank

Manufacturers

1949

i:$1.60 *$1.52

were

money

easy as

$

1950

t

just how

enlightened

more

X

Corn

the

uninformed

this

set

t.

1949

Commercial National-

undertook

between

the

—Earnings—

$

$1.87

National

Chemical

the

Robinsoil.

distinguish

these

shown.

—Profits—

1950

own¬

For the purposes of the survey,
which was national in scope, Drs.

formed

i

Central Hanover

Public
Research
Corporation,
by Dr. George Gallup

job,
Opinion

Manhattan__
Trust

Bankers

or

recently, the Stock Ex¬
change has undertaken a defini¬

In

are

Total

First

comment

no

of

Bank of NY & 5th A v.

More

•

Where the institution

Securities

1949

1950

their

admitted

had

various

ing

previous.

—Earnings—

Bank

ing about securities.

lic.

year

a

to

ing stocks, all of which also clear¬
ly reflected a lack of understand¬

to

of

operating earnings the indicated results
Operating

of

gave

the earnings results of 17 of the larger

are

City for the nine months ended Sept. 30, 1950,

with those

compared

familiarity with common
stocks; another third simply said
they were "afraid," which was
tantamount to saying they were
uninformed, and almost another

concerned

ownership, because people in the

report operating earnings showed an increase in per share

varied

income, it found that

readily

quarter

lack

we

about that low figure for Security

liability.

similar trend.

stocks of those with $5,000 or

mon

and

be pointed out that

indicated on their reports that
to provide for

account had been made

tax

com¬

Stocks

home

own

in general, a moderate

spite of this, however, 9 of the 12 principal banks in the City

does not report

the attitude toward

measure

contrast, 48% of the

their

wages

instance, when the Federal

Reserve

life insurance.

lower income brackets neither
♦An address

market.

unmistakable.

*.

a

market;

a

formation about them is clear and

or

individuals—own corporate stocks
r

large

uninformed

only

coun¬

families

tax

banks in New York

is

economy

brake

of

primarily

cervices of Merrill Lynch.

In

the

an

and

But

the banks,
or the government—an eventual¬
ity that would be a most unhappy

man,

Our

the increased

ties

insurance

such corpora¬

General

as

adjustment in the

an

gory

stocks

companies,

of these factors was,

effective Oct. 1, many of the banks

Certainly the relationship
between non-ownership of securi¬

gate its financing function to the

new

the

not

also

is

and

in¬

ties

and bonds

is

It

it

is indeed

one.

managed

A Wholly New Income Class

miliar with the concept of securi¬

through

sizable

this

jumping

applied to the
development of new business and
the expansion of old business into

Stocks

The combination

and

not report

a

had

than doubled,

Salaries

expenses were also higher.
did other operating expenses.

as

ties business has to sell

their aggregate income after taxes
more

was

gain in operating earnings before Federal taxes.
Because of the increase in corporate tax rates, which became

tive study to measure the public's
attitude
toward
securities.
For

capitalist
expect

1945, the number of
in this $5,000 — to —

By

securities

Government

that the market which the securi¬

a

the

half

That's

S.

U.

on

figures for the nine months ended Sept. 30, 1950, as compared with
the corresponding period of a year ago.
Among those which do

data, it is apparent

it

national

interest

or

Operating
increased

which

Sizable One

a

market

a

large reservoirs of private wealth

Market
From these

formed.

It is

might be described as

more,

Now, by the end of the war,
thanks to the general increase in

no

those who

just one-third own cor¬
porate securities.

or

say

a

exaggeration today to describe
the millionaire as the vanishing

cash

—

government bonds—total $5,000

or

Perhaps I should

In

future.

those whose liquid assets

banks'

slightly lower. The results of these various changes
good gain in gross earnings.

were a

angle of the situation

lion.

those

needs

has

Board

too, and its findings on this point
are
even
more
disheartening. Of

1929, there were 39,000 indi¬
who reported incomes of

39,000 to 42,000 individuals. But
significantly, the amount of money

that

covered that

viduals

gory had

demonstration, but simply by way
of documentation it might be noted

unchanged

Reserve

operating earnings of the New York City banks

period ending Sept. 30, 1950, have been issued during the
past two weeks.
Most of the institutions reported an increase in the income
received from loans. Fees and commissions were also higher. For
most'of the

the

JOHNSON

E,

for the

happened.

That propo¬
sition
seems

Engel

The records of

pocketbook, income may well be a
faulty index to available cashavailable for investment, that is.

to that fundamental problem,

redistribution

days of

these

in

that

rising prices and apparently end¬
charges against every man's

iness.
Louis

realize

H.

T/Hs Week—Bank Stocks

cor¬

less

of the dimensions

some

precise—own

become investors?

in

of that problem.

Fenner & Beane rests on one sim¬

ple

you

be

to

But

give

By

it

Well,

ask, have the other* 54% not

may

securities.

advertising and selling phi¬

for these fami¬

show

porate stocks and bonds. Why, you

brackets to
furnish larger portion of equity capital. Says advertising and
selling securities involves ethical problems as well as mass
selling, and asserts there is a growing desire for knowledge of
The

Reserve

shows that less than half of them

—46%

taxation, thus requiring investors in lower income

losophy of Merrill Lynch, Pierce,

Bank and Insurance Stocks

securities. And

Federal

individuals?

and

Thursday, October 19, 1950

.

or

obviously

people

own

the

data

$10,000

.

for the great

year,

these

do

of

level
a

afford to

can

By LOUIS ENGEL*

the

at

income

more

.

Stocks

Kericho,
and

Subscribed

Paid-up

Burma, Ceylon. Kenya
Kenya, and Aden

Zanzibar

Capital

£4,000,000

Capital

£2,000,000

Reserve Fund
The

Bank

£2,500,000

conducts

banking

every

description of

and exchange

Trusteeships and
also

business

Executorships

undertaken

Number 4952

Volume 172

.

The Commercial and Financial Chronicle

.

.

adopted promptly and put into ef¬
vigorously, either the infla¬
tionary spiral is bound to continue

Needed: A Tough Policy
To Stop Inflation

fect

of Governors, Federal

Board

question

will

it

By ROGER W. BABSON

Asserting "we all should know where
to

Inflation

injures most those least
injury. It strikes at
the core of democratic capitalism.
It destroys the strength and mov¬
ing force of our economic system.
able

and wage controls,
only conceal and postpone inflationary results of inadequate
fiscal and monetary action. Says more reliance should be
prevent inflation, such as rationing, price

and

with

future

but without

hope

too much

expectation. Events have
moved very rapidly these past few
years.
Three
years

with

ago,
sole

our

the

control

of

atomic

bomb

control of

and

the

air,
a

could

we

have

enforced

settle¬

peace

ment in Russia

inflationary results of inadequate
fiscal and monetary

The

controls

must

but also lower

ing and

based

be

fiscal

on

principally higher taxes,

measures,

nonmilitary spend¬

effective debt-manage¬
A prolonged period

an

policy.

defense

like the

preparedness

face must be financed on

one we

a

all of
to

reshape

us

kind

the

of

thinking

our

world

a

as
are

we

likely to live in during the next
decade. Fears and uncertainty of
in

lay

war

minds

our

of

of

The

them sharply

foreground.

end of the

end

many

day and succeeding

brought

have

the

to

of

prior to June 25.

events of that

days

back

the

in Korea

war

for many years

An

adequate tax program must
with a
restrictive

monetary and credit program if a
economic stabilization

functional

is

program

It

through addi¬
borrowing, their spendable

incomes

bolster,

that

to come.

Second, we must de¬
economic program

Likewise wages

should

salaries

creased

to

they

and

they

taxa¬

either added

are

and made for inflation,

prices

or

increased

offset

to

in¬

be

not

get
of

tough

a

the

our

efficiency out

maximum

economy.

As for the rearmament program,

Russian

agression can be stop¬
we
call their hand and

if

ped

convince

them

gressively

that

will

we

ag¬

further tyranny
and conquest. This means that (1)
we

thereby

the

reduce

ment's

needed

defeat

a

and

sources
as

utilize
labor

possible: (2)

much

of

defense

afford;
the

ail

our

of

re¬

effectively
must devote as
as

we

national

expenditures
and

cur

product to
as.

can

we

obtain
cooperation
of

(3)

must

we

maximum

friendly nations and win the

sup¬

port of neutral nations.
Two Principal Programs

Of equal
mament

importance to
is

program

an

rear¬

a

tax

govern¬

and

revenue

pay-as-you-go

vanced

in

months

recent

the inflation.

to

stop

The first involves

comprehensive

harness

a

direct

of

fiscal

policy.

Money and Credit Controls Needed

Basically,
controls

monetary
needed

are

and credit
to stop the

growth of bank credit. This is the
source of the money supply which
is

already excessive and therefore
This cannot

the basis of inflation.

by

nearly

15,000 competitive banks.

done

voluntarily

fore, the Federal Reserve should
be free to use such powers as it
has and be given adequate addi¬
tional authority to use if neces¬
sary to stop further credit infla¬
tion.
A

tough

credit

for

is

program

selective

of

those

limited

direct

num¬

trols, principally fiscal and credit

designed

measures

reduce the

to

volume of purchasing power avail¬

able to the public and

purchasing

power

increase the
of the govern¬

ment.

Inflation
of

stems

purchasing

available

services.

an

supply

of

measures

be prevented.

save.

is

nesses

capita] goods and housing needs
a growing economy.
However,
they should not be expected to do

of

the

without

and

such

future

dollar

will

ciate
The

far




at

too

in

dollar

protected.

It

has

is

its

much

in

worth

but

purchasing

economic

Eccles

be

If

a

power

to ten

years

58

value.
cents

today

as

broad and strong functional
control

program

is not

or

with

hard-

cash

responsible

sponsible for

selves

to

tional

tax

because

have
acquired a

or

having

tented

stocks

and

are

ment is
292

advertise¬

newspaper

appearing in 380 dailies of

cities.

additional

Two

will

paper

ads

There

will

any

system

listic

news¬

this

appear

fall.

far

history of the
world.
Yet,

citizens

our

about how

much

spends

really

know-

ple actually receive from this vast
of money.

sum

policies, and
largely ignored.
more

the

will make

we

and

be
in

taxes

wills

our

rea¬

future

voices

our

in

felt

the

coming elections. If we fail to do
this, we shall certainly lose mor
than

dollars

our

times

in

the

critica

ahead.

the government

what benefits the peo¬

or

with

tax

our "

about

better, con¬
merely

knew

their protests were
I hope we will all
and that

Roger W. Babson

of

who

denouncing

heard

thus

worked in the

to

addi¬

of

in years past
high-pressured

themselves

of government

few

first

The

other

common

function they

the

nei¬

as

nor

were

con¬

ready

cajoled into thinking there was
other course open to us. Busi¬

nessmen,

work

re¬

are

too

burdens

we

reputation for

broader

a

what

of

no

taxes

were

the imposition

agree

ther it

chiefly

was

as

We

ment in taxes.

democr acy

they

as

our

far

as

cerned.

made

in fact

us

getting into the
jam in which we now find our¬

has

about

to

in theory.
Indifference

are

to the govern¬

people

perform.

No Money for Unnecessary
I

do

not

Things

handing

of

approve

of the

much

country's cash
or classes
all
going and whether
A supplementary influence on
they are being wisely spent. Our the people. That is undemocratic.
the Exchange's decision to engage children should know more about It is
also financially dangerous,
in this educational program came
money matters, especially as they especially when we need all our
from the booklet entitled "Invest¬
concern
I
Congressmen
as
they money for productive things.
ment Facts About Common Stocks make
appeals for re-election. If am not against moderate farm
and Cash Dividends," which the
more
Congressmen had a better supports for basic farm products,
Exchange and member firms is¬ understanding of the value of a but I am opposed to the indis¬
be

magazine ad¬

one

vertisement.

in

sued

Requests

1949.

publication

have

ex¬

ceeded the 1,200,000 mark.

The

in

into

June

actual

1949
this

of

year

family investment undertak¬
ings in common stocks.

and

'

I

'

■

Merrill Lynch Opens
New Midtown Office
Merrill Lynch, Pierce, Fenner &

opened

a

office

new

Manhattan.

Located

Broadway, the new office
will be managed by Murray M.
Grossman,
Winthrop H.
Smith,
Merrill Lynch, managing partner,
announced.

it

first

York

City

has

opened

since

in

Merrill

New

Lynch,

Cassatt merged
with Fenner & Beane in 1941.
A.

Pierce

The

new

E.

and

office

is

staffed

by

eight registered representatives of
the
New
York
Stock
Exchange
other

and

Mr.
A.

Besides

Exchanges.

Grossman,

they

Jerome
Dreyfuss, Leonard O. Fischer,
R.

Percy

Sol

Gold,

are:

C.

Healy,

Oscar Isaacson, Kenneth S. Lester
and

Spitzer.

Harry

dence,
in

born

By

coinci¬

seven of the eight were
New York City; Sol R.

Gold is the single exception.

tends

use

of tax dollars which

to. make>

farmers

dairy

favored

a

foolhardy farm support pro¬
might not break the country

gram

enslavement of the farmers them¬

expenses,

selves.

I

shall

New and

higher taxes we
They need
just as well be applied to state not be much higher if each of us
will take the time to impress upon
and local government taxes and
those who are now up for elec¬
expenses. Federal taxes have been
increasing since the early part of tion the acute need for drastic
what

of

the

present

the

national
for

need
ment

though
mention might

century.
Naturally,
growth created the

expanding

unfortu¬

as government'grew big¬
individual and corporate in¬

nately,
ger,

initiative

and

centive

have

fault

the

of

been

This

undermined.

steadily

our

cuts

has

Congress¬

Southeast'!! IBA Group
To Hold Annual
Group

reveal

would

structure

Federal

our

an

tax

aston¬

will

of the Investment

its

hold

wald
A.

Rayvis

He

Bldg.
Blair

associated

become

has

Co.,

Inc.,

were

necessary

of

ess

steps in the proc¬

coming

our

of

age

as

a

This is not true.
Time

formerly

was

with

Co.

Claybaugh &

F.

with

Langford

Schwabacher Adds Two
(Special

FRANCISCO, Cal.—Rich¬

SAN
ard

to The Financial Chronicle)

G. Kinscherf, Jr.,

A. Ryder are

Co., 600

York

and Oliver

with Schwabacher &

Market Street
members

and

Exchanges.

San

of

at Mont¬
the

Francisco

New
Stock

annual

24, at
of taxes, still in the
Maryland Club, Baltimore.
which were enacted as
A committee consisting of Ed¬
"temporary" measures, throughout
ward K. Dunn, Robert Garrett &
the past 50 years. The most recent
examples are the obnoxious excise Sons, Baltimore; Richard A. Big¬
taxes placed on the statute books ger, R. S. Dickson & Co., Char¬
lotte, N. C.; James H. Lemon,
early in World War II. Our Con¬
Johnston, Lemon & Co., Wash¬
gressmen have added to the tax
C., and Roderick D.
burden slowly so as to attract a ington, D.
Branch,
Cabell
&
Co.,
minimum of unfavorable public Moore,
Va., have presented
attention.
Now they try to sell Richmond,
the following slate;
us the idea that all these increases
meeting

Tuesday,

on

Oct.

number

ishing

Chairman—W. Peyton May, In¬
vestment

Corp.

of

for

to Be Alert

billions

more

of

Norfolk,

Nor¬

folk, Va.

Now the bureaucrats are

(Special to The Financial Chronicle)

J.

America

thirtieth

effect,

nation.

Rode-

of

Association

Bankers
of

Meel'g

BALTIMORE, Md.—The South¬

.

review

Federal

nonessential

in

spending.

eastern

men.

A

have.

govern¬

our

but

expenditures;

probably

Vice-Chairmen

Fla.—Frederick

potato

financially, in the years ahead, but
eventually it could lead to the

and

taxes

With J. A. Rayvis
MIAMI,

or

class.

myself here to Fed¬

I will confine
eral

firm's third New York office, and
the

certain groups

coming elections,

In view of the

been

the nationwide investment

is

It

criminate

A

our money.

The Tax Load

much

have

for

easy

and

histories of individual

case

welfare,

parasites to waste

carried
presented

appreciation
it would
bureaucratic

better

a

so

to support

of the people at the expense of

social

be

our

are

and

true

of

over

know where

all should

dollar

not

advertising of the Exchange

developed

We

tax dollars

October,

this

for

gomery,

ago.

idea

done

earned

purpose is
information de¬

bring

to

understanding

the

ex¬

Direct controls

Mr.

the

of

already been permitted to depre¬

Banquet of the 17th Biennial Congress of
the Cooperative League of the U. S. A.,
Chicago, III., Oct. 12, 1950.

by

that

power

assurance

purchasing

compared

address

individuals and busi¬
required to finance the

by

the

♦An

signed

vig¬

a

of

their

The

basic

discuss

to

scarce

people
A large volume of new

"land

after paying it

de¬

our

is

Campaign

tising campaign.

induce

to

program

savings

this

goods
can

orous

to

little

what

to

are

excess

over

Only by adequate fiscal

and credit
cess

from

power

in

we

controls,

certain

on

cur¬

it must

materials and facilities and

con¬

as

es¬

economic

in the

However,

be accompanied by a

ber

absolute

an

effective

an

situation.

rent

of fiscal and

program

measures

fixing and rationing of goods. The
functional

so

have

as

this

phase of its national adver¬

new

a

There¬

be

such

involves

free"

concern

mil¬

so many

in

Commencing Oct. 17, the New
Stock Exchange will enter

stead of adopting a pay-as-you-go

controls including price and wage
second

the

people

York

midtown

stabilization

ad¬

the

amazing that

of

1407

economic

been

to

It is
lions

Exchange

New Adv.

in

sential

hove

N. Y. Stock

at

cipal

programs

the
sys¬

against Russian Communism.

policy for the public if the gov¬
ernment
runs
large deficits in¬

designed to assure finan¬
cial stability at home. Two prin¬
program

lead

preserve

Beane

resist

must

to

deducted from profits

are

policy.
at home to stop inflation.
Both However, it would be difficult, if
of these programs must be de¬ not impossible, to adopt the needed
monetary
and credit
signed and carried out so as to restrictive

velop

unnecessary

that government money is not spent

see

The American

fense

reduced

been

have

by higher taxes.
and

stopping

in

work

to

People must not be al¬

to

tion because

problems, face us in
emergency.
First, we must
rapidly build an adequate defense

the

of

combined

be

tional

Two main

all

of

the government.

taxes due

tne

mean

this

program.

collection

enforced

inflation.

has just
begun and means the
building up and maintenance of a
large military establishment and
helping other countries to ao the
same

if

of the tax loopholes and an

lowed

present emergency.

our

of all

the

will

Nor

basis

pay-as-you-go

have

e s

seeking

functional

of

cornerstone

the pur¬
chasing power of the dollar is not
to
depreciate further.
This in¬
gained
enorMarriner S. Eccles
m o u s 1 y
in volve.-? not only very high taxes
but much greater efficiency and
economic and
military strength.
The Commu¬ economy in the spending of pub¬
nist blitz in South Korea has made lic money as well as the closing
and her satel-

also

cial and economic life that

the required program is
weakened and destroyed.

of

1 i t

higher taxes coming, it is time for public
for
things and that no groups or classes be supported
at expense of public.

weakening and eventual destruc¬
tion of the very foundation of so¬

to accept

ment

then Russia

actions. They

symptoms rather than
They sugar coat the
inflation so that the public's will

of

Since

would

are

and

more

be alert and

to

with

deal

disease itself.

with little risk
war.

ration¬

price fixing,

would

but

tem

they

An extensive

controls

only

seriously
impair
functioning of our economic

ing, etc.—do not prevent inflation.
They only conceal and postpone

and

sea

and

—wage

not

direct

of

system

on

One must face today's world and
its

It must be stopped.

functional economic stabilization through monetary
credit controls, adequate tax program and effective debt
management policy.

placed

in view of

bear

to

our tax dollars are going
wisely spent," Mr. Babson calls attention
astonishing number of taxes in Federal tax structure. Says,

and whether

velopment would be calamitous.

direct controls to

Former Federal Reserve Chairman asserts

Id

Taxes, and Moie Taxes!

be

necessary
to
impose
a
straitjacket of objectionable direct con¬
trols and restrictions.
Either de-"1

System

Reserve

without

or

By MARRINER S. ECCLES*

Member,

(1503)

Carroll

W.

—

Mead, Mead, Miller & Co., Balti¬

asking

dollars

and

and

more,

John

C.

Jr.,

Hagan,

Mason-Hagan, Inc., Richmond, Va.

Secretary-Treasurer—Leroy A.
framing laws which
possible for Uncle Wilbur,
Stein
Bros.
&
Boyce,
Sam to help himself to a much
Baltimore.
larger share of your income and
In addition, the committee nom¬
mine.
In these days of inflated
values, it costs a great deal to inated Jonathan G. Gullick,

already

are

make

will

on

carry

Korea.
be

military

a

the

in

even

it

area

as

campaign
limited

as

Thus, I suppose we must
to this demand for

resigned

Let

not, however,

more

taxes.

be

carried away by the tension

so

of

the

times

us

that

we

surrender

ties and

of our hard won liber¬
rights to the bureaucrats.

Let

make

any

Interstate

lotte,

N.

our

Congressmen

for

Corp., Char¬

election

Executive Committee for
year

term.

Walter

S.

serve as

the

to
a

three-

Edward K. Dunn, and
Robertson

(Scott

Stringfellow, Richmond)

more

us

Securities

C.,

&

will

ex-officio members of the

Executive Committee.

"si

.

v

,

20

The Commercial and Financial Chronicle

(1504)

Continued

jrom

■...

-

,

■■

.■

Thursday, October 19, 1950

.

threats

many

10

page

.

.

.

outlook

for

the

to

the

long-term

dollar.

Canadian Securities

International Trade in

ent story.

to

the

But

immediate prospects are a

differ¬

This applies especially

the relationship

between Brit¬

ish sterling and the dollar.

A Defense

By WILLIAM J. McKAY
Now

that the smoke has begun

have

been

ridiculed,

that it ling revaluation is now only a
unde¬ question of time. In the absence
sirable repercussions. On the con- of a concerted British exchange
.trary the beneficial results have scheme it is also strange that
exchange,

lias

it

said

be

can

certainly produced

no

probably exceeded all expecta¬ Australia has so long
Despite earlier scepticism, logical step of raising
its
the cost of living has already com¬ above
present
menced to decline, and to this ex¬ level. If such a plan

deferred the

its currency
undervalued

tions.

does exist it

revaluation of the would be reasonable to suppose
-currency as a deflationary meas¬ that any move directly affecting
ure has been clearly justified.
On sterling would be initiated by the
tent

at

least,

the other hand the expected wave
of

liquidation of Canadian hold¬
ings on the part of foreign holders
has failed
at

the

to

materialize.

In fact,

higher level of the Cana¬

dian dollar there

purchasers
internal

are as many new

sellers of Canadian

as

securities.

of investment

This

had

category

been supposed

to have attracted the greatest vol¬
ume of "hot money," but there is
now

reason

to believe that the to¬

tal of purely speculative security
transactions has been greatly ex¬

aggerated.
If such is the case,

to

be

ficial

reason

comment

appears

question

to

there

the of¬

made

time

the

at

of the announcement of the

free¬

ing of the dollar to the effect that
the
move
had
been
virtually
forced by an overwhelming influx
of U. S. speculative funds.
This
ostensible

reason for a step of such
importance at no time appeared
.fully convincing. Subsequent de¬
velopments
and
significant ex-change rumors emanating from

-other

countries

of

to antici¬

pate that the timing of any action
the part of the United Kingdom
will be largely determined by the
of

success

also have

tion

Canadian

the

Another factor

ment.

bearing

a

that

might

the situa¬

on

reconciliation

the

is

experi¬

of

the

International

Monetary Fund to
principles of exchange

to

It is unlikely in power now in Peking.
Nor can we expect a peaceful
foreign
prices down will be very effec¬ settlement on Formosa. It is easy
tive.
Monetary measures applied to decide what should or should
But it
by Washington authorities, on the not be done in Formosa.
other hand, may depress a number should not be forgotten that For¬
of
domestic
prices. By making mosa is now in the hands of a
credit money more expensive and government which has over 600,by restricting private speculation 000
soldiers, well trained
and
or
stockpiling, Washington may armed, at its disposal.
Such a
temporarily
influence
domestic government will not voluntarily
price trends. But movements on abdicate.

lead

Prices

international
will not be

commodity

Currency

ternational
revived.

allocations

The

feel

II

war

emergency

do

not

proaching.
terests

be

allies of World

war

War

cannot

that

another

already
immediate

is

Their

ap¬

in¬

to be in conflict with

seem

As

the

strongest

unit

-of the group,

the Canadian dollar
play the role of
guinea-pig for the new exchange
-experiment. The Dominion also
would be the logical choice for
interpreter to this country and the
was

well fitted to

Monetary
with

velopments

in

that Canada is

serve

now

discuss¬

strict

the

ing with the Fund the question of

commodities

available

to

the

United

below

level

continuance

subsidy

paid

in

1951

the

by

the

of

Canadian

Government to gold producers. It
is
believed
in unofficial
circles
that

the

Dominion

envisages

Government

eventual payment of

an

States

price

spiral.

gic

question
the

of

the

breakdown

sections

of

the British Commonwealth.
Whereas only a few months ago
any

suggestion of

valuation

of

the

an

upward

pound

re¬

would

the

or

sacrosanct

the

blow for the freedom

wartime
that

restrictions

since

stifled

world
be

to

of

exchanges and the abolition of
the

the

It

commerce.

what

to

seen

countries

and

will

controls

have

war

only
growth
of

natural

and

the

now

remains

extent

follow

end

other

this

She

therefore

She

the

has

the

also

gold,

dollars,

to go on a buying spree.

of

exchange

a

She therefore has

materials.

raw

financial stake in

united

A

front

higher prices.
the

of

Western

commodity exporters against Rus¬
sia will not be acceptable to most
of

them,

if they
sphere."

belong to

even

the "Western

Washington

protest

may

—

but

too

arti¬

was

of

quotations.

that

based

forces
a

the

can

trast to

There

is
of

transition

from

been

4-2400

ny

be

of

disorder.

In

con¬

the strength displayed

paper

issues
in

base-metals
well

on

the

however

$10

newsprint,
and

golds

per

for

ton

and
were

also

countries,

case

of

our

own

specter

of

spending,

es¬

In many

war.

in

especially

Western

Europe, speculators expect that
the United States will be the first

dollar

the

on

inflation

r

ex¬

in

The

up-valuation of
eign currencies

soft

later

had
now

get increased dollar
without "grants-in-aid"

by

domestic

:

trols.

to

"roll

' V-.

price

con¬

miscalculated
reaction to Korea.
It

is

quite

shall hear

that

more

have

a

to

where

will
I

that

we

work

conditions

under

combination

strange

a

therefore
of

free

time

personally

unlikely.

prices. Our

broadened

its

foreign field.

From

now

on

it will publish "International Re¬

Finance and Currencies,"
"Statistical Market Letter on For¬

Gold,"

and

Letter

and
Foreign

on

Exchange and Gold," as a timely
and
practical combination with
our
"Foreign Letter."
These

previously published by Mr.

Guenter Heimann,
of

Managing Edi¬

"Foreign Letter."

our

of

illustration

an

that many of these important

for¬

about

all-out

an

and

serious

the

war,

prob¬

dollar's value

Problems of this sort will have
to

wait

the

for

event

point

their

solution

in

until

There

occurs.

guessing

is

no

about

now

in relation

to

exchange developments are
predictable,
we
were
able-to
anticipate correctly the upward
of the Canadian

movement

the

tralian

new

speculation

dollar

gold,

or

about the

circumstances that may

bring this

about.

(2) If

price

a

inflation

United States

were

in

the

allowed to

much beyond the
stage, then fears of

very

dollar devaluation would

of dollar

rumors

would

become

gain;

devaluation
numer¬

more

ous; and speculation against
the dollar would probably in¬
crease.

But

price inflation will not be

a

allowed to

trols

run

Credit

away.

con¬

already in e feet,
are
being tightened.
Price
wage controls will follow, if
when they can no longer be
are

and
and

and
put

off.

We

can

(a)

therefore conclude:

That

foreign

some

curren¬

cies will be stronger because of a
basic
change
in
international
trade

relations, brought about by

basic

change in the foreign
policies of the United States; but
That

(b)

eign

of

some

the

current

speculation against the dollar has
carried

been

bounds of

little

a

beyond

the

common sense.

in Aus¬

Conclusions

pounds.

We believe

Australia

will

that the decision
made

be

litical rather than

on

a

Let

in

sum

us

There

po¬

briefly.

up

will

be

in world

strictly mone¬
tary basis, and that up-valuation

crease

in¬

marked

a

trade.*

This

will

exports.

a

be decided
(or "has been decided").

probably

upon

be

greater

But
of

the

the

Strong

has

been

greatly

exaggerated
such

by speculation;
speculation against
will

dollar

and

the
probably

backfire.
Some

and
or

have

gained

imports

however,

the

world

especially
,v->

....

is

It

very

war—no

mains

for

America's

will

ecoromy

on

politics,
issue—war

the

than

on

anything

•

through

pass

than

international

on

peace—more

else.

"no

currencies

in

depend

movement

downward

dollar

for

Basically,
role

Dollar Basically

likely that

we

shall

prolonged stage of
peace," where it re¬

a

doubtful

whether

a

new

will be inevitable.

But

strength in terms of the dol¬

total

lar, and may be appreciated.
But
such changes will reflect special

even

tions will continue and defense
armaments

new

general weak¬

a

win

back

lost

administrative

is

new

lems

a

fact

the

American dollar will probably

and

follows:

will be raised.

in

to

It

the dollar's
international cur¬

among

then

reason

activities

own

terrific difficulties.

its

commodity

on

me now sum up

position

organization,

own

has for that

nelly has been added to the staff

strengthen

effect

temporary

important to observe

as

incidentally,

and

hopes

new

markets.

foreign exchange movements and
possibilities as it is to follow mar¬

As

short

a

and
promises may also turn out to be
illusions.
But they will have a

practical point of view,

a

it will be

tor

which

unsolvable

The

ago.

present

were

was

issues

of

be

to

seemed

intervention will exist.

of Southern Securities

erty Bank Building.

settlements

get

the

that

Spending for armaments will
certainly be increased.
But we
shall also have numerous "peace
rumors" and promises for peaceful

and
strategic controls and government

ket

thought
economy

war

situations and not

encourage

arrangement

peace

will

traders

foreign exchange controls,
markets,
switch
exchange

about peace talks

discussions.

Korea is

American

who

or

war

at¬

specu¬

when the dollar will be devalued

Foreign

American

possible

Moscow

believe that
on

the

the

of

effect.

issue of today or tomorrow.

an
-

private in¬
some

too difficult to

circles

all-out

will

-The Far East Situation

he

terms

dollar.

Eastern

currency

Administration

in

ening of the American dollar.

Corp., Lib¬

lative

the.

number of for¬

a

tight¬

policies

position of those

there

fur the

Exchange

back"

or

the

tack

(1) If

Foreign countries therefore

credit

have

not be

will

as

In China, on the other hand, the
Communist Government will have

SAVANNAH, Ga.~John L. Con¬

It

rencies

pect

the

of

the .Treasury

Efforts to curtail

will

and that it will have to carry
the major burden, financially and
otherwise.

"Far

crisis

private

Let

war,

outcome

Federal Reserve., a

of

country to be involved in another

eign

credits, which would have re¬
quired Congressional approval.

and

maintained.

(Special to The Financial Chronicle)




the

revives

em¬

will

earnings

the

With Southern Securities

Boston f*. Mass.

in

and deficit

pecially in

The

movement.

program

They

Plan.

greatly

l01/^%-9V2%. Stocks, after earlier
We
may
now enter a period
buoyancy with the industrials and where many people will believe
base-metals
touching
new
all- that a new basis for stable peace
with Russia can be achieved, after
time highs,
subsequently reacted.
having made it clear to Stalin that
Demand

1-1045

Fifty Congress Street

the

if

solved.

areas

such
WORTH

been

the

free¬

in
other sections, the corporate-arbi¬
trage
market
was
weaker
at

increase

Two Wall Street

to

country

the

continued

New York 5, N. Y.

Marshall

have

at

commodity prices. But the
only practical result will probably
be that a further upward spiraling
play of natural
accomplished with of prices will be stopped sooner

restriction

on

minimum

nar¬

confirmation

additional

fact

dom

incorporated

the

solved

be

Foreign dollar difficulties have
temporarily been solved—almost
too easily.
The advance in for¬
eign prices adds to the pressure

curiously restrained.
The
freeing of the Canadian dollar in
a

the

con¬

on

been

likewise produced

to

will

factors

ports

or

bureaucratic

A. E. Ames & Co.

of

would

currency

creased turnover since the freeing
of the dollar its fluctuations have

thus

CANADIAN STOCKS

countries would
end

soft

of

barrassed

prices
were
mostly unchanged. The new Cana¬

the

Corporation

problem

continued. The dilemma has

and

rowing

Municipal

dollar

bond

market

tribute

armaments

From

ternal and internal sections of the

London

Provincial

dol¬

of

the

between

partial liquidation of

also pay

may

not

slightly firmer at
5V4%, and despite the greatly in¬

Government

increase the outflow

without

lar

speculation and to force at least

exchange.

con¬

ficiality.
During the week there was a
lull in activity in both the ex¬

dian dollar

CANADIAN BONDS

.will

few

last

tne

of

will take place.

re¬

with sterling United States. Consequently, there
is increasing resistance against the
Russian
buying policies will "export of inflation" from this
the
also serve a political aim: to curb
country.
This leads toward an

maintenance
of

She

materials.

necessary

burning

the upward
will seek to

stockpile large amounts of strate¬
and

the

or auc¬

Russia will support

Canada

resolve

ox

prices.

at least $40 an ounce to domestic
producers. Thus it is also left to

tq

the

unrestricted "free market"
tion

and the

ening

more

she

to

in

is unlikely that the

continue

Whatever

"struggle"

ECA, due to the rise
sterling commodity prices.
In
addition, direct aid for armaments

sales, merely to make these inflation

any

other

pay

than

will

back
war

Lie

bringing controls.

in

Speculative

structive example.

Fund

Britain

before

But it

ventories

lars and gold.

much.
The mere an¬
in
A
number
of
influential ad¬
British ticipation of events has already
led to a striking increase of con¬ visors in Washington, D. C., will
.scheme of this nature. It is hardly
fidence in the pound; materializa¬ consider the rise of sterling prices
■surprising therefore that despite
tion of present beliefs can only for hard currency export goods as
-categorical official denials there
contribute still further to a more a "present from heaven."
have
been
They
persistently
strong
natural
balance of world
trade had
assured
Congress that the
-rumors of impending currency de¬
international

-connection

to

restrictions.

rolled

be

advance

months

Change

now

held

price

ceived from

result of the Cana¬

a

as

the first

currency

dollars

must

sterling export commodities.
It is most unlikely that the soft
dian
departure from previously
accepted practice. In this connec¬ currency sellers of hard currency
tion it is also interesting to ob¬ commodities will voluntarily re¬

new

.

British realm of influence.

America

number of

a

will not

Korea.

Relations Undergoing

Fundamental

to

levels

markets

greatly affected.

Old war-time agreements on in¬

the American attempt to cheapen

the

involved

confirm

"

real peace agreement may be held
undesirable by those who are

as

soft-currency areas.

$35 official world price of
yellow metal.
In any event it appears that supplies of strategic materials for
the belief that Canada's
recent
action constitutes the first step in momentous developments in the the United States or to make them
field of foreign exchange are new more expensive.
a preconceived currency plan that
embraces all currencies within the in the making. Canada has struck
Russia, too, is an exporter of
Commonwealth

to

that the pressure to bring

on

British

the

tend

United Kingdom.
It is likewise logical

sterling has been made
appear much stronger than it
really is.
A special campaign against dol¬
lar
inflation
now
starting will

Economy

there

is a
to clear following Canada's dra¬ growing conviction in most of the which must be stockpiled by the
matic action in the field of foreign world's financial centres that ster¬ U. S. and which come largely from

British

must

central

seek

police

machine.

A

In

in

the

some

recent

immediate

of

the

future,

ground

months.

it

There

war

in

this

stage,

war

programs

prepara¬

will

be

or

ex¬

panded rather than curtailed.

the

are

Frankly, we
disappearance
on

which

may

a

may

of

new

have relied.

observe
the

world

a

fatal

foundation
reace

era

The incorpora-

Number 4952

Volume

172

tion

China

of

The Commercial and Financial Chronicle

.

.

ings today at more than $40 billion

of power."

Moscow will not turn back from

the

it

course

is

there

has

unless

taken,

change which can¬

some

will

probably

make

from

breaks

within,

world

new

shall

we

period with a

this

end

probably

empire

Russian

the

Unless

inner

The

war.

sian

empire probably are greater

known.
What
in fact, is
whether the breaking point can
be reached without the necessity
than

is

generally

must

we

test

For

foreign

pect has certain implications.
will

Trade

but

grow,

will

so

controls.
Volume of imports

will increase

of

more

a

these somber aspects

—

with

acute

ac¬

nature

fac¬

no

less.

bloc,

certainty
t h

ro

tne

I

still

leave

you

trading

particularly the
improve "fur¬
controls are not

depend

with the thought
opportunities must

affairs
more

no

characteristic
man's

of

ex¬

perience
change.

than

,Even

few

C. Middlebrook

A.

a

be

dynamic for
would

an

leading

the

(5)

wili

which

of

ago

shareholders of

which

vir¬
un¬

to more rational

Efforts

mula
mon

risk

government

by

to

fluctuations,
ma¬

se¬

of

development

new

so-called for¬

as

plans for investors in com¬
stocks, which minimize the
of long-term capital depre¬

You
last

will

in

recall

that,

New

authorized

by

York

State

were

the

amendment of

Decedent Estate Law to

requirements of
To the extent that in¬

effective

1, fiduciaries and trus¬

July

tees

facts

institutional

invest in

domestic corporate securities not
otherwise
eligible, including
savings banks
-stocks, to the extent oil 35% of
are
denied
investment
freedom
the market value of the property
and flexibility which are reason¬
held.
You will

the times.

such

stitutions

—

principles.
Marginal factors,
however, can be of major and, at
times, of controlling importance.

ng

Thus

virtual

the

and

would

become

not

that

assurance

preferred

stocks

common

major savings

bank investment assets should not
be

considered

justification for

a

denying to this subject the careful
consideration

and

thought which

it demands.
Historical

Institutional

investment

securities

equity

considered

matter

innovation.

an

of

record

in

hardly

can

that

b©

It is

prior

a

I©

as

^

also

to

recall

that

announcement

an

insurance companies of New York
State, They are still held in con¬
siderable

amounts

domiciled

in

by

other

companies

states.

Ac¬

cording to the Institute of Life In¬

ciation.

with

economic

savings bank investment port¬
certainly not as long as
operations
of
the
savings
banks are guided by sound bank-

by

economic

The

(6)

and

consonance

fundamental

oc¬

General

techniques such

without
predisposition to

or

never

minor position

a

in

are

num¬

riously affect stocks.

bringing investment practices in¬

and

in

our

studies

and

than

change.

increases

control

moderate

and

wisdom

Presumably-

would

institutional 1906, the year of the Armstrong
Motors,
for investigation, common stocks were
example, will presently have more prominently represented in the
investment portfolios of the lif©
than 88 million shares outstanding.

constructive action to address our

thoughts

continuous

organizations

these

corporations,

willing

By

framework

course

prejudice

to

tually eliminates the risk of

pattern of a past en¬
vironment. Rather, it would seem
be

technological

due

ber of shares and

traditional

to

since,

highly fluid and
with a reduced likelihood of
indefinite time, it
jor depressions that would

theoretical

the

du

in

with

(4) The great

thinking unduly with

investment

concerned

research,

unwise to shackle

seem

technological

of

Investors

it
ably related to the economic and
probably ■financial context in which they -according
years

the exigencies of

on

of

conditions

Under

vanguard

in the forefront of such

important im¬

Shackled

research, as a result
organizations are

these

investors.

Be

Not

presumably

pervasive >the

likely to be abandoned.
that

ughout

range

human

will

exchange

is

at e r

g r e

and

countries,

there

cent)

Although the dollar position of

ther,

of life

might be added another somewhat
less somber, namely, change. With
the exception of nature (includ¬
ing
h u m a n

able.

sterling

Must

the

change

Traditional Pattern

trade,„ others will affect the vol¬
ume
of supplies that are avail¬

many

an

The extensive development

which

be

nomic values.

this world nothing is certain but

To

have

may

(3)

Pont,
General Motors, General Electric,
and other corporations need not

pact upon political, social and eco¬

operation; every.hing appears to

Some of
will bear directly on foreign
than

rather

ments

an¬

problems

the

advances.

to

seem

folios

in

promise develop¬
within our range of vision

would

that

is in actual

„

Controls will be

these

as

an

exports.

a

promise that it will last; but in

rapidly than the volume of

more

tor,

1789, wrote

"Our Constitution

this pros¬

traders,

letter
follows:

in

death and taxes:'

the Russian empire.

cn

written in

now,

serious military de¬

inflicting

of

feats

Franklin,

more

of corporate

strains and difficulties of the Rus¬

Benjamin

cupy

of

forefront of change;
(4) great increase in shareholders; (5) reduced likelihood of
future major depressions; (6) new techniques minimizing risks
of capital depreciation; and (7) higher investment yield and
greater diversification from equities.

final

the

savings banks.
securities

*

facilities which put large corporations in

further existence.

of the
such

funded debt at all.

banks' invest¬
ments, cites: (1) emergence of large, strong and capably man¬
aged industries; (2) accumulation of large holdings of cash
and government securities by corporations;
(3) technical

an

earnings

financing
expenditures.
Many
of
these corporations have no pub¬
licly held debt; some have no

Stressing recent changes in investment patterns, savings bank

the center of
Europe in order to dictate to the
rest of Europe the conditions of

retained

21

investment

capital

executive, in support.ng equities for savings

control

to

attempt

Through

the

to

swer

the securities markets in

Vice-President, East River Savings Bank, New York City

spontaneously.
In
Europe, Germany will be
the main field of decision, and
Moscow

1939.

themselves provide

and
depreciation reserves many
of these corporations are, to a con¬
siderable extent, independent of

By ALFRED C. MIDDLEBROOK*

predicted.
We must try to
bring such a change about; but we
cannot
count
on
it
happening
not be

almost four times the total of

are

Equity Investments
For Savings Banks

sphere would eliminate a possible
''balance

(1505)

Russian

the

into

.

United States life insur¬

surance,

companies representing 97%

ance

of the assets of all companies

domestic

stock

held

investments

ag¬

gregating
$1,813
million rs of
June 30, 1950, an increase of $257
million

the

-over

amount

held

on.

June

30, 1949. The total of $1,813
million, representing 2.9% of total
assets, comprised $1,354 million of
preferred stocks, and $459 millioa
of common stocks.

While

the

rities

is

equity secu¬
established, it is a

well

such

that

savings

in

investment

fact

of

record

bank

been confined

investments

have

largely to shares of

made in the latter part of June, commercial banks. For many years
operate—to that extent the
life
insurance
companies the laws of the New Lngland
be prevented from per¬
have
authorized
bank
domiciled in New York State have States
forming the full measure of pub¬
decided to seek statutory author¬ stpqks for savings bank invest¬
lic service for which they were
ization at the 1951 session of the ment subject, of course, to varying
•

the

would have been considered most

have

rency

unlikely that at this time the sav¬

will they

free, or semi-controlled cur¬
markets.
And that today's
foreign trader must be as much
interested in currency quotations,
and

in

the

possibility of special

ings banks would be considering
investment
in
equity securities.

Yet, such have been the compul¬
of events, the coniinuity of

trading arrangements, as he is in
the relative changes in commodity

sion

prices here and abroad.

investment markets, and

in

Politics,
sense,

the

It is not surprising that

shadows

trade

its shadow over

casts

now

all trade.

international

its

should

falling
be

foreign

on

impene¬

more

thinking that we, as well as other
instituiional investors, are

laws and institutions.
He wrote as follows:

in
the
liberalization of fi¬

developments

Recent

toward

institutional invest¬
include equity secuiities
outstanding
interest
to

and

of

are

the responsi¬

charged with

savings bank invest¬
developments be¬

for

bility

the

changes

ments to

Meyer

enlightened attitude to¬

an

ward

those

Admit Donald A.

Monticello in 1816, re¬

written at

vealed

subject.

duciary

Foster & Marshall (o

actually

designed, and to that extent will
Legislature to hold common stocks
they become vulnerable to com¬ to the extent of
5% of assets. This
petitive forces and to a possible authorization would
supplement
encroachment of public authority.
existing powers to invest in pre¬
Thomas Jefferson,
in a letter ferred shares.

giving serious consideration to the

trend

trable than the rest.

the trend
progressive

and

informed

in

capital and

the

in

developments

to

These

ments.

speak growing efforts to bring in¬

practices into more real¬
istic ailgment with the actualities
of the capital and investment mar¬
vestment

kets.

The essential elements in

intel¬

ligent investment must always be

although the spell of
illusory
protection cast by the
legal
list has occasionally
ooscured
this
fundamental
truth.
This means that intelligent invest¬
dynamic,

"I

for

necessity for occasional

in

certainly not an advocate
frequent and untried changes
am

in laws and constitutions.
moderate

borne

be
once

I think

imperfections had better
with; because, when

known

we

accommodate our¬

them, and find practical
of correcting their ill-ef¬

selves to
means

But I know also,

tions must advance also and keep

with the times."

pace

practices must of necessity
be more concerned with and based
upon

Donald A. Meyer

SEATTLE,

Marshall,
member

Second

820
of

Exchange,

the
on

&

Wash. —Foster

Stock

should

admit

factor of stabilization

Donald A. Meyer as partner.

Mr.

Meyer has been with the firm for

in charge of the mu¬
nicipal department.
some

years

Hariy Diamond Opens
Investment

Office

Harry D. Diamond, member of
the

New

announces

office

at

Stock

York
the

Exchange,

opening of

Reynolds

&

a

new

Co.,

120

be

a

guide

valuable

in the

and
pro¬

jection of new thought.
Nevertheless, its value and sig¬
should

nificance

be

not

overem¬

phasized—particularly in times of
rapid
and
far-reaching change
that can profoundly influence in¬
the

the

World

Western

decades

Throughout

thinking.

vestment

been

have

and

revolutionary

last

two

period of
pervasive
a

change in the field of science and
technology. Advances of unprece¬
dented

made.

have

significance
The

momentum

of

been
events

Broadway. New York City, where
he will
ment

conduct

a

brokerage

general

invest¬

business.

Mr.

Diamond is the founder and Pres¬

ident of Eagle Petroleum Corp.




ground

common

ment

objectives,

basic invest¬
such as more

in

yields and wider diver¬

generous

sification within the limits of

curities
The

se¬

mere

fact

of

some

differ¬

ultimate

in

responsibilities
and obligations is no basis for ex¬
clusion of savings banks from a
ence

investments to the extent of some

*

An

the

address

Annual

Banks

by

of

of

the

York, Lake Placid, New
1950.

Middlebrook

Mr.

Meeting

Association

The
State

at

Savings
of New

York, October 5,

these

the

securities?

percentage of assets con¬
the operation
and

obligations of these institutions.
consideration

of

the

great

A

few

of

the

Banking Law
July

was

24,

states.

Massachusetts

(ef¬

amended

1950)

shares

to

permit
certain

investment

in

commercial

banks located outsid©

concerned

with

local
In

of

with their welfare and

their

banks.
10

banks

states in which,

the 17

of

mutual

savings banks operate, the
authorized

are

stocks.^

These

by

law

t©

10 states rep¬

resented, as of June 30, 1950, sav¬
ings
bank
deposits
of
$6,249'

million,
total.

31.7%

or

the

In

of the national

three

states

of

Maryland, Delaware and Indiana,
with

aggregate deposits of $526million, or 2.6% of the national
total, this power is not exercised
Six

of the

are

in

area

the

setts

of

remaining seven states
England, and in this

New

two

and

for 71.9%

states

The
shire

Massachu¬

of

Connecticut
of the total

all stocks held

accounted
book value

by mutual

sav¬

:-'
banking law in New Hamp¬

ings banks

with

Serious
are

the

fective

hold

investment quality.

of

economic
equity field as a source of limited
than with the recorded facts of changes that have profoundly af¬
selected
investment for
savings
the past. It is not my intention to fected the position of equity se¬
banks is an important and un¬
underestimate or to deny the im¬ curities and the investment of in¬
avoidable responsibility of those
portance of the record. It can and stitutional and fiduciary funds in
What

the

tions of fiduciaries, life insurance
Commonwealth, thus supple¬
companies and savings banks dif¬ menting the authorization of manyfer there is obviously extensive years' standing to hold shares of

sistent

Investments

the realities of the present
indications of the future

will

1

obliga¬

several

in

recently

the

moderate

Changes Affecting Equity

the

York

New

Nov.

Avenue,

ultimare

that laws
broad investment field in which
and institutions must go hand in
they could find advantageous em¬
hand
with
the
progress
of the
ployment for some conservative
human
mind.
As that becomes
portion of available funds. It is
more
developed, more enlight¬ no valid
justification for denying
ened, as new discoveries are made,
to the savings banks the advan¬
new truths disclosed, and manners
tages in wider diversification and
and
opinions change with the
higher yields to be derived from
change of circumstances, institu¬
holding prudently selected equity
fects.

ment

and

the

Although

restrictions

Only

was

as

of Dec. 30, 1949.

amended

in

1949

t©

savings banks subject t©
prescribed restrictions, to inve'ifc

empower

in

shares

trusts

to

of

the

mutual
extent

deposit liability.

investment
of

5%

ell

The New Hamji-

shire savings banks hold a greater-

capacity

to
project
future scene

diversity of equity securities tLUx
themselves on
the
is the case in any of the other
(1) The emergence of a large as viable and vigorous organiza¬ mutual savings bank states. It i*
number of strong, capably man¬ tions in a highly competitive en¬
of
interest
that as
of the end
aged
industries
serving
basic vironment in a rapidly changing of 1949 these banks held bank
needs of the population.
As re¬ world. This capacity is related in stocks in an amount of
$9.^milcently as a generation ago there considerable part to their ability
lion, while holdings of otiier
were only a few such corporations
to maintain
earnings permitting
stocks, including shares )i rail¬
of
which
the
equity securities dividends which are effectively
road, public utility, indusl ial and
were available for conservative in¬
competitive with returns on other insurance companies, amounted t©
vestment.
Shares of these corpo¬ forms of savings, even though the
$11.6 million.
Total equity hold¬
rations are in fact participations safety
and
liquidity factors in ings of $20.8 million amoi nted to
in the ownership of outstanding these competitive savings media
6.6% of assets as at the end of
organizations in the broad field are inferior to those of the savings" 1949.
more

of

important are as follows:

American

business

enterprise.

banks.
Mutual savings banks as of Decaccumulation of large
Investment Problems Not Solved 30, 1949, held stock investments in.
holdings of cash and government
total book value of $153 million,,
By Equities
securities by leading corporations,
of which $138 million, or 90%,
It is not my intention to imply
providing an important factor of
Continued on page 3£
strength and stability. Such hold¬ that equity securities in and of

(2)

The

22

The Commercial and Financial Chronicle

(1506)

The

First

of

Bank

National

has

purchased

Farmingdale, New York, increased
its

capital, effective Oct. 2, from
$200,000 to $400,000 by a stock

for the

be

razed

dividend of $200,000.

News About Banks

term leases

ed

asked

if

CONSOLIDATIONS
BRANCHES

NEW

NEW OFFICERS,
REVISED

On

Bankers

and

ETC.

recommendation

the

of

the

directors, the stockholders of the
Casco

CAPITALIZATIONS

Bank

Trust

&

Portland, Maine, at

Company

of

meeting

on

a

Oct.

Brooklyn

Cravath,

with

&

Swaine

Trust

under the

Robert C. Porter, formerly asso¬
ciated

name

ness

Mr.

Porter

admitted

was

following
the

to

C.

tional

Bank

which

will

Trust

Company

of

New

been

chosen to

succeed

of

new

it is stated.

the

Ferdinand M. Bissell, Vice-Pres¬
ident

of

Senior Loan Officer

and

purchase

the

Bank

& Trust Co.

York

the

following

the company to
office

will

the

L.
announced

President,

Mr. Bissell's career in

Oct. 13.

on

Harvey

company,

Schwamm,

Vice-President:

banking and credit began in 1920
Philip F. Gray, Nolan Harrigan,. with the Battery Park National
Hiram A. Mathews and Carl A.
Bank of New York, which later
Miller.
Mr. Gray is the Senior
merged with the Bank of America,

Mr. Mathews is in charge
of
the
company's
international
banking division, while Mr. Miller
is in
charge of Irving's branch

,

offices.
*

*

Henry V. Von Elm, President of
Manufacturers
New

Trust

Company,

George

and

York,

V.

Mc¬

Laughlin, President of the Brook¬
lyn Trust Company
N.

Y.,

of

Brooklyn,

that

announce

special

at

meetings of stockholders of the
two companies held on Oct. 11,
the merger

of the Brooklyn Trust
Company into Manufacturers Trust
Company

was

approved, under the

terms set forth in letters of stock¬

holders of both

institutions^ dated

Sept. 8, and in the agreement of
details of which appeared
in these columns Sept. 7, page 907.
merger, Manu¬

facturers Trust will take

the

over

Bissell ulti¬
mately rose to Vice-President in
Charge of Credit Supervision in
tinued

with

Trust

&

Chemical

the

Company

sorption

He

year.

is a past President
of the Bank Credit Associates of
Mr.

New

Bissell

York

and

New

Credit

York

of the

member

a

the

Associates and

Robert Morris

Financial

and

is

owned

or

con¬

Brooklyn Trust

Com¬

into
Manufacturers
Safe
Deposit Company. As provided in
the agreement of merger, all of¬
ficers and employees of Brooklyn
pany,

Trust become members of the staff

Trust.

Manufacturers

of

tion,
John

In

addi¬

George V. McLaughlin and
Gemmell, Jr., will become

*

Mr.

McLaughlin,

Brooklyn

President

Company,

Trust

and

will

dent,

Chairman of
mittee

respectively,

become,

Executive Com¬

the

Vice-President

and

of

stockholders

The

turers

Trust

also

of

Manufac¬

authorized

the

George P. Kappesser as Assistant

if

Following
the

rate

as

of

a

stock

one

dividend

share

for
as

at

each
of the

close of business Sept. 18, and also
authorized

shares

the

additional

of capital

82,000
stock of Manu¬

facturers Trust to be issued to the

stockholders
under

the

of

Brooklyn

terms

of

the

Trust
merger

agreement, thereby increasing the
authorized
capital stock of the

from $45,000,000 to $50,390,000. Under the terms of the
merger agreement, stockholders of
company

Brooklyn Trust.

York

The

merger

became

effective

13

and

the

various

on

offices




Oct.
of

the

of
of

Company

Oct.

on

Trust

with

company

of

his

marked

Bank,
service

Company

affiliate

Angeles,

25th

after

years'

ten

Omaha
In

and

He

staff

Bank's

of

year

trust

and

13.

Oct.

on

California

of Los

California

bank

the

joined

in

1925

experience

in

Lincoln, Neb., banks.

he

1926,

October,

trans¬
where

was

ferred to the trust company

he has held

official posi¬

various

including that of Trust Of¬

Vice-President,

Exec¬

and
He

Vice-President.

Stock¬

has been

was

member of the board

a

of

New

State

Street

Boston,

held

Forbes

was

admitted to the State bar

Chairman

is

He

1931.

&

Co.

-f

.

The

of

*

Company

Boston,

if

■:

'

J.,

from

was

the

of

has

of Bergenfield,
its
capital

increased

increase

stock
the

dividend

further

of

$62,500,

addition

from the sale

came

of

of

enlarged capital

the

regular

meeting of

the

City Bank of New York, held
Oct.

17, Warren Wheeler

pointed

on

ap¬

was

Assistant Cashier.

an

tit

Sit

Oct.

11

dend,
tal

new

composed of members of the staff
of the

of

Union Dime

New

York,

dinner

was

200

DeBost,
of

annual

the

held

became

ef¬

&

*•:

of

of the
a

The

American

the

recom¬

bank's board of

33%%

stock divi¬

increasing the bank's capi¬
$3,000,000 to $4,000,000.

increase

will

be

basis

of

three

one

shares

of

effected

by

new

share

held

by stock¬

record

Oct.

11,

for

1950.

spoke

recent

be

in

William

L.

of

excess

$10,000,000.
According to President Lawrence
F.

Stern, it is expected that the
be

rate

the

on

of $6

increased

continued

at

the

stock

❖

A

if

if

$5,000,000 modernization and

the

Board

construction program for the
Fifrst National Bank in St. Louis

of

the

honor

has

to the Union Dime

election

of

J.

Wil¬

bur Lewis, President of the bank,

new

been

authorized by its direc¬
according to an announce¬
ment
by President William A.

tors,

McDonnell.

The

building program
remodeling of the
Association of the State of New bank's present
six-story building,
York. He reminded the staff that
resurfacing of its exterior, and the
as

President of the Savings Banks

Mr. Lewis entered the bank's

em¬

will

include

construction

of

five-story
ploy as a clerk in 1911. With ex¬ building. The expansion is neces¬
perience in every department, he sary, Mr. McDonnell said, because
rose
rapidly—holding various of¬ of the continuing growth in the
ficial
positions. In
business
since
it
was
1937,
when bank's
Treasurer, he was elected a trustee formed by consolidation in 1919
of the bank, then Executive Vice- with total resources of
$147,600,President in 1944, and in Decem¬ 000. Today this total is approach¬
ber, 1947, President. A gift from ing half a billion dollars. In addi¬
the

Club

sistant

presented to
John M. Roberts,

was

by

Vice-President,

instrumental

Club, 17

years

in

who v

organizing

ago.

Mr.
As¬
was

the

dividend

of

stock

is

Anglo

the

of

National
and

bank's

the

the

in

increase

an

San

of

Bank

capital

announced

by Allard A.
Calkins, President.
The salary increases were ap¬
furtherance
of
the
maintain salaries

in

proved

bank's policy to
at

level consistent with prevail¬

a

conditions

economic

ing

of

results

bank's

the

Calkins

Mr.

and

Action

said.

the

operations,
the

on

salary increases was taken at the
shares

bank's

the

30 cents
from

on

increased

was

share

per

dividend

the

that

time

same

per annum, or

$1.50 per share to S1.80 per

share per annum.

Directors of the

bank have declared

cents

share

per

for

a

dividend of

on

the capital
period

six-months'

the

commencing Oct. 1, 1950 and end¬

March

ing

follows:

1951,

31,

cents

45

per

payable as
share pay¬

able Jan.

1, 1951, to shareholders

of record

as

Dec.

ness

close of busi¬

at the

20,

1950,

share payable

per

and 45 cents
April 1, 1951,

to shareholders of record as at the

of

close

March

business

tion
the

to

bank

services
Mr.

this

added

customers

McDonnell

directors

new

increase

has

to

a

in

volume,

many

new

since

1919,

pointed out.

announce

of

Disbursement

20,

1951.

The disbursement is handled

of two ways.

that the

The
bank

that

paid

for

the

to the
have been

goods
shipped

and

from

the

country of origin; get reimbursed
by the Bank; or he can satisfy the
that the orders have been

Bank

placed
which
takes

goods

for
to

list,

the

on

in

the Bank either under¬

case

supplier

the

pay

as

de¬

advances funds

as

needed to make

payments as
being fabricated.

progress

In this way

the

goods

the Bank is assured

that the proceeds

of the loan are

lyzing briefly the stages through
which
and

recently published by Mr. Black,
called ''Lending Techniques of the
International Bank," he has briefly
set

forth the main steps taken by

the

Bank
that

process

the

course

Bank

first

also

sends

of

exploration."

First,
loan

there

request,

Representatives of the Bank have
the right to examine the site, to

this

was

the

examine

materials

that

are

processing a loan.
he divided the

into four basic stages, the
which was "preliminary

installed in the project
contemplated.
This
is
done by our treasurer's depart¬
ment, and is a procedure that is
applied in some manner in the
case
of every lending operation.
actually

in

article,

made 1 in

as

pass,

may

might state that in an article

I

the goods and materials
in the project.
Of

request

about processing it.

goes

In

people to the spot to see that the
goods which
have arrived
are

loan

a

by indicating how the Bank

spent only for the procurement of

to be used

Handling Loans

in

commenting on these six
guideposts, as I have called them,
I have already given some indica¬
tion as to the Bank's procedure in
handling loan requests.
I think,
however, it might be constructive
to
approach the matter from a
different point of view by ana¬
In

livery of the goods takes place or

are

the

strengthen

to

the country.

Procedure

in

Either the bor¬

satisfactory

evidence

used

are

own

your

economy of

can
buy
the
goods
or
equipment and then, upon produc¬

ing

therefore,

are,

investment
by ensuring that the proceeds of a
protecting

Proceeds

Loan

Bank

You

increased.

loan

Supervising

present

share annually. A
previous reference to the plans to
enlarge the capital appeared in
our issue of Oct.
5, page 1332.
per

of

Chairman
come

increase, the bank's cap¬
ital, surplus and undivided profits
will

for

be used only

may

procurement of goods, mate¬
rials and services on that list.

rower

the

approved

club

Waldorf.

the

at

attended.

Trustees,
the

Savings Bank

staff

the

mem¬

17

page

the

stock.

from

will

meeting of the Union Dime Club,

from

while

National Bank and Trust Company
of Chicago at a special
meeting
on

Bank

the

one

Stockholders

dividends

On Oct. 13, following the annual

of

bers

]■'

all

for

increases

:

'

if

'

In World Bank Loans

With the

At

board of directors of the National

Salary

if

Gnideposts and Procedures

$62,500

Oct. 5.

holders

!;!

in

'
if ;

■

if

$125,000 to $250,000, part of
resulting
from
a

the

the

sji

Continued

Bergenfield National Bank

Trust Company

&

each

.

Vice-President

and

1927

was

Vice-President

1934.

stock

Southern California School of Law

Maulhardt

Mr.

Assistant

elected
in

Bank, recently ob¬
anniversary with

35th

bank.

a

and

his

16, Edward

elected to the board.

pointed

if

Trust

Oct.

C. issuing 10,000 shares of. common
announced stock at par of $100 per share, on

has been ap¬
Assistant Treasurer.

the

the

in

Maulhardt, Vice-President

California

served

90

past ten years. Mr. Schmidt is
graduate of the University of

Angeles

Los
if

Cunningham, of the firm of J. M.

that James A. Barry
an

J. G.
of

Francisco

Schmidt, President of

in
if

if

California

elected President last January and

increased

Lawrence

11,

President,

Marshall,

Lewis

after the close of business

of

directors for

meeting

a

Manhattan

in

issued

The

mendation

*

>ii

board of directors of the Bank

Stock, par value $20 per share, to

12 shares held of record

Officers.

Trust

Estate

that had

the

California

First

if

a-

de¬

with

be

H.

Frank

with

space

meeting

18-20.

St.

increase of 42%.

if

Oct.

meeting of the directors of

a

sjt

additional 187,500 shares of capital
be

At

of
ap¬

About

Manufacturers Trust.

shares

National—an

ciation,

Company—

Trust

fective

Company

Trust

Guaranty

of

George A. Barnewall, Vice-Presi¬

line

will

*

*

New York has announced the

Manufacturers Trust.

of

directors

which

Trust

utive

right to subscribe at the
price indicated expire on Oct. 16.
On Sept. 30 the Casco Bank &

The

Management Association.

Real

by

which

the

and

space,

Union

Thursday, October 19, 1950

.

be

its pres¬

over

.

ference, American Bankers Asso¬

alley

and

capital

of The Rumford National.

N.

$224,527,605, making the combined
deposits of the two institutions as
of that date $2,360,437,765.69. Ap¬
proval
was
also
given
to
the
merger of Brooklyn City Safe De¬
posit Company, all of the capital
of which

the

holder's

American

with

pointment of Lester J. Harris and

trolled

working

Louis

ficer,

bring

ab¬
be¬

in January of the

Trust Company

present

Bank

its

upon

Continental.

of

associated

came

con¬

Vice-President and Loan

as

Officer

and

Bank

Continental

the

deposits of Brooklyn Trust which,
at
Sept. 30, 1950, amounted to

stock

basis of

$5,000,000 by the acquisition

over

Mr.

merged.

were

merger,

As a result of the

Casco

will

14-foot

present build¬

Co. had total resources of Los Angeles Chamber of Com¬
$22,587,061; the capital and sur¬ merce Aviation Committee, Chair¬
plus Sept. 30 were $600,000 each, man of the California Bankers
and
became
Credit
Manager of
the while the undivided profits on that Association Trust Division
General Chairman of the 24th An¬
Continental Bank & Trust Co. of date were reported as $309,429.
nual Western Regional Trust Con¬
New York when the two banks
if
if
if

Loaning Officer of the company; : N. A. He joined the International
Mr.
Harrigan
is
in charge of Trust Co. in 1929 as Assistant
Irving's domestic banking divi¬ Manager, Credit Department, and

sion;

ent

tions

new

one

surplus account in
posits

offered

the

the

on

re¬

the

These will

city

the

vacate

bounds

increase of 58%

an

shares already owned.

seven

This

of

the newly created

Senior

of

each

York, has been elected a director

Vice-Presidents of

were

of

be

of The
The

the

on

share for

approximately

American Trust Company of New

Company of New
announces
the election of

Irving Trust

will

Bank.

of

shares

2,500

stockholders

Bank

part

a

the stockholders

to

ad¬

an

Casco

latter

the

Maine,

as

As

price,

of

Rumford National

to

*

n.

*

#

the

Company.

stock

issued

Rumford,

maining 3,500 shares
*

Commander in the U. S. Navy.
*

J.

N.

his

assume

President of the
Rational Bank of
Mr. Emery will
post in January,

at

be operated

office of

Trust

&

the

Lt.-

as

ditional

First-Mechanics

the

During

Mr. Porter served

war

to

the

Trenton,

has

long-

the west. A total of 74,496
square
feet of additional floor
space will be provided by the new
building. This will give the bank
ing

purchase all
capital stock of The Rumford Na¬

James Ringold as

year

of

Bar

York.

New

of

State

last

The

School.

is

of

has

Tirnberlake

F.

this
of the

Vice-President

York

Bowdoin Col¬
lege, and in 1939 graduated from
the
University of Pennsylvania
Law

L.

Bankers

his A.B. de¬

received

President

indicated that the purpose of
issue

#

*

It is made known that Harvey

1934 from

in

gree

busi¬

of

opening

16.

Emory,

Chairman.

Jackson,

Baxter

by

made

announcement

an

N.

the

Oct.

on

*

Company of New York, according
to

with

Trust

Moore, has been appointed a VicePresident—corporate trust depart¬
ment of Chemical Bank & Trust

operating

began

of Manufacturers

4, authorized the issuance of
an
additional 6,000 shares of the
capital stock of the institution.

expansion.
and

to

which

if

if

obtained

or

the buildings need¬

on

.

People
write

is, of course, the
which is generally

an

the

informal

into

come

the

and

for which

are

good ones

they would like to

The Bank encourages

loan.

a

or

Bank, every day about

projects they think
have

manner.

Bank,

informal approach because it

affords

us

an

opportunity

at

an

early stage to consider whether a

arriving, to

project is of

currency

finance, or whether it is some¬
thing that would be ruled out be¬

project
in

and

see to it that the local
required to make the

go

construction
gresses

is

forward

general
of

along

see

the

the

plated when the

available,

that the
project pro¬

to

lines

loan

made.

This aspect of our lending pol¬

icy is very

important,

in that

it

that each loan is actually

type that we could

it could not pass the tests I

cause

have just referred to.

contem¬

was

a

If
a

it appears at

project is of

a

that stage that

type which

may

be

suitable, we may suggest to the
prospective borrower that he take

used for the

the
matter up
with the appro¬
priate member government to see

has

whether

ensures

a

project, which in turn
direct bearing on the ability

of the

pared

If

such

a

country to repay the loan.
country actually benefits by

having

the

if

the

and

soundy

project

go

project

forward,
has been

save

to
a

or

not

=

it

would be

purpose.

pre¬

for
This is done to

guarantee

a

loan

both the Bank and the pros¬

pective

borrower

time

and

The preparation of the
evaluated, the country's trouble.
ability to repay the loan will have documents
and
information

.Volume 172

needed

to

Number 4952

enable

is

re¬

time and effort, and

some

there

ap¬

project

a

The Commercial and Financial Chronicle

.

.

to

anyone

praise the merits of

quires

.

no

either

in

sense

of

us

undertaking the expense of sub¬
mitting and examining a lot of
data

relating to a project and then
finding out that the government
of the

country in which the proj¬

ect is located would not be

to give its guarantee
for that purpose.

Assuming that
mitted

which

worthy

of

and
the

make

one,

might

guarantee

we

not

to

to
you

critical

of

begin

we

only the

project

credit

worthi¬

of the

ness

country and its ability
forward the project.
already referred to two

carry
I have

critical

that

stages

be

must

passed in the repayment of a for¬

eign loan, pointing out that it is
not

to

only necessary for the project
be

a

local

borrower

the

in

success

earning

also

foreign

of

sense

but

currency,

must

the

able

be

exchange

to

welcome

a
a

we

which projects
ought to go forward first."
This

type of relationship is, as
will understand, a very satis¬

you

factory one.
The
the Bank helps the

mission

so

be

their

taken

in

from

country estab¬
that projects can
order

proper

with each project contributing as
much

possible to the success of
development program and of

the

as

projects to be undertaken later

on.

Having made the general sur¬
which I referred, it may be

vey to

necessary for the Bank to make

a

second

survey before reaching its
conclusion.
The first mis¬

final
sion

that

have
of

to

goes

decided

projects have

But

that

tion:

country may

a

that

certain

types

these

Are

This

projects

well

the Bank must take

means

its

to

ence

prospects
there

balance

to

of

payments

what

see

likelihood

is that the

able

country will be
provide the foreign ex¬
necessary to service and

to

change

the loan

repay

So

the

Bank

usually send

this

stage will

mission to make

a

on-the-spot

at

examination

important facets
the country

the

of

an

of

this

upon

•point.

projects,

as

that they,

see

to

are

To

give

an

example

types

of

surveys,

government

of

is:

project,
of

have

program

other words,

In

the

success

conducive to the

or

development

a

generally?

the

Are

borrower fconducive to the

success

of

these

I

might
refer to Turkey.
In the first in¬
stance, the Bank received a re¬
from Turkey for assistance

quest

in financing projects which would
contribute to her economic devel¬

The

opment.

ment gave to
of

projects

and

Turkish

Govern¬

the Bank
said

and

a

number

"we

would

to take a look at these,
which projects should go

you
see

forward first."

question:

you

the

Should

Bank

be lending money to assist
country in developing its econ¬
omy if that country has adopted
policies which are working di¬
a

in the opposite

direction?

contract.

of

the

to

Turkish

that

and of the

economy,

going forward

was

and

basis

the

on

in
its

of

by the Bank three types of
projects: First, projects to im¬
port

prove

harbor

and

facilities;
increase

secondly,
projects
to
Turkey's grain storage
and

thirdly,

purpose

which

a

project for

facilities;
a multi¬

dam in the Adana district

to'be worthy of

felt

they

consideration.

serious

the

borrower,

meet

negotiate

and

the

terms

of

loan

administration

through

the

on

following

—

disbursement

of

the

loan, seeing to it that
goods are actually used in

the
the

projects, and thereafter following
very closely the progress of the
project and the development of
the country throughout the life of
Naturally, there
binations

often

are

project

the progress of

financed

being

by

a

one

loan and at the same time to
a

on

begin
second project that the

has

country

submitted

type of

become

for

mission

our

is apt to

increasingly common. A
policy, particularly for

the

less

developed countries,

result in

should

series of loans,

a

the projects which are financed in
the

early stages being designed to

contribute to the country's devel¬

opment, to strengthen its credit¬
worthiness, to give it an oppor¬
tunity to undertake projects that
it

have

wouldn't

been

able

to

of, had not the
first projects been well conceived
well

carried

out.

Thus

a

lending policy on the part

of the Bank and

sound borrow¬

a

ing policy

on the part of a country
increase the latter's capacity

may

to

other

absorb

borrow for

capital

and

to

projects.

new

have

here

referred

have

been

predominantly operating missions
in

the

that they have been

sense

missions whose work is concerned

directly with the loan request.
I

kind

of

mission

sending out another

mission.
went

first

such

Colombia.

Re¬

The

to

hand,

find that such and such

we

policies which you are embarking
on
are
working at direct odds
with the objective that you

trying

foe

project.
think

Therefore,

it

while

accomplish

to

would

mission

consisting for
the most part of technical men.
This group

we are

foe

bad

ment of the

take steps to revise

country?"

international

an

organization, that

recommendations

the

basis of
the

of

the

situation,

makes

country

made

on

analysis

weight

the

the

enables

and
a

gives

which

suggestions

assist

are

unbiased

an

the

to

Bank
to

Bank

remedy particular shortcomings.
At

the time

amining the
try,
Of

priority.

mission

consider
should

is

ex¬

coun¬

what

types

have

Sometimes

of the

improvement

Bank.

and

of

the

original

the basis of the

on

missions

combined

develop¬

ment.

Another member of this mission
was

expert

an

whose field
facilities.

was

took

a

a

high

country

look

a

at the sites

on

the

grain storage facilities

be

He

which

erected,

were

to

examined the plans
and designs for construction and
operation, and reported on the
technical

for which

a

loan

Finally, there

was

who made

project,

also made.
expert in

was an

construction

dams

of that

features

of
a

multipurpose
very thorough

check of the site of and plans for

Worthiness Examination

Thus,

in

what

you

might

call

feels it ought to embark upon one

the

stage

type of a project, but the analysis

you

have first the analysis of the

of

the Bank mission results

in

a

different conclusion.

Very often
mit

a

particular

Bank with

a

projects

to

the

request for financing.




credit
an

country will sub¬

the

with

particular

of critical examination

worthiness

of the

country,

appraisal of its economic poli¬

cies

and

economic

their

bearing

prospects of

on

the

try, the overall selection

or

the

coun¬

allo¬

or¬

are

overall economy

of

country, of analyzing its de¬

making
suggestions as to how the country
can
improve
its
prospects
for
development, of assisting in the
velopment

shaping

prospects,

of

develonment pro¬
indicate prior¬

a

will

which

gram

of

ities among

the important sectors
of the economy without reference
to particular
requests for loans
the Bank.

from

It

It

is

of

the present

strictions
trade.

in

relaxations

Such

re¬

be mitigated slightly in some
particular in inter-European

may

directions,

courses.

conceivable that exchange

course

have

already

been

effected during recent months, even before the

development
within

flight

the

of

of the policy

pursuance

the

Possibly

Europe.

the pound, in
stimulating trade

to

of

feel that it could afford

now

the

Treasury

may

Dr.

Paul

Einzitr

to go further in

direction.

It seems most unlikely, however, that major
the establishment of general convertibility for cur¬
payments or the extension of existing limited convertibility

same

steps such
rent

as

arrangements to capital payments would be decided
present

After the disastrous

stage.

vertibility in 1947

experience

in

upon

at the

general

con¬

quarters which had been formerly fanatie
convertibility are now inclined to advocate

even
advocates of immediate

"wait and see" policy.
As for the extension

of present convertibility arrangements
capital payments, the authorities feel that it would

from current to
not

be safe because the inflow of capital might at any moment
give way to an equally sweeping outflow. In any case, the gov¬
ernment would prefer to retain the control of capital investment
abroad, irrespective of the exchange situation.
Nor is the present government likely to restore the freedom
of the fluctuation of the exchange rates.
In this respect, too, the

view

is

that

authorities

the

could not possibly depend
sterling as being
permanent
Although at present the removal of the control of exchange rates
would result in an appreciation of sterling, this is not expected to
last.
A major war scare in Europe, a relapse in Sterling Area

the

upon

present

commodity prices

strength

or a

tuations

would

stability.

break in the American boom might at any
cause a fall in sterling. - Its fluc¬

trend and

be most

And

of

unwelcome

the

even

it

as

speculative

would

disturb

rise that would

internal,

follow

the

freeing of the exchange rate would be considered with disfavor in
official

circles, for the

same

addition

in

loan re¬
quests,
even
though
they
are
judged against the wide frame of
reference

have

I

already

de¬

scribed, it would be, desirable for
the

Bank,

technical service,

a

as

assist its member

to

in

making

this

governments

of

type

overall

for which

reasons

the

government

of

cedure.

the

the major out¬

Bank's

I might say

leading

pro¬

that within

have
£2

missions

mendations

of

the

by

all

Sommers
loans

Board

top

are

staff

con¬

which

general policy guidance to

the President.
Mr-.

of

are

And, of course, as
no

doubt indicated,

made only

after the

Directors, acting

on

the

recommendations of the President,
has considered the matter and de¬

termined

granted.

i

increase

to

billion

is

considerably their gold

mentioned

as

the

into

would

be

con¬

indication of the in¬

an

instability that, while before
England could rely on a gold reserve running
tens of millions, and even between 1925 and 1931 £150

the Bank
mere

million

the

which

of the degree of international

crease

1914

It is

The figure of

reserve.

minimum

sidered sufficient for the purpose.

or

so

of

was

Exchange

considered

Equalization

accumulate

a

authorities

are

reserve

of

ample, during the last prewar years
Account considered it expedient to

some

thinking

In any case

ment's

no

£700

or

£800

longer in

it would not be in

intention

fluctuations.

million, and now the
of millions, but of

terms

to

The

restore

the

any

circumstances the

complete

freedom

of

govern¬

exchange

Exchange Equalization Account would

resume

its functions, and it would aim at
maintaining the stability of
sterling, even though it might allow a certain relaxation of its
present absolute rigidity.
It would take advantage of the present
influx of "hot money" for the increase of its gold
reserve, in pur¬
of its effort to prevent an unwanted appreciation of

suance

by

mepns

offered

in

sterling

of buying up excessive supplies of foreign currencies
the market.
When the tide turned it would prevent

moderate the fall of

sterling by unloading some of its supplies
foreign exchange.
Such a policy would provide a fair scope
for maneuvering to squeeze speculators, in the same way as this

that

a

loan

is

to

be

done on many

was

tuations
an

the Bank the findings and recom¬

gives

movement.

After all, it is

of

have covered

lines

sterling by official action.

The view is strongly held in official quarters that before they
could risk a restoration of the freedom of sterling rate they would

or

appraisal.
I

controlled

a

to

particular

at

looking

be

desire to revalue

no

billions.

that

felt

was

sidered

that project.
Credit

at the

look

a

the Bank recently made Turkey a

the

the

economy of

it will

projects

the

the

to

loan for port and harbor

take steps to

to

submitted

a

that of grain storage

Here again the fact that we are

our

been

work

a manner that would
conducive to the develop¬

with

made

They made certain suggestions for

policy in

more

who

tech¬
ports and

some

thorough
appraisal of the port projects that

you

don't

included

familiar

concept,

good

a

with the Bank's find¬

At that stage the Bank sent

second

this

thing,
considering the loan,

if you were to

the

be

would

by

to expect

reason

no

requests, but rather

harbors

other

is

equally inconvenient to reduce the present comfortable "safety
margin" by action of the government and by action of the specu¬
lators.
Indeed, the former would be preferred because it would

nicians

the

On

one.

There

government to follow either of these

concerned

like

good

official

an

not

the position of having to say, "We
have seen the project.
It looks
a

to

has

a

find itself in

alternative

an

as

cently, the Bank has sent similar

ings.

may

level

missions to Turkey, to Cuba, and
to Guatemala.
These missions are

the question
negative.

Bank

sterling rate could be allowed to find its

The Bank, on the basis of the
findings of the mission, advised
Turkey that it would be willing to
give serious consideration to these

ganized for the purpose of taking

the

could
altogether, and

measures,

removed

or

moment reverse the

"might mention that the Bank

also has been

relaxed

official

The types of missions to which
I

be

revaluation.

success

a

and

existing exchange control

own

a

make

loan

So

the

com¬

mission that

pound is to be made convertible.

to suggestions that the government could now
well afford to free sterling.
This means that

that

these various stages.

of

You may have a loan

This

if

LONDON, Eng.—The flight to the pound is in full swing.
"Hot money" is pouring into Britain in anticipation of a revalua¬
tion, notwithstanding the official disclaimer of harboring any
such intentions.
The present strength of sterling has given rise

now

the loan.

why British Gov¬

unlikely to restore freedom of fluctuations in ex¬
change rates. Sees need of still larger British gold reserve

Once .the loan is made,
then enter into the stage of

you

reasons

is

ernment

contract.

ment agreed

clearly in the

pation of pound's revaluation, gives

the

projects, and the Turkish Govern¬

very

Einzig, commenting on rising sterling exchange value in
open market and flow of "hot money" into Britain in antici¬

of the
guarantor,
with members of the Bank

I think most of you would answer

rectly

By PATJL EINZIG

Dr.

The

possibly

sound

in 1949, a Bank mission
Turkey, made a study of

Early
went

Turkey,

followed by the
the
prospective

loan

a

sound loan

eration

considered

be

and

findings recommended for consid¬

policies that

of the

apt to be soundly carried

are

Government

Another

of

representatives

soundly conceived

are

important question that

'

tion

consideration.

to

Sterling From Controls

the negotia¬

upon

ticular projects

work

Question of Borrower's

ready to enter

23

Will Britain Fiee

and

Once you have passed the criti¬
examination
stage, you are

work

all

economy

bearing

technical

cal

group of qualified people examine
the technical aspects of the par¬

like

needed.

as

the

of

goes to check on

two

look at the overall economy of
the country with particular refer¬

appraisal

commercial features of a particu¬
lar project.

designed, technically sound, com¬
mercially feasible?
In
other
words, you may want to have a

and

a

cation of priorities to the types of
projects and, finally, the detailed

high priority.

a

raises the further ques¬

out.

foe made.

has

shall

de¬

survey and suggest

with

local

and

but

think

we

mission which will make

Bank

currency when service
amortization payments must

procure

that

of

projects which

sirable,

loan

what

to

which

itself but also the

spon¬

a

willing

stage

in

examine

be

pass

the

examination
to

consideration,

government indi¬

to

call

be

to

appears

Bank

hand, a country will
"Here are five or

sometimes say,

six

lish priorities

willing to give its

sorship
should

loan

a

project is sub¬

a

serious

and the member

cates it is

willing

for

On the other

(1507)

in

elastic

would

the

occasions during the period of exchange fluc¬

'30s.

defense

There
of

is much

sterling.

to

be

said

in favor of such

Nevertheless,

the government
prefer to retain the present system under which the official
rigidly stable.

rate is maintained

The recent recovery of various
markets abroad, and the tendency

unofficial sterling rates in free
of their discount to disappear,

has caused much satisfaction in London.

From this point of view,

too, the weight of argument is against a revaluation of sterling or
an

appreciation through the removal of the control of its official
For it is assumed that if the official rate is raised from $2.80

rate.

to, say, $3.00, the discount on various unofficial sterling quotations
would tend to widen to

a corresponding extent.
And it is felt that
point of view of the prestige of sterling and of Britain,
the disappearance of the discount on unofficial quotations would
be much more advantageous than an appreciation of the official

from

rate.

the

I

The Commercial and Financial Chronicle

24

Continued from

haps the proportion can be raised
still higner.
At the present time
about 45%
of the males of 65

first page

labor force.

Economy

the

equipment may require large in¬
creases in toe outlays tor defense.
Since

it

the

unlikely that

not

is

military expenditures of the coun¬
try will rise, it is important that
the country substantially increase
its productive
capacity.
Other¬
wise, every increase in military
expenditures will force reductions
in the standard of living of the

Consequently, the num¬
economic problem con¬

people.
ber

one

fronting the United
is

how

States today
the

accelerate

to

in

rise

research; (2) pre¬
in the propor¬
population
of

technological
of

vention

drop

a

civilian

of

working age who are in the labor
force

of

nance

tures

work;

at

anq

(3)

high rate of expendi¬

a

Acceleration of technologi¬

(1)

conditions

researcn—Several

cal

defense

the

in

mainte¬

plant and equipment.

on

to
encourage technological research.
The shortage of materials is one.
The
necessity of
making
new
kinds

of

goods and meeting new
specifications and stand¬

kinds of

The

another.

is

ards

tend

economy

large

1,582,000

were

ex¬

force

labor

of

males

among

the

If

durable

total

goods

$6

the increase in the

tion of military

construction

consump¬

Thursday, October 19, 1950

.

The with¬

employers.

by

posed

drawals could be cut considerably

able-bodied workers

keeping

by

longer. This will un¬
doubtedly happen. It is interest¬

several years

ing to note that under the General
Motors

pension plan, employees
option of working until
If the proportion of males of
the

have
68.

pansion of government-supported

65

military research yields important

labor force

ity of the country is around 3.5%

by-products of new knowledge to

to

of

years

age

were

or more in the
raised from 45%

50%, the labor force would be
increased
by
about
200,000
to

appropriate in

may

the

years

and

States

must

win

for

last

United
rapidly ex¬

whicn

by

panding its output.

$11 billion, the

were

long-run produc¬

a

which

contest

tion

Can

prices

effectively

be

con¬

maintenance of outlays of $30 bil¬

trolled by the use of indirect con¬

lion

trols—that

industrial

on

and

piant

males of 65.. years of age
or over.
Most of the withdrawals
are involuntary on the part of the
worker—they are the result of the
arbitrary retirement standards im¬

billion

durable goods and

residential construction,

among

the

construction

industries increased by
and

of

output

and

struction

years

productive capacity.
The normal
increase in the productive capac¬

would

tion of about $5

con¬

reduc¬

a

billion in the out¬

durable

of

put

require

goods,

consumer

and pub¬

lic non-industrial construction

of

reduction
not

large

a

strikes

11%.

—

This

a

is

prices.

ii

construction, the maintenance
expenditures
on
industiial
plant and equipment would re¬
quire larger cuts in outlays on
durable consumer goods, residen¬
tial building, and public non-mil¬
itary construction.
the

in

con¬

of
durable
consumer
residential
construction,
public construc¬
tion might seem easy to accom¬
plish. But the rise in personal in¬

the

de¬

it is the¬
push in¬

Indeed,
possible to

oretically
direct

of

11%

in

rise

limit

can

goods and thus limit the

to

and

of

mand for

were

causes

output of durable goodi

Cutbacks

methods

these

course,

Of

cut.

other

or

limit the

about

is, by less government
higner taxes, stricter
terms of credit, and stronger in¬
ducements to save?
Undoubtedly
spending,

controls

that

far

so

the

military goods
by the government does not cre¬
demand

huge
ate

sellers'

a

As

for

market.

matter of

a

fact, there is

no

possibility that indirect controls
will be applied drastically enough
to
prevent at least a moderate
rise in prices. One reason is that
indirect
controls
are
unpopular

sumption

among

goods,

groups

and non-military

in

large

influential

and

in the community.
government spending

Cuts
arouse

opposition from local chambers of
five inaustry. Even higher taxation of
commerce
and other groups that
corporate profits seems to encour¬ 300,000.
comes will make the task far from
speak for the beneficiaries of the
age technological research.2
The
years
(3) Maintaining a high rate of easy. In August, 1950, for exam¬
spending. Most of us do not like
principal limit on the ability of expenditures on plant and equip¬
plan
ple, personal incomes were run¬
higher taxes, particularly taxes on
capacity by well over 19%—say business concerns to expand tech¬ ment—In the second quarter of
ning at an annual rate of about spending.
Many consumers and
about 25%.
nological research is likely to be 1950, expenditures on industrial
$9 billion above May, 1950. Some business
groups
do
not
like
The great increase in the de- the number of qualified research plant and equipment were running reductions in
outlays of consumer stricter credit terms for real estate
workers. Hence, it is of vital im¬ at the annual rate of about
$30 durable
goods and housing can loans or loans for the buying of
mand for goods for defense and
foreign military aid, coming at a portance that neither the draft billion. Outlay on producers' dur¬ be accornplisned
by
allocations durable
consumer
goods.
The
universal
military training able goods was at the annual rate
time of high employment, is likely nor
and
priorities, which
limit the Treasury does not like to offer
shall limit the training of young of about
to bring about an increase in the
$21.6 billion and on private
per

about

or

year,

19%

in

next
five
the United States should
to increase its productive

years.1

During

the

general level of prices. Although
the consumer price index has risen
less
of

than
the

in

2%

since

the

outbreak

Korean

War, wholesale
have increased nearly 8%

prices
the

three months.

last

Unless

The indefinite duration

scientists.

production contest with
Russia makes it particularly im¬
the

of

that

portant

the

in

increase

the

number of scientists shall be kept

large

as

possible.

as

taken to retard the rise

(2) Prevention of a drop in the

prices, it is likely to be quite
substantial.
Consequently, the
number two problem of the de¬

proportion of population of work¬
ing age who are in the labor force

fense

men

steps

are

in

economy is how to keep the
rise in the price level as moderate

possible.

as

It

would

be

mis¬

a

and at work—Since the number

of

in

military service is being
increased by about 1.5 million and
substantial

a

made

the

in

civilian

of

number

being

is

increase

take, however, to control the rise
in prices in ways that prevented

employees of the armed services,

substantial and continuous expan¬

the ratio of the civilian labor force

sion of plant and

to

dinate to the problem of maintain¬

years of age or over) can be main¬
tained only by an increase of well
over
1.5 million in the civilian

equipment. Con¬
sequently the problem of control¬
ling inflation is definitely subor¬

ing
in

substantial rate of increase

a

plant and equipment.

I have

It is, as

said, the number two prob¬

lem of the defense economy.

rise in

Some
level

is

the general

probably

price
inevitable in

spite of the best efforts that
be made to

rise

in

bound

The

limit the

can

advance.

A

the general price level
to

create

incomes

is

inequities.

many

of

population of working age (14

force.

labor

The

achieving such

of

possibility

increase in the

an

labor force within

the

next

year

is fairly good.
It can be done
partly by increasing the propor¬

tion of

of

women

working

in

age

the labor force and partly

by in¬
creasing the proportion of work¬
ers of 65 years of age or more in
the labor force.

The

unincorporated

proportion

of

of

women

businesses and of organized work¬

working age in the labor force in

ers
'

steel.

of age or more. In the
same period, there were 1,536,000
entrances
into
the
labor force
65

tion

example, there
withdrawals from

months of 1950, for

A Defense
thermore, the development of new
weapons
and improved military

of age or more are in the
During the first seven

years

Economic Problems of

^

.

.

(1508)

1950

likely to rise much more
promptly than the incomes of mil¬
are

has

been

about

32%—about

than $8.0 billion.

more

little

a

and

the next year or so
continuation of the ex¬

The

able target for
would be

a

private industrial
plant and equipment at $30 billion
a
year — in
terms of middle-of1950 prices. By 1952 the expendi¬
penditures

tures

on

industrial

oil

will

dropping

rate

expenditures from

the

below

$30

billion

the government

after

of

It will not be easy to

these

prevent
rate

the annual

above

be

$30 billion.

orders

for

tanks, guns, planes, ships and
other types of goods made by the
construction

and

industries

in production.

ing the

are

durable

1951

year

the

goods
Dur¬

output

of

military construction and of mili¬
tary goods made by the durable
industries

goods
rable

(including

If

War.

the

output of plant and

private
to
be
reduced,
production
of

equipment
is

for

not

for

industry

the in¬
military

construction and of durable mili¬

executives,

probably

restore

ment

the

tary goods will have to be accom¬
plished (1) by increasing the total
output of the construction and du¬
rable goods industries and (2) by

technicians, govern¬
employees, trade union offi¬
preachers, professors, and

cers,

white

collar

in

workers

Furthermore,

the

general.
in prices

rise

will

diminish

the

power

of

billions of assets

many

purchasing

feasible

not

proportion of

labor
but

force

to

to

the

level

the

in

women

of

1944,

increase is undoubtedly

some

possible, particularly

in view of

the fact that the size of the labor
force is partly determined

by the

that

allocations,

priorities will be too narrowly

limited to military goods, and will

give little or no precedence to ex¬
penditures'on industrial plant and
equipment over expenditures on

the control of the

reducing the production of hous¬
ing, nonmilitary public construc¬
tion, and durable consumer goods

use

of credit for

these purposes. Between the mid¬
dle of 1949 and
the
middle
of

1950, outstanding
increased by $4.1

credit
billion and the

consumer

mortgage indebtedness of individ¬
uals

institutions

to

about

strict

$4.5 billion.
credit

increased

by

By reasonably

terms

it

ought to be
possible to cut spending on dur¬
able consumer goods and housing
by

over

$5 billion

du¬

foreign military
aid) will probably be at least $11
billion to $12 billion above the
output planned before the Korean
goods

creased

It

is

housing, durable consumer goods,
and
public civilian construction.
present rate,
f
The best opportunity to limit ex¬
During the second half of 1950 penditures" oh housing and dur¬
able consumer goods is through
outlays on plant and equipment

is

War.

danger

and

the

of

World

making

and

plant

equipment should rise above

4% less than in 1944 in the middle
Second

for

durable goods, housing,
civilian public construction.

consumer

A reason¬

lions of unorganized employees—

the

available

materials

construction at

industrial

the

possibilities of
controlling the rise in prices and
how

are

control of the

price level
accomplished?
The im¬
position
of
ceilings
on
prices
should, in general, be avoided—
though some
direct
control
of
be

can

best

wages mfay be unavoidable. There
are
three principal objections to

ceilings on prices.
One is that
they interfere with production be¬
cause
they
cause
shortages
at
many
points.
A second is that
they cause wasteful use of re¬
sources because they
prevent in¬
dustry from making goods of the

by savings bank de¬ availability of jobs. If the propor¬ —since the military construction kind and
quality that the market
posits, bonds, and life insurance tion of women of working age in and durable military goods must,
demands. The ceilings are bound
policies. Indeed, the rise in prices the labor force were raised by 2%, of course, be produced by the to make
the production of some
is
equivalent in some respects the increase in the labor force construction and durable goods articles or of some
qualities more
to a large-scale expropriation of would be about 1.1 million.
industries.
represented

these types of property. The
ber three major problem of

profitable

num¬

de¬

a

fense economy,
to

therefore, is how
keep the inequities produced by

the rise in
In

my

prices to

minimum.

a

remarks this morning, I

The

tion and durable goods industries

dropping

about

1890

for

many

years.

the proportion was

68.2%, but by 1940 it had

dropped

to

The

42.2.

increased

(1) how to obtain a substantial
increase in the productive capac¬

tion to nearly 50%.

ity of the country during the next
several years; (2) how to
keep the

tion

It ought to be
possible again to raise the propor¬
of

to

the

approximately the levels
Second

World

is

true

that

the

effect

is

acceleration

of

on

the returns

taxees

that

from research.

probably
had

"jolt" many
neglecting re¬

if

accelerates

force
There

a

is

little
a

more

slow

than

tendency
drop.

1 %
a
for the

of work per week to


)


year.

hours

research

existing

equipment

But

do

been

undertaking it.

Furthermore,

the rate

be

can

at

which

junked,

the

effect of

higher taxes on the returns from
research do not entirely offset their effect
in

lOutput per manhour increases on the
about 2.5 % a year and the labor

average

higher

reducing the net cost of research
largely offset by the effect of higher

taxes

concerns

Increasing the productive capac¬
ity at more than the normal rate

of

taxes in

search into

an

Per-

running at the annual rate
$79.9 billion. Of this total

was

of about

$33.8

billion

output

represented

was

reducing the net

cost

of research.

taxes^ become so high that
anticipated,
cost

effect

of

in

search.

their

research

reducing

effect
is

in

reducing

greater

the

If

reduction is

a

than

returns

the

their

from

re¬

by

of

producers'
durable
equipment ($21.6 billion), private
industrial construction ($8.1 bil¬
lion), military durable goods ($4.0
billion), and military construc¬
tion ($150 million) and about $46.1
billion by output of durable

2It

higher

II

requires

War.

moderate

as

possible; (3) how to keep the
inequities from the rise in the
price level as small as possible.

second

been

Back in

demand for labor during the Sec¬
ond World War raised the
propor¬

as

the

quarter of 1950,
the total output of the construc¬

wish to discuss these three
major
problems of a defense economy:

rise in the price level

In

proportion of males of 65
years of age in the labor force has

con¬

goods ($26.7 billion), resi¬

sumer

dential

construction
($12.8 bil¬
and
public civilian con¬
struction
($6.6 billion).
During
the year 1951 the total output of

lion),

the

construction

and

industries

goods

the

durable

could

probably
be increased by between 5 to 10%
above the second quarter of

about 7.5%

—say

The

principal

would
certain

or

1950

$6.0 billion.

than
others.
Enter¬
prises, quite naturally, will con¬
centrate on producing the kind of
goods that yield the largest prof¬
its.
But when prides are limited
by ceilings, the Irind
of goods
which are in greatest demand may
not be the kind of goods that are
most profitable to^produce.
Fi¬
nally, price ceilings limit the ex¬
pansion of productive capacity at
the very points where expansion
is most needed.
where

In the

the

output

smallest in

relatidn

capacity most severely in
industries where output is
in

relation

used

only

A

to

attractive.

second

why indirect
applied dras¬

reason

controls will not be

tically enough to prevent
in prices is that such severe
ful and would produce

conditions.

portant

use

of

intolerable

Among the most im¬

of

features

the

of the United States
and

rise

a

be waste¬

indirect controls would

economy

are

the large

The

powerful trade unions.

largest and strongest of the unions
far

by

are

tions of

the

greatest

economic

aggrega¬

power

that the

the

has ever seen. Never in
history of the United States,

for

example,

country

has

great corporation
even

a

there been a
which has had

substantial

fraction of

the

of the United Mine Work¬
ers, which has the power to cut
off the nation's supply of coal, or
of the United

Steelworkers, which
off the countr.y;s
supply of steel, or of several of
the
railroad
unions, which are

has power to cut

off

able

to

road

nation's

the

rail¬

service.

So
a

cut

powerful are the unions that
degree of unemploy¬
is
necessary
to
prevent

moderate

ment

unions
than

from

raising

wages

faster

increase
output per manhour and thus to
prevent unions from raising labor
management

costs per

can

unit of output and forc¬

ing increases in prices. The nor¬
mal rise in output per manhour in
industry as a whole seems to be
about 2.5% per year.
The amount
of unemployment that would keep
unions
from
putting up wages
faster than 2.5% a year is not
known, but it is undoubtedly in
excess of 3 million.
In 1947, when
unemployment averaged 2.1 mil¬
lion, hourly earnings in manu¬
facturing increased by 12.8 cents
per hour, or 10.9%
and in 1948,
when
unemployment also aver¬
aged 2.1 million, hourly earnings
of factory workers increased 10.3
cents, or
with

test

possible

ductive

and where the need for

Conse¬
be
with moderation.

really

quently, indirect controls will

down to

them, profits* tend to be ab¬
normally large. ?rBut price ceil¬
ings tend to prd^ent abnormally
large profits.
H&hce, price ceil¬
ings are likely tcRimit the incen¬
tive and the ability to expand pro¬

smallest

ment

is

goods

to the demand

for

those

ing large amounts to the govern¬

industries

of

other

or

conditions that would make lend¬

power

a year.

Ill

What

lenders the interest rates

ously,

7.9%. During the con¬
Russia, it ought to be
to
get
unemployment

1.5 million

it

wasteful

would
to

create

employment by
of

or

be

less.

Obvi¬

extremely

sufficient

indirect

un¬

methods

price control to prevent unions

from

forcing

output

per

up wages

faster than

manhour increases.

In

the quickened conflict with Russia
the

United

States

needs

the

out¬

demand

pro¬
limiting condition
probably be the supply of ductive capacity is greatest. Price
raw
materials, such as ceilings would be particularly in¬
more

put of every member of the labor
force.
to

The

country cannot afford

lose the production of 1.5 mil-

Volume

172

Number 4952

.

.

.

The Commercial and Financial Chronicle

(1509)

I

lion

men or more in order to preprices from rising.

vent

unsound

Although indirect controls cannot prevent a rise in prices with-

that it is virtually

possible

to

draft

good

a

im-

excess

the need for stricter credit terms,

individuals

But bank credit

reduction

may

be needed to

profits tax law. A poorly drafted
law can be inflationary by encouraging extravagant spending,

help finance an increase in plant
and equipment—that will depend
upon what other ways are avail-

causing a
production,
keep the

This

rate,

Indeed, the
ability to save
millions of

save.

the

by the public board which would
refer the agreement back for further negouation if it were found

able for financing an expansion in

prices moderate. But if the
wrong kind of indirect controls

to

in

out

of

creating

moderate

a

unemployment

substantial

they

loss

do

can

and
of

much

amount

rise in

are

used, the

the

rise

in

industrial

on

the

current

the

greater

temptation
to
no

not

would

equipment. As I have already
pointed out, the problem is how to
impede the rise in prices without
discouraging
expenditures
on
plant and equipment. Let us exbriefly

the

struction

cause

be

anti-inflationary, bethe tax bears differently on

different

competitors

and

cannot

be completely passed on—even in
a sellers' market.

pro-

The

gram of indirect measures for dis-

excess

couraging the
consists
that

of

prices.

principal

seven

in

are

in

operation

It

parts
have

or

income

corporate

of

use

(6)

bank

stiffer

credit;

credit

of

terms

and

real

stiffer

(7)

(1). Reductions in non-military
expenditures of the government,
At

time

a

when

reduce

to

expenditures

and needs to be

expanded. An

ex-

cess profits tax is particularly unsuited to a long-run production

contest, such

as

the United States

in

ment.

in.

engaged

now

contest

The

country
in this

by

adopting

tax

a

that

seriously hamper industry
expanding plant and equip-

increasing the country's procapacity, the government
needs to set a good example by
reducing its own outlays. Efforts

that

to persuade

crease

successful.

strong

The

not very

demand

for goods and labor should greatly
reduce
ment

the

the

on

tural

outlay of the governsupport

prices,

of

agricul-

unemployment

on

compensation, and on old-age
sistance.
utive

Furthermore,

branch

of

the

in

of the spending of

propriated
quently,

by

many

as-

exec-

government

usually has discretion
mg

the

the tim-

money ap-

Congress.

Conse-

expenditures

that

would compete with the output of
military goods or the increase in

productive

^capacity of the coun-

try can be delayed. Indeed, shortage
of materials will probably
compel delay in some of these ex-

the first two

During

penditures.

months of the fiscal
the

year

1950-51

of

If

an

adopted,

should

it
of

part

profits tax is

excess

not

profits

apply

used

to

to
in-

plant and equipment.
(4) An increase in the personal

the

in

were

purchase

of

is

important, as I
have said
several times,
to increase productive capacity than to
retard

a

(6)

more

Restrictions

the

on

use

income

tax.

personal

The

increase

income

tax

is

in

the

anti-in-

are an

and

much

the control of inflation.
(7) Restrictions on the
consumer credit. There is

no

more

ent

income

conditions

fairly

tax, under presbe passed on

will

prices. This is fortunate. It would
most uniust to impose this spe-

be

cial tax

upon

interest

to

the stockholders of
corporations.
Furthermore,
it
would be contrary to the national
the

reduce

ability

of

corporations to expand plant and
equipment by imposing a special
tax

their

on

profits.

The increase

the

corporate
income
tax,
therefore, will contribute somein

what to

increasing prices.

It

can

method of controlling inflation only to the extent that it provides the government with income and, therefore,
makes it unnecessary iui the suvmaxes it
unnece&bcuy for Hie govbe

regarded

as

a

ernment to raise the same amount

of income by
be

even
i

more

methods that might
inflationary.
For

ic

^

example, if the corporate income
reduces the sale of new gov-

tax

ernment

securities

to

sumer

credit

serve

a

double

pur-

pose—they limit the total demand
for goods and, in particular, they
limit the kind of demand that

under

uses

conditions.

present

courages not

dis-

only expenditures

goods

consumer

It

but

on

also

saving,
large expenditures
on
industrial
plant
and
equipment, a high rate of saving is

jn order to finance

needed.

What

is

needed

is, not a
incomes, but a tax
spending for consumer goods,

higher tax
on

on

That would discourage the rise in
prices hut would encourage sav-

ing and ^us would tend to inthe

crease

funds

available for

fi-

materials and production facilities needed in the production

of military goods and in expanding industrial plant and equip-

less

than

severe

would be.

it

otherwise

But, although the cor-

porate income tax contributes less
inflation
than
might
other

to

methods

of financing

government

expenditures, it can hardly be regarded

an

as

anti-inflationary

is

(3) An excess profits tax. One
handicapped in commenting on

the excess
that

no

acted.
of

an

profits tax by the fact
has as yet been en-

excess

profits

tax




is

so

next

two

of

following

year

the

Korean

War

about 5%, for the year follow-

ing

that.

But

expected

if

prices

must

be

rise

to

by about these
amounts, steps should be taken to
the unfairness of inflation

minimum.

If nothing is done
the self-employed, who profit im-

mediately from higher prices, and
union workers, who promptly began seeking wage increases after

an

of

average

drop.

a

the

increase

in

the

income

not

great

Allowance

must

'

nff't

•

offSGt

.(5) Restrictions
of

slon

be

credit

adopts

government

the

individuals, the economy will
in a stronger position at the

end

the

of

than

it

lions

with

contest

would

policy

you-go

be

if

were

owners

curities

(and

the

Russia
pay-as-

adopted.

individuals

of

would

Milhave

of government se-

millions

would

have increased

ings).

These

outbreak of

of

others

their hold-

will maintain

the

Korean

War,

in the community goes up evenly
the result of inflation and, in-

deed, that would not be desirable
because

induce

workers

others.

even

to

from

move

localities and industries into

some

protection against misfortune

the

it would prevent differin wage increases needed to

ences

have

persons

the income of everyone

that

sure

raise their stand-

or

as

would have

It is

possible, however, to

much

a

broader

and

more

rise in incomes than occurred

reduced

to

$10

spending would be cut substantially below the volume of
incomes

after

taxes.

deflationary

A

help the economy eventually adjust itself to the end of

offered

incomes.

•
,

,,

..

,

„

tionaiy Program of the

keep
a

inequities

the

of

minimum:

(1) Cost of living adjustments,
similar

those

to

found

in

some

a

T

power,

:n

arp

?t

tfPnprai

npiL<;arv

h

pnntrni

rf

waf?es

linfwjrah1p
.

,

nti,

bnwpvpr

th

to

nrin-

direct

nf

_

tv«p

and

ft would

p'nforoe

\

„trnn„

thp

R„oda

readv

orpatpd

erable.

vet

has

ad-

*or ttie employees of the Government of the United States. It is
also equally good for the officers
anc* employees of trade unions and
for the employees of New York

Cily> Detroit, the State of Massachrusetts, and all other States and
cities- A cost-of-living adjustment
would n°t Sive
unorganized
employees in American industries
wage increases equal to those be-

collective

inS given to large numbers of
uni°n workers every day. Nevertheless, it would diminish substantially the untair difference in

re-

Jgthp „n.,Lv finds intol
P^nle collelve
for example, collective

bargaining

cost-of-living

with

rontpsi'
frpp

a

surh

harPainin^ i<? likelv to nroduce
th

be

con-

And

cpilprs^rnarkpt

nnipkpnpd
w

such

rnmrrmnitv is

it ~+rnnf? e,,nnort
•

to

thi<5

rPTdv w

P

fh_

•

PJLnilinitv

If

General Motors, it is equally good

nnHpJrnhlp

'r»f

PYppntinn

an

ployees.

just is good for the employees of

Mnin(,e

mot

nr;ppc,

their

This review of the anti-defla-

to

savings bond that people workers. Some large corporations
are eager to buy in large quan- will probably do this voluntarily,
tities. In order to be attractive in Certainly the Federal Government
a period of rising prices, a bond should set an example by adopting
would need to carry a very high a cost-of-living adjustment for the
interest rate or be payable in a compensation of all Federal ern-

effect

produced if consumers
spending less than their in-

taken

inflation to

the contest with Russia. Thus far, union contracts, should be aphowever, the government has not plied by employers of non-union

„lnlo

gradually

were

problem of the defense economy,
principal steps should oe

Four

would

mai.p

.

on the extenby commercial

the

time high—above $20 billion. If it

sumer

The

If

will probably
be
effective
in
bringing about a moderate drop
in the demand for goods. At present, consumer credit is at an all-

abie

recently

been

govern- showing itself to be a device oy
ment leads to the conclusion that which powerful and aggressive

lTMr

nf

hptwpon

union and

treatmbetw<|enT^°n
£}
®m]^u^orLnTed
mJ 110ns P1 unoiganizea

non

white

wnite-

banks to business enterprises ^e program is far from adequate, groups of employees protect them- trv
L^There a^e overf^rnmi'on
Government policy with respect Whether the government proposes selves from sharing in the drop *ry>
thene are over 5.8 miUion
to the terms of commercial credit to make substantial reductions in in the standard of living that the Soveinment employees, uonseis m a state of confusion because the volume of postponable civilian increased production for defense
Hi,to
tL.PPm
of the conflict between the Fed- spending remains to be seen The and foreign aid will soon impose
5^b^2?ffv
eral Reserve System, which is kind of tax increases that have on the country as a whole for a
endeavoring
to
stiffen
credit been made up to now produce a year or more. More important,
fo 1 if cos^ of UvinVadhistment
terms, and the Treasury, which mixture of good effects and bad collective bargaining becomes a
A.cost-of-livingadjustment
,

is endeavoring to keep them easy, ones with the good effects not device by which the determination
inD®J?pplAed"J® P^™i
During the last three months the very much greater than the bad 0f the price level of the country
^fd aJi and enrvivors
commercial, agricultural and in- ones. No one knows what kind of is largely transferred to numerous
Sq™hpG
dustrial loans of the weekly re- excess profits tax will be passed, bargaining groups, each of which V™we<3n i»4U;and 1949 when
porting member banks have been but it will be difficult to draft one is too small to be much interested
thl agJJpLS
expanding rapidly and have that does not severely limit the in the effect of its bargain upon
aaGaKlp„^p^
nfd-aec
reached an all-time high. The in- capacity of industry to expand, the community as a whole. This p^yaple "^r tne r ederainlan age
^
*
~7
LUC
,V"U1V.
pn,j
onrvivnrc insiiranpp
old in-

infurance

i

.

.

,

The recently announced stiffening reSult follows from the fact that
and the end of September was of the terms of real estate credit the people who set the wages of
well over $2 bililon—in the face of and of consumer credit-will be an the country virtually determine
liftlo
inr>rP9co in
fho
imnnrtant
t/Ybiriflotirm
fimnc rv-F
little increase in the same period important check tOb inflation.
its price level. In times of a selllast year.
The most serious lack in the ers' market collective bargaining
between the end

crease

of

June

camo

The

mercial

~

rapid expansion of
credit, however,

largely to have

com-

the

last
an

because

August
the

end
seen

abie

to

several

months
in

to stimulate personal saving.

rather

inventories

inventories at the end of
were

of

about the

June.3

how

far

it

It

same

as

remains

will

be

to

out

discourage the expansion

defense

V consumers* no

of

accept

a

more

community

rapidly rising

would

be
if carried

entirely to make wage bargains that proso-called pay- duce changes in the price level,

expenditures

taxes—the

as-you-go

policy.
a

Such

blunder,

a

policy

The community may require that

particularly no

wage

agreement

that

raises

mainly by higher wages
by more than a given
personal income taxes and an ex- amount (say the average annual
cess

3The real stockpiling has probably been

to

to tolerate. Sooner or later the
community will probably insist
government to meet the costs of that restraints be placed upon the
the Korean War and the increase freedom of unions and employers
in

desir-

is likely to force the

This price level than people are willing

defect in the program evidently
springs from the intention of the

at

of commercial loans. Any increase
jn inventories is an indication of

Cerns.

pro-

in fi-

been used

increase

anti-inflation

gram is the absence of an attempt

nancing the rise in production of
than

government's

seems

law

Nevertheless, the principle

the

jY

billion by a drop in the volume
of new loans, the level of con-

be

measure.

say

to

in

for the

and to considerably less than that

reduce

deficit

ment. Until today, restrictions on
consumer credit have been barely
more than token restrictions. The fixed amount of purchasing
stiffer terms of consumer credit

nancing the expansion of produccapacity, a tax on spending,
however, is not politically acceptt}ve

commercial

the inflation

banks, it will make

national

on goods. Since consumer credit ernment bonds would make milis used largely to finance pur- lions of people more willing to
chases of durable consumer goods, spend their income after the conrestrictions on the use of con- test with Russia subsides and thus

flationary. But it is a crude and
unsatisfactory instrument to use

in the form of higher

soon

net

10%

outbreak

the

more

of
consumer
credit.
Certainly that ownership of government se- during the Second World War.
people should not now be helped curities would give them. Fur- Keeping the inequities of inflation
to spend more than their incomes thermore, the acquisition of gov- to a minimum is the third major

comes instead of more than

corporate

the

in

$9

of

desirable way of combating inflation than restrictions on the use

were

the

to

become
use

demands for higher wages. To that
extent its
anti-inflationary effect

in

debt

rise

A smaller deficit
would permit the ratio of the debt
to
the
net
national
product to

important step forward in

in the income tax tends to stiffen

corporate

But

years exceeds
billion a year.

of

could be

inciease

product.

the

resources

made for the fact that the increase

The

national
national

than
the

product will drop, unless the gov-

credit in residential building. This
is a highly useful method of controlling prices and also freeing

yGar * 4?r
increase m the

tax.

debt

ernment

rise in prices.

pronounced

(2) An

Federal

product rises
by about 7% during the next two
(the normal rate), the ratio
of

it

ig

mcome

of

net

the

But

personal

ln/o\GA

the ratio
net

years

tax probably does more good than
harm, but the net beneficial effect

were

if

equipment, because this method of
financing is highly inflationary,

the Federal
considerably
less than during the same period
expenditures

government

in

the

to

the

be

abnormally high, productive
capacity is too low for demand

are

ductive

expenditures

con-

down

price index to not

of

for

military

the

or

rise

upon

hold

may

consumer

productive

would

budget for 1950-51

heavily

in the anti-inflation policies of the government

materials

should not handicap itself

non-

rely

V
Improvements

capacity needed for military goods
and for increasing industrial plant
and equipment. The recently announced rules in Regulation X

Nevertheless, it is true as
general rule that, where profits

release productive capacity for
the output of military goods and

Congress to cut

to

inimical to the public interest

a

expansion

order

in

a

purchasing

policy of meeting part of the in- ard of living at a time when the
creased costs of defense through
community as a whole has less to
borrowing from the real savings consume. It is not possible to as-

where

is

to

suffer

also

for use in producing
military
goods
and
industrial
plant
and
equipment
because
housing construction uses many

industries

needs

everyone

will

tions.

of

^

Further-

most needed. This generalization is not true without qualifica-

estate

terms

equipment.

is

industry;

credit.

consumer

present

it would do this in a large
of cases in precisely

those

tax;

in

under

an

proportion

proifts

excess

and

more,

(3) a
tax; (4)
an
increase
in
the
personal income, tax;
(5) restrictions on the
proposed

tax

to

the funds available for expanding

plant

been promised: (1) reductions in
non-military expenditures of the
government;
(2) an increase in

the

profits

objection

need

commercial banks to finance

conditions is that it would reduce

rise

principal

who

persons

substantial loss in the

power of their bonds, savings bank
plant and equipment. In other deposits, and life insurance polwords, it will depend upon tax icies as a result of rising prices.
policies and upon the willingness
The pay-as-you-go
policy has
of individuals to invest in indus- been advocated on the ground that
try. Let us hope that industry will it is desirable in order to avoid a

doubt, however, that an excess
profits tax could be drafted that

plant

and

amine

for

reason

some
business enterprises
spend extravagantly. There is

prices will also limit

expenditures

important

an

for

that limit

measures

is

not making the maximum rate too
high. The higher the maximum

to

would be great among

25

sonal

hetwepn

income

increase in output per man-hour
sub- for the country as a whole) shall

Still higher per-

taxes

would

weaken the capacity of be put into effect until reviewed

1040

cogt

f

^

^

when

1949

and

jiving increased

far

pension.

average

the

more

The

Qenerai Electric Company has re-

cendy

workers

re^red

them
rjge

pavments

some

-n

in

in

increases

announced

pensjon

to

previously

order

to

give

compensation for the
cost
of living since

their retirement,

out

profits tax.

usiness con- sj.anjjajjy

Umifpc® pi® n^r
lly ;P
.An®r® J"®
lrh(FlJ Annliratinn nf
UllQGr tlllS SCnCITIG. AppiACallUIl Ol
^ ,7^fi^iir,i
t
to
pension" would prevent a repeti^.Qn Qf the in;us^ice that occurred

CV{e^!3*J

Rent control

ren'ts
,,

t0

rise with
.

.

"

should

permit

the increase in
Qne of the most

liv:r„

'

Continued

OP

on page

26

-

The Commercial and Financial Chronicle

25

Good Questions!

them, probably best meet these

of

specifications.

Economic Problems oi
A Defense Economy
of inflation during
World War was the
unfair discrimination against land¬
lords. As a result of this discrim¬
ination the item of rents in the
consumers' price index rose only
about 19% between 1940 and July,
1950, while the average of all
items in the index was increasing
unfair

72%.

about

VII

protection
of
their current savings but, by stim¬
ulating thrift, it would help keep
inflation moderate and it would
build up purchasing power to sus¬
er

tain

savers

inflation for a large part

demand in some future

year

government buying drops.
proposals for miti¬

when

control laws
permitting landlords to raise rents

justment in the rent

offer

bonds

from

materials seems to overlook the possibility of
eliminating the profits of many companies not en¬
gaged in the preparedness ef¬

Some of the

tainly the wrong kind of taxes and

designed
controls could
greatly
retard
the increase in
production.
I believe, however,
that the chance is good that the
of the United States will,

economy

be strengthened by
Certain¬

the whole,

on

with Russia.

contest

gating the injustices caused by the ly technological research will be
rise of prices (the cost of living stimulated and the strong'demand
adjustments in wages, pensions, for labor will cause the labor
of and rents) would have some ten¬ force to become larger than it

rapidly as the consumers' price
index
increased would substan¬

as

the

diminish

tially

inflation for millions

inequities
of landlords.

rise

the

aggravate

to

dency

in

would

have

prices.

1941 and 1950 have suffered
heavy losses, and this sort of thing
should not be allowed to happen

controls

either

prepared

direct

adopt

to

years

to enforce

war,

been

again.

through fiscal and credit policies
an
unemployment rate of three
million or more, a rise in wages,

July

The holders of E bonds in
1950 had paid $31.5 billion
for
their
securities
and
these
bonds had a redemption value on
July 30 of $34.7 billion.

But in the

wages, or

over

vate

hous¬

of business and life upon us. What may
we
expect if we are called upon to fulfill our other
commitments in other parts of the world?
Could
we, without destroying our way of life, actively dis¬
charge these obligations? Aside from the manpower
costs, what about'the monetary costs?"—Henry H.
Heimann, National Association of Credit Men.

gross

three

before-our entrance into the
1939 to 1941, outlays on pri¬
plant and equipment had
8.0%.
A similar drop must

not

•.■.■I.¬

representative of practical businessmen
who asks some of the right questions.
We wish there were more like him in public life.
Here is

a

purchasing power of the year in compelled to suffer from them. As portance in the present contest
which the bonds were purchased, a matter of fact, plenty of injus¬ with Russia is preventing a drop
thev had a redemption value on tice
would
remain
unalleviated in the present proportion of the
July 30, 1950 of only $27.7 billion. because there is no direct way of output going into industrial plant
Continued from
In other words, the bonds in July protecting savings bank deposit¬ and equipment. If this proportion
were
worth $3.8 billion less in ors, bondholders, or beneficiaries is kept high, the rivalry with Rus¬
purchasing power than the owners of life insurance policies from a sia will strengthen the American
had paid for them—a loss to the rise in prices.
economy
and the United States
will win the production contest.
owners of 12.1%. The magnitude
of the loss of purchasing power
VI
varies with the year in which the
How will the production
con¬
bonds were purchased.
Only the

The

Robl. Garrett

purchasers of bonds in the year
1948
were
ahead —their bonds
in

1950 could be redeemed

July,

Russia

with

banks?
dollar

will

It

tend

raise

to

New York Office

the

value of many of their as¬

particularly the real estate
for
1.24% more purchasing
against
which
the
banks
hold
power than was paid for them.
mortgages. It is obvious that the
The
buyers
in 1941 had the
contest with Russia is likely to be
biggest loss — their bonds
in hard on
depositors
in
savings
July,
1950 had
a
redemption banks. The
prospect that the
value
21.9%
less in purchasing
movement of the price level will
power
than
the cost of their be
slowly upward must cause in¬
bonds.
The loss of the buyers in
sets,

reexamine the

dividuals to

&

Garrett

Robert

110-

Sons,

investment

Baltimore

year-old

panies,

stable stocks, may
suitable for small

even

sold

Minsch,

New York.

President

past

a

Oct.

on

Mr. Boveroux has

1950.

14,

firm

the

of

one

on

bond with

larger

incomes

$25

-Income
The

final redemption

a

of

and

tax

persons

(as

indicated

payments)

by

larger

but

very
ups

which

long-term

responsive

to

as

move

over

up

prices rise.

With Walston, Hoffman
Walston,
members

Goodwin,

Hoffman &

of the New York Stock

Exchange and other leading stock
and

commodity

exchanges,

nounce

that

become

associated

an¬

Mitchell

Irwin

the

the

with

the

Some of

MINNEAPOLIS,
liam

has
firm

G.

Minn.

O'Connor

is

—

now

well

Date

Bought

Paid

Originally

Purchasing Power

response

was

economic

in

depend¬

by

govern¬

ment."

decade

The

1930

from

the first in 60 years

not reach

actually

capital

1940

formation

the average

annual

During the '30s there

rate of 3%.
was

capital

in

growth

our

to

in which

net loss in capital

a

and

the net productive

investment
during
and
war,
though great in
totals, falls far short of the

the

since
dollar

of

to do its

our

job!

and to keep pace

opment

deficiency is estimated

$80 billion and is indicative of our

was a

-

have demon¬

our

economy

is

at $70

to

industrial lag as measured by our

performance.

past

own

This

in¬

dustrial

lag includes replacement
obsolete equipment as well as

of

strated that when

with the devel¬
technology. This

our

and

confidence in the
industrial machine

The postwar years

of

war

increased

productive

capacity.

But, you say, our wages and our

$679

—$191

—21.95

148.05

2,661

—551

—17.15

139.56

3,917

—742

July, 15)50

of

Redemption Value
(Col. 2-r Col. 8)

Gain

or

Loss

(Col. 4 minus Col. 1)

Loss I Col. 5

or

as

% of Col. 1)

from

released
were,

on

—15.93

management, labor and consumer

6,082

137.45

4,425

—1,005

—18.51

demand,

1945

4,852

134.35

—18.63

vigorous.

2,347

2,503

123.83

3,611
2,021

—827

1946

—13.89

British

1947

2,532
2,901

2,633

108.35

2,430

—102

2,959

100.76

2.937

+

3,197
1.904

3,218

102.011

3,155

102.80

1,852

1,904

'

-

—326

—

—

36
42

52

•

—

+
—

—

4.03

1.24

the

$34,671

$27,688

—$3,802

becomes

1.31

hibited
tion

—12.07

As contrasted with the
where the war
maintained through

were

postwar period, we have ex¬

2.73

greater

and

more,

gains

in produc¬

consumption on

a

com¬

capita basis. What is
notwithstanding the govern¬
per

the

for

British

cotton

textile

in¬

tremendously dustry, those industries have been

economy,

controls

parable




and

decay

"salvation

on

the

expansion. There

of

rec¬

5,430
4,438

$31,490

technological
ence

virility

continuous with

was

ability

immediate and

The postwar

1944

1950

experience of Great Britain
and avoid the dangers inherent in
the

pundits
and
self-styled liberal goal which we would have reached
politicians rhat we were headed if we had continued the rate of
for
prolonged depression and growth which existed prior to
1930.
This means that there is a
grave unemployment. As it turned
out, after rhe relaxation of war trend-deficiency in new industrial
controls, when the job was put up plant and equipment to meet the
to American industry and labor, needs of our growing population

5,466

1949

profit from

Here is where we may

formation

4,659

i

I regret to

of them are larger
proverbial man's hand.

some

the

3,940

3,212

Price Index)
to

$1,114

1942

1

that

than

standard of living have risen. This
such
controls
as
the whole, justifiable is correct. There is a reason for it.
under war conditions, the Ameri¬ In many industries we have been
can
potential, through American living off our fat. As was stated

July SO, I960

$870

1948

there

say

was

1943

,

other economy.
are several clouds in

any

domestic sky, and

163.97

Redemption Value

1941

t

or

But
our

pontifically advocated
by some
leading economists in the '30s, ana
of the
prophecies made toward
the end of the war by economic

ord

Percentage Gain

cost inflation, our price
compared to the prewar is
less inflated than that of the Brit¬
postwar

did

con¬

the

our pro¬

World War and its

Second

overwhelming.

as

days

people

agri¬

in

level

postwar period to date have pro¬
vided striking refutation of the
theories of economic stagnation so

the

of purchase.

same

needs!

Wil¬

Rise in Price

|

The

become

had

recent

that

our

and

capacity is inadequate to

our

resurgence

as

very

have been telling us

continued
year

in

And

the

of

that

disappeared,

population

our

stabilized.
many

further chance

growth;

had

Rand Tower.

strictly accurate estimates, it would be necessary to know the month,
in which the bonds were purchased.—(Dollar figures in millions,)

J

industrial

that

no

preventing

of

readjustment

cultural prices and in wages, with
attendant fixation of the war and

ish

mature economy;

a

was

frontiers

record

following table shows the approximate losses of purchasers of E bonds by

I.!
Level (Consumer

was

ours

nected with Central Republic Co.,

In order to make
year,

for

warning

and

on,

the great depression of
said

that there

meet

and downs of business
do

sig¬

casts

management

light

During

nearly 30 years and is a former
partner of Minsch, Monell & Co.

(Special to The Financial Chronicle)

not

are

with cyclical

economic

been in the securities business for

Persons with incomes too

value

salient features of another type of

ductive

with

plan

the

that

Mr.

a
in
monthly purchase not be very
its
office
at
the
Waldorfsales to each buyer savers. It is easy for the investor Astoria.
Mr. Mitchell in the past
to buy at a price that soon turns was with Ward & Co.
small to make them liable for an out to be too high. The small in¬
income tax payment might be per¬ vestors
need
an
opportunity to
With Central Republic
mitted
to
purchase each month buy the shares of enterprises that

be

limited.

The foregoing summary of

nificant

Industry

policies

mental

downward

"planning."

resident partners in

discontinuance

The bonds should

call

the '30s there were many who

who

of buyers in 1945,

Instead of 2.9%.

they

which

controls

stifling

signals for, our own economy. |

ques¬

quantity of purchasing ings bank account or bonds would
power savings bonds issued would probably conclude today that the
depend upon the needs of the gov¬ proportion ought to be smaller.
ernment but would probably not But what is the small investor to
exceed $5 billion to $7 billion for do?
Suitable types of investments
the calendar year 1951, unless the for the small saver who cannot
Treasury saw fit to refund some watch his holdings closely are not
of its short-term issues with pur¬ easy
to suggest. Certainly the
chasing power bonds. The bonds prospect that the long-run move¬
should be sold to yield somewhat ment of prices is upward strength¬
less than the present E bonds if ens the case for owning one's own
held to maturity—say about 2% home.
Stocks of individual com¬

American

have been ad¬
mitted into the firm, will be the

have

Boveroux,

was

The

Piospects ioi

opened a New York
office at 115 Broadway.
William
J.
Minsch
and
G.
Leonard

firm,

17.1%; of buyers in 1943, tion of what
proportion of their and member of the Board of Gov¬
15.9%; of buyers in 1944, 18.5%; assets should be held in fixed
ernors of the
Bond Club of New
18.6%; of buy¬ dollar assets. The man who last
York, was a partner of Minsch,
ers in 1946, 13.9%.
May considered it wise to hold Monell & Co. from 1942 to the
(See table below.)
half of his investments in a sav¬
1942

7

page

Opens

savings

affect

already imposed a dif¬

ferent way

be permitted to happen.
In
prices is inescap¬ the four years since the war, 1946
to
1949, 10.2% of the gross na¬
able.
Persons who can do little
about
the
rise in
wages,
labor tional product was spent on plant
and
equipment.
Of crucial im¬
costs, and prices should not be

test

.

.

.

"The Korean conflict has

labor costs, and

years

inflation.

eventual

plant

the

on

excess

an

Henry H. Heimann
purchasing power outruns
production of civilian goods and
services, controls or price ceilings merely defer

Purchasing

ground that they 1945, private expenditure on
would
weaken the resistance to and equipment, exclusive of
inflation. Thi& is an unconvincing ing, dropped to 3.8% of the
In the
argument. Unless the country is national product.

cized

that

of

The great un¬

been.

power bonds certainty is how the contest will
would
have the
opposite effect. affect expenditures on plant and
Proposals to mitigate the inequi¬ equipment. During the four years
ties of inflation have been criti¬ of the Second World War, 1942 to

The government should of¬
fer savers relief from the inequi¬
ties
of
inflation by permitting
them, to buy limited amounts of
.non-negotiable savings bonds pay¬
able in a constant amount of pur¬
chasing power if held for a mini¬
mum. period.
The buyers of gov¬
ernment savings bonds during the
(4)

idea

profits tax will check inflation
is open to debate, as such a tax
brings on extravagance
and
high overhead burdens which
will extend over into peacetime
production.
"All the controls we may put
into effect, even including price
ceilings* at best can only defer
inflation until after the present
war crisis.
When the expansion

poorly

the

The

fort.

mul¬

a

undermine
the efficiency of industry.
Cer¬
of controls that

titude

profits tax is neces¬

an excess

war

by forcing the
United States (1) to adopt taxes
that undermine the incentive to
American economy

purchasing pow¬

proposal that

to recapture high earnings from producers of

sary

people fear that the con¬
test with Russia will weaken the

in accordance with a
predetermined scale.
Not only produce and (2) to enforce

would the sale of

cost-of-living ad¬

A

"The

Some

amounts

parts

Second

the

'

Thursday, October 19, 1950

.

but not all

investment trusts,

the

Continued, from page

;

.

.

(1510)

26

"living

their

on

that

sense
or

they

including

capital

were

in

the

not earning

in operating costs

a

sufficient return to maintain their

capital equipment."
American

brave
war

effort

to

industry has made
since

make

up

a

the

end

the

deficiency.

of

the

Volume 172

Number 4952

;

The Commercial and Financial Chronicle

.

.

(1511)
Expenditures

for

plant

new

by

omy.

But

eorporate industry averaged about
$16%. billion per year for the years

spite

of

'46

,

must admit

we

industry,

have

we

lion yearly average have gone for
replacements alone, the remainder
being for expansion.

It is obvious

that expenditures
replacement must be consU-

for
ered

part of the cost

as

of

fictitious

using

which

an

paid)

has

not for dividends
for

been

for

or

result

of

high

re-

hard

unless

be profitable.

continue in business

can

hignly competitive market.

a

I

have

staled

above

that

$10 billion have been expended
annually for replacement and renewals.

But

this

of

billion,
charged to

$10

only $5% billion was
depreciation and treated
The

costs.

as

remainder, just for replace-

ment, not for expansion, came out
of

so-called

that

for

$1.65

profits.

had

to

of

about

paid first.

rp.

39%

had

•
'

,

,

•

.

(The depreciation charges whicn
allowed

were

based

were

much

ent;

by

the
Treasury
plant installed at

on

lower prices than the presFuture depreciation charges

the

piant win be ch^ged
off at the greatly increased prices.
on

new

But the fact is that

plant

new

ana

at

curfew

prices,

must

be

years

from

I

obtained

looking

20

that

must

we

stop

depreciation

upon

as

of dollar replacement

must look

In

ae-

not

nou>,

it

upon

out

wear

other

a

and

words,

accounting
procedures should recognize that
it is not dollars, but tools, with
which

we

our

here

are

concerned.

called

able

for

tors.

cash

Cash

people

to

dividends

live

on

equity values.

The

what

are

increased

not

-

inves-

eifect

the

on

.

below

parity

steel

nroducts

-rru

•

,

Thus

have

we

addi-

or

•

other

the

with

industrial

prices

of

stiucture,

kept

its

and

inability

supply

10

connectfon,

In this

.

ing

to

that

note

other

prices

as

period

the

apparently

British

became

which

hazards

this

I

postwar

Government

have

the

of

aware

mit
on

initial

an

per

rJ5.,u
As a result
_

^vestments
.,

.

bv

anH

initial
to

40%

t

equipment

on

4u

f!

.

t

u

purchased
i

+

Lstry^increased
onh?

ment

about

SHndustty

the

and

23%

this belated

to

that

fact

invest-

That

the

the

industrial

com-

their total comprehensive

investment
same

an

the Dow-Jones list in-

on

creased

45%

by
period!

Mnwipt

lnnk

nc

during
'

rea

-

turned

uneconomic

con-

policies

to-

hope that

ful

of

our

the

Treasury

enlarged

needs for steel and

mind-

production

other durable

goods, will take the same lesson
to
heart?
A
beginning in this
direction

has

Recently

our

already been made,
own
Congress took

note

of the problem and provided

for

accelerated

amortization

of

defense

plant facilities similar to
which was available during

that

This provision

the

recent

for

the period of emergency only,

I

to

a

our
:

war.

trust that

I

comprehensive

solution

of

need

not

the

important

to

this

place

of

industry in the national econ-




form

of

erav

of

ments

for

national

defense

the

freedom

and

individual.

incentive

In such

a

cli¬

mate, American industrial genius
will

thrive

and

discharge

its

expand

and

obligations

will

the1

to

Nation.

these

restrictive

policies and price disrepresent hindrance to

D. Walton Matthews

alignment and accelerated functioning of our national
proper

With Hayden, Stone
D.

Walton

President

Matthews, formerly
Bondex, Inc., since

of

1938, has become associated with

Hayden,

Stone

Street,

&

Co.,

25

Broad

New
City,

York

members

of

industry and those of
dustrial
the

the

values

A

the

oast

although

three

.

be

f.nprriw

-rtwt

nr^r
of the
"
al, n/rnnrti™!
we b°vf
PentW had tvnieal
pvamnip
One of the smaller^steel
even

a

j'

announced

to

the

nrhe

5"/

a

of

in

eertoin

of

ln tlle Prlce 01 certain of
products
immediately
the

itg

customary

clamor

panjed

shrill

by

Certain

arose

cries

Pan!^a Dy snn

radio

accom-

of

"infla-

commentators

prices of

on

Telephone and Telegraph,
which is a public utility and the

)f automobiles from "$200 to

inrrpa^o

<*".

three steel companies included in
!be cornPOSite) showed net barn"

thf t(*al. tooJs used (.to^al

flxed assets p us net curr n

s-

1939 ot 7.18%, whereas

prices™? steel

weeks

the

wfthin

made

indicates

current

repro-

company

of a steel
to be between

$250

and

showed

of

return

a

h?Zo whJn^

high

steel

onlv

dollars, the figures were
for
the
adjusted
Dow-

in

industry.

6%

and

for the

In 1949, the adjustIndustrials

Dow-Jones

ed

had

10.6% and steel 5.54%.
Thus

we

see

that at the

top of

the postwar boom the earnings of
the

steel

industry

were

approxi-

ma+eiv one-half of the Dow-Jones

which

composite

is

indicative

of

the rest of the industrial economy.

Consequently

it

was

able to have

oniv about

one-half' of

expansion

It appears evident that

the capital

^

economic reaction proceeds
directly from adequate prices and

would

raise

the

car„°

Qne

published

an

headline "Five

from

neur

of

companies

per

an-

ingot capacity varied
$36.32 to a high of

low of

a

$87.42.
This

means

that

the

entrepre-

who desires to enter the steel

business
brand

"from

scratch"

plant

new

with

wQuld

face

a

an

with

a

Boost—Sharon

cent
R-se

gpurs

buy

—

more and better products at

^ lowest workable costs; to pro-

.Vlde. Prod"ctlve fHu. employment
t0 Is w?rkef
llvln« standards
c?n£ormfn« to those of »«»?'vef soclal economy, and to Play
'
iPa ,'stre"gthemng the
naf!ona emergencies. meetmg a11
defen„se a.nd
national
,

-

Tn
.

nr

,.r

-lllfill

.

thic

if

rn1_

order to fu^lfill this role, it

Is necessa^y
try provide

that the steel mdusadequate

and

im-

fhat^rp ohqole^e hv^ddbii morf6
that are obsolete, by adding mod

Sifeld standard^
highest standards

of

technical

ot

technical

Autos Expected to Climb.'»

be
.

in

'ease

called

Qf

the

In

nercentaee

current

costs

of

a"C;ea^Gfobdee ev^n the cheap^ automobile, even toe cheap
eSt,'

to?«

dain

that the criUcS of the

industrv and its pricing

have rione

a

ereat

pol-

dis^rWce
v c

mies nave done a great cuss

to th^ country and to the national
sepurity. The induced states of
mind m government and in indusbave contributed to restrict
*be Low of risk capital which
woulh permit the very expansion
which is demanded so clamorously- The accompanying depres-

expansion

and

increased

em-

Pl02/mentLet me cite another comparison:
For

the

first

six

months

of

the lective

from

the condieconomy, such sedeflation of an essential

it

is

announced.

In

his

new

ca¬

pacity,

Mr.

Matthews

in

Walton Matthews

D.

will specialize

"

investment

commercial

of

other financial

banks

institutions.

One of the founders of Bondex.

Inc., New York investment coun¬
sellors s p e c i a 1 i zi n g in bank
portfolio

work,

Mr.

previously has served

Matthew.'
as

Vice-

a

President of Telephone Securities

Co., Chicago.

Ames Named to Head
N. Y.

Group of IBA

Amyas

Ames, partner of Kid¬
Peabody & Co., has been

der,

nominated

the

for

chairman¬

executive committee
of the New York Group, Invest¬

ship

the

of

ment

Bankers

Association of

America,
for

the

en¬

suing

year, it
announced.

is

Other

nomi¬

nations for the

coming

year
Walter F.

are:

Blaine

of

Goldman,
Sachs

&

Co.,

Broome

Guaranty

for the industry to achieve ecoequilibrium

nomic

with

the

rest

the economy. To do this we
must correct an obsolete price

..

.

capital.
We have been characterized in
■

recent

years

economic

as

t

feast

a

companions

goods production.
ent

Trust

reason

in

I see
why
the

I

see

for

Amyas Ames

of

Co.

York,

Secretary-Treasurer.
Duncan R. Linsley of The First
Boston
Corp., Chairman of the
Nominating Committee, an¬
that

nounced

take

the

elections

place at the

meeting

Oct. 26

on

will

group's annual
at the Hotel

Pierre.
Clarence E. Goldsmith of White

Weld

&

Co.

Stitzer

Corp.

of

are

officio.

and

Raymond

Equitable

nominated to

L

Securities
serve

ex

Henry Herrman of Henr

.

and

durable
inherindustry

no

it, once the basic
price disparity is corrected, an
epoch of prolonged high activity
do

and Rob-

New

^

d hfireb
t
.
vestment status to the steel industry so that it can compete
with other industries for risk

Chair¬

-

man,

°*her types of goods, including should remain subject to the burluxuries.
Since
inflationary dens of inadequate profits. Rather
arise
tion of the total

stment

of

famine
industry. There is an
exaggeration to this because so far
as profits in the prosperity years
in the past decade are concerned,
our industry has not shared in the
sion in the pric.e °f sjeel has de" feast that was ^xpenenced by i s

pressures

n v e

service,

E.

Because the steel industry has

been in a sub-parity position with

inflation

nprjiitfibie

i

tional

u

n°l°&y-

sequently in profits, it has been
the cost of the avera^e automobile unable to fully discharge its
approximately $10.
This could duties. It is, therefore essential
hardly

in-

and

t i t

Vice

respect to the rest of the industrial economy m prices and con-

Actu-

firm's

industry, and by pursuing a vig-

of

Cost

bank
s

,

Price

Steel

inflation

the

problem,
now

»

4

per

newspaper

article

of

and

largest
ton

as

manager

problems

ma™et

nual

orous program of improved tech-

f^cted a part of the due compensation for steel investment and
adequate profits to adequate capi- steel labor to
expenditures on
tai

Ex¬

eight

^ the price rise would increase

J1

Stock

$300 per annual ton of ingot
opacity the
value of the

g°vernmfeat offlbials' columnists, steel

spoke about the effect

.

ihp

of

tndTthers0 whenever

Parnin^ anH

nt

can

of

returns

stlS comoan^es

of

calculatfon

that

to-

efflct

smlll

is evidenced in the
shares

and

other

The

conwrns

comparatively

0n

laree

a

grotfp of

representative

in™^ fb? fxteUng St6el CaPaC"y 3t mUCh
attributed to toe 'Tbe&at the steel indusucllfve. UIdt
1I1UU£>

automobiles and stated that this

-on

the New York

between the earnings of the steel change,

f-umulailve coercive effect of the ^y s role m our national econ«UG and V
&nfS frT omy is to ^ive the consumers of

a

t

emphasize

if

"dU?,^la/pvhIf AmPr^

problem.

audience
our

is

it will point the way

the

markets. At this time
increased investment require-

.

our

er^se
crease

.

.

11A1%

and

wards depreciation, is it too much
to

oray-

.

the

■N°w let us look 3t earnings and

jones Industrials

past

industry the di-

'
impossible
financing
question arises as to the since the investor can

nru

PllrYlllintjv~

exception
the general rule is indicated by
not

was

effects

of

takes

even

black

are

' on beve it
in-

steel

its total

bya Socialist government

the

laws,

large
expenditures
are
planned. The capacity of the industry has increased more than
i0% since 1946.
But I maintain

nnJ

dustry was earning its all-hme

i

j

indicates

tax

present

,

other

during

2.45%. In 1948> when the steel in-

4V,-

ace

,

ization
of

t

..

9W

pan

UP°?
period

basis

comparable

charge-off of 20%

after April 6, 1949.

.

computation

under

greatdemandswh°ch
same

a

50%

over

.

the

equipment, and in 1949 the
charge-off was increased

new

that,

...

with that of the general economy,
we wiU not be able to do the ^ob
+Kprequired of us.
1
the oil industry in-

ct^_rLnrLiSiv

mentioned

and amended her tax laws to per-

f

1VC'ta*®"J^hen the

Dow-Jones list (excluding Ameri-

it is interest-

in

ltsAassets*
a recent

quirement for tremendous capital
investment to meet the postwar tbat until the price structure of
deiJlP{l 5
their products. Late the industry is brought into line

growing

a

population with coods and iobs

and

steel

and responsible
enterprise,
without

\

sums

the

replacements
except their relation to the ability of the
highly taxed prolits; reduced industry to replace its plant and
dividends to sharenolders; lack of to provide increased capacity to
capital for expansion, and threat keeP Pace wlth the growing econstagnation

the

itrprkefh^no" ^ for plant and equipment and duction cosl
prices naa not
findu?ir* has sPent tla^e
estimated

i.e.,

to

up

compared with 1926 as a base.
They were also faced with the re-

1

industrial

within

And

uses

free

.

As a adequate
depreciation
reserves
industry is se- were set aside to
replace plant at
verely handicapped in its efforts current costs of
$250 per ingot
to attract risk capital in competi- ton of
capacity the earnings of the
tion with other industries.
steel
industry would be almost
The oil industry had similar exhausted.
difficulties.
It came out of the
During the past five years the

inadequate

ultimate

assets, inventory
the steel com-

products.

from

of

receivables,

investment

the

consequence,

cycle—

vicious

a

far

are

ceivea lor steel products aie tar

panies

new

essential

are

re

for

the

and to expand,

maximum
for the

less

They

government restrictions and with

industry only diverts the inflation

u

mv

inevitable, and this, in turn, has a
drastic effect on the ability of cortional risk capital

fixed

gr0Ss

the

our

market values of stocks nas been

porations to obtain

in

double

of

competitive

8-20

to

version

important to note that with

than

more

iy-54

the prospects for

are

industry?

"climate"

4.51

..

progressive

we, the people, choose to
them. We must maintain a

make

^.83

and

we

Seef

avail-

money

dividends

com-

what

7.28

t

earnings tor replacement oi

plant has made less

below half those of the auto

What, then,

+

enaeren1nis^oTr^™tS°oI Tbeen'mposed
During this

caUed6

well

r

the replaceindustry when

become obsolete.

or

companies

are

tn

as

ment of the tools of

they

tne

now.

believe

matter

and

depreciation allowance

in

three bases the earnings

steel

balanced

a

business and social economy.

adequate income over of plant and with an inade- economy.
?°VGr?Uate dePreciati°n allowance for
if steel were over-priced or
Lri kn t! lv r?h t3X PuurP°se\
steel industry even fairly priced, it is reasonable
-Hpnr3' in amount- c,ii?ir?Lnt
?w,a
profit position to assume that the effects would
attract investors to our industrv
iVi
?nt mod?rn7 appear in the profit statements of
Q ,
,
thi
exnand
Rfplace"?ent (not expansion) the steel companies and that as a
mPPt tup rymwinu nppHc nf^nnr
tools of production must be result thereof the shares of steel
economv
in chort
must have ?
m curr®1r|!: operations un- companies would be in great dendeauate vrices for
vroducts
!nSS
^
Lquidate mand by the investing public,
In
oninion
the nrices
' ?
industry through wasting of
I have cited above a comparison
fu

.

1

ficiency

the

With the large investment
in plard: and tbe far slower turn-

w

of

American

19.29

come.

Income

reived

...

,

means

spent, about
earned, because

be

income tax

an

to be

This

$1

every

Gn all
0f

adequate returns for the old
attracted new investment in
conformity with the requirements

364,518,106

Panies had only 65% of the net in- parities

industry Must Have Adequate

9 steel companies

556,486,240

Gross ^eiSe* P'US inventory
Npt lnrtlf
S

and

about

and
and

$8,081,938,849

mcome
Percentage return on:
Invested capital ^

industry is healthy and panies.
vigorous the rest of the economy
rt is

that you

as

$3,515,432,031

our

suffer
To be healthy and
vigorous the steel industry must

in

Aran^ receiva^es

our customers.

will

largest auto
follows:

seven

(ex Ford)
.

6 Auto companies

ingots,

times, but to replace obsolete plant to make sure

serves

with six of the

makers

Gross fixed assets plus inventory

there

which acted to materially increase
the cost o£ steel to

nine

compare

prod-

our

that

priced

the

year

companies

.

been, for much of the postwar
period, a flourishing gray market,
as well as a large volume of conversions

calendar

steel

able

The steel industry is frequently
characterized as being the basic
you industry
of the American econ(on omy.
I take this to mean that

profits

tax

income

the

current

the largest

doing
either

business; otherwise, you are
liquidating your business or
are

with

by

been

not

through '50, but the deficiency 1 to meet the demand for

is still very large. It is estimated ucts,
that $10 billion of the $16% bil-* has

that, in

efforts

vigorous

27

Herrman

&

Valentine

of

(Inc.)
year

are

terms

Co.

and

John

Harris, Hall
nominated for

on

&

W

Ce

three-

the executive

com¬

mittee.

Centennial Investment Co.
DENVER,
vestment

Col.—Centennial In¬

Co.

is

engaging

in

securities business from offices
1525
are

R.

Arapahoe
Ezra

L.

G. W.
E.

Street.

Alishouse,

Giddings,

<

Officei
Presiden

Vice-Presideni

Nash, Secretary, and Arthui
Gaines, Treasurer.

The Commercial and Financial Chronicle

28

.

.

Thursday, October 19, 1950

.

(1512)

support
Continued from first page

sulted in

for the government securities market has re¬
a monetization of the unpaid cost of the war.

jurisdiction over its proxy solici¬

and to avoid it we shall,
great deal more than curtail con¬

That, we must avoid in the future,

It

We See

As

of course,

thus placed in the hands of businesses
operations which do not
for the most part supply the markets with anything these
funds can buy. Much the same is to be said of any policy
which stops banks from lending to consumers, but permits
(indeed in a fashion encourages) them to lend to others,
whether it be for enlarging facilities to be employed in
the manufacture of munitions or for the production of
munitions directly. This whole question of the generation
of inflationary forces by the extension of bank credit
is an involved one which cannot be left to chance if infla¬
power, so-called, is
and individuals in

the course of

really to be avoided.
But a large part of the consumer credit about
hear so much these days is not bank credit at all,

which
either

When a finance company loans funds
which it has obtained from its stockholders, or from an

direct

or

indirect.

company, for example, to some individual to
automobile, one consumer is put in receipt of funds
which another consumer has saved. Should the man who
has done the saving prefer to buy government bonds, a
new issue of securities, a new mortgage, or any one of a
insurance

buy

an

available to him, his
funds might then impinge in the first place upon markets
other than that for automobiles or washing machines or
television sets, but they would impinge up®n some market
or other, and when they did so they (or a very large part
thereof) would pass into the hands of individuals who
(since they would own the funds then) could spend them
they pleased so far as consumer
concerned.

for whatever

strictions

of investment

forms

other

dozen

are

credit re¬

"propensity to
naturally be influenced by
such things as easy credit. Possibly it is more easily in¬
fluenced by such factors, than the decisions of business¬
men, or than the decision of investors to hold cash (that
is to say, hoard) rather than to put their funds to work
or
vice versa. There may, therefore, be an appreciable
additional ultimate effect of diverting funds from con¬
sumer loans into some other channel, but the difference
is not nearly so great as a good many appear to suppose.
such

is

There

thing, of course, as

a

consume," and this urge may

.

^

.

phase of the current situa¬
tion. The individuals of this country, when we plunged
into World War II late in 1941, owned bank deposits, cur¬
Now let

rency,

us

turn to another

government securities and other so-called "liquid*
$60 billion. They came out

assets" in the amount of about
of the

war

later with approximately

four years

$155 bil¬

They bought as never before during the half decade
is now just past. Yet individual holdings of these

lion.
that

liquid assets have been steadily rising. They are now at
an
all-time high.
In particular, individuals have been
building

their time deposit accounts, and they hold
quantities of savings bonds, which they can con¬

up

enormous

vert into cash at

It would

will.

that, by and large, many of these
preferred to borrow for current purchases
draw down on their time deposits or redeem
appear

individuals have
rather than to

their

prior to maturity., Of course, the
increase in consumer debt and enlargement

savings bonds

simultaneous

liquid savings does not imply that the same
individuals save and borrow. But there is every reason
of

consumer

to believe that many

of them do just that. They can now,

they choose, proceed to bid up goods by use of their
savings. Whether or not they will actually do so remains
to be seen. If they do the effect upon the economy as a
whole may not be very different from that of continued
consumer lending so far as such lending has been by bona
fide savings.
if

Must Not

But the real

Ignore Other Things

danger is that public attention will be so

fixed upon consumer

credit that it will fail to understand
are a million other ways in which

and realize that there
an

inflationary potential

The fact that such
the way

a

be built up in the economy.

potential exists today is a result of

World War II

be foolish to suppose

may

was

financed. It would of course

that such

could, human nature

a war

being what it is, be vigorously conducted without some
measure

this

of inflation.

Such

imperfect world of

things simply do not occur in

could have been made, and a
financial hazard

up

a

much better effort

much smaller aftermath of

developed. We

obsessed with the notion that

mopped

But

ours.

were

altogether too much

inflationary funds could be

by sale of savings bonds. Treasury policies of




corporate

man¬

intent upon .concen¬
trating more and more power in
their own hands, serve to weaken
the American system of private

Surely it must be agreed that
proxy practices disclosed by
SEC study are repugnant to
our democratic tradition.
If that
were all to be concerned about, it
would be enough.
But it is an¬
terial. Though seriously deficient,
other fact that underlies the fail¬
required with respect to large
this material probably represents
ure of
publicly held corporations not so
many of our corporations
a
better than average selection.
listed.
to afford an opportunity of par¬
Approximately one out of every
I have been heartened by the
ticipation in the enterprise by
six
of
the companies examined
extent and character of support
those who have the legal right to

from page 8

the

the

The Frear Bill

The financial com¬

for the bill.

failed

furnish

to

with

one

basic

has

problems of investors,
given its almost unanimous

the

financial

its

stockholders
of

more

or

the

statements

three
neces¬

participate and have been and
be again called upon to risk

may

the

in

funds

their

venture.

rudimentary anal¬
proval. Organizations such as the ysis of the state of the business. Corporate Practices Which Depart
From Business Norm
These are a balance sheet, profit
Investment Bankers
Association,
I have not thus far discussed
the National Association of Se¬ and loss statement, and statement
Many companies so corporate practices which depart
curities Dealers, the National Se¬ of surplus.
sary

for even

a

the handled their

Corporate

of

Society

York

ap¬

Association,

Traders

curities
New

impossible
with

reserves

balance

a

that it

determine,

to

sheet,

was

even

the

com¬

Analysts, the National Association
Companies, the New pany's net worth. For example,
York
Stock Exchange,
and the one company with assets of $6,a
reserve
for con¬
New York Curb Exchange sent 500,000 had
representatives to testify in favor tingencies of $2,200,000 and did
of the bill. When organizations of not mention any specific contin¬
of Investment

this

character

conservative,

—

re¬

provision

which

for

gency

was

business

the

from

The
startling

norm.

abuses I have mentioned,

None of therm

to me, are common.

exist in those companies now

can

subject to the Securities Exchange
S. 2408 is designed to elim¬

Act.

inate such practices in other large
companies with publicly held se¬

curities.

made. Let me make it clear that
In addition, S. 2408 attempts to
spected members of every com¬
munity — agree that
legislation these do not represent cavils about outlaw' trading by insiders upon,
fine points of accounting practice. inside information. This is closely
suggested by a bipartisan com¬
the other provisions,
mission of the Federal Govern¬ Not only do such practices result related to
of the for by withholding accurate in¬
ment is essential, it seems obvious in depriving the owners
business of essential information formation the insider may take
there must be compelling reasons
their
company,
but they advantage of information unavail¬
for the enactment of the legisla¬ about
create opportunities for concealed able to the public generally totion.
manipulation of security holders' trade for his own benefit.
Nu¬
I think it is a remarkable thing
they deter investors merous examples of such trading
when the leaders of an industry rights and
from risking their capital by mak¬ were called to my attention.
In
agree with the agency which the

Congress has created in that

field ing investment in such companies

legislative a blind adventure.
The proxy soliciting practices of
proposal. It reflects favorably on
these companies also represented,
both
government
and industry,
and such a spirit of cooperative in most instances, an insensitivity
to the rights of the owners of the
give-and-take should be encour¬
aged by the Congress.
Of course, enterprise. There was a minimum
of disclosure and a maximum re¬
opposition was expressed—I would
The
not be fairly describing our com¬ quest for blanket authority.
merits of

the

to

as

mittee

Plenty of Money

"Undemocratic

agement^,

enterprise."

Continued

munity, which presumably knows

tion is

we

have to do a

credit.

sumer

tation.

a

hearings unless I disclosed
But I can fairly say that

that fact.

typical notice for the election of
did not give even the

directors

where

instance

one

the

security

registered on the New York
Stock Exchange and the insider
was
therefore subject to the Se¬

was

the minor¬

curities Exchange Act,
to

million

dollars

of

such

result of

a

almost

return

insider

the

compelled

stockholders

ity

half-

a

profit made as

short-term trad¬

In another instance, involv-1

ing.

ing

security,

unregistered

an

I

based predomi¬ names of the directors in office or am informed that insiders made a
those
proposed for the ensuing three and one-half million dol¬
nantly on misunderstanding of the
bill and of its provisions for ex¬ term. One of the items of business lar profit in two months. All the
in
one-third of the stockholder profit in such trading, of course,,
empting companies and transac¬
tions not within its purposes, I meetings was the approval and was at the expense of the secu¬
There is no reason
have tried to make it crystal clear ratification of all acts of manage¬ rity holders.
ment since the preceding meeting why this basic fiduciary obliga¬
to all concerned, and I reiterate,
but the nature of these acts was tion to avoid profiting from in¬
that it is not the purpose of the
bill to
restrict business—every¬ in no instance disclosed—a proce¬ side information should be im¬

the opposition was

one

problem in

who foresees any

compliance is urged to make his

I want this to be

problem known.

truly representative and fairly
operating piece of legislation. Such
a

dure

tantamount

request for
his

a

a

fiduciary's

with¬

undisclosed

and

past

to

blank check to cover

drawals.
The

typical

proxy

had

form

provision for only a "yes" vote
voiced were presented relatively upon matters to be decided at the
I should like to quote
in the main by management. Se¬ meeting.
from an article by Robert P. Vancurity holders were almost unani¬
mous
in their support.
Thus, at derpoel, financial editor of the
the same
time security holders Chicago "Herald - American,"
which appeared on May 3, 1949:
clamored for legislative assistance

opposition

their

in

quate

arguments

attempts

disclosure,

to

were

as

"On May 10

obtain ade¬
manage¬

some

opposed such legislation and
sought to protect their ability to
keep operations secret. This very

ment

Camden
asked
to

stockholders of the

Forge

to

Company will be
an amendment

approve

the concern's certificate of

in¬

posed only upon officers, directors
and
10%
stockholders of regis¬

the

believe

I

companies.

tered

prohibition against such shocking
conduct should apply to all large
listened

have

I

testimony
made

upon

all

2408.

of

I

the
have

exhaustive inquiry into

an

had

have

to

S.

need for such

the
I

companies.

held

publicly

legislation, and

voluminous

a

corre¬

spondence upon it which I have
studied carefully.
I have found
sound

no

of

actment

argument against en¬
the bill.
As I have

mentioned, such opposition as

dici

largely from misun¬
of office of directors from one to derstanding.
'For
instance, onedivergence in viewpoints seem to
three years with only one-third company expressed the view that
me to
illustrate the need for the
of the board to be elected each the bill, if passed, would require
legislation.
changing the

corporation,

tenure

appear arose

it

year.

its

list

to

stock.

No such re¬

Says Bill Is Timely and Necessary

"Unlike the Montgomery Ward quirement is in the bill and none
The detailed studies completed & Co. charter, which permits such is proposed. On the contrary, the
by the Securities and Exchange change by majority action of di¬ bill seeks to maintain a balance
the
exchange markets
Commission in 1946 and 1950 force rectors, it is necessary for two- between
the conclusion
that this
bill is thirds of the Camden Forge stock¬ and the over-the-counter markets
holders
to
approve
before this so that neither one will have an
timely and necessary. I will not
unfair advantage over the other—itemize the findings contained in backward step can be taken.
those studies, for copies of the re¬
"It is unthinkable that stock¬ and the acid test of this is that
„

ports themselves
able.

that

I

should

these

analysis

are

like

studies

typical

of

corporations.

There

readily avail¬
to emphasize

holders

represent

his

an

unregistered

am

sure

there

to

a

request

financial
studied.
sion

was

for

respond

the Securities and Exchange Com¬

even

copies

statements

Moreover,

of

their mission

could not be

the Commis¬

able to obtain access only

to a limted

the SEC would

character.

examined.

nancial material available to their

Those which did not

'an undemocratic cor¬

the proxy for a negative vote.
"Under
normal
circumstances

in which

for
only corporations making some fi¬
were

as

kets

tion

are many

holders

proxy

scribed it

representatives of both mar¬
appeared and testified in
favor of the principles of the bill,
Another objection was voiced on

the

management, with arrogant dis¬
regard of fair treatment of stock¬
holders, makes no provision on

some

their fiduciary obligations;

security

the proposal.
in sending in
against the plan, de¬
ratify

the

be

management is even less sensitive
to

will

businessman,

porate subterfuge to perpetuate
management in office.'
"In this particular instance, the

may

which follow better practices. And
I

One

amount of proxy ma¬

listed

rities

the

bill

the

the

on

a

exchange

registered

the

SEC

was

intrastate

passed.

field after
This objec¬

specific language in
permitting exemptions to
companies of an intrastate

ignores
bill

those

Fear of

Bureaucratic Regulation
Unwarranted

would

prevent such a
one-sided presentation, but inas¬
much as Camden Forge stock is
not

ground that

invade

In
was

part, opposition to the bill
expressed as a vague fear of

secu¬

government

lacks

believes

regulation.

more

No

one

than I do that bu-

Volume 172

in

reaucracy

be

Number 4952

that

these

2408

are

I

But

relation

in

fears

The Commercial and Financial Chronicle

.

.

should
believe

government

discouraged.

.

S.

to

and

result

misconceptions

from

unfounded

and

faulty

S. 2408 is not

experiment

new

a

government control of regula¬

tion.

neither

It

the

requirements

Securities

and

and in that

of

view

Exchange Act

incorporated in the Public
Utility Holding Company Act of
1935 and the Investment Company
were

I

controls

nor

reg¬

Act, it should be noted,

pany

dissenting

its

to

profits

pay

term

made

in

trading

doing, and
from short-

their

company's

securities to the company.

No less

should be tolerated by our society.
No

is contained

more

bill.

the

in

To call the administration of such
a

a

bill

"regulation" is,

misnomer.

in

sense,

a

For the bill gives no

authority to impose gov¬

power or

will

ernmental

on

aspect

any

whatever of management's
iness discretion.

bus¬

sion

character of the corporate

process

suggestion contained
in the bill new. As early as the
year
1847 the Connecticut Bank
Commissioners

recommended

to

the State

Assembly that a law be
inhibiting the power of
management over proxies and re¬
stricting "the authority (of in¬
siders) to trade and speculate in
passed

the stocks of their bank; the pre¬
cise value of which stock, their

peculiar
means
of
knowledge
gives them the exclusive power of
determining."
British

As early
held

court

directors

able

who

of

published

sheet,

profits
bank

false

a

li¬

bank

balance

when

no

with

bank

to

money

the price.

up

Many corporations, although not
subject to the disclosure

now

re¬

quirements

of the present law,
voluntarily embraced the
principles of S. 2408. I believe
this represents
the predominant
attitude of responsible manage¬
ment, which recognizes the enor¬
have

full

which

benefits

mous

disclosure.

The

flow

of

"March

umn

this

in the May

29, 1950 issue of the

Digest,"

from

in

trend

direction is expressed

Dealer's

"Investment

the

under
the

col¬

Markets,"

follows:

as

V

"This

trend

toward

compulsion

simply

of

It's

sort.

any

becoming evident to
a
number of wide-awake
that it pays."
vice-president of one of our

greater

businessmen
The

business
enterprises
re¬
cently sent a questionnaire to a
great

whose

group

analyze

business

it

inyestments,
was' the

"What

management

mold

the

favor

of

marized

do

to

attitude

He

sum¬

in

two

answers

words

"Full

were

Disclosure."

in

this

is

it

Disclosure"

"full disclosure bill,"

Bill

financing

a

is enacted, I

will

simpler.

be

both

This

was

plainly indicated by the testimony
securities

the

of

the

has

job

industry,

which

of underwriting and

selling corporate stocks and bonds.
Underwriters'

costs,

by

far

the

largest factor in the cost of selling
any new

issue,

are

to the ease with

directly related

which

antici¬

an

issue of securities may be
sold, and publicity of the accounts
pated

of

well-managed

a

one

business

is

of the best methods of creat¬

acceptance for its securities.
Financial
scandals,
which
cast
ing

their

reflection

upon

corporate

enterprise, will be reduced.
The

specific

objections

which I have heard

2408
same

as

of

tions

the right of

on

to

seems

unrealisitic to tell
that

hire

reports.

types

of
are

filed

There

filings

S.

mation

contained
is

ments

the
of

an

accounts

enue.

a

New York

by

The

the

the

direction

corporation.

contains

average

only the

information.
have

Where

suggested

cation

and

rejected

annual report
basic financial

I

possible, I
simplifi¬
pleased to note

further

am

continuing

in

progress

made

that

company's
condition, even when obtained, is
out of date. The illusory character
of this right is well illustrated by

is that required whenever
proxies
are
solicited. This averages ap¬

the recent

proximately four

knowledge

nority

steel

portant

obtain

to

of the

sion.

litigation in which mi¬
stockholders
of
an
im¬
list

a

circularize

the

of

that

so

and

late

they

by

the

it would

have been

institute

A

are

action, similarly contested,

new

have

which

in

the

of

the

their

the

SEC

tunity

into

other

The

No

is

also

and

argued

of the act will thus suffer

not

gards

as

standable.

the

own

business

of

it

management

investors

in

Sixteen years of
the

1934

Act

the

sult

of

Commission

in

such

of

the public

as a

constitute

proxy-soliciting




and

appeal

map

is to

a

traveler; it points out and makes
clear things and conditions that
otherwise

would

be

obscure

and

greeted

the

.

principle

new

was

followed by toleration and tolera¬

tion by extension of

will

ress

pensive

suits

has
ex¬

against

as

recalcitrant

upsetting

and

providing

normal
play¬

a

ground for litigants and specula¬
tors.
I

1917

by

managements,

1913 and of the Excess Profits Tax

in

it

drastic and

marked,

been,

the practices.
Passage of the Income Tax Act in
Act

be

always

business

economy

I

proud of the part which

am

hope to share with the Congress

business¬

in the movement to bring knowl¬

necessity of a
correct system of accounting.
In

edge of corporate affairs to their

to

men

compelled

accept the

the meantime, the

accounting pro¬
recognition, al¬
though as late as 1907, investiga¬
tions by public accountants were
made secretly, often at night or
on Sunday.
fession

achieved

for

corporate enter¬
without a financial state¬
accurately disclosing the

money

prise
ment

condition

of

lieve

to

investor

such

corporations

search

of

new

Fuller,

manager

It

Paine, Webber, Jackson & Curtis'
office in
Milwaukee, died sud¬

be¬

denly
tack.

have

emerged

they

can

a

heart at¬

and

their

Sept. 19 of

on
*

own

I believe

that

point

where

on

we

in

have arrived

the

resistance

historical
to

ade¬

quate disclosures to stockholders
is crumbling in the same way that

Dunn Limited Partner
Auchincloss, Parker & Redpath,
members

of

the New

York

Stock

Exchange, announce that Richard
P. Dunn has retired as a general
partner and has become a limited
partner in the firm.

has

form

says,

of

the

in

busi¬

While

so

I

extreme

defining the line

big and small business, it
considerable

in

shadow

$50

one

with

connecton

contended

that

million

S. 2408 is, in a

of

this

on

wit¬
bill

business

a

assets

was

licity
a

be

corporate
which

has

emergence as

est storehouse of

a

characterized

the world's rich¬

private economic

potential.
The revolution

nique

kept

.

predicated

>

sheet

in

lending tech¬

upon

the

bor¬

taken,

Miss Marie R. Cambridge, of Union

Securities Corporation, was
the annual

re-elected President of the Wall Street Riding Club at

meeting for election of officers held in New York

City recently.

McLaughlin, Reuss & Co., and Mrs. Helen
McGuire, of the Milbank Fund, were re-elected to the offices of
Vice-President and Secretary.
Mr. Charles Downey, of Clarke,
Mrs. Mildred Butler, of

Greenwood, was elected Treasurer and was also elected
Directors. Miss Ruth Shellens, of Merchant, Olena,

Oakes &

to the Board of

addition to the Board....

a

current balance

Buck & Santomenna, is another new

and. other

financial, infor¬

its sixteenth season on Friday night, Oct. <5,
with the first indoor ride at their ride headquarters, Split Rock

rower's

may
su<j-r

in

trend

our

helping
to be
toward pub¬
affairs.
It is

sense,

in what has appeared

irresistible trend

an

And if the

ever

Wall Street Riders Elect Miss Cambridge

so

country.

giving

change in banking practice since

of

the investment department of

en¬

today

merits.

trend

in
r

Brock

I

where

should be sold only
at

securi¬

the

W. Brock Fuller
W.

Com¬

point

a

widen

capital.

also

is

information.

stocks

mon

to

business.

the

every

titled

a

to

ties markets to include additional

Today no bank or other lending
institution would think of provid¬

ing

and

owners

enterprise.
deliberately

testimony offered by

hand

is

was

a

the

belief

and were rejected by suc¬ oessful in fhe appeal, prevent any /. mation w a s, to quote Roy A.
ceeding' Congresses when provi¬ -public disclosure. In the 10 years • Foulke, Vice-President of Dun &
sions comparable to the financial of the Commision's history, only Bradstreet, "the
most radical

reporting,

banker what

a

of

in¬

my

then

such

is to

and

Without S. 2408 prog¬

"small" business.

such

information

confidential,
the company
appeal to the courts and, if

one

generally.

harmful

holders

80%

the

who

a

not

in

with

determines that such
should

remain, to the damage

investors

of

B.

considered "large" or "small,"
as
total assets, tangible net

throws
the

re¬

when

interest.

will

ized

statement," said banker James
Cannon, "provided it is correct,

the pockets of resist¬

2408

S.

enterprises in this
is sheer invention to

limitation

con¬

make

only

profitable relationship.

out

ance

years

regis¬

present

may

public

bill

busi¬

my

included.

be

security

It

between

their

information

With¬

lenders

mutually
"An item¬

the

business enterprises having
tangible net worth of $10,000 or

a

registration. Where
information required by the Act
should be secret or confidential,
the

move¬

through

small
were

would not subscribe to

enterprise.

competitively

realizing that the

is still in full swing.

ment

business

ness

tered suffer

providing

any possibil¬
but the largest con¬

any

300

less

experience under

at

limits

would

nesses

the

steward¬

demonstrate

companies

down

which cemented
a

publicity in financial

matters

without

further

no

organization

a

clusively, I believe, that the Con¬
gress has struck a proper balance.
There is absolutely no indication
that

in a hope¬
minority. No one can contem¬
plate the great drive toward full

small

state

ship to account to and deal fairly
with

themselves ultimately

less

and accurate

businessmen into

to

find

to

was

procedure

its way toward

on

the bond
and

new

attempt

only

worth, annual sales, number of
employees, value of product, and
income, it was concluded that

of
not managment's

is

By 1900, the
well

and

such

re¬

It is inherent in

have

can

affecting

are

affairs is under¬

However, the

affair alone.

duties

do

manage¬

what

disclose

to

its

giving information before they

could obtain money.

object

progress,

con¬

that
minute a
proportion of the
largest busi¬
nesses in the country affects small
business in any way. In a recent
impartial study of various medi¬
ums
by which business enterprises

The desire

the part of corporate

of

legislation

com¬

a

All

say, as one

certain

that

this

small

to

be

the

upon

country.

state

competitors

whose

requirements

new

to

obstruct

50

some

The die-hards will

years ago.

tinue

disclosures

about one-half of 1 % of the 4 mil¬

within the size standards

come

sceptical of the
for

busi¬

resentful and

making
crumbled

Business

that

could

truth.

2408

size

lion

legislation remotely com¬
proxy and insidertrading provisions of the Secur¬
ities Exchange
Act which now
apply to listed securities only.
It

innovations,
both

to

creditors

been estimated that the 1,800 cor¬
porations with $3 million in assets

parable to the

not

the

cerns

has any

companies

a

requirements

Small

burden

a

ity that

avail¬
able to security holders directly
and
through
advisory
services,
unless, as I shall mention, there
is reason for treating the infor¬
confidential.

most
were

eventful."

more

or

with

nessmen

simple,

more

to

established to avoid

through reasonable

Commission is immediately

as

fill

Con¬

spaces.

said

Nothing

effect

make

machinery. Fur¬
information filed with the

mation

must

unfounded.

are

been

be

that S.

of the proxy

ther,

sells his

or

quiries have confirmed

proposals and views known

each

use

re¬

all;

affair with

these

Burden to

has

from

By

today provide oppor¬
to

It

ness.

stock¬

a

today.

stockholders

for

buys

blank

that

at

blank which

a

one-page

onerous

will

is

requirements

proxy

meeting.

securities

dozen

No
<■

made

That

which

forced

be

may

contrast,

have

out-of-date.

dilemma

the

holder

delay,

more

would

turn

list

new

new

meant

a

tentions

nec¬

to

might

It is

half

the

simply of

corporation's

logical

As

been

resistance

29

action.

essary

a

filing

in length

corporation

in.

rent list

of

pages

each insider who

was already an old list when they
acquired it, and to obtain a cur¬

type

about

management. Although ulti¬
mately the Ohio Court of Appeals

list, it

Commis¬

type of filing does not

to

it consists

the

the

second

contains simple and relevant

A third

other

might
in opposition to

them

The

information

attempted

company

stockholders

information

were

connection

the data at present required
the Bureau of Internal Rev¬

This
procedure
not
only
effectively
deprives
the
average
investor,;:
with limited financial means, of
his legal rights but it often results
in such
interminable delay that
a

Commission

They

corporations

in

keep

from

with

of

state¬

available

which

size

any

these

in

readily

have

more

First, mysterious." The skepticism which

upon

lawyer to com¬
pel the examination of the books

accountant and

the

are

three

are

required.

the financial statements

registration and annu¬
ally thereafter. All of the infor¬

completely

may

no
hardship upon com¬
compelled to file the re¬

there

stockholder in

a

he

im¬

may

is

quired

inspection, it

be.

to

me

requirement that

panies

restric¬

varying

reason¬

suggestions for modification

there

a

proposed legislation.

have

states

those voiced in the hear¬

1934.

states,

argued that there is no

disclosure

to

ings upon the Securities Exchange
Act

there

Apart from the fact that the sev¬
eral

engaged in a continuous
of simplifications and has

unnecessary expense or in¬
convenience. I am convinced that

common

need for the

on

which is essentially

cheaper, and

is

organization of the Bank of
America in 1781. Nothing

could

The Commis¬

onerous.

pose

law right to
inspect the corporate books. From

ment

If S. 2408,

predict

all

almost

are

of any

by those

that

petitive disadvantage.

"Full

A

exists,

bill

rules

the

always been amenable to

contended

the

to

statutory or

in

company?"

These

words.

important

could

investors'

the

to

was

inquiring:

most

thing

a

opposed

to

complete

disclosure is not the result of SEC
or

reforms

Delays in Common Law Actions
It has been

the

effort to deter¬

an

sustained their right to this

made, and purchased

were

shares

keep

British

a

a

dividends

paid

1858

as

criminally

lations

able

California

is the

Nor

whether

sufficiently testifies to the
bi-partisan non-controversial

what the corporation is

detail

requirements
imposed by these rules and regu¬

that

proposed by this bill.

legal terminology, S. 2408 sim¬

in

years

mine

action

ply instructs corporate fiduciaries
to inform their security holders of

carefully and

regulations of the Commission

many

the

North

which have been in operation for

was

believe

1

vote.

considerable

and

passed by the Congress without a

provisions are not
new.
Enterprise remains free and
unrestricted under it. Stripped of

its

and

ulates

the Commission's

case

sustained.

was

have examined

in

Act of 1940. The Investment Com¬

analysis.
in

insider-trading

(1513)

The

Club began

Academy,
announces

in

Pelham

Manor,

New York, and Miss Cambridge
fall • and winter season for the

plans * for an active
equestrians.

financial district's

*

.

-

'

'

•

30

The Commercial and Financial Chronicle

(1514)

Continued

jrom

sold

sues

6

page

V

highest

privately
and,

of the
therefore,

banker

Pios and Cons of Direct Placement

The

adverse
disclosure

of

business.

this

that

desire

merely

to

tion

a

to

and

extent

To
for

is

secrecy

giving iniorma-

avoid

competitor, it is under-

standable.

the

To

is designed to

that

extent

it

enable the issuer to

less than candid with possible

be

security purchasers, it is not in
the
public
interest.
From
the

viewpoint of the insurance industry
complete figures and disclosures
will
be
required for a

valuation of the securities,

proper

Through
tion

obtain

to

financial

dustry.

"laJ.
redound to the beneiit
tfie borrower in the long run.

direct placement, the

a

borrower may put itself in a

posi-

Another factor that

advice

from time to time from the lending
institution.
For a corporation of

as

ence

sought

ralher than
investor.
to

from

from

There is also the danger

the borrower that such

tionship

desire to support it.

institutional

an

acquiring

rela-

a

result in the lender's

may

to

undesirable

an

de-

irf'luential position in the
borrower's affairs.

gree an

Thus

the

advantages of direct
the issuer are not

placement

to

entirely unmixed. The

ment of the

is true

same

dium

of the

as

other similar investors to hold the

banker's

at

by

market

ever,

hurt

the

extent

to

business.

the average

purchases

restrictive

a

than

in

are

the

of

than the usual

on

corn-

public issues—smaller

on

to underwrite
salesmen

has

the risk

sell

to

been

even

low

claimed
rates

public issues

on

einpioy

or

the securities.

commission

today

that

It

the

prevailing
partly

are

influence of the direct

sales,
because

a

to

is

f 1040

is

Life insurance companies.

88.1

chiefly

a

bitter
large extent the is-

Bonds*

fiy42

0.2

that

desire for

maximum

.he transaction. The

sive group expeiie. ee beiieve ih.it
the
policy-making
onicers
of

leading companies do
inte. d to

or

hand,

good day's work and eased its i
burden

vestment

Perhaps

has

it

of

gree

for

the

increased

risk,

its

however,

there has been

i-

time.6

de-

because

tendency to have

a

some

years

number

probably

ago

of

Life

transfer

,

.

it,

as

SEC

observes

that

funds

pension

research

staff

of

tne

Association

12%

,,

of

purchased

the

to the idea that whatever the

the

provisions of the inden-

of

28

22

largest)

group

94.8

-{1943

1947

the

1S

93.0

90.5

0.5

0.1

0 4

c

.,

were

.

holdings

_

..

,.

were

_

,

placements.

.

In

the

m

,

indus-

.

piacecj
..

0.7

0.4

3.64

0.1

f

f

f

1.3

types)

bles

the respective figures

'

n_

,

87.3% and 86.5%.
III

100.0

100.0

and

0.1
100.0

.

,

reg-

the

market

,,

reputa-

tl0n
the honower and the mvestment bankers sponsoring the
issue.

In the

lender

direct purchase,

obtain

can

„

transferred

that the larger life

formation

by

its

.

■

.,

,

,

own
.

it

assuming
-.

.

^

,,

sonable time.

is

,

....

these figures

insurance com-

States Life Insurance

the distribution apparently did not cover
identity of purchasers was unknown.
seriously impair the use of the figures,

increase

in

1949

included

,

ade-

...

,

,

..

truth

T,

,

the

,,

,

lower

borrower,

the

,

.

to

in

largely reflects

this

be-

is

..

,

the

»

assumption

of

the

.

total risk by the lender

or

a

very

suspicion

seriousness

Committee

on

ot

the
Dec.

Economic
7,

1949,

Direct

$103.7

$23.0

$80.6

volume
from
and

592.6

588.2

ihe

1,800.8

261.8

Note:

Valuation

because

Source:

Life

of

basis

is

Public

Placements

Direct

Offerings

Placements

$38.3

30.5

340.4

259.6

56.7

1,320.3

1,207.8

112.4

91.5

$2,416.4

$930.6

~T2.2

$1,975.4

$1,565.0

$410.3

79.2

5-8

Rank

$9.7

$9.7

not

book value.

Components

of

may

not

137.0

110.2

55.4

332.4

272.9

59.5

82.1

$589.3

8^ miscell..

$409.9

$179.4

69.6

by Asset Size: 9-13

that

Railroad

$15.5

$5.9

$9.6

38.0

178.0

61.3

116.7

252.6

199.6

$446.2

$266.8

&

miscell..

53^

79.0

$179.4^ '

59.8

5 The

other six were
specially selected as being active in the private
place¬
field, and it is believed that the statistics include almost all of
the
private placements made by United States
companies in 1949.

Total
Rank by Asset Size:

14-17

Railroad
TABLE

IV

$10.0

_.

Percent

Direct

Railroad

$2,738.1
8,502.0
3,335.6

Utility
Industrial & Miscell

in

Industrial

&

Table

Note:

totals

$260.5

23.1

38.1

73.0

miscell..

Total

Placements

3451.1

$2,477.7
5,050.8

56.3

16.7

1.124.7

$19,575.6
Valuation

because

$144.3

86.5

$79.4

$11.0

77.1

$64.9

55.0

9.5

upon

tained

in

of

basis

is

cost,

not

$10,922.4
book value.

$8,653.2
Components

45.1

29.3

49.5

36.5

13.0

73.7

$55.2

$69.1

not

Note:

Life

Insurance




Association

of

America.

totals

total

Valuation

because

Source:

Life

ll

year

almost S2.4 bil¬

SEC

total)

to

went

tae

of

$3,279.5
basis

is

cost,

not

$2,376.3
book value.

rounding.

Insurance

four

largest comparies.
figures in this table and the

figures

strictly

in

Table

comparable.

I

are

not

life'

the

In

placements,
while
in
the
SEC
compilation they are classified as
public offerings. Nevertheless, the
figures are close enough to offer
substantial

proof

of

concentration. It is

both

the

the

asserted

significant also

volume

of

direct

placements and their ratio to total
size

Thus,

of

in

the

the

the

as

as¬

decreased.

groups

industrial

field

the

direct purchases of the four
larg¬
est

companies
their

total

constituted
industrial

tions,
they

while

were

91.5%

acquisi¬

in

There

were

in

groups

all

group

the

18-22

group

only 73.7% of the total.
individual companies

which

varied

but

average,

tracts very little from
cance

of

single

the

from

this

de¬

year,

is

the signifi¬

s.atistics.

these

figures
the

the

are

same

apparent in

portfolios

panies

of

for

a

general

statistics

Association

of

America.

72.5

$903.1
Components

may

not

add

the

same

on

com¬

(Table VI). There, in fact,

the concentration

Grand

add

annu

the 22 largest life insurance com¬

panies purchased

44.4

miscell..

Total

55.8
may

companies'

—

18.7

...

"Industrial &

rounding.

the

statements, shows tnat in that

trend

$11.0

63.8

$124.3

Utility

to

Source:

37.7

40.6

7,210.9

shown

___

.

Asset Size: 18-22

Railroad

Direct

Offerings

was

were sold privately.
below, which is based
information
con¬

V,

largely

While
Rank by

the

large

1949,

panies is

Total

to

Public

Placements

$10.0

61.2

Insurance Companies

Total

into

very

porate bonds

the

Utility

Corporate Bond Holdings of 28 Selected United States Life
(including 22 largest), as of Dec. 31, 1949
(Millions of Dollars)

few

a

34.5

Industrial

ment

of

according to SEC
figures, almost $2.5 billion of cor¬

of

add

America.

huge
away

companies

and

comparies. In Table I it

set

247.1

Utility

cost,

rounding.

Insurance Association

life

investors

acquisitions diminished

Railroad

Utility

87.3

$3,347.0

claim

securities

smaller

other

the

figures, for example, is¬
acquired through competitive
bidding
are
counted
as
direct

$16.8

Industrial

of choice

is

sues

600.0

Rank Dy Asset Size:

50.2

medium

company

$55.1

Industrial & miscell..

22.2

1,180.3
2,062.6

inves ed.

thus

Perhaps the most serious objec¬
tion to tne direct placement as an

SEC

Utility

Total

totals

V

Direct

Placements

de¬

the

Joint

1-4

Total
Public

The

objection

the

Report,
81st
Congress,
Transcript, P. 162.

Total

Rank by Asset Size:

Offerings

cast

may

quality.

this

of

pends, of course, upon how large
a portion of the lender's
portfolio

that

Direct

them

their

Furthermore, over SI.5 bil-'
lion of these, or 65.9% (63.8% of

Railroad

Placements

sell

on

lion.

Companies, Grouped by Asset Size

purchases

category.

di¬

established

no

tnem, they are not
known to other investors, and any

,

to

..

,

any

.

cost

,,

case

is

,

,

the

of

-

Lie

in

..

this, it presumably

in

attempt

purchased

is

for

portfolios

..

there

If

issues.

.

.

that

.

.

public

There

maiKe.

,,

,

...

slightly higher than

,

,

directly placed securities

.......

..

,

reputed

..

on

is

,

is

...

.

rectly.

Ui

(Millions of Dollars)

III

Tolal

to

un¬

This is not equally

securities

investment

.

staffed

of

that it operates to channel a

Corporate Bond Acquisitions in 1949 by the 22 Largest United
pre¬

Percent

Total

cr

credence

in-

mves.iga-

..

...

yield

TABLE

(Millions of Dollars)

Industrial & miscell

bought

lend

to

There

where

cases

the

first-hand
*

..

,

,

where

TABLE

Utility

protection.

insurance has been

old

is

..

,

on

Corporate Bond Acquisitions in 1949
by 28 Selected United States
Life Insurance Companies
(including 22 largest 5)

Railroad

of

enough

6Sf? L*r°y A- Li?C°:n'S Investment be¬
testimony
fore the Subcommittee

IV.)

It is obvious from

100.0

a

(See Ta-

.

100.0

in

inside the business.

on

up0n
,

cause

,,

(including miscellanex

were

lender

In public is-ues, despite SEC

.ol

,

bond

field

ous

,

quately to handle the problem,

-

x

trial

.,

'

...

Soing

a

,

_

.

direct

91.9

...

the

put

Further, it

..

■

1949

...

and

.

companies

,

corporate

,

close relation with the bor-

a

tion,

by
.

,

0.5

are

them, eitner tnrougn
purchase, to deal

new

new

.

,

,

bonds

.

4.9

the

good

bought at public sale,
Also, the chances are excellent

of

than

more

...

..

of

2.5

which

be

been

isiration, considerable reliance is

directly, and at the ena
'
that year 56% of their entire

2.7

however."
4 The

by private

would

forms

..

6.2

f

of

_

selected

0.8

0.1

to

The fact is

almost all

do

Amenca,

0.4

and

bor¬

many

groupwise witn the lending com¬
pany if it is an
undei writer of

true

„

4.8

not

or

it

other,

On the

tha.,

have

the term of the loan, to know what

Insurance

5.9

issues

does

think

business for

The

small

felt

those

position, initially and throughout

investment

..

*Bonds, notes and debentures.
financial Analysis Section,
SEC, which makes this comment:
i
Figures for the years 1940-1943 were taken from
work-sheets

This

is

larger investment in a single
credit than where securities are

...

Furthermore, private issues are
an
extremely important part of
the bond portfolios of the larger
companies. In 1949, for example,
according to a study made by the

0.5

100.0

pared

operations with

the sales operation.

it

not sponsor

permit any mingling

of the investment

rowers

rower

Source:

a

in-,

product, particularly group insur¬
ance.
Tnose wno have nad exten¬

insurance company, in takiig tne
whole issue, has accomplished a

shown in Table II.

0.5

Total

he

say

companies.

they

11.2

.____

borrower

because

fiaCei!ner!t £i"a?fin?
the hands of the life

m

.

93.4

0.1

_________

is

has been pointed

as

the

by

the

re;son

position

simplicity in

Investors

on

understatement

an

(including

fli)41

Other insurance
companies
Banks

institutions

this

actuated,

out,

lish

acquired

Direct Placement of Corporate

Other

It

corporate

particularly

Percent of Total Amount Purchased
by Various Investors

Individuals & corporations
Unknown

is

by the agent if there

or

The

one.

takes

changes.

,

pill

TABLE II

Type of Investor—

is

.

The

more

case

serv-

because the banker does not have

direct place-

often

Impact

perhaps

finder's fee for their

a

due to the

indenture

While

ore-half of the direct

many as

missions

five.
The covenants in

of life

case

negotitions tend to estab-

will adjust to these

insurance

would be available in any particular case would be quite specula-

ment

be urged to do so by the po ential

borrower,

investment

ices, this fee is much smaller

Admittedly, howattempt to predict the
which this opportunity

any

tne

in

that

ceive

maturity deprives the

open

tuat

thing, the insurance surai.ee companies dnect purchase
often has the opportunity of an issue gives the purcnaser a
of taking the whole issue if it leverage which it can use anj. noes
wants it.
Indeed, it usually will use to promote the saie of its
one

a

that direct

discount.

a

the

company

New enterprises as weli
established businesses re-

placements, in number, are negothrough bankers, who re¬

corporation of the opportunity to
reduce its outstanding debt or to
meet
its
sinking fund requirements

and

on

tiated

until

many

leged

For

the

against

lenders

Such

direct placement me-

has

disadvantages. It has been
argued, for example, that the policy of insurance companies and
issue

of

facilities.

influ-

may

an

sion need not be based

banker

a

selection

easiest

sort

a

of

group

lack of niarketabiii y of L.e issue.
On the negitive side, it is al¬

On the other hand, it can De ture will
be more favorable to derlying force a lorm of
a decireciprocal
altruis- argued that the plight of the bank- the lender than in the case of a buying develops.
ers has resulted from the willingpublic offering because they can
It has been observed also that
tic motives; the issuer may be
ness of millions of people to turn
be tailor-made to fit the situation, any sizable investmenc in a di¬
looking ahead to a time when it
over
their lunds to institutional Then
too, sinking fund and pay- rect placement necessarily has the
will need this distributive meehanism to handle an issue that may investors; that such a change in out clauses are commonplace in effect of freezing a por.ion of the
the source of funds was bound to the direct
placement and not only lender's assets.
While the same
not qualify for direct placement,
cause, as other evolutions in the provide
better security
for the objection applies in part to large
economy
will cause, changes in loan but also help to even out blocks of securities purchased in
Impact on the Investment Banker
the machinery of the bond mar- the lender's inflow of funds.
the
open
market, tnese usually
Beyond question, the develop- ket; and that the bankers can and
can be disposed of within a rea¬
Direct

(ioned whether such advice should
be

is

quiring additional funds for expansion suffer, and along with
them the public generally, by the
weakening of investment banking

issuer to avoid the niedium of direct placement is a recmodest size this may be a valu- ognition of the importance of the
able service, but it may be ques- investment banking system and a
not

the

be

result

and

public offering. This is quite Un¬ banker, tending not only to rcderstandable since the lending in- duce his volume but also to skim
stiiution has considerably more to off some of the cream of his busisay than it does when it is merely ness.
A continued
upward trend in
a buyer of publicly marketed securities. On the other hand, there the use of the direct placement
will further injure the
appears to be no evidence that the medium
banking
machinery,
lenders have taken or nave sought investment
to take unfair advantage of the This unquestionably would be exborrowers; at least the borrowers tremely harmful to the economy,
do not seem to have complained, The investment banker performs
Furthermore, some of the cove- a valuable function, and nis servnants, particularly those requiring ices will continue to be needed by
substantial sinking fund payments, large segments of American in-

details

the

figures

its

to

as

would

and

sell.

to

small

it has several advan.ages.

woulJ involve the least risk to the

Thursday, October 19, 1950

,

panies have found the direct purchase
an
attractive proposition,
certainly trom their viewpoint

are

grade

.

.

even

in

the

more

big

com¬

pronounced.

At the end of 1949 the four largest

companies had 67.4%
direct

of the total

placements of the 22

com-

Volume

172

Number 4952

panies, and

90.3%

industrials

vately

.

.

The Commercial and Financial Chronicle

their

total

purchased

were

pri¬

of

against

as

.

only 47.8%

for

crease

the size of the corpora-

as

decreased; i.e.,
corporation the

the

the

smaller

risk.

the

greater

(1515)

The
of

fact

direct

in the

size

direct placements in the hands of
the big companies,

ability of an issue of a large cor¬
poration is one important point.

power.

be

Nevertheless, it cannot be denied

of

that

boards

they may not
entirely fair. Perhaps a more

significant
to

comparison

would

be

relate the direct placements of

each

group of companies to the
combined assets of the companies
in

that

This

group.

is

Table VII.

done

in

>

While these figures are not so
startling as those in Tables V'and
VI, it still is apparent that the
is

score

rather

heavily

of

weighted

in favor of the
top four companies,

With

less
of

than

the

obtained

60%

of

the

total

companies,

22

they

two-thirds

over

of

the

direct placements of all
types and
more
than three-quarters of the

industrials.
Some

due,

of

of

this

concentration

to

course,

differences

investment
policy,
but
a
large part of it would seem
a

natural result of the

is
in

very

to

be

registration

the

number

of

offerees

be

must

strictly limited. The larger the is¬
sue
the larger the share of each
lender

will

stances,
are

.

be, and

only

in

sizable

the

smaller

financing,

system

as

invest

the

required.

companies

direct

companies

to

amounts

in-

many

big

position

a

in

do

The

engage

but

under

in
the

it works today
they are

restricted generally to the smaller
issues. This usually means issues
of corporations that
size

smaller in

are

and not well known.
Students

of finance

there

was

in the

long
a

for

observed that

the

industrial corpora¬
credit

risk

in¬

to

better

history

price

market¬

shows

that

Therefore, if smaller buyers, ineluding insurance companies, have
deal

to

of

with

the

crop,

matter

how

as

generality,

a

good

no

led

to

promotes

an

undue

of

industrial

concerns;

to the

.

Railroad

of

important
that it leads

of

removes

high-grade

large

a

Two

these concerns;

vanced

in

influence

In

the

flow

rebuttal?

of

it

that

"victims"

ly, there

are

that while many
high grade bonds are sold private¬
the

smaller

sumption

plenty of others for
investors.

that

the

This

big

of

business

been

has

the

best

tirely

investments

unwarranted.

contention is that
vestors

are

in

pate
many

not

for

race

seems

The

the

en¬

second

smaller

in¬

geared to partici¬

direct

placements.

instances,

at

least,

In

this

is

quite true, but it misses the point.
If
the
smaller
investors cannot

the

shrinkage

in

the volume of securities available
in the open market.

in

the

borrower's

agement continue, and that probably no accumulation of capital
in the country has been less
prone

to

it for purposes of domina-

use

tion

of

industry than the life in-

surance

companies.

The monopoly charge has been
extended to the borrowers themselves.
It has been claimed that
direct

placement

is

available

chiefly

to large businesses
and
thus gives them a preferred
position over smaller companies.

This,

it

is

toward

further concentration of

a

economic

this

Statistically,

power.

question has been

examined

at

first,

various

sizes;

Placements

(2)

$1,437.5

$205.0

___

3,669.5

1.689.4

$1,232.5
1,980.1

As to the

1948 experience of 17
life insurance companies

placed before Senator O'Ma-

5,389.6

549.0

90.8

Total

$11,045.5

Rank by Asset Size:

honey's

subcommittee8

following

46.0

5,938.5

Industrial & miscell._

14 3

„r.

,,

..

$451.8

$20.7

$431.1

corporations

2,174.4

1,047.5

1,126.8

48.2

1,075.2

Utility
Industrial & miscell..

t

899.2

176.1

in

83.6

having

$3,701.4

Rank by Asset Size:

$1,967.4

$1,734.0

53.2

$502.9

$20.8

$482.2

-

471.7

1,019.0

31.6

924.9

681.8

243.0

made

less

than

must

company

life

!

totfal ?i
to

a

be

$2
re-

fi-

73.7

7

mortgage

vli?

through corporate bond
Furthermore, it should be

issues.

4 1

1,490.7

___

ment

of

467

such

or
or

less, and 17
less.
Fur-

thermore

this
study
excluded
great numbers of smaller lending
institutions.
important consideration that

has already

been

hinted

at

but

Bell,

of Securities,

Assoc. of Life Ins. Counsel
Proceedings (Dec. 1949), p. 173
See also
Mr.

Bell

(1) It
that the

can

hardly

very

companies

are

be

doubted

large
insurance
equipped to make

$2,918.5

$1,174.3

$1,744.2

Jhe'r smaU investment staffs, the
'?sk assu'1!ies1 formidable proper-

tons particularly if they are takthe whole issue. In the first
P ace'
?£e n°t aP' t0 be deal!
with the large and well-

known corporations. Also, there

JM*^e
they are

ourchasing

securities

purchasing.

/?1P1aVfon, regarding

matters

wb'rb affect the risk may not be

Published in the financial

man-

Pala' Unless an investment banker
15 brought into the picture, the
company is strictly on its own and
must use its own money time and
Personnel to investigate a large
number of factors with which it
maJ have had little experience
and -yet ^ch lt must consider
ve!7 carefully.
Furthermore
the investment
must be policed vigilantly
.

throughout its existence. The periodic
reports
of
management,

which

normally

required

at
jeast quarterly, must be studied
carefully, and a constant surveiliance mUst be kept over most of
£be

fac£0rs

initially.

are

that

considered

were

comments

s

on

paper

by

Harold

that

This

a continuous
must be kept

stant

check

termine
,

must

be

whether

.

made

„„„„„„

to

de-

the

of

any

in...

.

„

Fraine, Direct Sale of Security Issues,

denture Covenants has been vio-

Jour, of Amer. Assoc. of Univ. Teach-

lated.

ers

Rank by Asset Size:

11-17

Railroad

$12.7

$258.9

$246^2

of

Insurance, No. 1,

p.

63 (Mar. 1949).

81st

ThlS

569.8

137.5

432.3

24.1

Industrial & miscell._

168.6

106.1

62.5

62.9

Total

$997.3

Rank by Asset Size:

Railroad

$256.3

$741.0

ment

plied by

of

America.

TABLE

$43.7

$0.6

$43.1

67.0

295 6

18.5

Industrial & miscell._

106.6

50.9

55.7

Direct Placements

1.3

362.6

47.8

__

quite

a

With

can

Single

a

consume

hnnrc

Whpn

a

lnvest-

good

thpciP

many
multi-

arP

man-nours. wnen tnese are muiti3

large number Of loans,

25.7

18-22

_____________

Utility

Association

be

Can

Attention to all these things in
Connection

Congress.
See
Donald
B.
Woodward's
testimony, Dec. 7, 1949, Transcript, p. 202. The statistical information
he presented
was
prepared by the Life
Insurance

Utili.y

alone

task

Jo?„f"eVc~ R°U«,

4.9

$512.8

$118.5

$394.3

Note:
to

totals

total_______

Valuation

because

Source:

Life

of

basis

$19,175.5

is

cost,

not

$10,800.5

17

book

value.

Components

—Direct Placements—

(In Thousands)

not

add

rounding.

Insurance

Association

TABLE

Percentage Comparison of

of

(As of December 31, 1949)
Direct

Combined Assets—All Types—
Percent of Total

Placements

Industrial & Miscell.

Percent of Total

Percent of Total

1-4

58 5

5-8

18.4

18.2

-$1,000
2,000

5

.59

.99

13.4

10.9

28

5.54

10,000

78
73

15.45
14.46

20,000
50,000
100,000

93
99
41

18.42
19.60
8.12

28
18
30
1
8

5.54
3.56
5.94
.20
1.58

505

100.00

2,000
5,000
10,000

-

5,000

-

-

-

500^000-

1,000,000

1,000,000 and

12.6

9-13

9.6

67.4

of Total

100,000- 200,000
200.000- 500,000

Bonds—The 22 Largest United States Life
Insurance Companies, Grouped by Asset Size

Rr>nk by

3

50,000

Placement Holdings

of Corporate

Asset She

$500

20,000

VII
Direct

75.6

14-17

5.8

2.4

3.9

1.1

100.0

Information

over

lacking

Total

0.7

109.0

100.0

*After

—Public

Offerings—
fPercent

Number

of Total

Based

upon

figures

America.




furnished

by

Life

Insurance

Association

must

recent develop¬
yet been sub¬

New York State's
Legislative Committee on

report of

Rates and

Insurance

Regulation,io

is that ownership of the entire is¬
sue

force the lender virtually

may

take

to

ment

and

to

to

business
assume

problems

desire
not

the

over

borrower

which

handle and

of

the

manage¬

it

has

which

no

it

is

equipped to handle.

The

public relations aspect also

must be considered.

As the insur¬

companies learned in the 30s,
it never is a simple matter to con¬
vince the public that enforcement
ance

default clauses

of

basis

wholesale

a

on

is necessary, and it

is

ques¬

tionable whether the problem will
be

difficult

less

any

merely

be¬

industry.

company or

On

other hand,

the
the

that

it has been

it probably

and

argued,

of

flexibility

is

true,
direct

the

placement will obviate in a great
many instances the necessity for
extreme enforcement procedures.

tions

is

of the negotia¬

characteristic that

a

con¬

tinues

throughout the life of the
issue and undoubtedly improves
the ,chances
for a
proper
and

ties

they arise, without the in¬

as

of

tervention

be

may

the

course,

a

lender

in

modification

a

The

courts.

is that there
strong temptation for
to yield to too liberal

of

danger,
the

difficul¬

adjustment of

equitable

order

to

cure

prevent the occurrence of a de¬

or

fault that would affect the valua¬

tion of the security on the lender's
books.

valuation problem
the difficulty of ap¬

The

(3)
arises

from

plying the current valuation rules
of the National Association of In¬

Commissioners

surance

to

secu¬

rities

direct
these

purchased via the
placement
route.
Under
rules

at

otherwise

"amply

is

be

value

secured";
carried

be

must

it

can

amortized

an

it

if

only

instrument

debt

a

carried

at

The standards for ample

market.

defined in terms of
statistical organiza¬
yields based on current

security

are

ratings

by

tions

or

Neither

market.

these

of

stand¬

ards is available in the case of di¬
rect

they
judgment

and

purchases

placed

the

by

N. A. I. C.'s Committee

tion

based

Securities

of

are

re¬

of

on

the

Valua¬
on

its

study of available data, including
furnished

that

by

insurance

the

cult
we

raises two serious

method

This

the first place, it
the insurance com¬

In

task

a

is diffi¬

which

enough in the prosperous era
still have with us but which

become a nightmare during
depression when values have to
be determined for large numbers

a

__

__

the system

__

1

1.09

judgment of men for the actual¬
ities of the market place.

6

6.52

20

21.74

10

10.87

8
22

8.70
23.91

20

21.74

5

5.44

The

method

director of
the

wide

100.00

which

Since

7,

1949,

Transcript,

p.

easily

See

of

are

(1949)

Ycrk

No. 70,

p.

on

Legislative
97.

loans.

normally

ought to be

evaluated

Continued,
10 New

opinion
with

connection

loans

bank

because of rounding.

footnote).

in

valuation

short-term loars. they
more

before the O'Mahoney subcommittee (preceding
202 and Tables XIV, XV, XVII and XVIII.

of

difference

arises

figures formed parts of four tables prepared by the Life Insurance
Association of America and presented by Donald B. Woodward in his testimony,
of

in

bank is familiar with

a

examiners'
92

comparable,

is

that employed by bank
examiners, and every trustee or
effect, to

9 These

Dec.

placements.
Secondly,
substitutes the abstract

direct

of

__

financing.

tDo not add to total

Source:

it

device is

not

imposes upon

1.5

18-22

1949

Joint

missioners

fPcrcent
Number

Under $500

1,000

America.

Assets and

but

may

56.3
may

has

and

problems.

Major

United States Life Insurance Companies, Number and

23.1

$8,375.0

prosperity,

comparatively

a

and Public Offerings of Industrial and Miscel¬

laneous Bonds—1948 Combined Acquisitions of

*Assct Size of Obligor

Grand

of

companies.

VIII 9

Percent of Total, by Size of Obligor
Total

times

The. direct nature

16

40.2

about

efficient and thorough inves- cause businesses rather than homes
In
a
tigation of the proposed issue, and and farms are involved.
it can be expected that generally widely held public issue, at least
the initial onus of foreclosure or
their appraisement of the risk involved will be sound. For the other enforcement falls upon a
smaller companies, however, with trustee and not upon any one

G.

Total

It

(2)

an

necessarily means
statistical record
of the status
j.jie
0£
borrower—its
earnings,
the direct placement liprofits, working capital position
Comments on Direct Placement and similar matters.
Also, a con-

e<.n

noted

Industrial & miscell..

0xWi !

.

nancing of small business is more

9-13

Ra?lroad

,,

that

route than
_______

,

assets, it

membered

4 6

____

„.

^UiieSe

million

___

miscellaneous bonds:

-

65.9

and

to Indus-

as

in.19?.8 °?13!loans0Ut °f
36 were
505
direct

$3,76*1.5'

$7,284.0

trial and

5-8

the

the

major
was

Direct

Offerings

Placements

of

nesses

size of the loans made.

Public

large scale.
is easy to wax enthusi¬
direct placements in

out

those of three
stitutions that

the

least two angles: (1) the
number of loans made
to busi-

VI

direct placements on a

be remembered that the

insurance

is

geared to handle the job ade¬
quately can afford to engage in

companies and
other lending in-

life

this

argued, aggravates the im
participate in direct placements, equality of opportunity between
they have all the more reason to little and big business and tends

____

____

em-

management and
the
lender
is
anxious to have competent man-

as¬

fellow

should be favored in the

which

not

55

issuers,
the
alleged control,
have
not
complained, that the
competition
among
insurance
companies for good investments

ad¬

One is

sizable staff is

a

company

astic

An

phasized

mitigation of these in¬

equities.

No

"Study
of
Industrial
Private
Placement Loans, 1948," reported
from a review of the portfolios of

"shopping around" on the part of were for $300,000
borrowers; and that it permits in- were for $100,000

corporate

have been

essential.

loans made in 1948, almost half jected to the rigors of a serious
were for $1,000,000 or less, 139 depression.
One danger, and a
that it discourages were no larger than $500,000, 85 point that was emphasized in the

dividual personalities in the large
insurance companies to direct or

confidence

arguments

it is obvious that

agreements concerning the
sharing of future financing by

vestors.

Tola'

,

1-4

the

on

showed the

.

Rank by Asset Size:

Utility

influence

companies

directors

Percent

Total

the

such

As to the size of the loans made,
V. Hale and Company, in its

which deserves fuller discussion is
the risk element involved in diobligations from the open mar¬
rect piacements. This problem as
ket, a severe investment problem
affects life insurance companies
is imposed upon the smaller com¬
can he divided into three phases;
panies and also upon other pur¬ prevents domination of borrowers,
assessment of the risk; (2) the
chasers such as colleges, savings that debt securities carry no vot- effect
of default; and (3) the
institutions, administrators of trust ing rights, that one of the prin- valuation of the security on the
funds
and
even
individual
bases of credit lending is iusurance company s books,
in¬ cipal
financing

volume

Direct

Railroad

that

E.

activity.

(Millions of Dollars)

Utility

few

of

certain specific

Corporate Bond Holdings of the 22
Largest United States Life
Insurance Companies as of Dec.
31, 1.949, Grouped by Asset Size

.

economic

is contended

It

these

from

.

concentration

financing enhances

Furthermore, to the extent that

TABLE

v

has

the argument that it

issues may be.

direct

lion's share nancing reflected smaller
obligors
financing is than in the case of the public isvery large sues.

few

a

insurance. companies

smaller

issues, they
participating in the cream

not

are

tendency, particularly complain about
of

case

tions,

ago

business

the

affect

The

tion to the size of the corporation.

by-passing

of the SEC. For the
transaction to
be exempt from SEC

obligors

securities.

corporate defaults and reorganiza¬
tions tend to be in inverse propor¬

particularly in the industrial field.
assets

of

other elements than the

the

hands of

the 18-22 group.
To the extent that these
figures
reflect
merely
the
volume
of

Of course,

that

placement

31

than
page

the

32

Document

32

(1516)

The Commercial and Financial Chronicle

<

Continued

from

Continued from

31

page

Auto

5

page

.

.

Thursday, October 19, 1950

.

Output Shows Moderate Decline—Unhindered
Operations Predicted for Rest of Year

Pros and Gons of
Direct Placement
long-term

which

obligations

are

purchased by insurance companies.

method of

Of course, there is no

securities valuation that is perfect.
value

Market

given

a

on

day

the whole answer,
and it may well be that the ap¬
praisal method the commissioners
surely is

not

using will produce satisfactory

are

results.

At

basis for

there is
hoping it will. The

mittee's

staff

least,

has

considerably and
if

further

improve

rent

development of tech¬

in

central bureau of

a

appraisals

all direct place¬

on

should

cur¬

relieve

immeasur¬

ably the burden otherwise placed
the individual examiners and

upon

should lead to economies and

more

for

direct

angle of

from

orders

manufacturers

the

government, which meant
had to hire extra help, and

who

personnel

hiring to 45 and 50
Steel

for

its

few

National

Production

Iron

Age,"

at

national

will

turn

have

be

to

limiting the DO
already doomed,

It cannot

weekly,

last

in

its

than

more

a

completely unworkable

prove

clarified

and

its

limits

the

on

percent

soon.

Anyone who really believes that DO orders will not require
than 5% of carbon and alloy sheet and strip production in

placement

financing which' has already been
phasis.
the

There

part

borrow
their

inversd

size.

smallest

tendency

a

borrowers

of

in

is

In

em¬

to'

on

over-

proportion

to

wor&s,

other

companies

will

the

extend

themselves, if granted

the credit,

more

the

recklessly

the

than

larger

This appears to arise out of

ones.

desire

of

the

proprietors

to

avoid dilution of their equity. This

dangerous tendency appears
loans to medium-sized compa¬

same

in

nies,

and

it

not

is

larger
that

that

it is.

in

that

say

the

of

some

experience has shown

On

the state¬
namely,
that the

average,

stands;

credit

to

not

present

cases;

ment

is

risk

tends

to

in

vary

in¬

proportion to the size of the

verse

borrower.

To

the extent that

in¬

surance

companies, through inex¬
perience in direct placement fi¬
nancing and excessive competition
among themselves, have failed to
be

conservative

the

or

financial

vinced,

as

to

the

of

in¬

firmly

con¬
ex¬

Total

of

know that

one

tal is hard to find,
particularly for
smaller business houses. Whether

placements

have

has

been

prove

an

That

does

or

not

even

through the

of the

investment

bankers and public sale.

place

does

not

in¬

attempt

to

final

judgment on the
present practice of direct place¬
a

ment.

tinued
is

Whether it should be
or

largely

experience
sufficient

modified
a

matter
to

for

con¬

for time
It

and

is

trouble shooters

points out.

for

C.

casualties
a

B.

Bo.yne,

veteran

of

furnace

to

500

them.

satisfactory for the critics

claim that the system is

a

are

bad

continued
week of

because

going

not

are

Steel

Corp. has granted him

sit

back

priority.

and

For

let

their

to

numer¬

some of which

from the enactment of the
Securi¬
ties Act means that it is
not a

wholly natural phenomenon.
If
society wishes to modify or abol¬
ish the system, it will have to
by appropriate legislation.

it

absence of legislation the

do

can

In
di¬

full

be ex¬

force

indefinite time.




manager

of

the

government

regular

get

customers

American Iron

and

Steel

the

They

steel

them

from

be

the

announced

a

week's operating

1,959,600 tons
the
a

a

successive
a

record

week

the

week

American

steel

tonnage of ingots and steel.

week

rate
for

castings
ago.

is
the

equivalent to
entire

1,967,300

industry,

A month ago, based

on

100.4% and production amounted to

was

year ago,

at
a

rate

ago

year

mild

dip

based

tons

of

compared

to

new

capacity,

1,936,400

tons;

the smaller capacity then prevailing, it stood
172,000 tons. The low output a year ago was due to

9.3% and

the

which

172

94

below

of

,*jf|

in

1948.

the prewar

188 in

to

rose

the

occurred

Despite

the last

holiday

in

this

the

ten

weeks,

similar

increase,

total of 237 in the

week

failures

comparable

on

last

increase

occurred mostly in retail trade and in
Manufacturing casualties rose, while whole¬

Failures

retailing, construction

in

from

the

were

appreciably above

and

service, but evinced a
manufacturers and whole¬

level among

1949

salers.

Middle Atlantic and Pacific

The

week's

States accounted largely for
Slight rises occurred in most other areas.
the 1949 level in four of the nine major
the Middle Atlantic, West South Central,

increase.

exceeded

geographic regions!
Mountain, ana Pacific States.
Food Price Index

Moderately Lower in Latest Week

The downward movement in food

The

prices moderated last week.
index, compiled by Dun & Bradstreet,
drop of 11 cents the previous week. The

wholesale food price

fell 2 cents, as

against a
index—$6.48 on Oct.

current

from the current

3.1%
the

lowest

$5.57

since

July

10—shows

a

cumulative

high of $6.69 touched,
18 when it stood

at

decline

of

Aug. 29, and is

on

$6.41.

Compared

with

the latest figure shows a rise of 16.3%.
the sum total of the price per pound of
31 foods in general use.
Its chief function is to show the general
a year ago,

The index represents

trend of foods prices at the wholesale

level.

Wholesale Commodity Price Index Turns Slightly Lower
The Dun & Bradstreet daily wholesale commodity price
at 290.28 on Oct.
10, down slightly from 290.72 a

closed

earlier.

The current index

corresponding date

a

year

compares

index
week
with 241.94 recorded on the

ago.

Prices in leading grain markets were irregular last week
definite trends

with

evidence.

in

Activity in grain futures on the Chicago Board
dropped to the smallest volume in over three months.

of Trade
Sales for

the week totaled 131,698,000 bushels, or a daily average of about
22,000,000 bushels, the latter comparing with 24,300,000 the pre¬
vious week, and with 27,000,000 in the comparable week a year

Dullness in wheat largely reflected
political situation and a lack of

ago.

the foreign

business.
to

continued to
Domestic

in

flour

uncertainty regarding
appreciable export

any

Trading in corn was only fair but demand was sufficient
all offerings at current prices.
Moderate quantities of

absorb

move

flour

into export

channels.

business

reduction

picked up last week,
prices late in the period.

in

sparked
Export

by a
trade

remained

slow.
The cocoa market was easy most of the
developed a firmer trend at the close. Early weakness
stemmed from large offerings from Africa and reports of a slow¬
down in consumption as a result of high prices.
week

but

prices

declined

rather

sharply

mid-week

at

of heavy selling prompted by lagging demand for

pressure

under
green

coffees from roasters.
Lard

and

total

1949.

temporary

this

for castings.

ingots

21%

Coffee

fourth

industry is geared to turn out
This

a

preceding week, Dun & Brad-

highest level in

saling' and construction declined.

filling

rise of 0.4 point.
will

and

Year Ago

154 in the

At the

the

week's

on

94% of the steelmaking capacity for the entire industry will be 102.0% of capacity
for the week beginning Oct. 16, 1950, compared to
101.6% a week
a

and

119

The

corn

they will continue
higher prices.

Institute

going

are

for

that the operating rate of steel companies having

or

States

142,957

1939.

and 42 in

110

steadier tone, added by active buying by
commission houses and soap manufacturers and an upward trend
in vegetable oils.
Market receipts of hogs continued heavy and

developed

values showed

a

a

further moderate drop for the week.

fresh pork remained slow

Demand for
with prices also trending lower. Steers

and lambs finished with small net declines.

Cotton

strike then in progress.

prices moved irregularly

Publication

ing

a

Electric Output Shows Moderate Recession From

of

the

/

wide range last week.
government crop estimate show¬
yield of the staple for this year re¬
over a

official

larger-than-expected

sulted

Record High

week.

The

at

amount

of electrical energy distributed
by the electric
industry for the week ended Oct. 14, was esti¬
6,508,591,000 kwh., according to the Edison Electric In¬
power

stitute.
It was 5,116,000 kwh. lower than the
figure reported for the
previous week, 1,027,856,000 kwh., or 18.8% above the total output
for the week ended Oct. 15, 1949, and
1,026,561,000 kwh. in excess
of the output reported for the
corresponding period two years ago.

Carloadings Dip in Latest Week but Hold
Above Year

in heavy

The

liquidation and sharp declines

on

Monday of this

Oct. 1 conditions, indicated a total crop
for 1950 of 9,869,000 bales, or only 13,000 less than the Sept. 1 esti¬
mate.
Domestic mill demand was active with spot market sales
continuing at a high level. Foreign inquiries were numerous al¬
though exports for the week dropped below a year ago for the first
time this season. Harvesting of the new crop made good progress
report, based

on

under favorable weather conditions.

Trading in cotton textiles fell

off somewhat from recent weeks.

Trading in the Boston

raw

wool market continued slow. Prices

generally held firm but spot offerings

at 50.4%

business

Ago

were scarce and volume of
of prices in the Australian and
again lower with current values
drop of about 15% from the August levels.

was

limited.

The trend

South African wool auctions

Loadings of revenue freight for the week ended Oct. 7, 1950,
863,676 cars, according to the Association of American
Railroads, a decrease of 16,309 cars, or 1.9% below the preceding

showing

a

was

totaled

week.

.

.
_

placement method
pected to continue in
an

leave

is holding up delivery on 80% of
they lack steel to make casings for
to pay high prices for steel to fill

orders made with gray market steel at

This

12 from

commercial service.

Corp., will become

government orders for furnaces used in barracks.
to

the United

of

up

involving liabilities of $5,000 or more increased to
week and were slightly more numerous than a
year ago when 130 businesses succumbed in this group. A rise also
appeared among small failures, those having liabilitieis under
$5,000; they numbered 51 as compared with 35 in the prior week
137

years

one

have been developed in this
paper.
The stimulous the device
received

effect for

25

field, will direct the stainless steel division

manufacturer

furnaces

They

is it

and

than

more

trade

cold-polled sheets.

mated

rect

this

no

A

in

made

was

,

exceeded

ago

year

Mortality

doubt, the magazine declares, that many small
companies have already been hard hit by the steel shortage. They
have been forced to pay as much as $399 a ton in the
gray market

400

built

week

States, output was 168,900 units, and in the like
139,918. Canadian output a year ago amounted

street,. Inc., reports.

steel

other

They will form

Robinson,

is

current

and 1,777 trucks built in Canada.

of fast year

the

In addition, industry

belatedly being called.

Allegheny Ludlum

light and

the

orders

announced,

for

the

6,648 units.

NPA

example.

one

orderly administration of the modified con¬
trolled materials plan which will finally evolve after the elections.
Two new appointments will soon be
paper

for

25,943 trucks

cars

week

to

and

more

to

claim that the system is a brilliant
because of its size. Neither

objections to it,

rather

are

the nucleus for

success

ous

on"'DO

sheet

pipes.

bear testimony to this.

not

proponents

merely because there

under way

of

shortage

£

output

For the United

abandoned

or

decide.

the

made and

steel

This paper, as stated in the

troduction,

limits

Programs

of

becoming evident that even Washington recognizes that
the basic priorities regulation is unworkable. Modifications
already

a

greater amount of capital may not
have been available

instrumentality

the

only

are

5%

is

It

ago,

equal

raise

plates and

as

strip

a

de¬

large volume of money
loaned.

that

to

and

product.

than

more

books

Moreover, NPA orders so far do not provide steel tonnage for
long list of essential programs which do not qualify for DO
ratings but which are vital to the defense effort. A few of these
are freight cars,
ship repairs, plant expansion, machine tools, farm
implements, oil and gas pipelines, electrical equipment, roller
bearings, motors and tin cans. This list could be extened almost
indefinitely.

The

been

large help in this problem is
A

such

and

5,232

the

pur¬

papular political complaints

batable.

have

soon

There

has been the allegation that
capi¬

direct

But sheet

flat-rolled

much

semi-finished sales for Jones & Laughlin Steel
director of NPA's semi-finished steel division.

institutions

us

will

items

.one

its

on

of absence from his position as assistant
general manager of sales
and manager of stainless steel sales. J. W.

a

most valuable service

All of

output.

of

will require

of its mills going into defense

of

officers

business

America.
of the

a

strip

5%

one

single defense order

terms

the result of their

are

-than

more

a

NPA.

perience to date, that direct
chases

calling for

already outlined

has

of

the

are

Another company

the stainless steel

Conclusion

companies

company

duction of hot-rolled sheets from
work.

in

contribution to future trouble.

Many

steel

awakening, this trade authority
already has almost the entire pro¬

in

indenture, they have made

surance

One

rude

a

either

lenders

the amounts lent

declares.

rest

the

of the metal.

more

the months ahead is due for

further

for

Casualties

mentioned

deserves

of

themselves

assured

with only two producers suffering from acute

year,

week ended Oct.

metal working

it might

most, and

have

unhindered operations

Week and

than that.

sooner

makers

auto

continue

Commercial and industrial failures

As a clarifying order, it does remove some of the confusion
resulting from the original order establishing DO priorities.
But

it in

most

to

Business Failures Rise Above Level of Previous

Authority's order

of the steel trade.

summary

months

much

the

said

steel

Output Set This Week at New Historical

"The

current

Ward's
sufficient

years from 35 years.

(priority) tonnage that steel firms must book is
states

175,909 units, compared with the previous week's total of
177,853 (revised) units and 146,566 units a year ago.

cars

High Record
The

totaled

orders

more

the govern¬
expanding new defense agencies.
Meanwhile the department noted that
shortages of certain skills
are beginning to appear.
Steel mills and foundries in the Pitts¬
burgh area, it was reported, have had to raise the age limit for
hired

ment

of DO orders will have to be raised

valuations.

uniform

One

defense

the

Also,

At the least, the mainte¬

ments

high employment to the following reasons: War-scare buying and
prosperity-propped purchasing, which forced employers to hire
more sales help; larger consumer
demand coupled with increased

be increased

can

necessary.

and the

niques.
nance

com¬

enlarged

Industry

It is said 45,500,000 persons were
employed in non-farm
work at that time, 500,000 above the
mid-August figure and two
million more than a year earlier. The
department attributed the
come.

of the valuation should
with continued experi¬

accuracy

ence

been

some

The State of Trade and
to

Combined motor vehicle production in the United States and
Canada the past week, according to "Ward's Automotive Reports,"

The

50.4%

week's

above

27,975 cars,

the

or

total

represented

an

;

Trade Volume Continues to Ease Due to

increase of 289,488 cars*

Unseasonally

Warm Weather

.,

or

corresponding week in 1949, but a decrease of
3.1% below the comparable period of 1948.

As

unseasonally

warm

weather

came
to many parts of the
Wednesday of last week, retail dollar
However, it was moderately above the

nation in the period ended on

volume

generally declined.

.Volume 172

Number 4952

.

.

.

The Commercial and Financial Chronicle

Securities Salesman's Corner




(1517)

33

34

The Commercial and Financial Chronicle

(1518)

I

like

Tomorrow's

claims

you're long of the

Continued

infallibility would
only be erroneous but
would make you seethe with

Walter

So we'll

future of the market.

penetrating fashion. It asked
the people to assume that we were
laced
with ten
years
of rising
prices and then to make their in¬
of that

selections

When the

In

writing last week's col¬
I completely, forgot the

umn

Columbus

Day holiday which
don't

I

intervened.
it

suppose

much difference

made

ex¬

cept that a mid-week market

interferes

holiday
clical

with

cy¬

the

to

movements

ex¬

#

I

When

thought
had hit a low, or
and

a new

rally would be underway by
the

reached

this

time

you.

After

checking the figures for
the week ending Oct. 14, I
find I'm 50% right, which to
my way of thinking is a rot¬
*

*

*

Oct.

On

closed

For the week

at

At this

point

50%

could be

just

trustworthy

as

indication of the future

an

pontifical interpre¬

any

and

major break in

not

see

the

foreseeable

any

chances

We

hours).

next ten

counts.

now

are

56%

—

them

of

they could

dollar

half

than

More

blandly

—

disadvan¬

see no

myself

out

a

The

that if you

a fixed
period of infla¬

a

An Ethical Problem

might digress for a moment
here, I should like to point out the
considerable ethical problem

very

counter

to

the

interest

whole

buying in

vision

and

sets

building, etc.

of

outside

But

tele¬

new cars,

temporary

a

halt, I doubt if it will hurt
any

marked

ex¬

which

retrace-

previous advance

a

is within normal limits.
>'fi

*

it all up

sum

a

the

answer

bull market

should

trading

any

Securities

[The

views

article

do

not

coincide

time

be

the

They are presented as
of the author only.]

who owned stocks had

Here

New York Curb Exchange

14 Wall Street

New York 5, N. Y.

COrtlandt '7-4150

Teletype NY 1-928

Private Wires to Principal Offices
San Francisco—-Santa

Fresno—Santa Rosa

Ohio

Oil

Plus Tax

•

@ 39% Nov. 30 $325.00
@ 40% Oec. 21 275.00
GenT Motors .@51
Jan. 17 450.00
....

U. S. Steel

So. Pacific

..

..@53

Dec. 15

the

Langford
that
they

Building,
announces
inaugurated a new type of
investment
vestors.

SPECIAL CALL OFFERINGS
Per 100 Shares

in

quarters

have

Barbara

Monterey—Oakland—Sacramento

•

larger

187.50

service

One

of

for

the

blind

firm's

in¬

sales

of view

point

hand, from

public

the

of

as many

possible to put their ex¬
funds into government bonds

cess

as

the

reduce

thus

and

amount

of

client
This

who

same

lives

in

another

the

city.

service will be extended

to any

blind person anywhere who
wish to purchase investment

existence exerts

securities.

Chrysler

With Metropolitan St. Louis

.... @ 79% Dec.
18
Mo-K-Tex pfd.@ 45% Dec. 22
Cities Service @ 16
Dec. 21

475.00

Southern

curities

were

a

dealer

you

resolve

you

were

helping

broker or a se¬
just how would

the

Since

problem?

sincerely interested in
bring

to

about

wider

a

stocks and

common

investor, I suspect

might be
strongly tempted to try to capi¬
talize on the present inflationary
situation.

you

Nevertheless I

the problem

issue

as

sure

am

did when the
long ago.
Obvi¬

we

not

arose

the interests of the whole

ously,

public must prevail.
I

am

mentioning this just

as

AtchJop&SF@ 133%Nov.18 450.00
Liggett-Myers @ 81% Jan. 12 412.50
Y'ngst'n Sheet @ 52
Dec. 21 300.00
Am. Cyanam. @ 71% Dec. 15 425.00
Subject to

prior sale

or

price

change

THOMAS, HAAB & BOTTS
Members Put <&

Calls Brokers

<fr

Dealers Assn., Inc.

50

Broadway, N. Y. 4, Tel. BO 9-8470




fraught with

many

more

ST.
Jr.
of

LOUIS, Mo.—John T. Neaf,

has

been

added

Metropolitan

pany,

St.

to

the

Louis

staff
Com¬

718 Locust Street,

To

back

come

Opinion

to

Research

aware

of how their

best

are

purely
do not

that

Neb.

—

Fred

Walters has been added to the
staff of W. E. Bell & Co., Gaston

Building.

com¬

market

that

market

is

se¬

finan¬

own

are

not

interests

and

understand

even

the most

a

stockholders and

alone

share

corporation.

in

3%

the

said

its;

in prof¬
stockholders

42%

and

that both
bondholders benefited;

candidly admitted that they

and

know.

cite

Merrill Lynch

just two findings from that

survey as further documentation
of public ignorance about the se¬
business.

his

survey,

Mr. Roper pre¬

those

questioned with a
leading brokers
—a list that was changed, area by
area, to include always the brok¬
one

Know

text

curities:
Are

going to do that

is only one possible an¬
Advertising, which is noth¬
ing more nor less than mass sell¬
ing.
To

attempt to do the job by
personal contact in the old tradi¬

culars

brokerage business

the

and

A

distribution

pamphlets

to

What

Bonds?

How

What

What's

ask

Are

Broker

a

Exchange?

listed

Securities?

or

of cir¬

would

be

dig the Panama
pick and shovel gang.

Will advertising

question

isn't

Whether

it

resort

to

alternative.
other

got

to

maining
we're

dozen

best known locally—and asked

people if they knew what line of
business any of the 12 was in.

as

the

along

that

have
last

our

isn't any

job

with

possibility.

talking

we

there

do

string

material.

not

it

to

that the

say

proved

or

When

way

to

me

be

pays

several

are

really

can

advertising
got

there

to it—let

answers

work?
Before
that question

answer

think

I

you've
the

re¬

Remember,
selling se¬

about

curities to hundreds of thousands,
even millions of people. Just how

do that job without ad¬
vertising?
can

you

There's

saving grace

great

one

in the situation.
The people

They want to

buy them, what

in

for

I

times

do with them.

you

made-to-order

a

of

advertising that

business

securities

past.

used

chaste

The

has

and

dignified
card
announcing that
John Jones, broker, maintains of¬
fices

Main

on

only wasted
average

ing

ads

Wall

Sold

.

can

this

prior

with

a

smile

is

"Bought

to

once

con¬

.

.

.

.

assure

enfant

$5,000

You:

that all of us'

you

terrible after

on—for that's

it

was

spending

what

full

a

ad in the New York "Times"

page

ad

the

suppose

that

the

those who already knew
to
the
questions—

were

answers

and

lot

a

why

offer

."

The

issue
forbidding
new

two—"This

announce¬

offer to sell

nor

solicitation of any offer to buy
securities. The offering is made
a

only by the Prospectus."

After all,

else

anyone

hour

an

besides.

more

should

half

spend

wading through all

that copy?
In the thought that
we might
get a clue to that answer by pro¬
voking some mail response, we

finally

decided

advertisement

to

type

conclude

with

offering

the

line

one

in

reprints

to anyone

of

who

might want them.
And

so

Oct.

19,

1948,

ran

on

on

the

advertisement

the
back

of the "Times."

page

It would be difficult to tell
you

just

what

here

are

happened
then.
highlights.

received

postal

copies
some

for

over

cards.

or

Some

for

their

bankers

Other

quests—for

100, 500,

schools

great
a

for
And

asking

to

their

quantity

and

bulk

from

came

asking

distribute

customers.

the

from

came

directors.

from

came

copies to

from

three weeks

5,000 letters and

presidents,

company

But

few

a

In the next two
we

re¬

1,000—came

colleges.

of

the

But

requests

just plain people who
for themselves—.

copy

few copies for some friends.
I
wish
you
could
have
read
of

some

and

those

hundreds

letters.

Hundreds

them

contained

of

comments like these:
"I've waited 30 years for some¬

body to tell

me

this.

.

.

"Thanks for this public service."
"I majored in economics in col¬
lege but I never really understood

what
all

the

securities business

about till

"I

have

was

now."

$5,000.

What

should

I

do with it?"

"I

have

whom

.

only provokes

now

an

"We

or

sale.

applies
that

or

Un¬

Do

How

conceived. Was it worth

the

as

meaningless

their

lingo,

legend which

far

so-called trad¬

Quoted"

.

to

thing

same

ads

with

.

represents

as

prospect
the

do

Street

subject

Street

money,

new

So

cerned.

the

Are

Lynch had considerable
misgivings about what to do with

se¬

advertising. But not

kind

the

What's

What

at Merrill

a

about

know

is

then

"Divi¬

Worth?

Buy and Sell Securities?

wanted

want to know.

curities—what they are, how you
Here

se¬

What

Are

Stocks

the advertisement

—and

about

Do?

Stock

sim¬

Stocks?

Big

Are

as

of the basic-

some

people

like attempting to

I attempt-to

of

page

answer

modest

a

Stock and

solid

general feeling
only people who
might possibly be interested in the

There

by

seen

6,000 words in small type
possible

as

This

About

.

.

.

Bn^ess."

—

the

tion of the

the

some

advertisement, en¬
Everybody Ought to

—under idKing

I

you

ment is neither

A few years ago,

ers

are

in

Perhaps

will remember having
"What

was

Advertising Is Mass Selling
How

f.

costs.

cially illiterate.

the

bondholders participated

list of

D.

to
a

abysmally ignorant of

curities—a

for

investment-wise,
simply because they

stockholders

sented

(Special to The Financial Chronicle)

is

only

was

And

ago.

you

it—a full page

market which

a

individuals at least is

decades

two

to

sake, and for

times larger than it

many

is

it

served

profits of

In

HASTINGS,

problem the
up against:

pound the difficulty, it is

Public

the

survey,

obvious that most people

curities

With W. E. Bell & Co.

securities

situation

retained Elmo Roper for a survey
of its own and I should like to

(Special to The Financial Chronicle)

our

in terms of

an

ethical problems, than that of ad¬
vertising ships or shoes or sealing

didn't

337.50

Ry. @ 16% Jan. 15

362.50
600.00

of you

Canal with

prices.

pressure on

If you

strong upward

a

19%

may

Republic Steel @42% Dec. 21 312.50
Mission Corp. @ 34% Dec, 18 437.50

is

business system—

even

spendable cash which by its very

understood that

serve

the

swer:

other

the

On

bonds.

representatives, having a customer
elementary
facts
about
invest¬
who is blind,
learned to write
ments.
Thus, the survey shows
Braille through the courtesy of
that only 3-3% of those questioned
the Lighthouse for the Blind in
Miami in order better to

is

business

own

have his money invested in com¬
mon
stocks than
in government

wax.

MIAMI, Fla.—J. A. Rayvis Co.,
Inc., which has moved to new and

then

securities

tell

published,

was

New York "Times."

dends?

industry in general.

to

insertion

page

questions

job?

one, one

New Braille Service

Stock

Exchange
(Associate)
San Francisco Stock Exchange
Chicago Board of Trade

full

a

ply

they simply held onto their
never a change in
their portfolios despite the fluc¬
tuating fortunes of the market and

of

like

It is now almost two years since

securities with

advertising and selling se¬
curities is a far more complicated

Members

sold

never

They only bought. Year after

any.

should

I

year,

is obviously more prudent in a
period of rising prices for him to

evidence of the fact that the prob¬

Schwabacher & Co. J. A. Rayvis Go. Has

of their

are

lem of

York

Lynch

reference

a

experience at Merrill

own

as

how utterly unaware stockholders

individual it

average

in the end that you would resolve

expressed in this
necessarily at any
with those of the

Chronicle.
those

runs

since you were equally concerned
about the welfare of the individual

done with that in mind.

New

our

that advertisement

Roper

more

the story of one advertisement,

best

finding has
always struck me as particularly
shocking because it demonstrates

From the point of

public.

ownership of

*

poses.

of

interest, it is desirable for

one-to-two-thirds
of

this

as

situation in which the

a

view of the

people

A

finding such

a

Here is

the

%

%

is: we're still in

Pacific Coast Exchanges

dozen

to

will indulge

other

One

sell

If I

individual

and

on

the

of

any

If you

brokers!

It must—for its

the

To

Orders Executed

exactly oneThey had never
to

the sake of

tion.

of

economy or so

trade

Pacific Coast

known

investments with

value in

interest

war

a

the

of

close
to it that any difference can't
be
distinguished with the
naked eye.
The new credit
in

actions

#

soothsayer.

are

owning government bonds or hav¬
ing their money in savings ac¬

(def¬

future

inition of foreseeable future:

ment

wonderful

a

tage to

Seriously, however, I can¬

.

make

so

tried

said

*

*

*

69.36; hence

❖

the research agency
reverse twist. On the same

people

tation.

I

#

Finally,

toss of a coin prices—they asked people if they
could
see
any
disadvantage to

a

might point out that re¬
at this stage of the
market cycle, while upsetting,
At this point I could dis¬
are part of a normal market
regard the unfavorable im¬ picture, so long as they keep
plication, stress the favorable within predetermined limits.

the

solutely nothing
quarter of them.
of

meant ab¬

names

far

is

Experience

owned

Bond

the former earnings to
227.63, while the tent.

closed at

boast

stocks, the firm

who

responsibilities—their

*

latter

showing, but they could still
of only a negligible 23%.

those

among

about

Extensive Advertising

discouraging.

dling along, hemmed in by assumption—that1 this country was responsibilities to themselves. Mr.
faced
with
ten
rumors and "interpretations."
years
of rising Roper found that 27% of those

14,

Oct.

ending

rails

the

and

at 68.83.

were

industrials

9, the

230

at

question was put this
stocks
improved

common

their

Even

An

most

was

titled

ment
were

way,

The result

heard

restrictions will affect instal¬

ten average.
"

about
scorn

I

in reach qf it,

were

the

about

week

last

market

the averages

nothing to boast
or
point a finger of
at; it's just there daw¬

doing

than

*

wrote

is

as

tent that it distorts them.
*

For the moment the market

basis

the

on

assumption.

*

❖

❖

all valid and susceptible

are

talking
convincing.

Advertising of Securities
more

vestment

get down to it.

By WALTER WHYTE =

tions

18

page

Thursday, October 19, 1950

.

I'm

to

justifiable rage. All this, how¬
ever, has little to do with the

Says —

from

.

of proof, but the specific evidence

not

Markets

=5

do

that went down, so any

ones

.

it

read

family.

"I own

didn't

this aloud

to

my

..

some

stocks, but frankly

know what I

owned till

now."

And most poignant of all—
"I have put this

away for my
children. I don't expect it will
happen again in their life time."

Wholly
one

its

on

advertising

York—the

Emmett

old

own

agency

firm

of

initiative,
in

New

Newell-

interested in
of advertising
interest, con¬ knowing whether people would
read a long and
weighty ad like
tributes nothing to the mass edu¬
that that they sent their own
re¬
cational job which we must do.
street the
Our conviction that the public searchers out on the
next
day to check on the ad's
really does want to know about
securities rests on specific evi¬ readership and recollection value.

No,

elicits

that

kind

dence—not

just

on

a

general as¬

so

The researchers asked "Did
you

advertising pays,
that it has brought us many new
accounts, that it has helped us

read

build

about?

our

was

public

no

sumption

—

that

business. Those assump¬

yesterday's

'Times'?

Do

you

New-

York

remember

advertisement in it? What

any

was

Whose advertisement

it

was

Number 4952

172

Volume

.

The Commercial and Financial Chronicle

.

.

to do with that $1,000 or $2,000
just lying in the bank. But he is
/remembered it and checked to see not likely to take positive action
exactly how much of the text he unless he is repeatedly and conhad read.
siantly spurred on by advertisings
it?"

They then showed a copy of
ad
to
anyone
who said he

our

Neweil-Emmett, which had
checks

similar

hunureas

ties

advertisements,

send

to

enougn

of the ulumate

-copy

Tnat's

and

hundreds

on

otner

oi

good

was

run

me

report

a

1

pre-

quote:

'•'The

ad

business.

by half

advertisements,

with

appealing,

illustrations,
But

text

half

than

more

and

text to

interest

tnis

important,

more

remember,

read

full

that it

a

was

Merrill Lynch ad. This is at least
three

four

or

of

reading

Sa?^'
On

iu

the

m

have

'

t-u

York

New

newspapers and

a

last

yertisement

magazine,

the

to

is

This

results
we

5/otner

m

"Time"

in

it

that-

in

That's

In

in-

is

when

"Time"

it

special pleadbehalf of any given

behalf

idea

the

of

One

carried

legitimately exploit, the ad-

and

experi-

demonstrates that

alone

not

wnole

especially noteworthy be-

it

cause

of the

realizing

in

his

product

In

short,

Tiiree

we

the

the

—

States

published

Lynch

about

that question.
invest

in

have

attention

presidents, and

If

a

wants to

man

than

return

make with
risk

be

Take

asked

he

reprints

the

of

gans

article

special

prepared

or

their

articles

General Motors, for

own.

instance, bought 100,000 reprints,
and Chrysler used it as the lead
article

If

its

in

this

employee publication.

will

you

account

of

a

one

a

indulge

one

more

personal

very

Service

the

over

a

proof

lieu

advertisement

letter to

a

downstate
ago

years

the

of

of

past

in

Illinois, where I learned
in Sunday
School or

somewhere to associate stocks and

bonds only with race

horses, pool
and other pursuits of questionable morality.
Her response

rooms,

direct

was

as

ful.

She

as

it

was

meaning-

"Dear Son:

back:

wrote

Thank you for sending me the ad.

and

.

.

Want

Public

both

sound

sensible."

...

...

_

business

the

made

It

ethical

„

to

__

Know

.

About

Securities

This then, is the full story of an
ad that was made

It

succeeded

not

by its audience,
of

because

any

quality of its own. Perhaps I should say it succeeded in

special

spite of itself—in spite of its length
and weight.
And for only one
Because the public

reason:

to

wants
To

my

biggest

know

about

mind

that's

guarantee

really

securities,

the

that

year,

single

securities

the

about

picks

stocks
up

or

less

own

bonds

than

he

He may even think

idly of security in-

vestments when
his

in-

thousands

in casual conversation at

the Elks Club.
more

and

of

he turns

over

in

mind the question of what




in

perhaps

tax,

—

tentions

of

Russia

coma n

d

•

94*

forces

g"2K
6.25

~

1941

which
ourarmed

415

_

--

----

•

ex-

the

-—

----

-

•

.

age

expect

can

5%

his

on

a

return of

investment

in

Some will do bet-

COmmon

stocks.

^er;

will do worse, but the
is sufficient to constitute

SOme

aVerage
a

strong

stbie

a

rjsk

thoroughly

and

copy

defen-

appeal.

object, "he runs
his capital." Yes

And he also has

be d0es.

^an aVerage

a

Let's

better

chance of increasing
at

look

bar

you

the

record

W&t

vFl<

KMS
E
"SmfM M

opposite end of the qual¬
are the "yield" munici¬
pals too low in quality and long
as to maturity to be attractive for
bank
investment
but
avidly

ity scale

bought

by

companies

insurance

competition with tax¬
for

able Treasurys and corporates

insurance company favor, so

they
simply cannot reflect higher taxes

Del1 H- Stevens

again,

jg29 from consideralegitimate

ti0n—and there is every

the

in

in

shows

taxes

bonds,

the

$12,000-

The

fol-

bond

prefer medium and lower medium

yields

prime
lastly
"yield" municipals. Even the lat¬
ter may be regarded as particular •
ly attractive for income and ap¬
preciation, if issued for an essen
tial service and capable of im
provement in quality, but they are
only mildly attractive in connec

same

(to show

market

in

they did in 1944,

coming
for

profits

tax,

of Treasury

therefore

deficits, and since the latter cannot be entirely funded into bonds,
which would lead to violent infla-

doing

believe

so,

because

I

the years go on.
the long pull the investor—not the speculator but the
investor—stands a better than avSo

over

erage

increase in value.
money

obviously,

common

his money into investments
with a fixed or semi-fixed dollar
value.
Of course,

if John Jones has to

sell his stocks to meet some fam-

Man's

Bookshelf

if the motive force is to be

increases in the present
normal tax and surtaxes, municipals can very well afford to discount much of the increases since
the size of the Federal

debt and

Introduction
John

Book
42nd

Investments

to

Clendenin—McGraw-Hill

C.

Wes1

330

Inc.,

Company,

Street, New York 18, N. Y.

—cloth—$4.75.
Finance

Personal

A

John

bound to have a materiah further increase in Federal
income taxes. The end result will

duration of the rearmament proof

Leavitt and Carl O. Hansonf—M

of the values

in

West

tion,

we are

an

enhancement

require
perpetuation
higher taxes if equitable.
Congress will convene late
gram

Graw-Hill

—

Book

3
York 1

Co.,

Street,

42nd

New

Inc.,

November to pass a new tax bill N. Y.—cloth—$3.50.
by Christmas if possible. The muPrudential, The — A Story <
nicipal bond market should have Human Security — Earl Chap
kef pattern shows us the Treasury its big rise before the year-end.
May and Will Oursler — Doubl
2i/2s, December, 1972-67 very ef- Consequently, municipal bonds day & Company, Inc., 14 We.
fectively pegged between
100V2 should be bought well before then, 49th Street, New York 20, N. Y.and 101. This issue at the moment before the enhanced value of full cloth—$5.00.

Gf

fully

tax-exempt

securities—

municipals.
At this writing, the bond mar-

fs

the

bond

cornerstone

market.

of

the

whole

Despite the tax increases of Oct.
1950, the Treasury deficit for
the present fiscal
year
ending
next June may reach $10 billion,
l,

program

Revenue Act of

In comparison,

even

housing projects this December or
January. The new bonds will
come as close to being full, general, tax free

United

obligations of the

Treasury as any
differing from a
general obligation only in the pro¬
vision that Congress each year
must make a separate appropriation from the General Fund of
the Treasury to make good the
bond

States
be,

can

planation

and

tables —Prentice
Fifth

1950—With

e:

you

- ;

pay
-

-

as

-

Hall, Jnc.,

Avenue, New York 11, N. "

prices

(lower

—paper—$1.00

quantity orders).
Shares of Upper Income

in

and

Income

Kuznetx

Savings

Broadway, New York, 23,
paper.

American

South

New York

Franz

S.

Estate

of

Handbook Wilson Con

52, N.

Taxation

Martin

Joseph

Fiduciary

E

on

Aliens

Nonresident

from Trusts and

York

N. Y.—

University Avenu
Y.—cloth—$1.5

950

pany,

U.

of
1819

-

1950 Edition—H. W.

tates

Simon

Inc.,

Research,

Economic

Group:

—

Bureau

National

—

—

•

reprint'

Estates Magazir

Publishers,

Inc.,

N<

City.

Ernest C. Lyons
fSpecial to The Financial

Chronicle)

—Yield After Federal Tax of—

Yie,d

stocks than through put-

ting

develop

Business

unpopular and unfair and hence
slated for very early repeal. How-

that the speculative

as

power

tax

municipals

tax exemption can be discounted.
the Also, we favor long maturities,
bank-eligible Treasury 2V2S, Sep- which stand to register far greater
excesses are likely to be repeated
tember, 1972-67 are from IV2 to gains than short maturities are
—or
even
could
be
repeated— 2 points
too
high, and
prime capable of.
stock
prices historically have corporate bonds are perhaps a
The favorable outlook for the
tended to move generally upwards point too high. Even prime mu- municipal bond market should be
as
bave ab other prices.
nicipals may be from 5 to 10 basis shared in by prime medium, lower
Certainly there have been wide points too high. For all other sec- medium and low grade municipals,
swings from year to year, even tions
of
the
market,
current but by no means equally. We are
m0nth
to
month, in that price developments hint at protracted told that the Public Housing AdlinG) but the significant thing is stagnation or mild weakness, but ministration is trying to arrange
that stock prices have always come municipals, seemingly high, are for the initial refunding of some
back, always moved on to higher merely
discounting
to
a
very part of the $262 million of temground, and on the basis of his- limited extent the higher taxes porary Veterans' Housing Notes
torical precedent apparently al- that are on the way. They are in into
the new AAA permanent
ways
will, for the dollar seems line for a moderate to very sharp housing authority bonds and the
destined to decline in purchasing price advance.
financing of some of the newest
for

reason

don't

current

ments.

not attempt to discount
the full tax because it is intensely

ever,

and

long-terms,

with

tion

then

long-terms,

grade,

municipals now yielding 1.47%
going the full distance back
in price to the 1946 record
at which the maturity yield was
a mere 1.04%. But they are cer-

large

armament,

exemption and profit, we

grade

are
up

an

now

porate

for tax

1945 and 1946.
We are not claiming that prime

period of large scale re-

are

Consequently, in recommending
bonds now for
cor¬
and individual investment

municipal

various

2J/2% bond, it becomes evident
that municipals could gain heavily
as

and

municipals

present

a small increase can
have), 60% and 75%:
If one converts these yields into
dollar prices for a 20-year taxable

whole

medium

grade

on

what effect

the

that

extent

medium

the

hut after taxes of 50%

excess
should

rise

the

com-

income

the

to

tainly headed in that direction.
If the motive force is to be an

^

ex-

We

extended

be

you may

0f losing

to

months.

on

year

ab0ut

JB
L ' Mwm

■

u&k

of

in

bracket.

before

on

that

powerful

the basis of that record the average man in an averClearly

1

have

table

surtax

surtax

net

surtax

price much

periencea

•

—

individual

an

$14,000

JsHRi

secRon 0f

bound

•
—

S

securRjes
market
is

•

-

—

of

became

rate

the

and

the

fjfHpJl

-

tbe

•

-

-

iMMHH

-

WW

hJbeen

evident

---

fPjjg11

disintegrated
_u

•

--

will and the

and

world

tate to

-

tax

tax

on

types

June

military in-

4 77%

~~

of

end

Congress and the people
finaily had knocked into them two

438

__

corporate

yields

greater than the
current one. Accordingly, to reduce the deficit and the serious
inflation potential, the Treasury,
the Federal Reserve, the Admin-

hundreds

profits

bined

but more will
of people in the middle income make money, and on the average,
brackets to invest their money.
it is certainly arguable that over
Of course, interest alone is no the long run John Jones is likely
guarantee of action. A man may to build himself a better retirewant
to
know
something more ment through investing in good

the

taxes, perhaps in the form of

Here is where the great promise

Moreover, the armed forces are
asking for 1951-52 a rearmament

duce

cor-

income

in the municipal bond market becomes evident.
As of Oct. 1, the

chance of seeing his stocks
Some will lose

advertising can succeed—can

higher

yet

individual

and

it

when

the dangerously low es-'

Yie.d

mother in

my

per

since

munism

.year

"But,"

one—I

should like to tell you that I sent

porate

Congressmen

Presently
International

'50.

facts—the vicious ill

Here

dozen years:

reaction to this ad

a

for

DELL H. STEVENS

Ever

likely to
comparable degree of

gratified

to their employees,

demanding

are

lowing

is

look at the record.

a

company

published it in their house or-

or

of

tor

$11.40 and

were

better

'49

(Medium and Lower Medium
Grade Municipals)

the average yields on the 200

are

more

of interest

many

continue in

and

share. Earn-

per

Analytical Department,
Tripp & Company, New York City

other forms of investment.

in

than 10% of them, reallzing that the information would
tuat

ments.

seeking income. Such issues must

'48

1947,

$15

Manager,

stocks —not

1

300

to
making
them slightly less attractive for
price appreciation than medium
or
lower grade
municipals less
directly competitive with govern¬
and

Treasurys,

surtaxes.

to

a

were

of

we

relative

ground

some

form of higher normal taxes and

for

no

yes

we

saying

common

EverybodysDigest

the

to

lose

eligible for bank investment can.

Merrill

to°kthe jlibeirty of piece
call-

tv,-

to

cess

Qne
•

at $970,691
profit of $150,083

smart return (not in-

a

between

At the

books
a

_A

in

way

Treasury Bonds and prime mu¬
nicipal bonds, causing the latter

normal

At

hesitation

condensation of the ad.

"***

its

their

wedge

lower

Ju^1Qr
And

Commerce

Digest

HBSI

tough

45%, about the equivalent of the

'

o3

D_

LI KB

Housing

top

Prated the ad magazine published
as editorial text. So
did
Future
s

V !1HA

1

the

10%.

I

1937

of

¥

J

of

1949. A particularly

Congress
might
delay
action.
Otherwise, the new bonds will

taxable

—

?

<nnno

provisions

Act of

Silver is selling around 60 to yield

1

Everybody

nnh

•

1-.

produced

looks

fundamental question:
got a good product to

+vP Beverly Hills »r^+aper"'-rep111
?ri?
an
Citizen

Chamber

has

it_

the

'Have

^n0nt0 rl'wr'i Kthe Cincmnat!

the

ob-

an

under¬

to

paying $6

are

that

newspapers

all

aJBCIIIIIV

average over

to face up

he has

have

obligation

unconditionally the annual

debt service of bonds issued under

to the very

vestors

ness.

irnm

g°0cl Qua^ies and its bad quali- ings for '49
ties.

we

means.

write

earnings

its

know

—

believe

we

product to

Treasury's

35

eluded in American earnings). Net

man

+u'-anH ? know bond busi- stocks tabulated by Moody's Insomething
this stock and

about

Lynch

in

f

on

in the securities in 1949,

other line of business, must

analyze

good

a

of moderate

men^ The Canadian subsidiary is istration, and

u

business, like the advertising

ter

facet

is

Merrill

lire_,

fL A
1 ||C

yertising man

have
man

stock

of

*

any

And

believe at Merrill Lynch

we

we

sell the

onunuea Jrom page c

Before deciding what appeals he

in

in-

consolation.

Advertising Man Must Analyze

may

Yes,
that

of

stock

still

it

newspapers.

ence

small

y,

Continued

behalf of all stocks.

in

speculate, but invest—he has, on
the basis of the record, a better
published ^than average chance of earning a
country s
biggest good return on his money—a bet-

the

58 <of

chance

his

on

—

the fact that it had been

iri

is

why

*

.

6,000 responses, despite

over

50-50

than

con„tantlv

is

It

ance
for protection and enough
savings to meet emergencies,

periodic

a job of

in

but

job.

its

of

ligation to business and to our
whole society, if you please, to
sel1 that product as hard as we
iisned material that no one invest can
advertise it honestly and
unless he has adequate life insur- as aggressively as we can.

cigarette

or

ownership.

three-page ad-

May

the

in

time when the

a

one

money

vestments

buying urge needs

advertising's

ing—not
stock

in slightly c°n- sell? '

note

published

mes-

Times,

incidentally,

teresting
was

4-u

used the ad

densed form—as

drew

*

strength of

since

normal

advertising

an
4-

the

the

times

food

or

is

in

better

a

PaSe

the day foi-

on

it

is

making

constant provocation.

3/% read enough of the

lowing publication

market

downswings, the fact that he had

record.

20%

the

of

those

even

human

equal

the

Very

than

The

admittedly
seen

was

New YorK "Times" audience.

few

business

automobile

pared by its Research Department.
inere

ily emergency at

less true in the securi-

no

(1519)

4r,%

50%

60%

Ernest

,5%

U. S. Treas. 21/2S, Sept., 1972-67
U. S. Treas. 21/fes, Dec., 1972-67
Aa Corporate Bonds—

2.20% 1.22% 1.10% 0.88% 0.55%
2.44
1.34
1.22
0.98
0.61
2.72
1.50
1.36
1.09
0.68

Aaa-Aa Municipal Bonds_

1.47

1.47

1.47

1.47

A Municipal Bonds

1.85

1.85

1.85

1.85

•

1.47

1.85

Crittenden

Starkweather

&

Co.,

City, died at his home
of

fifty-five

after

an

Lyons
New

1

Yc

at the a;

illness

<

36

The Commercial and Financial Chronicle

(1520)

Continued

from

present. This type of provision

not

saves

Building Outlook and

the

of

because

reason

amount of

larger

contraction in residential

that their savings

cash needed, so

will be untouched and funds that

All in all,

therefore, the volume

funds flowing into invest¬

new

ing

institutions may

and

of

such

mortgages

expense

and loss of

York savings

institutions
could find

vestments and commitments to in¬

some

Moreover,

mutual

into

savings

deposits

will

banks

aggravate the investment problem
at a time when the mortgage sup¬

be declining

will

ply

dilemma

and other

thrift institutions will

be

bidding

sions,

of

the

with

Will

incurring ill

by

under the
guarantee provi¬

mortgages
and

reducing current collec¬

or

tions

loans

confronted

themselves

Insurance

of

inflow

sustained

such

not decline, foreclosing

could increase.

A

interest

of

account

on

amortization

and

granting indul¬
to. borrowers to avoid ill

gences

by

will.

Mortgage investments are more

desirable, as a class, as a result
of the lending curbs now being
gages
that become available. It
It is particularly
will mean that savings banks, un¬ put into effect.

aggressively for

more

mort¬

the

less they wish to buy government

other

and

that

bonds

yield

ma¬

terially less than mortgages, will
desirable mortgages

liave to seek

timely, therefore, to ask ourselves
mutual

whether
are

the

savings

banks

share of
prospective smaller supply of
likely

their

get

to

Unless this is mortgages.
done, the over-all rate of return
The Mutual Savings Banks' Share
realized from earning assets will
The statistics show that mutual
decline from the current
level,
which reflects the higher yields savings banks hold a considerably
smaller
percentage of the total
obtained from the enlarged mort¬
outstanding real estate mortgage
gage holdings of mutual savings
vigorously.

more

debt than

'

banks.
does

not

that

mean

mort¬

lending standards should be

lowered
risks

to

point where serious

a

incurred.

are

In

conditions

current

fact, under

loans

flated appraisals might
ditional

in¬

on

decade ago.

a

studies

Our
This

gage

at

Savings

Banks

Trust Company of available mort¬

that mutual

statistics show

gage

savings banks at the end of 1949
owned 11.8% of outstanding nonreal

farm

estate

mortgages,

invite ad¬ whereas in 1939
they owned 15.9%

government restrictions.
The problem is one of getting a

larger share of the available mort¬

of such loans.

But life insurance companies at

19.5% of the

the end of 1949 held

governmental
real estate mortgages outstanding,
regulations
will
permit,
while
as
against only 15.8% ten years
maintaining the quality of mort¬
before. Savings and loan associa¬
gage portfolios at a high level.
supply

gage

that

tions

held

Mortgage Investments More

1949,

and

Desirable

1939.

*

The
the

prospective

volume

of

j

•

■■

contraction

new

in

residential

19.6%

the

at

end

of

the

at

12.4%

end

of

held

banks

Commercial

18.9% at the end of last year, and

only 12.2% ten
In

earlier.

years

held

a

investors will in itself tend to im¬

tate

mortgages

scarcity quality to proper¬
ties underlying outstanding mort¬
gage debt

other three major classes of

a

Losses

mortgages have

on

usu¬

of the
thrift
In 1949, mutual sav¬

institutions.

ings

banks

volume of

than

any

much smaller
mortgages than any of
held

a

three.

other

ally been greatest in periods fol¬
lowing building booms, when a

the

surplus supply of residential space
developed. The intensive construc¬

the relative role of mutual savings

tion

field

boom

ample,

of

the

1920s,

for

ex¬

The

reasons

the

in

banks

lending

mortgage

We operate

followed by the wave only in 17 states, while other thrift
early 1930s. institutions operate all over the

was

of foreclosures of the

The current residential

boom
at

a

was

very

Korean

building

gathering momentum
rapid pace before the
The number of

war.

dwellings being erected—at

a

Were

num.

tained
eral

600,000

some

home

at this

per

building

additions

an¬

increase in foreclosures.

The

bring

volume

of shortages of materials and ris¬

savings

mutual

increase

new

restrictions imposed on

new

threat

of

banks
the

Since the
available mortgages is

of

going to be smaller, mutual sav¬

will want to take
reasonable step to expand
their mortgage portfolios.
banks

ings

every

Mortgage

How to Expand

number

the

have

share of

their

ing costs, will at least defer this
If

we

mortgage supply.

over¬

mortgage- lending, plus the effect

than

for

Nevertheless, these figures do
that by more aggressive

could

building

available

funds

indicate

sev¬

about

enjoyed more rapid

during this decade.

policies

succession,
would inevitably

an

to

investment

new

sus-i

high level for

in

years

have

tutions

rate

gin the increase in the number of
—

Also the other thrift insti¬

tions.

new

of almost 1,500.000 units annually
—exceeded by a very wide mar-*
families

country and therefore participate
in the economic growth of all sec¬

overbuilding of homes.
of new dwellings

Portfolios

for

mortgages

num,

competitive market
we now face, each
savings bank will want to work

least

out

its

erected

terially

is

reduced

below

to

a

rate

1,000,000

per

ma¬

an¬

it should be several years at
before
overbuilding again
becomes a dangerous threat. There
is still some backlog of demand
for dwellings resulting from the
low

level

of

building

during

World War II.

Moreover, the mi¬
gration of population, which re¬

In the

more

own

methods for increas¬

ing its share of the new mortgage

of

groups

insured

FHA

provided financing for residen¬ with other thrift institutions in
properties located in 27 states, mortgage lending, so that they
the District of Columbia, Alaska will get their full share of the
and Puerto Rico.
About 99% are new mortgage supply.
Observa¬
insured under Section 608 of Title tion of mortgage lending by life
VI, the balance being Title II Sec¬ insurance companies, savings and
tion 203 and Title VI, Section 603 loan associations and commercial
loans.
A very substantial
addi¬ banks provides useful hints on
tional

insured

FHA

of

amount

properties lo¬

loans on

mortgage

cated outside New York State has

added

been

to

the

protfolios

mortgage
view

favorable

their

of

building
to

is

lenders

gages

who

of
on

direct

absorb,

benefit of insurance
any

resulting

lenders

on

importance

conventional

must

or

capital




interest

payments

have

scheduled

and

guarantees,
losses. But

FHA insured

where

mort¬

and

VA

wise

and

been
the

received

as

is other¬

age

in¬

died

Co.,

Oct.

12 at the

of 75.

Ins. Banks Div. Bureau
Mass.

NEWTON,

offices

with

formed

Road,

—

Insured

Dividend Bureau has been

Banks

to

portfolios
of
mutual business.
current dividend proprietor.

at

64

Royee

engage in a securities
Maurice Robbins is sole

banks,

ex¬

tual

savings banks in New York
Legislature next year
for authority to invest in Section
501
VA
guaranteed
mortgages
originating
outside
New
York
will ask the

State.
The

Pennsylvania Railroad

savings banks in New York

State

also

going to ask the
Legislature to permit two or more
banks to lend jointly on conven¬
tional mortgages, so that they can
handle large loans that otherwise
have been finding their way to
life insurance companies or com¬
are

just slightly above the postwar bottom
stock has advanced to above 20.
Percentagewise, this represents a substantial recovery, but the
stock is still well below the peak of 47 Vz registered in the 1946
boom.
With the decided change for the better in the company's

tional

mortgages anywhere in ad¬
radius of

a

office

main

the

instead

states,

within

of

from

lending

the

affected

vides.
Mutual

can

fuel

have

of

sure

immediate

own

it

finding

area.

business of any road in the country.
It has a large
l.c.l. freight.
Finally, by the nature of its territory,
handles a substantial tonnage of short-haul
traffic where

The

larger

volume
is

future

program
company.

of

mortgages
by

illustrated

issuing

for

insured

ments

FHA

The

Pennsylvania

equipment

situation

was

VA

million.

In subsequent years

recovery

brought earnings

ance

under

there
1949.

company a year or

Because

vania

will

commercial

of the limited

bank

two later.
period the

be

are held
by commer¬
banks, the latter are said to
to lend at 3% for this

ready

♦

this

connection

sharp reversal.

Gradual
share to $2.61 by 1948, but last year
Only $0.95 a share was reported in
its record has been spotty.

that basically

the road

was

continuing

on

the upgrade.

year

Since steel and coal

with.
items

more

no

are

the road's most important traffic

unfortunate set of circumstances could be imagined.

The road's troubles continued

into the current year, with the

bituminous mines still out of production because of labor difficul¬

It did not get into the black until June, but in that month,
was without benefit of rearmament influences, net income
amounted to more than $5 million.
This contrasted with a net

ties.

which

loss

earlier.
Sizable net profits contrasted
in July and August.
It is virtually
certain that this pattern will be continued over the balance of the
year.
On this basis earnings of around $3.00 are expected. More¬
over, if major coal and steel strikes are avoided next year the
share results could easily be increased to around $5.00 in 1951.
of

with

of

In

a

per

there were periods when bituminous mines were on
only a three-day basis and periods when they were completely
shut down by strikes.
Also, there was the steel strike to contend

The effect of this lower
interest rate paid to the commer¬
cial bank is to reduce materially
the size of the net premium ac¬
tually paid by the insurance com¬
pany for the mortgages involved.
Savings and loan associations
have long had, in effect, the priv¬

funds.

when both freight

This relapse, caused by outside forces, pretty much obscured

the fact

purpose.

ilege

was

Last

mortgages
cial

with the added

same,

1946, for the first time in 100 years of operation, Pennsyl¬
Railroad sustained a deficit.
The loss was roundly $8.5

In

mortgages to the insur¬

the

the

volume receded from the record wartime levels.

repurchase
resell the

much

inability to get operating expenses under control
and passenger

which

terminal costs

covering the most highly indus¬
literally choked with traffic

System,

of cur¬
rent investment needs and selling
the
mortgages to a commercial
bank when received, but with a
excess

agreement

Postwar,

handicap that by and large motive power was obsolete.
All of
these factors contributed to an important degree to the company's

commit¬
and

heavy burden.

during World War II.. The properties had run down somewhat
in the
preceding depression period and during the period of
intensive war use it was impossible to maintain them properly.

for
the

adopted by an insurance
This
institution
has

guaranteed loans in

a

trialized sections of the country, was

a

been anticipating future mortgage

requirements by

impose

costs

road haul costs.

wise.

acquiring

war.

involved in handling passengers and l.c.l. freight
mounted particularly rapidly.
Also, they were more difficult to
counteract by operating economies than were the increases in

artificial geographical
restrictions
justifiable
formerly are no longer suitable or
method of

the

and the expenses

This

that

Another

following

costs

of

terminal

lending

the

material

passenger

adequate mortgage outlets within
their

in wages, and
It does the largest

major railroads by the sharp rise

the

of

and

volume

no

institutions

local

banks

size to a point where
longer be considered

in

grown

they

savings

was

last year, the

reached

132A

operating status it is felt in many ^quarters that further substantial
price enhancement is in prospect.
;
Pennsylvania, which does approximately 10% of the total rail¬
road business in the country, v/as one of the most adversely

only

of

miles

25

14V2, which

1950 low of

of

also be sought to lend on conven¬

joining

growing conviction among railroad analysts

Railroad has now definitely turned the corner.
That this opinion is shared by a large number of investors is
obvious from the action of the stock in recent weeks.
From the
that Pennsylvania

will

Permission

banks.

mercial

There has been a

I

use

amortization

loan

&

man

Fairman of the

P.

banking house of Fair-

perience with nationwide FHA in¬
sured mortgage lending, the mu¬

ible

without

expansion of the

Thanks to the

savings

is quote from the Report of the
being made by savings banks of Home Loan Bank Board for the
armament will stimulate further, the
so-called
"open-end
mort¬ year ending Dec. 31, 1949:
adds to the demand for new homes
gage" to finance real estate re¬
"The extent to which the Fed¬
in many parts of the country. The
pairs
and
modernization.
This eral Home Loan Banks have func¬
abatement of the threat of over¬ type
of mortgage provides that tioned cis a national credit reser¬
increasing

William
vestment

banks can further ex¬

pand their operations to step up
their share of the mortgage total.

direct mortgage

by

lending by individual banks.
In

how savings

savings banks

be done with this end in view.

York

Eugene Barry Director

buying

tial

supply. I will mention some things
that are being done or that can
New

referred to as
May," has been selling
mortgages than it has been

more

acquiring mortgage in¬
vestments in anticipation of pros¬
pective increases in their invest-

In

familiarly

tion,

"Fannie

recently. Mutual savings
Eugene P. Barry, partner of
mortgages, under trust or agency banks may find in the secondary Shields & Co., has been elected a
arrangement
with
Institutional market for mortgages a volume of director of Interstate Motor
Securities
Corporation,
their loans that will shape up as desir¬ Freight System, it was announced
wholly owned mortgage company, able under existing conditions.
by John P. Altwater, President.
The basic problem facing mu¬
in an aggregate amount of approx¬
tual savings banks is to keep pace
imately $274,000,000. These loans
William P. Fairman
in

vest

means

in

decline

the

for

well known.

are

As of Sept. 30, 1950, 47 New
banks had made in¬

ing.

savings bank, as the law now pro¬

1939, mutual savings banks
larger amount of real es¬

building which will reduce f the
supply of mortgages available to
part

mortgage

Foreclosures

later interest.
making
instalments could be saved.

as

The increased demand for com¬ government and
other bond in¬
giving
substantially
loans on mercial loans, which have ex¬ vestments
which experience has been good.
panded around $214 billion since lower yields, narrows the cover¬
New York savings banks have the fighting
in Korea began, is age of current dividend payments.
found that the statutory authority causing
some
commercial banks This consideration provides an ur¬
in smaller communities to reduce gent
incentive
for maintaining
they have obtained to make FHA
their mortgage holdings. The Fed¬ and
insured
loans
anywhere in the
expanding
mortgage
port¬
eral National Mortgage Associa¬ folios now and in the future.
country facilitates mortgage lend¬

in

involve

would otherwise be paid out

of

also have
gratified by a forced
building.

mortgages

to be

buy at all

others will not

the

vestment

and homes, but guaranteed

durable goods

many

$2,942,711,670, of which $2,- payments are being covered by a
have
been
repaid, reasonable margin. Any consider¬
a
balance of $433,429,150 able decline in mortgage holdings,
which will lead to an expansion in
outstanding on the latter date."
509,282,520

leaving

tion to retain and increase his in¬

Loanable Funds
on

to the borrower and
lender in better posi¬

expense

places

Thursday, October 19, 1950

.

loan and prior liens are ing

the larger

5

page

.

.

$788,000

1949

losses

a

year

continued

Probably the most important factor in Pennsylvania's recovery
the substantial expenditures for additions and better-

has been
•

ments

voir is evidenced by the fact that,

to property and equipment in postwar years.
Since 1946,
expenditures have approximated $370 million, divided roughly
one-fourth on roadway and three-fourths on equipment.
Another
$55 million of Diesel power has recently been ordered.
This

since

Diesel

program

of any

size

ness

they first opened for busi¬
Oct. 15, 1932, to Dec. 31,
the Federal Home Loan

on

satisfactory, the loan can be 1949,
up
to
its
original Banks have made advances to
if the appraisal justifies horyie financing institutions total¬

such

tion

of

the

increased

With

amount

expected.

these

has been particularly effective.

were placed in late 1946 and
recent order the company

deliveries

further

The first orders

early 1947. On comple¬
will have 1.034 Diesels.
gains in operating efficiency are

ff

Volume

172

Number 4952

1

i

f

! h

i

,

*

•

•

The Commercial and Financial Chronicle

...

'

•>.)

,

(1521)

The following statistical tabulations

Indications of Current
Business

latest week

Activity

week
Latest

AMERICAN

IRON

AND

STEEL

Indicated

steel operations
Equivalent to—

Bteel

ingots

and

INSTITUTE:

(percent

Oct. 22

month available.

month ended

on

Previous

102.0

Month

Ago

that

(net

tons)

Oct. 22

Crude

PETROLEUM

oil

and

AMERICAN

1,959,600

1,936,400

IRON

to

runs

output

daily

—

(bbls.

average

of

Gasoline

output

Kerosene

output

Gas,

oil,

and

distillate

Residual

fuel

oil

Stocks

at

oil

(bbls.)

output

19,259,000

Oct.
fuel

output

5,871,900
1(6,091.000

7
7

2,240,000

Oct.

(bbls.)

7

Oct.

(bbls.)

7

Oct.

(bbls.)

average

7

8,449,000

and

Kerosene

5,908,830

5,014,800

6,051,000

5,971,000

5,335,000

19,624,000

19,595,000

18,107.000

2,471,000

2,172,000

Gas, oil,

and distillate fuel oil (bbls.)

Residual

fuel

(bbls.)

OF

7,891,000

7,131,000

BUILDING

OF

7

8,156,000

8,306,000

8,285,000

7,363,000

7

103,700,000

104,383,000

106,381,000

102,707,000

7

28,170,000

27,849,000

26,640,000

27,548,000

freight

Revenue

7

78,601,000

76,734,000

71,597,000

85,800,000

New

7

42,213,000

42,330,000

42,727,000

68,222,000

Additions

new

CIVIL

loaded

(number

of

cars)

Oct.

of

cars)

7

Oct.

_

(number

CONSTRUCTION

ENGINEERING

—

S.

U.

Private
Public

7

863,676
730,156

879,985

and

642,136

730,562

574,228

$123,259,000

S.

DEPT.

517,781

and

8287,974,000

$219,743,000

157,407,000

123,324,000

68,632.000

130,567,000

96,419,000

66,327,000
77,370.000
59,959,000

Oct. 12

57,306,000

84,842,000

77,314.000

Oct. 12

Federal

11,326,000

45,725,000

19,105,000

OUTPUT

Bituminous

(U. S.

BUREAU

OF

Oct.

7

11,415,000

•11,495,000

10,066,000

7

1,003,000

1,037,000

768,000

332

262

90

—__™

69

120

113

83

buildings

39

35

81

78

60

130

129

110

33

loft

and

38

33
23

garages

building

_

(

28

Beehive coke

(tons)

Oct,

7

143,800

"•■•149,900

122,500

2,100

INDEX—FEDERAL

RESERVE

All

I_
and

output

FAILURES

(in

(COMMERCIAL

7

STREET

Oct. 14

AND

INDUSTRIAL)

DUN

—

326

220

295

INC.

6,508,591

6,513,707

6,449,101

188

154

165

11

7
701

27

40

209

204

218

_

V

;

.

and

and

steel

(per lb.)

Pig

(per

gross

Scrap steel (per

Oct. 10

:

ton)

gross

3.837c

3.837c

3.837c

3.705c

Oct. 10
Oct. 10

:

ton)

849.19

849.19

$46.61

$45.88

$40.67

840.67

$40.75

$26.58

CIVIL

PRICES

(E.

M.

&

Export

J.

Straits
Lead

tin

Lead

(St.

Zinc

Louis)

(East

St.

U.

S.

BOND

at
at—

17.550c

112.000c

106.500c

100.500c

Aaa

PRICES

16.000c

16.000c

13.750c

15.800c

15.800c

15.800c

13.550c

Oct. 11

1—

^

_

DAILY

17.500c

i17.500c

17.500c

Federal

COPPER

9.250c

Oct- 1?
0cfc* 17

101.60

101.83

—

__

Bar™——7_7—
Group

Utilities

Crude

In

(tons

115.43

115.63

115.82

119.82

120.02

120.84

118.80

118.80

115.04

115.04

115.43

114.27

—

S.

A.

1

YIELD

DAILY

CROP

of

109.24

106.56

BOARD

112.00

109.42

CULTURE—As

116.02

116.41

Corn,

119.00

119.00

119.41

119.41

Wheat,

U.

all

2.38

2.36

2.22

2.88

2.87

2.86

2.90

2.66

2.65

2.61

Oct. 17

2.72

2.71

2.71

2.70

Oct. 17

2.90

2.90

2.88

2.94

3.22

3.21

3.36

3.09

3.08

3.06

3.2C

2.85

2.84

2.85

2.83

2.70

2.70

2.68

2.68

-Oct. 17

-Oct. 17

all

446.2

INDEX

465.4

476.9

334.8

S.

—-—————————Oct.
———Oct.

at——

(tons)

191,916

282,832

236,422

180,467

201,544

100

7

253,120

231.663

—

—

Percentage of activity
orders

281,869

^ct-

:

;

PAINT

AND

REPORTER

DRUG

PRICE

AVERAGE=100

103

81

92

763,679

714,877

738,187

440,721

INDEX—1926-36
.Oct. 13

._

LOT

DEALERS

THE

FOR

EXCHANGE—SECURITIES
Odd-lot

sales by

ODD-LOT

SPECIALISTS

AND

ON

137.8

137.6

135.6

126.7

THE

N.

OF

Y.

112,083

103.115

50,952

193.890

3,162,638

3,377,790

1,011,644

1,146,463

740,537

740,537

901,668

269,532

271,107

244,795

33,457

end

of

37,239

Barley

31.014

29,636

22,266

18,380

941,601

884.732

C70.102

537,896

Sept. 30

$41,807,525

$42,249,065

$28,706,532

$20,753,844

sales)-

Flaxseed
Rice

34,814

33,796

23,381

24.496

286

265

222

119

34,528

33,531

23,159

964,241

663,011

637,455

10,484

10,843

8,893

4,640

-Sept. 30

986,829

953,398

654.118

632.815

Sept. 30

$39,247,146

$38,350,289

$25,091,286

$20,224,962

1

-(in

:

_

.

(bushel)..

Sorghum
Cotton

233,868

205,931

1.481,864

1,322,924

299,954

297,922

238,104

22,509

22,509

4,817

4.681

5,184

35,224

34,142

43,664

36,776

36,237

40,113

184,641

152,630

•

—

,_

pound
grain

bag)—

(bushel)

184,091

—

(bale)

all

Hay,

wild

all'alfa

and

lespedeza
dry

(

timothy

edible

41,285

38,546

29,395

(100

lb.

29,395

24,657

7,836

8,571

16,717

21,554

bag)—

2,902

(bushel)

274,702

222,305

1,655,895

1,873,825

426,782

54.232

7,597

6,796

13,151

10,197

26

and seed

1,970,376

7,300

;

26

(ton)

(ton)

:
.

Fears

(bushel)

(bushel)

crop

58,753

50,730

119,053

133,742

52,407

51,990

74,818

30.657

29.964

36,404

2,520

2,538

2.662

231

231

198

193

198

941

941

840

109,731

.....

106,438

128.174

—

(bushel)
(ton)

Cherries

(12

states)

(3 states)

Cranberries
Pecans

(ton)

(ton)

(5 states)

(barrels)

—

(pound)

MOODY'S
200

;

WEIGHTED

COMMON

Industrials

'

342.220

354,040

214.530

342,220

354,040

214,530

274,410

271,660

272,110

229,860

202,480

274,410

■

Banks

AVERAGE

YIELD

STOCKS—Month

of

(125)

Railroads

^Utilities

Round-lot sales by dealers—

-

purchases by dealers—■

OF

6.45

(25)

6.66

(15)

5.99

8.66

5.92

5.68

4.45

4.50

4.52

3.27

3.51

3.21

6.22

6.39

6.31

$275,000,000

$275,000,000

8225,000,000

257,215,671

257,873,892

256.679,558

17,557

29,359

$257,891 449

$256,708,917

(10)

U. S.

PRICES

NEW

SERIES

U.

S.

DEPT.

OF

GOVT.

As

at

LABOR—

1926=100:
All

Oct. 10

Livestock
Meats

Textile
Fuel

j.
than

farm

and

foods

1

products

and

Metals

other

Building

•Revised

metal

materials

and

figure.

159.7

224.6

241.5

195.5

172.6

175.3

178.9

allied

Oct. 10

234.4

246.7

260.4

517,000

*160.0

157.8

145.0

162.2

*161.7

156.0

138.0




135.0

134.9

134.9

of

foreign

crude

that

LIMITATION

omitted):

be

may

outstanding

time

gross

public

debt

177.1

176.0

167.3

222.0

*222.0

220.7

188.9

130.6

129.9

127.4

116.1

Guaranteed

obligations

not

Treasury
Total

owned

by

the

—19,862

public

gross

debt

and

guaiarteed

$257,235,533
Deduct—Other

gations

not

,

outstanding
subject

to

public debt obli¬
debt limitation

714,012

716,904

755,867

S25S.521.520

$257,174,545

$255,953,050

18,478,479

17,825,454

19,046,949

130.6

177.5

Oct

barrels

DEBT

(000's

217.5

160.8

Oct. 10

products

((Includes

one

159.1

Oct. 10
_

any

30

amount

156.4

221.1

^Oct. 10

products

materials

Chemicals

182.0

166.5

Oct. 10

lighting

and

152.0

179.1
167.4

Oct. 10

—

commodities

169.1

177.9
165.4

Oct. 10

1

Foods

All

*108.8

Oct. 10
Oct. 10

products

Grains

STATUTORY

Sept.

face

Total

168.3

Oct. 10

Farm

.

of

(2u0i

Outstanding—

i

commodities

yield

Average

6.39

6.04
5 82

(24)

Insurance

Total

WHOLESALE

250

Sept.:

—

.

Round-lot

44

58,288
120.104

_—

Grapes

401,962

59,884

1,950,725

—

.___

(ton)

420,286

59,658

1,950.124
13,282

^

—

for sugar

3,267

275.256

,__

(bushel)

2,902

1,676,890

_x_.

1

(pound)

"

15,916

(bushel)

Sweetpotatoes

beets

41,702

____,

(ton)—

(pound)

Tobacco

12,296

(bagl

for, beans

Peanuts

12,657

(ton)

field

Soybeans

99,305

12,657

—_________

(ton)

clover

16,128

106,818

7,987

—

9,882

107,870

__

(ton)

dry

18,697

9,869

(ton)

Hay,

Beans,

38,864

236,075

1.4S3.975

■

(bushel)

(.100

Peas,

AGRI¬

24,377

997.317

-Sept. 30

Oct.

(bushel)

Apricots

Sept. 30

REPORTING

(bushel)

Buckwheat

Peaches

Sept. 30

CROP

—

(bushel)

Rye

period

thousands)

(pound)
Apples, commercial

.

79.949

119,529

1,010,069

at

(bushel)

Hops

purchases)—

purchases by dealers (customers'

*92,380

108,465

lbs.)

OF

spring

Broomcorn

..Sept. 30

Odd-lot

64,870

85.785

111,842

3,117,967

stocks

(bushel)

Sugar

ODD-

STOCK

COMMISSION:

EXCHANGE

dealers (customers'

ACCOUNT

90,541,000

(bushel)

Other
Oats

Sugarcane
BTOCK TRANSACTIONS

406.831,000
316,290,000

59,981,000

_

(bushel)

spring

Potatoes

OIL,

462,579,000
402,598,000

Sept.:

of

Hay,

(tons)

of

DEPARTMENT

Hay,

ASSOCIATION:

(tons)

$

58,748

2,00C

(bushel)

Hay,

PAPERBOARD

Month

lbs.)___

(bushel)

Durum
2.38

3.22

COMMODITY

For

of

PRODUCTION

111.62

109.06

2.67

—

$

327,128,000

2,000 lbs.)

116.22

AVERAGES:

__

Unfilled

403,478.000

2,000 lbs.)

copper

(tons

111.44

Baa

received

810,309,000

702,103,000

$

368,882,000

—

(tons

109.06

Oct. 17

Orders

1,164,682,000

590,648,000

2,000

of

116.02

.Oct, 17

Production

959,530,000

of

customers—

Oct. 17
Oct. 17
Oct. 17

——.—.—

—

NATIONAL

10

119.00

Oct. 17

MOODY'S

81

41,754,000

of

(tons
to

Refined

115.04

119.61
118.60

U.

All

Aaa

25

8

CONSTRUCTION—EN¬

municipal

INSTITUTE

Winter
BOND

18
90

e

NEWS-RECORD —Month

Oct. 17

„—_

Group

Industrials Group

MOODY'S

57

Copper production in U. S. A.—

103.82

Oct. 17

—

—

Public

101.55

Oct. 17

corporate

-

Aa

Railroad

58

17

_—L__

Deliveries

AVERAGES:

Bonds

A

15

255

90

construction

and

69

11

305

96.000c

16.000c

Oct. 17

Average

44

12

.

conslruciton

State

17.325c

24.425c

Oct. 11

—

Louis)

23.200c

24.425c

Oct. 11

—

24.200c

24.425c

Oct. 11

at

24,200c

Oct. 11

at

Government

'

44

310

service enterprises
development—

construction

Refined
MOODY'S

'

.

/

S.

Public

°ct- 11

,

York)

York)

U.

Private

at

(New

(New

"

-

public
and

September:

QUOTATIONS):

refinery at

reiinery

48

60

public.—

GINEERING

Electrolytic copper—
Domestic

11

80

39

>

40

-

water

ENGINEERING

Total

METAL

other

19
102

PRICES:

Finished

iron

institutional

20
105

.

Miscellaneous

172

All
COMPOSITE

40

238

721

Sewer

—Oct. 12

30

45

230

7

Other nonresidential
building—______
Military and naval: facilities—
Highways _v
"

5,480,735

30

43
228

29

Conservation

EBON AGE

30

.

735

Industrial

29'

BRAD-

&

388

private

Hospital

kwh.)

000

..

127

305

telegraph

utilities..

Nonresidential building

Oct.

11

116

301

Residential building

ELECTRIC INSTITUTE:

Electric

12

106

Educational
EDISON

20

12

construction

Public

SYS¬

AVERAGE=1<)0

29

_

:_

public

other

23

29

institutional

utilities

Oth»r

26
24

recreational

and

23

23

._

and

Telephone

1,100,000

TEM—1935-39

16

351

construction

Public

.78

16

Miscellaneous
Farm

2,142.000

Oct.

SALES

715

90

17

inonfarm)___

nonresidential

Hospital

MINES):

and lignite (tons)
anthracite (tons)

STORE

1,180

iqi

building

restaurants,

Social

17,411,000

Pennsylvania

DEPARTMENT

809

1190

' 87

Railroad

coal

1,513

1,286

"III

Educational

.

COAL

$2,214

2,050

1294

—"

Warehouses, office and

$143,697,000

88,065,000

Oct. 12

municipal

8156,697,000

Oct. 12

construction

$2,771

2 059

:

alterations

Religious

Oct. 12

$101,081,000

OF

52 794

(nonfarm)2

Commercial

Other

construction

OF

Industrial

751,276

NEWS-

construction

State

4,918,314

_—IIIIZIII

building
dwelling units

RECORD:
Total

6,597,935

5,668,898

SYSTEM—

construction

Stores,

ENGINEERING

*8,230,317

6,326,464

construction

Private

Nonresidential

freight received from connections

Ago

LABOR—Month of September
(in millions):

Total

RAILROADS:

Revenue

Year

Month

8 200 020

thousands).

Residential

at

GOVERNORS

RESERVE

(in

CONSTRUCTION—U.

—Oct.

at

at

AMERICAN

Previous

including alloy

tons)—Month of August

Nonhousekeeping
ASSOCIATION

of that date:

2,190,000

8,460,000

Sept.

Oct.

(bbls.)

are as

1x1)1,1

INSTITUTE:

castings produced
Sept.

products,

(net

FEDERAL
of

Oct.

gasoline

either for the

for
of

DEBITS—BOARD

THE

Month

Oct.

at

oil

steel

Oct.

unfinished

(bbls.)

BANK

5,903,450

'

(bbls.)

refineries, at bulk terminals, in transit and in pipe lines—

Finished

are

42
Oct.

stills—daily

of

stainless

STEEL

steel

tons)—Month

and

gallons each)
Crude

AND

ingots and

(net

172,000

INSTITUTE:

condensate

of quotations,

cases

Latest

9.3

Shipments
AMERICAN

in

or,

Ago

100.4

101.6

1,907,300

Dates shown in first column

date,

Steel

castings

production and other figures for the

cover

Year

Week

Week

capacity)

of

or

or

37

runs.

10

Grand
Balance

total

face

able,under
•Revised.

outstanding...

amount

above

JNot

of obligations
authority

including

stock

of

issu-

American

Tel.

&

Tel.

38

The Commercial and Financial Chronicle

(1522)

•

Aeronca

Middletown, Ohio
$50,000 of 4% convertible
promissory notes and 50,000 shares of common stock
(latter to be reserved for conversion of notes on basis of 1
share for each $1 unit of notes).
Price—$2.12 J/2 per $1
unit of notes. Underwriter—Greene & Ladd, Dayton, O.
Mfg.

Corp.,

(letter ot notification)

Proceeds—For working capital.

Office—Municipal Air-

"port, Middletown, O.
Corp., N. Y.
Oct. 11 (letter of nodtication) 867,500 shares of common

stock

Price—10c

lc).

(par

Frazee

H.

Olifiers

per

Underwriter—

share.

York. Proceeds—For
Office—12 East 44th St., New York 17,

working capital.

Co.,

New

York.

New
•

&

Eberstadt

F.

Price—$5.50 per share. Underwriter—
Co., Inc., New York, will act as dis¬

(par $1).

tributor

for

&
the

Richard

Proceeds—To

stock.

Sea-

W.

bury, Chairman of the board, who is the selling stock¬
holder.

Alabama

Power

22 filed 100,000 shares of preferred stock (par
$100). Underwriter—Issue awarded to Morgan Stanley
Co.

&

on

Oct.

18

its bid of $100.06 per share with a
Price—Expected to be reoffered at
share. Proceeds—For construction program.
on

dividend.

$102.20

per

Statement effective

Alabama

Oct.

Power

11.

from

underwriter.

Sept. 22).

Offer

expires Oct. 20
Statement effective Aug. 29.

(extended

Under¬
competitive bidding.
Probable bidders: Halsey, Stuart & Co. Inc.; Kidder, Peabody & Co. Proceeds—To finance, in part, construction
program of company and its subsidiary, Interstate Tele¬
graph Co. for 1950 and 1951. Bids—To be opened at 10:30
a.m. (EST) on Oct. 24 at Bankers Trust Co., 16 Wall St.,
New York, N. Y. Statement effective Oct. 11.
To

—

determined

be

Casualty

Co.,

Insurance

2

ferred

Burlington,

New

be sold to

—None.

Co., Indianapolis, Ind.
(letter of notification) 3,000 shares of 5% cumu¬
lative preferred stock.
Price—At par ($100 per share)
2

and accrued dividends. Underwriter
City Securities
Corp., Indianapolis, Ind. Proceeds—For working capital.
—

($100

par

Proceeds—To

reduce

debt.

bank

•

for

cruals, of all the 47,609 shares of outstanding $7 pre¬
ferred and 45,891 shares of outstanding $6 preferred;
and (b) the carrying forward of the company's construc¬
tion program. Bidls—Received by company up to noon
(EDT) on June 19, but rejected. Only one bid was made
of $100,003 per share, with a $4.95 dividend from Lehman
Brothers, Equitable Securities Corp. and White, Weld &
Co. (jointly).
Statement effective June 12. No further

Oct.

•

Atlantic City Electric Co. (11/13)
Oct. 18 filed $18,400,000 of first mortgage
bonds, series A,
due 1980.
Underwriters—To be determined by competi¬
tive

bidding.

Probable bidders: Halsey, Stuart Co. Inc.;
Union Securities Corp. and Smith,
Barney & Co. (joint¬
ly); Harriman Ripley & Co., Inc.; White, Weld & Co. and
Shields & Co.

(jointly); Lehman Brothers; Kidder, Peabody & Co.; Blyth & Co., Inc. Proceeds—To redeem a

like amount of 3y4%

first mortgage bonds due in 1964.
Bids—Expected to be received up to Nov. 13.

Big West Oil & Gas Co., Dallas, Tex.
Sept 5 filed $1,760,000 of 5% sinking fund debentures
due 1965 (convertible into

common stock on basis of 200
shares for each $1,000 of
debentures). Price—To be filed

by amendment.

Chicago, 111.

stock

—

For

9

2

Co., Chicago,
director, the

capital

Finance Co.,

of

per share).
creditors' claims and for working capital.
P. O. Box 2215, Los Angeles, Calif.
•

Ekco
12

stock

Proceeds—For working capital.

Cicero

Md.

(par

the

2

stock

(letter

Fire

of

basis of l-for-4; rights expire Oct. 25.
Price—$22 per
share. Underwriter
None. Proceeds
For corporate
—

purposes.

more,
•

—

Office—Eutaw

and

Saratoga

Streets,

Balti¬

Insurance

Price—$4.50

(par $5).

of

insurance,

liability

including

Md.

Brunner

Manufacturing Co., Utica, N. Y.

(10/24)
Oct.

17

(letter of notification) 37,172 1/7 shares of com¬
(par $1), to be offered to common stock¬

stock

mon

holders of
seven

share.

record

Oct.

24 at

rate

of

one

share for

each

^

Pro¬

shares held;

rights expire Nov. 8. Price—$6 per
Underwriter—Mohawk Valley Investing Co.,

Utica, N. Y.

Inc.,

Proceeds—For general corporate purposes.

California

Electric Power Co.
(10/24)
Sept. 25 filed $4,000,000 of 27/g% first mortgage bonds
due 1980. Underwriters—To be determined
by competi-

for

additional

withdrawn.

It

Price—In

reported

Statement

Oct.

on

5

that

Financial

share.

may

&

6

East

Street

be

company

in

exchange

for

& Co.,
Proceeds—For working caoital.

•

of

certificates.

five

shares for

each

^

•

Industrial

|Kaiser Steel Corp., Fontana^ Calif. (10
Sept.

filed

29

share

■

Philadelphia

San Francisco

Private

IVires, to all offices


/


.

Chicago

Cleveland

preferred

of

24)

stock

(no

.

of

common

stock.

Price—To

be

filed

by

amend¬

Boston Corp., New- York. Proceeds—From the sale of
the

units, together with $60,000,000 to be received from
placement of an issue of first mortgage 3%%**•

private

program.

•

Pittsburgh

shares

ment (probably at $25 per unit). Underwriter—The First

withdraw

Boston

1,600,000

paif and 800,000 shares of common stock (par SI) to be
offeredin - units of one preferred share and one-half

May 3 filed 170,000 shares of common stock (par 250)
Price—$3 per share. Proceeds—For plant and warehouse,
advertising research, working capital, etc. A request to

NewYork

by amendment.

Bliedung, Washington, D. C, Proceeds—To reduce
and to expand company's roof-proofing and
inc ustrial coatings plant.'Office—2600 Ali Baba Ave.,
Op* Locka, Fla.

$50& of '

Co., Inc.

(10/25)

lia )ilities

Office—4 East 62nd St., New York 21, N/ Y.

General Radiant Heater

III.

common

Cad J.

preferred for each

and

Decatur,

Coatings Inc., Opa Locka, Fla.
(letter of notification) 300,000 shares of common
stobk (par 10 cents). Price—$1 per share. Underwriter—

pre-incorporation

certificates at the rate of 10 shares of

$1,000 of certificates

Co.,

struction.

Realty Corp., N. Y.

$125,000

Price—

Oct. 4

Oct. 11 (letter of notification) 1,250 shares of 3% cumula¬
tive non-convertible preferred stock (par $100), to be
offered

$2).

Brothers

stock (no par).
Underwriters—Mer¬
rill Lynch, Pierce, Fenner & Beane and The First Boston
Corp. Proceeds—For payment of short term bank loans
(to amount to $9,000,000 at Oct. 15) and for new con¬

Seryice Corp. of Denver, Colo., and

62nd

Power

Price—To be filed

Wilmington, Del.
4

Proceeds—To retire

Underwriter—Dansker

(par $50), and 200,000 shares of

Fund, Inc., Denver, Colo.
Oct. 16 filed
2,300,000 Fund shares, 3,000 systematic
(periodic
payment)
investment
certificates
and
600
cumulative (fully-paid) investment certificates. Under¬

•

bonds

Underwriter—

18 (letter of notification) 100,000 shares of 18 cents

per

Illinois

Industrial

writer—Investment

and

Oct. 5 filed 150,000 shares of cumulative preferred stock

has completed purchase of El Monte plaqt.
•

102%.

Corp., Omaha, Neb.

rncT,"New York City.

(par $50) to be offered to com¬
of one preferred share for

working capital.

$30,000 of 33i%

of

excess

cumulative convertible preferred stock (par

$8^

Price—To be filed by amendment,

was

casualty

Hub Loan Co., Jersey City, N. J.

Sjgpt.

along with dividend rate. Underwriter—Smith, Barney
& Co., New York.
Proceeds—To pay promissory note,
to complete purchase of a new plant at El Monte, Calif.,
and

automobile

temporary loans.
common

basis

on

Proceeds—To

in order to offer additional

notification)

(letter of

1970.

due

June 21 filed 103,402 shares of series A cumulative con¬

stockholders

per

J Hooper Telephone Co., Hooper, Neb.

Fedders-Quigan Corp.

mon

Philadelphia
shares of capital
share. Underwriter—

Co.,

64,000

coverage.

Aug. 18

Office—1949 No.

per share.
Underwriter—None.
plant improvements.

vertible preferred stock

Office—55

acquired.

be

to

increase capital and surplus

Price—$40

each 12 shares held.

or

notification)

'

on

Proceeds—For exploration,

Jenks, Kirkland & Co., Philadelphia, Pa.

Wachob Bender

(letter of notification) 6,032 shares of common
(par $1) offered to stockholders of record Oct. 10

common

stockholders
for each 14
Price—SI.50 ner

offered to
of one share

cents)

company,

Hamilton
Oct.

Emmart

ceeds—For

25

Sept. 22 on basis
held; rights to expire Oct. 20.

lease-1 to

Address—

Packing Co., Louisville, Ky.
(letter of notification) 3,249 shares of

stock (par $1.25).

supplied

Liberty Street, New York 5, N. Y.

Ave., Chicago, 111.

Sept. 28

Baltimore,

be

(10/25)

common

mining of various properties located
principally in Arizona and New Mexico, at present unoer

Co., Chicago, III.
notification) 8,461 shares of common
Price—$13 per share. Underwriter—

(par $2.50).

(par $100).

Stockholders to vote

Gas Co.

Underwriter—None.

lines

None.

stock

development and

Products

(letter of

(Md.)

record

share.

Prices—At par
Underwriter—None. Proceeds—To

pay

(11/21)

&

Stock

shares

stock to be offered to present stockholders.

(40 cents

Co.

Haile Mines, Inc.
Sept. 19 (letter of notification) 100,000 shares of

(letter of

stock.

stock

Harrison

Drayer-Hanson, Inc., Los Angeles, Calif.
Oct. 3 (letter of notification) 255,033 shares of common

Oct.

Utilities

by amendment. Underwriters—
Co., and Walston, Hoffman & Goodwin, of
Philadelphia, Pa. Proceeds—To a selling stockholder.

notification) 1,000 shares of common
Price—$4.50 per share. Underwriters—

Inc., N. Y. City
notification) $200,000 of 5% subordi¬
1980. Price—At par. Underwriter
—Hodson & Co., Inc., New York.
Proceeds—To reduce
debt, for expansion and for general corporate purposes.
Office—50 Church Street, New York 7, N. Y.

drilling and development

working capital.

Brager-Eisenberg, Inc.,
Oct.

Price—To

of

(par $5).

be

to

are

Sept. 28 filed 32,000 shares of

Co., Chicago, III.

selling stockholder.

Underwriter—H. M. Byllesby & Co., Inc.,

Proceeds

expenses and for

Sexton

David A. Noyes & Co. and Swift, Henke &
111.
Proceeds—To Robert C. Caldwell, a

Oct.

States

Hagerstown
&

(letter

Crown

shares

735, 11 Broad St., New York, N. Y.
on approving issue on Nov. 20.

nated debentures due

decision reached.

Gulf

stockholders.

2

11,026

(jointly); Carl M. Loeb, Rhoades & Co. and Lee Hisrgin-

Price—To be filed

Cribben

(11/13)

51,026 shares of referred stock

Corp. (jointly). Proceeds—For construction program.
Bids—To be received up to 11 a.m. (EST) on Nov. 21 at
The Chase National Bank of the City of New York, Room

150,000

Arkansas Power & Light Co.
May 23 filed 155,000 shares of cumulative preferred stock
(par $100). Proceeds—To be applied to (a) redemption
on
Aug. 1, 1950, at $110 per share plus dividend ac¬

Co., Boston, Mass. Pro¬
for working capital.

son

(10/26)
shares of common stock (par $1).
by amendment. Underwriter—Baker,
Simonds & Co., Detroit, Mich. Proceeds—To five selling
filed

and

Brothers and Equitable Securities Corp. (joint¬
ly); Union Securities Corp.; First Boston Corp.: Blyth &
Co., Inc.; Glore, Forgan & Co. and W. C. Langley & Co.

Copeland Refrigeration Corp.
4

Co.

loan

Lehman

G.L.F.

Oct.

pre¬

Underwriters—To be determined by competitive bidding.
Probable bidders:
Stone &
Webster Securities Corp.;

Business—

Property
holding
and
financing
instrumentality
Exchange, farm cooperative.

Power

&

Putnam

bank

Oct. 17 filed 70,003 shares of preferred

Underwriter

share).

Co., Greenwich, Conn.
8,000 shares of SI.50

remaining 40,000 shares to be offered publicly. Under¬
writer—To be determined by competitive bidding. Prob¬
able bidders: Blyth & Co., Inc.; Kidder, Peabody & Co.
and White, Weld & Co. (jointly); Union Securities Corp.
and Salomon Bros. & Hutzler (jointly); Equitable Se¬
curities Corp.; Lehman Brothers; Harriman Ripley &
Co., Inc. Proceeds—To redeem $6 preferred stock, to re¬
pay
bank loans and for new construction. Exchange
Offer—Tentatively scheduled to be made Nov. 14; to
expire Nov. 27. Bids—Expected to be opened on Nov. 13.

cumulative preferred

per

the

on

(par $100),
offered in exchange,
share for share, for outstanding $6 preferred stock; the

patrons of Grand League Federation

Price—At

L.

retire

filed

13

which

of

York

Sept. 28 filed 25,000 shares of 4%
stock to

Gulf

Oct.

Ithaca,

Corp.,

31

share held;

for each

(no par) and 9,777 shares of common stock

Underwriter—F.

Cooperative Grange League Federation
Exchange, Inc., Ithaca, N. Y.
Sept. 28 filed 500,000 shares of common stock to be sold
to cooperative members.
Price—At par ($5 per share).
Underwriter—None.
Proceeds—To reduce obligation to
Cooperative G.L.F. Holding Corp. Business—Farm co¬
operative.
Holding

Oct.

record

(letter of notification)
stock

ceeds—To

notification) 50,000 shares of class B
(non-voting) common stock (par $1) to be offered to
present stockholders on basis of one share for each five
shares held.
Price—$2 per share.
Underwriter—None.
Proceeds—To increase capital stock and surplus.

G. L. F.

of

(no par), to be offered first to stockholders. Price—Of
preferred, $25 per share, and common $10 per share.

(letter of

Cooperative

one

Sept. 1

North Carolina

Oct.

share

Washington, D.C.
stock vpar $5),

capital

of

snares

stockholders

Greenwich Gas

by

•

Carolina

Exchange.

American Loan

Oct.

(10/24)

Birmingham, Ala.

Co.,

28 filed 64,0C0 shares of 4.20% preferred stock
(par $100) offered in exchange for a like number of out¬
standing 4.20% preferred shares of Birmingham Electric
No

.

Co.

Power

Sept. 28 filed $2,000,000 of debentures due 1960.

July

Co.

11.

Electric

of

to

rights to expire,
Nov. 20. Price—$10 per share. Underwriter-^-None. Pro¬
ceeds—For additional capital funds. Business — Auto¬
mobile financing.

Co.

Sept.

4.60%

Oct.

California

30,0uu

offered

basis

Radio Corp., Boonton, N. J.
(letter of notification) 2,000 shares of common

16

stock

**

at

filed

2b

be

to

Bids—To be opened at 10:30 a.m. (EST) on Oct. 24
Bankers Trust Co., 16 Wall St., New York, N. Y. State¬

Aircraft

Oct.

Sept.

gram.

writers

Air Marshall

•

Government Employees Corp.,

Kidder, Peabody & Co. Proceeds—For construction pro¬

ment effective

ADDITIONS

SINCE PREVIOUS ISSUI

bidding. Probable bidders: Halsey, Stuart & Co. Inc.;

tive

Thursday, October 19, 1950

.

INDICATES

Securities Now in Registration
Oct. 2

.

.

registration statement

was

filed Oct. 11.

Goldfields

Oct. 9
stock.

of California, Inc., Las Vegas, Nev.
(letter of notification) 300,000 shares of common
Price—At

par

($1

per

share).

None at present. Proceeds—For mining

ing,
504

exploration
So.

Third

and

development

St., Las Vegas, Nev.

Underwriter—

equipment, mill¬

expenses.

Office—

bonds' due
used

to

1970,

retire

Kansas

and

$25,000,000

from

banks,

will

be

$91,082,990 RFC loans and for expansion

Gas

&

Electric

Co., Wichita,

Kan.

(11/13-11/20)
Oct. 10 filed 75,000 shares of

common

stock

(no par) and

shares of cumulative preferred stock (par SI00).
Underwriters—To be determined by competitive bidding.
Probable bidders: (1) for both issues: Blyth & Co., Inc.

45,000

Volume 172

Number 4952

.

.

.

The Commercial and Financial
Chronicle

(1523)

39

and First Boston

Corp. (jointly); Union Securities Corp.;
Lynch, Pierce, Fenner and Beane and Kidder,.

Merrill

struction
1952.
the

costs, amounting to about $19,500,000

Offering—Expected in November, the

13th

the preferred

and

on

U. S.

on

capital.

Manganese Corp

Brunner
A

con¬

•

Common

(CST)

a.m.

Tennessee

Co._

Pfd. & Com.

Oct.

18 filed 1,000,000 shares of
capital stock.
Under-,
writers—American Trusteed Funds,
Inc., sponsor, and
Corporate Leaders Sales Co., general distributor.

Hagerstown Gas Co.—~

•

Illinois Power Co

October 25,

Lorain Telephone Co.

Oct.

5

of notification) 2,830 shares of common
par).
Price—$20 per share.
Underwriter—
None. Proceeds—For
working capital. Office—203 9th St.,

Power

&

Common

(EST)

October

—Equip. Trust Ctfs.

26,

October

Light Co.

May 23 filed 90,000 shares of preferred stock (par $100).
Proceeds—To be used to
redeem, at $110 per shart plus
dividend accruals, the 59,422 shares of
outstanding $6
preferred stock, and for construction and other

30,

(EST)

a.m.

Common

1950

purposes

Bids—Received by company up to noon
(EDT) on June
19, but rejected.
Three bids were made as follows:
Securities Corp., $100.40 per share with a
$4.65
dividend; Blyth & Co., Inc., and Equitable Securities

Montana

Bonds & Debs.

—

October 31,
Power

Lehman

Co

.Debentures

November 1,

with

$5.80 dividend.

a

further

Statement effective June

12.

Louisiana Power & Light Co.
Oct.

10

1,

v

filed

Nov.

(11/14)

1980.

$10,000,000 of first mortgage bonds, due
Underwriter—To be determined
by com¬

petitive bidding.

Probable bidders: Halsey, Stuart & Co.
Inc.; Merrill Lynch, Pierce, Fenner & Beane and Kidder,
Peabody & Co. (jointly); Kuhn, Loeb & Co. and Lehman

(jointly); Blyth & Co., Inc.; Harriman, Ripley
,Inc.; Shields & Co. and White, Weld & Co. (joint¬
ly); Salomon Bros. & Hutzler; W. C. Langley & Co., The
First Boston Corp. and
Glore, Forgan & Co. (jointly);
Equitable Securities Corp. Proceeds—For construction
(EST)

Bids

Expected

—

to

be

received

up

to

Loven

Gulf States Utilities

of

California, Newhall, Calif.
notification) 282,250 shares of capital

May 31

(letter of
Price—At par ($1

stock.

Allen

&

"impact" plastics

Office—244 S. Pine St..

over-the-counter.

dealers

may

Newhall, Calif

6

Proceeds—To five selling

cumulative

Corp. of California
notification) 1,395 shares of first pre¬
ferred stock, 5% series.
Price—At par ($20 per share).
(letter of

Underwriter—Guardian
cisco.

Proceeds—For

Securities

corporate

Corn.

of

purposes.

San

Fran¬

Office—333

Montgomery Street, San Francisco, Calif.

Metropolitan Brick, Inc., Canton, Ohio
Aug. 29 (letter of notification) 50,820 shares of
stock

offered

to

common

stockholders

common

of

record

Sept. 25 at rate of one share for each five shares held;
rights to expire Oct. 21.
Price—At par ($4 per share).
Underwriter—None.
and
for
plant
Canton, O.

Proceeds—To pay promissory notes

improvement.

Middle South

Office—Renkert

Bldg.,

Utilities, Inc.

June 1 filed 400,000 shares of common stock
(no par) to
be offered to preferred stockholders of three
subsidiaries
—Arkansas Power & Light Co., Louisiana Power &

Lighl
Mississippi Power & Light Co. UnderwriterEquitable Securities Corp will serve as "dealer-man¬
and

ager."

(See

Mississippi

also listings of Arkansas, Louisiana and
companies elsewhere in these columns.)

Middlesex
Feb.

9

stock
on

Co.

a

(letter

offered

Water

Co., Newark, N. J.
notification) 5,200 shares of

of
to

common

one-for-five

basis.

stockholders

at

common

$50 per share

Underwriter—Clark, Dodge &

Proceeds—To pay notes and for additional
working
Tndefinitelv postponed.

Michigan Consolidated Gas Co.

(11/13)

Oct. 16 filed $20,000,060 first
mortgage bonds due Nov. 1,
1975.
Underwriters—To be determined by competitive

bidding.
Probable bidders: Halsey, Stuart & Co. Inc.;
White,- Weld & Co. and Lehman Brothers (jointly);
Smith. Barney & Co. and Blyth &
Co., Inc. (jointly).
Proceeds—From sale of bonds, together with
$6,000,036
to be received from sale of 428,574 shares of common
stock to American Natural Gas Co., the
parent, to be used
to retire S15,000,000 bank
borrowings and to finance, in
part, the company's extensive construction
program.




York.
Bonds

&

Production

Metropolitan

1950
.Common

Oct. 17

Bonds

Bonds

Sept. 14 filed 10,631
1950

company,

a.m. (EST) on Nov.
415 Clifford St., Detroit, Mich.

Light Co. (10/30)
$27,000,000 of first mortgage bonds, series
1975, and $6,000,000 of sinking fund debentures due
Nov. 1, 1970.
Underwriters—To be determined by com¬
petitive bidding. Probable bidders: Halsey, Stuart & Co.
Inc.: Glore, Forgan & Co. and Lehman Brothers
(joint¬
Oct.

2

•

334?;OOjO.outstanding 4J/2% first mortgage bonds due 1967
and $4,050,000 of 2%%-3% serial notes and $6,100,000 of
bank loan notes; to retire $2,000,000 of 7% cumulative
preferred stock, series A (par $100); and for construction
program. Bids—To be opened at 11 a.m. (EST) on Oct.
30 at office of parent, 165
Broadway, New York, N. Y.
Mines
9

Management, Inc., Wallace, Idaho
of notification) 408,000 shares of capital

(letter

Price—35

cents

per

share.

Underwriter—Louis

Payne of Tucson,

Ariz. Proceeds—To explore and
Office—507 Bank St., Wallace, Ida.

velop mines.

retire
In

bank

loans and

install

space

heaters.

share plus dividends, the outstanding 44,476 shares of
rate

on

follows:

with

for construction

and

other

$6

corpo¬

Bids—Received by company up to noon
19 but rejected.
Four bids were made
Union Securities Corp., $100.10 per share

purposes.

(EDT)
as

stock and

a

June

$4.80 dividend; Lehman Brothers, $100,551 with

stock

(par $25)

share for each 25 shares then held.

Jersey Realty Title

Insurance Co.

(letter of notification) 125,000 shares of capital
(par $1) to be offered to stockholders of record

Broad

St., Newark, N. J.

Niagara Mohawk Power Corp.
Oct.

filed

4

(10/31)

$40,000,000 of general mortgage bonds, due

Oct.

1, 1980. Underwriters—To be determined by com¬
petitive bidding. Probable bidders: Halsey, Stuart & Co.

Morgan Stanley & Co.; Kuhn, Loeb & Co.; First
Corp. Proceeds—To pay off $20,000,000 of bank
loans, to refund $15,689,000 of Niagara Falls Power Co.
first and refunding
mortgage bonds, 3 lk % series due
1966 (latter dependent upon approval of merger of two
companies by SEC and FPC), and for construction, addi¬
Inc.;

Boston

'

tions and betterments.
Norris

Oil

Co.," Ventura, Calif.

notification) 675 shares of common
Price—$4.50 per share. Underwriter—
None.
Proceeds—To Halvern L. Norris, a director, who
is the selling stockholder.
Office—182 W. Ramona St.,
Ventura, Calif.
4

stock

(letter

(par

$1).

Northern

10

May

common

of

Illinois

(letter
stock

of

Coal

Corp., Chicago

notification)

(no par)

up

a

Vice-President of

& Co., Rogers
Northern
Oct. 2

the

to

2,000 shares

of

to be sold at the market price

(between $20 and $22 per share)

Mississippi Power & Light Co.
May 23 filed 85,000 shares of cumulative preferred stock
(par 100). Proceeds—To be used to redeem at $110 per
preferred

common

stockholders of record June 14,

Oct. 2, 1950, on basis of one share for each two shares
held; rights expire Nov. 15. Price—$2 per share. Under¬
writer—None.
Proceeds—To be added to capital funds
of company and invested in investments.
Office—830

machinery and equipment

proposed new plant to be located east of the Rocky
Mountains.
Business—Manufacturer of gas and electric

shares of

Light Co.

12

Oct.

a

water and

New

de¬

Appliance Corp., Hawthorne, Calif.
July 24 filed 50,000 shares of 6% cumulative convertible
preferred stock. Price—At par ($20 per share). Under¬
writer—Lester & Co., Los Angeles, Calif. Proceeds—To

one

Edison

England

stock

bonds and debentures, together with $3,000,000 to be re¬
ceived from sale of new common stock to American
Natural Gas Co., the parent, will be used to
pay off $13,-

stock.

bank

,

&

common

basis of

on

Oct.

ly); Kidder, Peabody & Co.; Harriman Ripley & Co.; Otis
& Co.; Smith, Barney & Co., Kuhn, Loeb & Co. and
Blyth & Co., Inc. (jointly). Proceeds — From sale of

•

repay

Statement effective

Statement effective Oct. 5.

filed

due

Oct.

pharmaceuticals.

Gas & Electric Association (owner of
97.37% of the outstanding stock) proposes to purchase
any shares not subscribed for by others.
Price—$67.50
per share.
Proceeds —To finance property additions.

Bids—Expected to be opened at 11
at office of

other

their bid of 101.359. To be reoffered at 101.875

on

to be offered to

New

13

and

yield approximately 2.77%. Proceeds—To

i
New Bedford Gas

Bonds & Pfd.

,

Anahist

Oct. 5.

1950

Co

common

amendment

loans and for construction program.

Light Co

Edison

of

by

New Bedford Gas & Edison Light Co.
Sept. 14 filed $3,750,000 of 25-year 2%% notes, series B,
due Oct. 1, 1975. Underwriter—Awarded to The First
Boston Corp. and Salomon Bros. & Hutzler (jointly) on

11, 1950

December 12,

filed

be

Statement has been withdrawn.

Mission

ranhal
•

$12.75

1950

Milwaukee Gas

Mercantile Acceptance

Co.

Power

stock (par $2).
(probably around
per share).
Underwriter—Reynolds & Co., New
Proceeds—To five selling stockholders. Business

Price—To

to

Carolina

Buffalo, N. Y.

(EST)..Preferred

RR.______Equip. Trust Ctfs.

December

purchase showcases and costume jewelry and for oper¬
ating and working capital.
Office—681 Seneca Street,

5

Investment Co.

Nepera Chemical Co.
Sept. 28 filed 490,000 shares of

1950

Minnesota Power & Light Co.
Southwestern Gas & Electric Co

20,000 shares of 5% nonpreferred stock (par $10) and
40,000 shares of common stock (par lc) to be offered"
in units of one preferred and two common
shares. Price
—$10.02 per unit.
Underwriter—None.
Proceeds—To

Oct.

Finch

November 29, 1950

(letter of notification)
•

1950

a.m.

December 4,

McKendry-Wallace, Inc., Buffalo, N. Y.
convertible

Co., 11

Missouri-Kansas-Texas

stockholders.

Get.

Nash-Finch Co., Minneapolis, Minn.
Sept. 11 (letter of notification) 3,000 shares of common
stock. Price—From $17 to $20 per share. Underwriter—
J.
M.
Dain
& Co.,
Minneapolis, Minn. Proceeds—To

—

*

Underwriter—Brokers and/or

be underwriters.

1950

Central Power & Light Co

McDonnell Aircraft Corp., St.
Louis, Mo.
Sept. 27 filed 40,000 shares of common stock (par
$1).
Price—At market (estimated at $35.50
per share) to be
offered

Multnomah Plywood Corp., Portland, Ore.
Sept. 18 filed 160 shares of common stock.
Price—At
par ($2,500 per share). Underwriter—None.
Proceeds—
For costs involved in completion and expansion of plant
and for working capital.

Bonds

Preferred

November 28,

per share). Underwriter—Floyd
Co., Inc., Los Angeles, Calif. Proceeds—Tobuy land, build a plant and equip it to produce so-called

A.

stockholders of record Oct. 19 at rate

each

noon

November 21,

Chemical

for

wholly-owned subsidiary, National Industrial
Credit Corp., which will use the funds to discharge an
indebtedness to American General Corp.

Common

& Electric Co

Nov. 14.

on

common

share

one

ceeds in its

Bonds

Preferred

November 20,

and

and electric proper¬

four shares held, with an over¬
subscription privilege; rights expire on Nov. 14. Price—
par. Underwriter—None. Proceeds—To invest pro¬

1950

Kansas Gas & Electric Co
Michigan Consolidated Gas Co.,
11 a.m. (EST).

Kansas Gas

bank loans

repay

gas

At

Co

November 14,

& Co.

program.

of

Common

Louisiana Power & Light Co., noon (EST)
Bonds
Norris Stamping & Mfg. Co
Common
Wisconsin Public Service Corp.
Bonds

Brothers

(10/31)

Brothers. Proceeds—To

offered to

1950

November 13,
Atlantic City Electric
Gulf Power Co

Co.

Morris Plan of America, New York
Sept. 21 filed 389,449 shares of common stock (par $5),

Bonds

Telephone Co

No

decision reached.

Power

ties.

Niagara Mohawk Power Corp

West Coast

Office—309

St., Oxnard, Calif.

for expansion and extension of

1950

Union

Corp. (jointly), $100.10 with a $4.65 dividend; and W. C.
Langley & Co. and First Boston Corp. (jointly), $100.30

"A"

Montana

Milwaukee Gas Light Co.,
11

To lease plant and to com¬

Sept. 25 filed $10,000,000 of 25-year sinking fund deben¬
tures due Oct. 1, 1975. Underwriters—To be determined
by competitive bidding. Probable bidders: Halsey, Stuart
& Co. Inc.; Blyth & Co.: Union Securities
Corp.; Merrill
Lynch, Pierce, Fenner & Beane; Kidder, Peabody & Co.
and Smith, Barney & Co. (jointly);
White, Weld & Co.;

1950

Copeland Refrigeration Corp

Lorain, Ohio.

Louisiana

1950

Preferred

Wabash RR., noon

(letter

(no

—

Monarch Radio & Television
Corp. (10/23)
Sept. 8 (letter of notification) 600,000 shares of common
stock (par 5 cents).
Price—50 cents per share.
Under¬
writer—George J. Martin Co., New York.
Purpose—
For expansion and
working capital.
Office—2430 At¬
lantic Avenue, Brooklyn 7, N. Y.
Expected next week.

Preferred

Gas Transmission

Proceeds

production of processed animal feed.

South

Co.,

None.

—

mence

Preferred & Common

Northern States Power

Processing Co., Oxnard, Calif.

(letter of

writer

Bonds & Debentures

,.

9

No

notification) 1,000 shares of common
stock, of which 500 shares are to be issued to Earl O. Sar¬
gent, President and Patent Licensor, and 500 shares are
to be offered
publicly. Price—$100 per share. Under¬

1950

Co

(EST)
Corp

Kaiser Steel

Lexington Trust Fund, New York

stock

Molasses

___Debs. & Common

Manufacturing
a.m.

10:30
•

Common

California Electric Power Co.,
10:30

Kidder, Peabody & Co. (jointly), $100.19

a $4.90 dividend.
Statement effective June 12.
further decision reached.

Oct.

off promissory notes and for working

pay

Corp

October 24,

(par $1). Price—$5 per share.
Fairman & Harris, Inc., Chicago, 111.

Underwriter—Sills,

Weld & Co. and
with

1950

Monarch Radio & Television

stock

common

Proceeds—To

October 23,

the 20th.

Kaye-Halbert Corp., Culver City, Calif.
Oct. 6 by amendment filed
120,000 shares of class
vertible

(jointly), $100.3lO witlf

NEW ISSUE CALENDAR

through

common

$4.85 div.; W. C. Langley & Co. and First Boston Corp.
a $4.90 dividend; and Blyth & Co.,
Inc., Equitable Securities Corp., Shields & Co., White,

a

Peabody & Co. (jointly); Lehman Brothers; (2) on com¬
mon stock
only: Glore, Forgan & Co..; (3) on preferred
stock only: White, Weld & Co. and
Shields & Co. (joint¬
ly)) Halsey, Stuart & Co. Inc. Proceeds—To
pay con¬

company.

by T. Howard Green,
Underwriter—Faroll

& Tracy and Shields & Co., Chicago.
Illinois

Corp.,

DeKaib,

III.

(letter of notification) 7,200 shares of $1.50 cumu¬

stock (no par) to be offered in exchange
5% cumulative preferred stock of
Friendly Finance Corp. on a share for share basis. Pur-

lative preferred

for

7,200

shares of

7

Af\

40

The Commercial and Financial Chronicle

(f524)

Continued

from

of

39

page

latter, of which
of the outstand¬

pose—To acquire additional control of
Northern Illinois Corp. now owns 96%

ing

Southern

ated

27 filed 175,000 shares of cumulative preferred
(no par).
Underwriters—To be determined by

stock

Proceeds—For

1100, 231

;

Sept. 15 filed 396,571 additional shares of common stock
(par $8) being offered to common stockholders of record

of one share for each 10 shares held,
oversubscription privilege; rights to expire on
1950.
Price—$28 per share.
UnderwritersBrothers and Bear, Stearns & Co.
Proceeds

an

Oct.

30,

Lehman

In

common

Oct.

•

Aircraft

Parks

stock

share.

Sales

•

Underwriter—Maynard
Cleveland, O.
preferred.

Murch

H.

•tock

(par $20) to be offered on
of record Oct. 20,

expiring

Dec.

4,

Price—$25

1950.

writer— Unsubscribed

shares

to

with

the

per share.
be offered

held.

Price—$3

Proceeds—For

Underwriter—None.

expan¬

Office—1218 Chestnut Street,
/

Tide

Water

Co.

Power

Sept. 27 filed 150,000 shares of common stock

(no par).
Underwriters—Union
C. Langley & Co.
Proceeds—

Price—To be filed by amendment.

Corp. and W.

For construction program.

Union

offered

Under¬
publicly

the

Investment

to

rate

of Detroit

stockholders

common

of

Co.

one

share

for

record

Oct.

shares

of

three

each

(par $4),

held, with

6

Stuart & Co. Inc.; W. C. Langley & Co. and First Boston
Corp. (jointly); Kidder, Peabody & Co.; Lehman Broth¬

Equitable Securities Corp.
expansion program.

•

Central
it

11

Statement effective Oct. 6.

Union

Telephone Co., Blair, Neb.
Sept. 25 (letter of notification) $100,000 of first mortgage
3%%

Price—At

bonds.

Bender

&

Power

stated

was

and sell in November

Kidder,
First

bonds
by

Proceeds will be used

Light Co.

(11/28)

that the company planned to issue
an issue of $10,000,000 of new .first

or debentures. Underwriters — To be
competitive bidding. Probable bidders:

Underwriter—Wachob-

103%.

Proceeds—For dial conver¬
sion, to retire outstanding bonds ^id for other corporate
Corp., Omaha, Neb.

purposes.

and

Securities

&

Forgan

Glore,

Weld

&

Corp.; The
Co. (jointly);
Co. (jointly);

Pierce, Fenner & Beane and Salomon
Hutzler
(jointly). Proceeds—For construction

Lynch,

&

Bros.

and White,

Corp.,

Brothers

Merrill

Union

Co.;

&

Peabody

Boston

Lehman

/

program.

'>•*.<

Electric

Illuminating Co.
Aug. 1 it was reported that company this fall may issue
and sell an issue of preferred stock, of which 495,011
shares

of

holders

value are presently available, stock¬
25 having increased the authorized
750,000 shares from 500,000 shares. The pro¬

no

on

to

par

April

to be used for construction program.

are

Probable
Dillon, Read & Co. Inc. if negotiated sale.

underwriter:

at

Ramie Products

Corp.
Sept. 21 (letter of notification) 25,000 shares of common'
stock
(par $1).
Price—$3 per share.
UnderwriterSmith, Talbott & Sharpe, Pittsburgh, Pa.
Proceeds—
For purchase of additional machinery and equipment and
working .capital.
Office—507 Liberty Avenue, Pitts¬
burgh 22, Pa.

(12/11)

market, probably in December, with an offering of $15,of new bonds. Previous debt financing placed
privately. If competitive, probable bidders are: Halsey,

ceeds

(Mich.)

oversubscription privilege; rights to expire on Oct. 23.
Price—$7.75 per share. Underwriter—McDonald-Moore
Co., Detroit. Proceeds—For general corporate purposes.

through Burton, Cluett and Dana, 120 Broadway, New
Proceeds—For working capital.
Office—
226 Walnut Street, Philadelphia 6, Pa.
York, N. Y.

Light Co.

000,000

amount

55,865 shares of common stock

11 filed

Sept.

rights

&

Power

reported that this company will be in the

was

Cleveland

Securities

1950,

share for each four shares

one

share.

one-for-four basis to

a

stockholders

Carolina

Oct. 3 it

determined

Engineering Corp.
34,155 shares of common
(par $1) to be offered to common stockholders, on

and working capital.
Philadelphia, Pa.

Quaker City Fire & Marine Insurance Co.
Aug. 2 (letter of notification) 10,000 shares of capital

the

of

shares

Halsey, Stuart & Co. Inc.; Carl M. Loeb, Rhoades & Co.;

sion

Co.,

&

Offering

(letter of notification)

basis of
per

offered

be

to

4

3,000,000

and its subsidiaries. Financing expected some time
during the first six months of 1951. Proceeds—For ex¬
pansion
program^
U

mortgage

Proceeds—For expansion program.

York.

stock

shares,

45,000,000

pany

Oct.

Thermal Research &

Proceeds—To J. Will

an

to

for

(10/24)

Co.

Transmission

250,000 shares of common stock (par $5)
100,000 shares of cumulative preferred stock (par

Oct.

to holders of presently
outstanding 7% preferred stock on basis of 5Mj shares of
new
class A stock in exchange for each share of 7%
$25),

(par

holders) and

debentures

filed

—Expected about Oct. 24.

Publishing Co., Cleveland, O.
filed 80,000 shares of $1.50 convertible class A

17

stock

Gas

issue of not to exceed $435,000,(to be offered to stock¬
increase in authorized capital stock from
new

a

convertible

New

13,000 shares of common
(par $1). Price—At market (approximately $2 per
Underwriters—G. H. Walker & Co. and Merrill

Penton

Oct.

of

Price—To be filed by amendment. Underwriter—
Stone & Webster Securities Corp. and White, Weld & Co.,

(letter of notification)

Lynch, Pierce, Fenner & Beane.
Young, a selling stockhodler.

Statement effective

Houston^ Texas.

$100).

Inc.

Service,

&

10

and

Oct. 12.

Oct. 9

of

approving

on

ers;
Oct.

amendment effective

4;

Commerce

Tennessee

program

effective

Statement

ary.

of

Sept. 22.

and to increase investment
stock of Pennsylvania Power Co., a subsidi¬

—For construction

Exchange Agent—The National Bank

6, unless extended.

Oct. 11, 1950 at rate
with

Offer to expire Nov.

Tennessee share for each warrant.

15

000

& Telegraph Co.

announced stockholders will vote Nov.

was

additional stock to be offered to employees of the com¬

Houston, Tex.
Aug. 28 filed 133,334 shares of common stock (par $5) to
be issued in exchange for 80,000 shares of common stock
of Sterling Oil & Gas Co., and for 10-year subscription
warrants to purchase 133,333 shares of Sterling common
stock. The rate of exchange is as follows: 1% shares of
Tennessee stock for each Sterling share; and one-fifth

Co., Akron, Ohio

Edison

Ohio

Sept. 20 it

35,000,000

Healey Bldg., Atlanta, Ga.

Tennessee Gas Transmission Co.,

Oct. 24 by company at Room
So. La Salle St., Chicago 4, 111. Statement effec¬

tive Oct. 13

reduce

tal. Office—220

to 10:30 a.m. (CST) on

up

Price—At par. Underwriter—
Allen & Co., Lakeland, Fla.
bank loans and for working capi¬

debentures, series E.

Proceeds—To

Probable bidders—Lehman Broth¬
& Co. (jointly); Smith, Barney & Co.
new construction. Bids—To
be received

Riter

and

ers

Prospective Offerings
American Telephone

Discount

For $100,000 of debentures,

competitive bidding.

Thursday, October 19, 1950

.

No un¬

(extended from

Oct. 20

on

Co., Atlanta, Ga.
Sept. 18 (letter of notification) $191,500 of 5% subordin¬

(10/24)

Power Co.

States

Northern

Sept

1%-for-l basis.

on a

Sept. 22). Statement effective Aug. 29.

stock.

common

Birmingham Electric Co.

derwriter.,, Offer to expire

.

.

Colorado

Fuel

8.

Iron

Corp.

announced company has purchased a 175acre tract of land
adjoining its Wickwire Spencer Steel
division plant at Buffalo, N. Y., for the purpose of ex¬
Sept. 22 it

was

pansion. Traditional underwriter: Allen & Co., New York.
Consolidated Edison Co. of New York, Inc. 1
May 15, Ralph H. Tapscott, Chairman, said the company
will require approximately $90,000,000 of "new money"
through the sale of securities. No permanent financing is
contemplated before this fall, however, and current ex¬
penditures are being financed by short-term loans, off
which $16,000,000 are now outstanding.
It is anticipated
that

Reliance

Electrical

•

Engineering Co.
Sept. 26 (letter of notification) 20,000 shares of common
6tock (par $5) to be sold to employees under an Em¬
ployees Stock Option Plan. Price—At the market, less a
discount*

Proceeds—For

working capital.
E., Cleveland, O.

Ivanhoe Road, N.

Rochester/ (N. Y.)

Oct.

of

Telephone Corp.

125,000 shares of common stock (par $10)
being offered to stockholders at rate of one new share

,

Rockland

Valley Oil Co., Inc., Idaho Falls, Ida.
(letter of notification) 7,500,000 shares of common

None.
stone

Price—2

cents

per

share.

Proceeds—To prosoect for oil and gas in Yellow¬
Office—845 E. 14th St., Idaho Falls, Ida.

County.

Petroleum

&

Mfg. Co.,
shares of com¬
mon
stock.
Price—25 cents per share.
Pnderwriter—
None. Proceeds—For manufacturing and distribution of
invention. Office—205 Carlson Bldg., Pocatello, Ida.
•

9

of notification)

(letter

West

Coast

1,000,000

Telephone Co.,

Oct.

12

filed

Price—To

be

filed

stock

common

by amendment.

(par

$20).

Underwriter—Blyth

Seneca Oil Co., Oklahoma
City, Okla.
April 27 (letter of notification) 225,782 shares of class A
atock (par 500).
Price—$1.25 per share. Underwriter—
Genesee Valley Securities

Oct.

for working

Proceed*

cani+sl

Shirlington Cooperative Department Store, Inc.
4 (letter of
notification) 6,000 snares or common

stock.

Price—At

None.

Proceeds

working capital.
Sierra

Sept.

1

par ($50 per share).
Underwriter—•
To liquidate indebtedness and for
Office—4025 S. 28th St., Arlington, Va.

Pacific

pro

holders of record

Power Co.
stock

rata to preferred and
Oct. 3 on basis of one

(par $15),*

common

stock¬

preferred

mon

&

Co.

loans

Price—$21
and

to

fective Sept.

per

finance

share.
new

Proceeds—To

construction.

pay

bank

Statement

ef¬

25.

Simmel-Meservey Television Productions,

Inc.
notification) 150,000 shares of common
$1).
Price—$2 per share.
Underwriter
Gunther, Newark, N. J. Proceeds—To com¬

June 29 (letter of
stock

(par

Koellmer &

plete films in progress and for general corporate
pur¬
poses.
Office—321 So. Beverly Drive,
Beverly Hills,
Calif.

Statement to be withdrawn.

Southern

35,766% shares of

common

Price—At par ($3 per share).
Underwriter—None.
—
To activate airline routes covered

Proceeds

certificate No.

by CAB

98.

Office—Municipal Airport, Birming¬

ham, Ala.
Southern Co.

July 28 filed 818,415 shares of
offered in

those

and

of West Coast Telephone
Telephone Service Co.

of

Western
10

filed

Natural

Gas

(amendment)

(par $1) offered to

13,

with

Co.,

subsidiary

a

common

shares

of

common

on

basis of

stock

of

(par $5)

common

stock

Davidson Bros.,

Oct.

stockholders of record

oversubscription privilege; rights expire Oct. 27.
Price—$15.75 per share. Underwriter—White, Weld &
Co.

Proceeds—To

corporate
•

Oct.

stockholders

16

purposes.

Wisconsin

retire

bank

loans

and

for

general

Statement effective Oct. 13.

which

stock

that

the

Public

Service

Corp.

are

(11/14)

1, 1980.

Underwriter—To be determined by competitive
bidding.
Probable bidders: Halsey, Stuart & Co. Inc.;
First Boston Corp. and Robert W. Baird & Co.

(jointly);
Kidder, Peabody & Co.; Union Securities Corp.; Equit¬
able Securities Corp.; Otis & Co.; Merrill Lynch,
Pierce,
Fenner & Beane; Salomon Bros. & Hutzler; A. G. Becker
&

Co.; Carl M. Loeb, Rhoades & Co.; Harris, Hall & Co.
(Inc.) Proceeds—From sale of bonds, plus $2,250,000 to

be

received from sale of stock at par to Standard Gas
Electric Co., will be used to repay $3,300,00 of bank
loans and to finance construction program.
Expected in
November.

Corp., New York
(letter of notification) 240.000 shares (par 10
cents). Price—$1 per share. Underwriter—To be named
by amendment. Proceeds—For merchandising and ad¬
program

and

working

Manufacturers of toiletries.

capital.

Business

—

Office—69 West 46th Street,

New York, N. Y.

t

.

'

vote

to

waive

unissued.

but

publicly

will

offer

It

not

200,000 shares and sell to its employees not
Proceeds—Will be used

their

for

in

-

pre¬

common

is

planned

excess

over

of

100,000

working capital.

Foundry & Machine Co.

Sept.

12 it was reported company plans to sell in midOctober 84,000 shares of common stock.
Underwriters—

Smith, Hague & Co.; George McDowell & Co.; and R. H.
Johnson & Co.

Eastern

Sept.

Gas

SEC

7

and

Fuel

authorized

Associates

Koppers

Co.,

Ipc.,

to

acquire

563,347 382/1,000 shares of new common stock of Eastern
Gas

(21.8%), pursuant to latter's plan of recapitalization,
subject to the condition that Koppers sever its relation¬
ship with Eastern and its subsidiaries by disposing of all
ed

not

Boston

El

new

imminent.

stock of Eastern.

common

Sale report¬

Latter's financial adviser is The First

Corp.
Paso Electric

Co.

19, F. C. Womack, President, announced company
plans to sell $4,500,000 of first mortgage bonds. Under¬

Sept.

writers

To

be

determined

by competitive bidding.
Stuart & Co. Inc.; Stone Sc
Webster Securities Corp.; Merrill Lynch, Pierce, Fenner
and Beane; Salomon Bros. & Hutzler; Kidder,
Peabody
& Co.; Equitable Securities Corp. Proceeds—To redeem
$1,000,000 of 3%% bonds due 1978 and for construction
program. Offering—Expected in November.
—

bidders:

Halsey,

Eureka Williams
Oct.

4

it

was

Corp.

announced

stockholders

will

vote

Oct.

31

increasing authorized common stock (par $5) from
600,000 shares to 1,000,000 shares so that company may
be in a position "to act promptly by
broadening the
scope of business and operations."
Traditional under¬
on

writers:

Hornblower

&

Weeks

and

Kebbon, McCormick

& Co.

Facsimile

Woodland Chemical

Sept." 28

,,

to

authorized

company

Probable

16 filed $4,000,000 of first mortgage bonds due Nov.

Inc.
were

emptive rights to subscribe for 300,000 shares of

share for each ten shares held,

one

Inc.

capital stock (no par) for subscription by stock¬
At April 30, 1950 there were outstanding 34,393 shares out of 47,000 shares authorized.

shares of the

Houston, Tex.

104,495

an

vertising
common

exchange for 545,610 shares




Oct.
stock

Co.,

&

Airways, Inc., Birmingham, Ala.

Oct. 2 (letter of notification)
stock.

and

Oct.

common

share for each
shares and one share for each 12 com¬
shares held; rights to expire Oct. 20.
Underwriters
—Stone & Webster Securities
Corp. and Dean Witter
six

Telephone Service Co., for advances to said company to
complete its 1950 construction program, and for exten¬
sions, additions and improvements to its own properties

—

filed 24,716 shares of

toeing offered

Co., Inc. Proceeds—From sale of stock and proposed
sale of $1,000,000 first mortgage 3% bonds at 100 are to
be used to retire bank loans incurred in acquisition of

Co.,

holders.

Dostal

40,000 shares of

Lobster

stated that company plans to offer addi¬

was

tional

shares.

Everett, Wash.

&

—To acquire properties and

Consolidated

Aug. 11 it

(11/1)

Underwriter—

Co.Vj Rochester, N. Y.

$257,000,000 will be needed for the construction pro¬
over the next four years. Probable bidders: Hal-,
sey, Stuart & Co. Inc.; Morgan Stanley
& Co.; Fir»4
Boston Corp.

gram

•

Utah-Idaho

Oct.

poses,

capital stock.

of

stock.

common

•

for each four held on Oct. 13; rights to expore Oct. 31.
Price—$11.50 per share. Underwriter—The First Boston

Oct. 6

(letter

Price—$100 per unit. Underwriter—
Greenfield & Co., Inc., New York. Proceeds—To expand
milling facilities. Office — 601 Heard Bldg., Phoenix,
Ariz. Offering—To be made next week.

June 29 filed

•

9

to be offered in units of $100 of debentures and 10 shares

Office—1088

Corp., New York. Proceeds—For general corporate purincluding construction and repayment of a loan.

U. S. Manganese

Corp.yPhoenix, Ariz. (10/23)
notification) $150,000 of 10-year 6%
sinking fund debentures (3% fixed and 3% contingent
interest) and 15,000 shares of common stock (par $1),

&

Oct.

2

&

Electronics,

stockholders

of

this

Inc.

(formerly Finch
Telecommunications, Inc.) voted to create an authorized
issue of 400,000 shares of class A convertible stock
(par
$1), all or part of which are to be publicly offered in the
company

near future.
Price—$2.50 per share. Underwriter—Gra¬
ham, Ross & Co., Inc., New York. Proceeds—To repay

indebtedness to RFC and for working capital.

Volume 172

Number 4952

.

The Commercial and Financial Chronicle

.

.

(1525)

41

'

■

..

Florida

June

Power &

''

•

.

Light Co.

Minnesota

9 stockholders

approved creation of 50,000 shares
$4.50 cumulative preferred stock (par $100). These
shares are soon expected to be offered to finance part of
construction program which is expected to
require ap¬
proximately $25,000,000 new capital through 1952.

in

to

nanced

through
and

the

cation

was

of

stock.

common

Previous

Co.; Lehman Brothers.

the

SEC

the

Oct.

13

and

sale

it

was

of

reported

underwriter for

•

company

plans

40,000 shares of preferred stock

Price—To be filed by amendment.

stock

issue in April of this

16 it

RR.

(11/29)

Halsey,

was

Stuart

&

Co.

Inc.;

Salomon

Bros.

&

Hutzler;
Lehman Brothers; Harris, Hall & Co.
(Inc.); R. W. Pressprich & Co.

issuance

(par $50).

Underwriters—Paine,

Webber, Jackson & Curtis; Stone & Webster Securities

•

Corp.; and

Oct.

struction

Mitchum,

Illinois

6ct. 5, it

Tully

&

Co.

Proceeds—For

con¬

Power

Co.

announced that company plans $30,000,000
future financing (in addition to the sale of 150,000 shares of cumulative preferred
stock, par $50, and

shares

with

SEC

of

Iowa

Southern

26

no

value,

par

order to finance, in
for the next three years.

program

Oct. 25 stockholders
sell

will

$350,000 of 4%

vote

on

proposal to issue and

sinking fund debentures due

1960.

Proceeds to retire outstanding

3%% debentures and for
Traditional underwriter: Stifel,

other corporate purposes.
Nicolaus & Co.
• 1

Kansas Gas &

Oct. 10 it

was

Electric

Co*

announced that

proposed sale of $5,000,000

first mortgage bonds, which had
tentatively been sched¬
uled for Nov. 27, has now been deferred,
probably until
1951.
Underwriters — To be determined by competitive

bidding.

Probable bidders:

Halsey, Stuart & Co. Inc.;
Blyth & Co., Inc. and First Boston Corp. (jointly); Union
Securities Corp.; Merrill Lynch, Pierce, Fenner & Beane
£nd Kidder, Peabody & Co. (jointly).
Proceeds — For
construction program. (See also registration of common
and preferred stocks above).

Metropolitan Edison Co.
Oct.

9

it

toward

determined

expansion

by

program.

competitive

Probable

be

bidders:

(1) For bonds: Halsey, Stuart & Co. Inc.; First Boston
Corp,; Carl M. Loeb, Rhoades & Co.; Drexel & Co.;
Kuhn, Loeb & Co.; Kidder, Peabody & Co.; White, Weld
& Co.; Harriman Ripley &
Co. and Union Securities
Corp. (jointly); Lehman Brothers.
(2) For preferred:
Drexel & Co.; Smith Barney & Co. and
Goldman, Sachs
& Co. (jointly); Carl M. Loeb, Rhoades &
Co.; Kidder,
Peabody & Co.; Glore, Forgan & Co. and W. C. Langeley
& Co. (jointly). Registration—Expected to be filed about

Nov.

1.

in

1951

tion

to

of about $10,000,000 of preferred

sale
(in addi¬

stock

$20,000,000 of bonds filed Oct. 16 with SEC and

428,574

shares of common stock to be sold to parent,
American Natural Gas Co.). Underwriters—To be deter¬
mined by competitive bidding. Probable bidders: White,
Weld & Co. and Lehman Brothers

(jointly); Smith, Bar¬
& Co. and Blyth & Co., Inc. (jointly). Proceeds—

ney

For construction program.

than $20,000,000 from banks. A permanent financ¬
ing program provides for the elimination of these bank
loans prior k) their maturity, July 1, 1951, and such pro¬
gram will include the issuance and sale of $12,000,000
more

additional

bonds

Co., Inc.

31

it

it

estimated

was

will

be

that

required

to

about

$37,000,000

construction

pay

1952.

new

costs

Present plans

to issue this Fall

are

$10,000,000 bonds and 70,000 to 80,preferred stock. Probable bidders: (1) For
bonds—Halsey, Stuart & Co., Inc. (2) for bonds and pre¬
ferred: Harriman Ripley & Co.
Lehman Brothers;
Kidder, Peabody & Co.; First Boston Corp.; Merrill
Lynch, Pierce, Fenner & Beane; (3) for preferred:
000 shares of

W.

C.

Gas

Co.

New

Sept.

7

Hampshire Electric Co.
applied for authority to

company

shares of

$4.50

shares

common

of

preferred
stock

stock
(no

announced

that




pending upon market conditions. If negotiated, Blyth &
Co., Inc., may handle financing. If competitive, probable
bidders are: Blyth &
Co., Inc.; Lehman Brothers and
Bear, Stearns & Co. (jointly); First Boston Corp.; White,
& Co. and Shields & Co.
(jointly); Merrill Lynch*
Pierce, Fenner & Beane; Union Securities Corp.; Salo¬
Bros.

mon

struction

this

_

_

&

Hutzler.

Proceeds would

toward

go

con¬

program.

Smith, Kline & French Laboratories.
Sept. 13 stockholders increased authorized common stock
1,000,000
shares
(no
par)
to
2,000,000* .shares
(par $1).
Following split up of present outstanding
807,295 shares on. a two-for-one basis, there will remain
unissued 385,410 shares of the new stock. The directors
were

empowered to issue all

at any

part of the latter shares

or

time.

.

,

Electric

,

..

.

.

& Gas Co.

Aug. 17, S. C. McMeekin, President, said the company
expects to issue and sell later this year $3,00QJ)90 of
bonds (in addition to private placement of
$3,000,000
of 4.60% cumulative preferred
stock, par $50), the pro¬

new

issue 15,000
(par $100) and 140,000
which are to be ex¬

changed for presently outstanding 150,000 shares of com¬
stock (no par) held by New England Gas & Electric
Association.
Latter plans to dispose of this investment
prior to Sept. 1, 1951.
Norris

Stamping & Mfg. Co.

(11/14)

Oct. 9, it was reported that early registration with SEC
is expected of about 190,000 shares of common stock.

finance

for

construction

bonds:

Halsey,

South Georgia Natural Gas
Co., Atlanta,
Aug. 23 company applied with FPC an amended
tion for authority to build a 526.9 miles
pipe
Georgia and Florida which, it is estimated, will
tween

Ga.
applica¬
line in
cost be¬

$10,500,000 and $12,080,000 to be financed by sale
junior secur¬

of first mortgage bonds and the
issuance of
ities. Probable underwriter: Courts & Co.

Southern California

Petroleum Corp.
1, Tyler F. Woodward, President, announced that
stockholders should be given the opportunity of subscrib¬
ing for additional capital stock, the proceeds to be use*
to develop the company's
Cuyama Valley holdings. The
offering would be underwritten.
'
Southern

Underwriters—William R. Staats Co. and A. C. Allyn &
Proceeds—To selling stockholders.
Car

Corp.

Edison

Co.

27, W. C. Mullendore, President, announced that
company will have to raise $50,000,000 in new capital
within

the next

18 months to

finance its 1951 construc¬

Total financing may involve $55,000,000
in new bonds.
Probable bidders: Halsey, Stuart & Co.
Inc.; Blyth &, Co., Inc.; The First Boston.; Corp. and
Harris, Hall & Co. (Inc.) (jointly); Shields & Co,
program.

Southern Natural Gas Co.

July 31 it

North American

California

Sept.

Co.

Aug. 15 it

to

program.
Probable bid¬
Stuart & Co. Inc.; The First
Corp. and Lehman Brothers (jointly); Kidder,
Peabody & Co.; Union Securities Corp.
f
ders

par)

mon

was reported

!

proposed financing

on a peima-

basis has been increased from
$10,000,000 to

nent

reported that the company is to issue and
sell publicly not exceeding 40,000 shares of common
stock (par $10).
Probable underwriter: Glore, Forgan

decide to take this in two

& Co., New York. The proceeds
rebuilding program.

$24,-

SEC approved

was

North

Sept.

Penn

it

25

financing
sidiaries

was

Gas

of the

Gas

of

&

plans

permanent

Pennsylvania
Electric

sub¬

the

Corp.,

$3,000,000.
Gas

&

Sept. 28

a plan was filed with the SEC, which provides,
part, for the refunding of the outstanding $6,500,000
5V4% cumulative preferred stock
(par $100) with an
equal par amount of preferred stock having a lower
dividend rate "as soon as the transaction becomes eco¬

in

nomically sound," and to finance part of the company's
construction

tional

by the issuance and sale of addi¬

program

stock.

Stockholders will vote early in
changing each of the 1,076,900 shares of

common

November

on

stock

outstanding to two shares of
each; and on changing the 825,000
unallotted shares, $20 par, of
4% cumulative preferred stock to 165,000 shares of $100
par cumulative preferred stock.
Probable underwriters:
common

common

shares

Stock, $10

of

par

but

Harriman Ripley & Co., Inc.; Smith, Barney & Co,

Pennsylvania

Electric

Oct. 4 company was reported to be

early next

year

-

of about $10,000,000

planning the issuance
new

bonds. Probable

bidders:

Halsey, Stuart & Co. Inc.; Kidder, Peabody &
Co.; Merrill Lynch, Pierce, Fenner & Beane; Union Se¬

Loeb
to

White, Weld & Co. (jointly); Equit¬
Corp.; The First Boston Corp.; Kuhn,
& Co.; Harriman Ripley & Co., Inc. Proceeds are

Securities

be

used

to

finance construction

Potomac

Sept. 20 it

was

Edison

it is estimated, will

bonds

due

which

program

1950-1951.

Southwestern
11

is

estimated

Probable

to

cost

bidders:

it

was

Gas

&

Electric

reported that

Co.

(12/4)

this company

is planning
early in December of $6,000,000 new
first mortgage bonds, series D. Underwriters—To be de¬
termined by
competitive bidding.
Probable bidders:
Halsey, Stuart & Co. Inc.; Salomon Bros. & Hutzler, and
and

issuance

Carl M. Loeb, Rhoades & Co.
(jointly); Lehman Brothers;
Equitable Securities Corp.; White, Weld & Co. and Kid¬
der, Peabody & Co. (jointly); Otis & Co. (Inc.); Merrill
Lynch, Pierce, Fenner & Beane and Union Securities

Corp.

(jointly); The First Boston Corp.

Proceeds—For

construction program.

Texas
Oct. 9 it

Eastern

was

Transmission

Corp.

announced company

plans to raise approxi¬
mately $40,000,000 of equity money, which would be sup¬
plemented by approximately $70,000,000 of first mortgage
pipe line bonds (latter may be placed privately). Under¬

writer—Dillon, Read & Co. Inc., New York.
expansion

Stockholders

program.
Increase
will vote Nov.
3 on

in

Proceeds—

Capitalization-

authorizing

600,000

shares of preferred stock (par $100) and to increase the
stock from 6,000,000 to 7,500,000 shares.

common

Texas

Sept.

construct
at

Illinois

Natural Gas Pipeline Co.

15 company applied to

an

the

FPC

approximately 72 miles of

for

new

authority to

line in Texas

estimated cost of $11,581,800.

1965; $10,000,000 3y4%

mon

mortgage ;bonds.for

and

75%

It is planned to issue
of the required capital

stock.

bonds due

and

'remaining, 25% through the sale ;of com¬
Probable underwriters?-^v%ite, Weld, & Co.
'

Glore, Forgan & Co.

May 9 it

Public Service Electric & Gas Co.

3y8%

•

Toledo

April 17 stockholders approved the issuance of $90,000,000 new bonds for the purpose of refunding $50,000000

for

and to raise the

announced company has decided to speed

an

21

Halsey,
Inc.; Blyth & Co., Inc. and Kidder, Peabody
(jointly); First Boston Corp.

Co.

&

first

Co.

expansion program, which,
cost $10,000,000.
up

program.

On June

on.

Stuart & Co.

For

Co.

although company may
pieces, viz: $10,000,000 to $12,-

and the balance later

construction

now

authorized

bonds,

temporary bank borrowings of up to $20,mature July 1, 1951, the proceeds to be used

$32,520,000

sale

Electric Co.

mortgage

000,000 initially

Oct.

Oklahoma

first

000,00jLto

company

merger

Pennsylvania

000,000

for

Co.

announced

following
of

to be used for car

are

parent. Proceeds—To retire, in part, proposed bank loans

able

newly organized
company may issue and sell publicly $2,800,000 of com¬
mon .stock and place privately with institutional investors
$6,9()0,000 of 20-year 3%% firsts mortgage bonds, the
proceeds to be used in connection with the acquisition
of the gas distribution properties of Arkansas Power &
Light Co., which, was authorized by SEC on Sept. 7.
Initially
it
is planned
to
sell
$800,000
stock
and
$1,500,000 of bonds.
Underwriter for Stock—Equitable
Securities Corp., T. J. Raney & Sons and Womeldorff &
Lindsay.
was

and

Sept.

Langley & Co.

curities Corp. and

MidSouth

July

Expected this Fall.

estimated at $40,000,000 for 1950 to

and

$3,000,000 of additional common
stock (latter to American Natural Gas Co., the parent).
Previous debt financing was placed privately. If com¬
petitive probable bidders may include Harrimon Ripley
&

Supply Co. of Utah

England Power Co.

24

financing

$20

Michigan-Wisconsin Pipe Line Co.
July 25 company received SEC authority to borrow not

company's original plan
$10,000,000 of bonds
changed to preferred stock, de¬

$8,000,000

Boston

•

Michigan Consolidated Gas Co.
Aug. 7 it was announced company contemplates

reported that the

was

between

this year may be

ceeds

Co., and the bal¬

Underwriters—To

bidding.

late

tion

would be applied toward the retirement at
maturity of
approximately $1,250,000 of 5% non-callable (assunied)

Diego Gas & Electric Co.

issue

Boston Corp.

was

bonds of York Haven Water & Power

to

and oil operations. It will be financed, in part,
through public sale by the new unit of 1,000,000 shares of
capital stock (par $8). Financing plan submitted by First

(12/12)

reported company plans to issue and sell
in December $5,250,000 of new first mortgage bonds and
20,000 shares of preferred stock (par $100).
Proceeds

ance

Mountain Fuel

June 6 company announced plans to create a new firm
to take over its exploration and development of natural

April

Shoe Co.

San

July 31 it

South Carolina

New

Brothers

of stock, which are closely held.

1951.

s

Johansen

Inc., Manchester, Conn.

reported to be negotiating with a.
group of underwriters for a public stock offering ot
about $150,000 of additional
capital stock at $1 or $2
per share. There are presently
outstanding 1,381 shares
was

from

gas

Utilities Co.

said to plan sale of first mortgage
bonds to finance part of its $3,200,000 construction
pro¬
gram for 1950. Probable underwriter: The First Boston
company

Corp.

Co.

by FPC last May, are
financing before April 1,

,

filed

Oct. 5—see above), in

on

part, its construction

April

stock

common

Utilities

with $3,000,000 of notes authorized
to be refunded by permanent

was

of new,

200,000

Montana-Dakota

11 company asked FPC for authority to issue
$2,800,000 of 2V2 % promissory notes to banks to provide
funds for its expansion program.
These notes, together

program.

Mills,

company

Weld

reported company is planning ot issue $5,700,000 of equipment trust certificates. Probable bidders:

Telephone Co.
that

common

a

Missouri-Kansas-Texas

Oct.

Roosevelt

July 20

announced that

was

year.

Harriman Ripley & Co., Inc.

Commercial

pro¬

$5,500,000. Previous bond financing was arranged for
privately through Union Securities Corp., who also acted
as

Corp.;

Illinois

for construction

plans to finance the instal¬
lation of additional compressor units on the
company's
pipeline system in Arkansas and Missouri will be supplued later. The estimated cost of the new facilities is

possibility of refunding its 433,869 shares

$15,000,000 3% bonds due 1970 and $15,000,000
Probable bidders: Halsey Stuart & Co.
Inc.; Morgan Stanley & Co. and Drexel & Co.
(jointly);
Kuhn, Loeb & Co. and Lehman Brothers (jointly); Fir«t
Boston Corp.
bonds due 1972.

Merrill

Mississippi River Fuel Corp., St. Louis, Mo.
Oct. 4 it

appli¬

of $6 cumulative preferred stock and 14,570 shares of
$5
cumulative preferred stock with a new lower cost issue.
Probable bidders: Blyth & Co., Inc.; First Boston

•

Proceeds

and

Dec. 4.

on

learned that company has discussed with

was

1968;

early
stock.

Bids—Expected to be received up to noon (EST)
Registration with SEC planned for Nov. 1.

gram.

Georgia Power Co.
Sept.T4 it

common

Co.,
Lynch,
Kidder, Peabody &

(jointly); White, Weld & Co.
Pierce, Fenner & Beane (jointly);

withdrawn.

sale

of

Underwriters—To be determined by competitive
bidding.
bidders: First Boston Corp. and
Blyth &

Inc.

$5,100,000, which would be fi¬
issuance of first mortgage
pipe-line

bonds

(12/4)

December, 150,000 additional shares

about

cost

Light Co.

Probable

Georgia Natural Gas Co., Albany, Ga.
Aug. 2 filed new application with FPC for authority to
construct a 335-mile pipeline system in
Georgia and
Florida

Power &

Oct. 3 company announced it
plans to issue and sell

of

sell

Edison

was announced

$7,500,000

.

^

Co.

that the company plans to issue
first mortgage bonds in

additional

December, 1950, and probably additional

common

Continued

on

stock

page 42

Chronicle

The Commercial and Financial
42

.

.

Thursday, October 19, 1950

.

(1526)

Continued

bidders: Halsey,
Kidder, Peabody
& Co., White, Weld & Co. and Merrill Lynch, Pierce,
Fenner & Beane (jointly); First Boston Corp. and Glore,
Forgan & Co. (jointly); Lehman Brothers, Harriman
Ripley & Co., Inc., Bear, Stearns & Co. and Carl M.
Loeb, Rhoades & Co. (jointly); Smith, Barney & Co.;
program.
Probable
Stuart & Co. Inc.; W. C. Langley & Co.;

expansion

plete

5 it was announced company plans issuance and
sale of $22,000,000 3% first mortgage bonds.
Probable

Bear, Stearns & Co. (jointly); White, Weld & Co.; Salo¬
mon Bros.
& Hutzler; First Boston Corp., and Blyth &

used to com¬

1951, the proceeds to be

sometime during

Sept.

Smith,
Blyth & Co.,
Inc.; W. C. Langley & Co., and Glore, Forgan & Co.
(jointly); Union Securities Corp., and Smith, Barney &
Co. (jointly); Lehman Brothers, and Bear, Stearns & Co.
(jointly); Kidder, Peabody & Co., and Merrill Lynch,
(jointly); Union Securities Corp., and

Co., Inc.

RR.

Pacific

Western

Brothers, and

Lehman

Co.;

&

Peabody

Kidder,

Inc.;

jrom page 41

bidders: Halsey, Stuart

Leh¬

& Co. Inc.; Blyth & Co. Inc.;

Brothers and Bear, Stearns & Co. (jointly); Union
Securities Corp. and
Glore, Forgan & Co. (jointly).

Barney & Co. (jointly); and (2) for stock:

man

Proceeds—To retire

$10,000,000 first mortgage 4%

$6,133,000 convertible income 4%% bonds due
over $5,000,000 "new money."
Expected about

and
and

bonds
2014,
mid¬

dle of November.

Pierce, Fenner & Beane (jointly).

Union Securities Corp.
Wabash

United Gas Corp.
Oct.

it

6

Bids

reported company will probably sell be¬

was

New York

$100,000,000 and $125,000,000 of new bonds before
end of this year, the proceeds to be used to finance con¬
struction of 1,130 miles of pipe line, which, it is estimated
tween

United Gas Pipe Line Co.

States

United

Line Co.

Pipe

will be raised

carrier."

taken

of the

shares of common

to

funds

provide

construction

its

for

to

(1)

Continued jrom

first

of

set

of

SEC and the

the

even

examined

the

long-term highly inflationary

effects

Peak Bull Market

tion

of

and

war

the

and

war

prepara¬

gradually

lowered

bidders:

though

I

different kinds

of these methods.

I

flation

ket with

:

after three

range

yielded

combined

the

to

inflation

of

backing and

of

years

that

averages

in
a
relatively narrow
between 160 and 190, finally

filling

forces

continued

and

justifying

confused

a

mind.

high

of

state

r

If the Korean

market in terms

a

Dow-Jones

the

third,

;

•

We have had

of

mar¬

few charts; and

a

forecast.

a

of the

the technical side

on

just an
isolated incident its ending would
war

was

spend just as
In

fact

spiral

fast

due

the

to

inflationary

spending

the

previously.

as

will

in¬

be

creased in dollars and cents. Even

if

our

the

chartists

the

confounded

and

economists, broke out on the up¬

restrictions

various

trols

and

imposed, artificial
under our present kind of
are

aged

such

economy

con¬

props
man¬

the

as

con¬

tinued

heavy armament program
obviously be continued in
a long time.
Even some
ber, 1930, of 232.50 on the indus¬
trials
and
a
new
high
since of these controls may be postponed
August, 1931, of 70.74 on the rails. in their initial stages and not be
as
severe
as
anticipated. No one
I do not pretend to be a
se¬

side last year and has just recently
reached a new high since Septem¬

will

force for

curity
but

as

such

really knows what is going to hap¬
student of market trends, pen after election or the exact

analyst,
a

a

break-out

base

three-year

economist,

an

or

such

of

period

long

a

indicated

that the major trend was up

likely to

carry a

long

bull market in the
has

shown

Every

way.

past 50 years

price

a

and

rise

of

55% from its low. In this

over
we

case

that there will be
whether
an

increase

profits

in force since June,

industrials

will

197.46

be

rails

and

a

force.

by

the

Dow-Jones

market

is

in

Fortunately the Dow The¬

has

ory

51.24
bear

new

break

to

confirmed

breaking

before

1949, and the

have

and

that

the

outstanding

one

time.

is,

virtue

it is not talking all

But

there

are

confusing forces going

many

in

on

to¬

though an excess
high as $7 billion

difficulty of administering it.
don't

we

Because

of

taxes

warned

are

we

year,

one

side

which woulcj influence future cor¬

porate
hand

profits and

are

the

inflationary
you

some

on

the

other

present and future

forces.

Let

well-known




me

cite

reasons

some

Dow-Jones

mated to

earn

Because

we

haven't

are

will

the

present
warned

have

considered

super-imposed

same

time

as

structure—

tax
that

face

to

the

this

the

market

force

at

inflationary

spiral is partially checked by the
deflationary effects of
cash

a

get so confused
at the bottom in February and

as

a

and a

1948,

March,

In

little bookkeeping

Line, point and fig¬

charts, money, ratio, volume,
odd lots, pressure moving aver¬
ages and a host of other charts.
ure

in

ago

year

quite evasive at first, but finally
came up with what proved to be
an
absolutely wrong answer.
I
am
afraid
too
many
kinds of
would

tend

contradict

to

June, 1949, and then last spring
just after the Korean war started,

charts

study my charts more care¬
fully. Sometimes they lead me out

definite

opinion.

hundred

point and figure

I

at the beginning
point in the dis¬
cussion that I do not believe you
Now let

me say

second

this

of

to

reduce

can

an

mathe¬

exact

vari¬
able as the buying and selling of
stocks by human beings motivated
by different purposes and opin¬

matical formula anything so

But

ions.

from

man

This is

so

stone

money on

speak, not just a curb¬

to

opinion.

It is the interpreta¬

is most

tion of these opinions that

charts

of

when

the

disdain¬

Many speak

important.
fully

the

stop thinking

as

Perhaps there are times

we

let

should do less thinking

other

the

answers.

tell

fellow

us

Actually there is no

technical

forecasts

market

in

movements
which

istics

age

the

price

many

prices

would

seem

the

Some

after year.

counted

be

can

character¬

same

habits year

and

amplitude

Most of these

moves.

for

on

a

pretty correct interpretation and
others

most unreliable.

are

mistakes that

this kind

studying

one

Three

common to

are

of

any¬

work

:

are:

the
i

of

characteristics
V

-

over

be led down
blind

some

'

alleys.

(2) If
clusion

each

chart

dark and

-very

and

statistics

very

serious mistake.

make

a

The best re¬
obtained

are

by teamwork between the chart¬

for

can

reluctance

th^i, greatest mis¬
•

&

:well

admit]

to

an

and^a 11

interpretation

is

any

incorrect
e m p

t

investor.
stock

It is
prices

though

statistics and facts.
am

an

I do not

orthodox chartist

—I do not carry or

follow

lot of different charting

a

whole

methods

to

other.

For

clue

a

industry action, I pick out a
leading issue with good trading

to

volume

^ood velocity char¬

and

acteristics, also ones that in the
past have shown a high degree of
accuracy.

Now

I

and

and

third

the

to

come

difficult

most

perhaps

dan¬

of this talk., I have
preliminary
re¬
marks'to imply that public psyr
part

gerous

tried

these

in

and changes in investor
play a most important
the wide changes in our

chology

confidence

in

part

security markets, often working
in
completely inverse ratio to
value
and
earnings —and
that
charts are important in measuring
these
that

changes.
corporate

You
all
know
earnings are the

major determinant in the forma¬
tion of stock prices but every ex¬
perienced
investor
also
knows
that

these

discounts

market

the

earnings at widely different rates
In 1929 it

from time to time.

discounted

times

20

at

was

earnings,

1936-1937 about 15 times earn¬

in

ings and today a little over eight
times earnings. Yes, earnings are
even discounted
at widely differ¬

in various stocks.
A
point was Standard Oil of

prices

case

New

in

Jersey when Jersev earnings

dropped from $5.00 to $3.00 from
1941 to

Yet the stock rallied

1944.

30

to

rallied to 60 by

earnings of $22,

1945 with earnings
U. S. Steel ral¬

dropping to $9.77.
lied from

earnings

low

a

of

of 47

$5.35

above 80 in 1945

$3.77.

believe that

to

on

So

on

of

reduced

earn¬

if

see

you

facing reduced

there

year,

for

precedent

ample

1942

price

in
a

you

we are

earnings next

Pacific

Southern

60.

seems

higher

a

market.
I have been told that by

switches

an

investor

timely

could

have

remained
Use

opinion that
even

each

to

it up.

cover

in

lation

ings of
W

makte and this goes

statisticians

the tape. I study charts
each industry in re¬

on

ex¬

research

will

yoy

sults for the investor

you

selling

of stocks

at 10 in 1942 with

charts to the

fundamental

Perhaps

hide the actual buying or

you can

from

f

you use

of

Lehman Brothers;

-

period of years or you will

a

of

Probable

merger.

Inc.;

& Co.

ent

(1) You must learn by studying

illogical to the aver¬

opinion itself is vitally influenced
by

of

show

charts

take

of

security

otherwise

completely

makes

position

I

chart because it

certain extent the

a

and depth

(3)
Contradictory Factors

charts

the averages.

on

ist and statistician

witchcraft in charting.

no

few

a

tends to show change of trend and
to

are

the tape.

keep

I

this type of

have

would

I

and

stocks and

use

transaction is recorded

the actual

and

can

you

what other buyers
doing.
When a
invests his money in stocks

sellers

and

line

charts

tell

certainly

each other

on

of the wilderness.

possible believe I

surplus in the Treasury.

other words

left in

are

conditions

When

The

enormity or accurately ap¬
praised the effects of the coming

our

we

are

this year.

increase

and

read

perplexed state of mind.

most

econ¬

the

bill

a 10-year mar¬
these things we

All

cycle.

devices.

by

and by others that earnings

the

we

factors

are

controls

likely to
drop to $13 to $15 a share instead
of the $27 they are currently esti¬
on

tax

Inflationary Forces

and

omists to expect a decline of 25%
in
net
corporate earnings next

on

the

answers

to that as yet.

day's market.

On

the

know

once

When I asked the director of this

on

160.

Dow

and

be collected from corpora¬
tions, the Treasury does not like
it because of its complexity and
But

the

as

normal

the wall.

on

office

an

dozens of charts

were

masterpiece of confusion what the
market was going to do, he was

may

the

Incidentally under

profits tax or

the

in

Even

tax

huge tax bill,

a

excess

an

surtax.

have carried 45% from the low of

Theory the bull market has been

There is not much doubt

answers.

On

visited

I

ket

a

to

system
any charts
a

nearing the end of
hear and

continue

will

government

market.

the stock

top of all this we are told by some
that
the
stars
indicate we are

of

earnings
of

in

probably be bearish, but it is not
isolated. The various departments

starts,

and after many false
which according to some
newspaper friends fooled

does

declines

all.

where there

sure

charts and charting

methods is just as poor
to utilize as not to use

background of in¬
not prevent cyclical

quite

am

at

a

the

in

Pierce, Fenner & Beane; Kidder, Peabody

studied and

have
47

buying stocks, but we are told that

historically

following

System,

issue and sell $12,-

Co.; First Boston Corp.; Harriman Ripley & Co., Inc.

over

that too many

Stuart

Halsey,

purchasing value of the dollar by

Is Still to Come!

Electric

participating

companies

Merrill Lynch,
&

possible. It is hard not
recognize and partially wedge

of seven other sub¬

company

England

000,000 of first mortgage bonds to retire bank loans

Washington State P.S.

to

with this

New

which Worcester County proposes to

short-term

deflation is

page

of

,

County Electric Co.

merger

sidiaries

issuance

proceeds would be used to redeem out¬

after the

the

for

involving $11,000,000

Proceeds—For

Otis.

Department of Public Utilities providing

Massachusetts

Commission issue their approval.

For bonds: Halsey, Stuart & Co.

Probable bidders:

be

and the

Worcester

standing 35,000 shares of $6 preferred stock on a date

program.

Underwriters—To be determined by competitive bidding.

capital.

Sept. 25 a plan was filed with the SEC, the FPC

nation-wide group of underwriters headed

program

Underwriter—Gear-

(par $1).

Expected in October.

preferred stock issue and to carry out a con¬

Part

loans.

additional shares of common stock in

and about 200,000

stock

working

&

Kinnard

hart

proposed new common stock (par $1) to the pub¬

new

and

500,000

Corp., the new company plans public offering of

&

struction

$12,000,000 of new bonds

to offer approximately

company

a

acqui¬

by Wilcox-Gay Corp. of Garod Radio Corp.

Majestic Radio & Television, Inc., Wilcox-Gay-Majestic

Sept. 8 it was announced that company plans
of

advances

and

July 14 it was announced that in connection wjth

by F. Eberstadt & Co., Inc.

announced that present plans call for the

was

loans

bank

repay

Wilcox-Gay-Majestic Corp.

Hig-

Washington Water Power Co.

'Oct. 17 it

not

Price—$35 per

stockholders.

construction.

for

and

on

lic through a

Light Co.

Utah Power &

Proceeds—To

share.

covering the sale of approximately 325,000 shares

SEC

markets to operate as a "common
The initial financing has been arranged for
midwest

poration.

1951

subscribed for by minority

change in company's name from William R.
Co., Inc. was approved, but no action waa
proposed recapitalization plan, due to market
conditions. It is planned to file a registration with the
Warner

issue

authorization to

SEC

to acquire 16,227% shares and any shares

proposes

July 20

(Del.)

received

company

16,298 shares of capital stock (par $25) to its
stockholders.
New England Electric System, the parent,

Warner-Hudnut, Inc.

privately, with no public offering expected for at least
two years. E. Holley Poe and Paul Ryan, of 70 Pine St.,
New York, N. Y., are the principal officers of the cor¬

•

16

sell

and

sition

that this company had been
formed to build, own and operate a petroleum products
pipeline from the Texas Gulf Coast to St. Louis, Chicago
other

Weymouth Light & Power Co.

Oct.

5, N. Y., up to and including 12 o'clock noon

Harris, Hall & Co. (Inc.); Lehman Brothers and Lee
ginson Corp. (jointly); Salomon Bros. & Hutzler.

Sept. 25, it was announced

and

•

Wall St.,

at 44

by the company

this year. Underwriters—To be determined by competi¬
tive bidding. Probable bidders: Halsey,Stuart& Co. Inc.;

July 25 filed with FPC for authority to build 1,130 milea
of new lines in Texas, Louisiana and Mississippi at a
cost of about $110,000,000, including new facilities. It is
probable that the bulk of this new capital
through the public sale of new securities.

received

(EST) on Oct. 25 for the purchase from it of $3,315,000
equipment trust certificates, series C, to be dated June
1, 1950, and to mature in 15 annual instalments from
June 1, 1951-1965, inclusive.
This will be in addition
to $5,220,000 principal amount of series C issued earlier

approximately $115,000,000.

will cost

(10/25)

Co.

RR.

be

will

In

vestor
more

the

of

the

Charts

general charts help
to

crystal!#?

definite his

best

Charts

time

also

to

tend

the in¬

and

judgment

buy
to

and

make
as

to

sell.

confirm

or

long of the market for

30

past

funds
dous
a

years

employed

with

with

a

capital appreciation.

good

all

his

tremen¬

It takes

deal of intelligence, fore¬

sight and

courage

to

make

such

strategic shifts in investment port¬

deny so-called inside information; folios

even

where there is super-

Volume

172

Number 4952

.

.

.

The Commercial and Financial Chronicle

(1527)
vision

of

ment.

It

well-qualified
is

add

to

stand

hold

position. But con¬
sider what a profitable switch it
would, have been just a year ago
pat

sell

to

the

tobaccos

chemical,

leading
shares.

and

oils

buy the
motor

or

The chart tended to defin¬

itely substantiate this opportunity
at
that
time.
For
example,
a
switch from American Tobacco at
71

into Standard Oil of New Jer¬

67

at

sey

86,

Liggett & Myers at
General Motors
at
60
or

into

would

have

been

advanta¬

very

geous.
1

Today I believe that there are
just as many opportunities exist¬

ing, if
fort

take

we

with

the

time

the

aid

of

ef¬

and

to

research

ferret them out, and I further be¬

lieve that the great many follow¬
of

ers

the

would

pay

fundamental

be

if

rors

saved

occasionally

little

a

approach

serious

some

er¬

would

they

attention to the

more

Outlook for Present Market

(1)
over

follows:

as

attraction

The

ment

today remains relatively

diminished.

believe

I

un¬

have

we

alternative

other

no

equities

for

other form of invest¬

every

the

with

present

inflationary
background
it exists today, but to invest in

as

One

stocks.

common

peculiar

the

of

most

which

phenomenon

ac¬

companies inflation is that it acts
chloroform in

putting people
sleep as far as realizing what is
happening is concerned. The tim¬
ing of an investment purchase is
what seems so important.
(2) So far nothing has changed

as

a

to

the fundamental trend.
in

are

While

high territory in

we

terms of

the averages, many quality stocks

selling

are

peaks.

below their 1946

way

There is

major

evidence that

no

distribution

or

taken

has

congestion

major

took place in 1946 and
took

1946

months

top

in 1937.
the

before

Every bull

formed.

was

top

such

place

as

It

nine

market has interruptions and such
brief setback

a

able

during

other

words

between

nexL month.
intermediate

an

top

prices
and
a
high between 235

present

possible

new

Dow-Jones

and 240

after election

Investors
hold

quite prob¬
In

seems

the

through

to

to

on

further strength and

build up a cash reserve as a better

buying

the

within

opportunity

month

next

sistent

and

seems

many

evidence

con¬

of

buying and

signals

that

higher

can

S

and

grams

h

c

1

e n

y
The
Merchandising stocks, most all of
the
department stores and the

chain

stores.

I

e

The

favor

Tobaccos:

Marshall

especially
American Tobacco and Liggett &
Myers. The long neglected Mov¬

Railroad

Equipment

behind

cially

the

like

group

market.

General

I

and

American

The

American

Brake

favor

The

upward
and

I

move.

American Air¬

Chemicals

are

of

above

the

such

issues.

other

The

merchandising

Aircraft

should

group

listed

groups

the

as

not

stocks:

be

paying little

tion

the

to

leading

individual

stocks;

this

indicated

are

Lockheed,

and

Grumann,

Douglas

and

Aviation

on

sell-off

purchases

North

a

one

from

two

or

point
levels

The

oils, motors and rails have

been the

cently.

most popular groups re¬

While

some

minor

very

distribution is evident in

porarily

withheld,

position
until

should

signs

of

few of

a

make

additional

been

has

but

far

investment

months

buying

cautiously

awaiting

another

opportunity.

in

even

major

1948.

The

this

has

place

leading group and

that

individual

many

bullish signals.

miscellaneous

is¬

many

there

tras should be
exert

a

factor to any
sides

the

the

stocks

flying

A few of them in
industries

are

as

has

at

Is

National

Thomaston, in tbe State of Connecticut,
its affairs
All creditors of the
are
therefore
hereby notified

closing

to

present

undersigned

claims
at

said

for

payment

to

the

Bank.
P. I. ROBERTS.

Liquidating Agent.
Dated August

18,

1950.




associated
of

H.

Lorenz,

17

active in Columbus

individ¬

as an

ual dealer.

RED

N.

J.—A.

Greenhall

has

with offices

at

157

Street.

Broad

He

formerly

was

with D'Assern & Co. of New York

Co., 53 State

Kenny

Mass.

has

—

joined

Donald

the

J

staff

oi

(Special to The Financial Chronicle)
Spencer Trask & Co., 50 Congress
BOSTON, Mass. — Robert
S. Street.
Moore, formerly associated with
Amott, Baker & Co., Inc., has
DIVIDEND NOTICES
joined the staff of Joseph F. Jor¬

&

Co. of Newton, Mass.

NATIONAL CONTAINER

Paine, Webber, Adds

Frank

Monmouth

formed

Securities Co.

R

wit:

With Spencer Trask

Securities Co.

BANK,

Charles

—

affiliated

(Special to The Financial Chronicle)

BOSTON,

dan

Monmouth

Mass.

become

with

T.

South

has

Street.

Rockland,

associated

CORPORATION

(Special to The Financial Chronicle)

On October 11, 1950, a regu¬
lar quarterly dividend of 15c

BOSTON, Mass.—Philip A. Kerrivan has been added to the staff

a

of

dend of 15c

Paine, Webber, Jackson & Cur¬

share; and

clared

tis, 24 Federal Street.

of

extra divir

an

share

a

de¬

were

the Common Stock

on

National

Container

Cor¬

poration, payable December

City.

11,

DIVIDEND NOTICES

1950, to all stockholders

of record, November 15,1950.
FINANCIAL

NOTICE

HARRY

GINSBURG,

TIDE WATER POWER

1

Treasurer

COMPANY

Dividend Notice
The

Board

declared

HYTR0N RADIO &

ELECTRONICS CORP.
NOTICE OF SPECIAL DIVIDEND

Directors

of

has

dividend
of 15c a shpre on the Common
Stock of the Company, payable
November 15, 1950, to holders
of record October 27, 1950.
quarterly

a

WARREN W. BELL,
October

NATURAL

GAS

COMPANY

4$

a

T

President.

is, 1950.

SOUTHERN
:

Birmingham/ Alabama

;
■

■

The

de¬

■

special dividend of ten

:

Board
a

(10c)

cents

of

Directors

share

per

Common

on

of

Stock

payable

the

of

stockholders

on

Company

No¬

record

,nrn

COFFIN

A dividend of
per

57% cents
share has been declared

DEBENTURE: The regular quarterly

•

on

the

dividend of $2.00 per share on

the De¬

;

Southern Natural Gas Com-

paid Nov. 1, 1950,

S

pany,

;

1950 to stockholders of

benture Stock will be
to stockholders of

record Oct. 24, 1950.

"A" COMMON

and VOTING

»

ord

COMMON: A quarterly dividend of

:

on

the "A" Common

Common

share

on

and Voting Common Stocks will be
Nov. 15, 1950, to

paid

stockholders of record

Stock

of

payable December 13,

I

30 cents per

Treasurer

Common Stock Dividend No. 47

;

DIVIDEND NOTICES

the

6, 1950.

i/

L

has

November 16, 1950

LLOYD H.

at

rec-

the close of business

December 1, 1950.
H. D.

McHENRY,

Secretary.

;
"

Dated: October 19, 1950.

Oct. 24, 1950.

Newhall, Treasurer

Co.
To The

Safeway

Stockholder*! Of

the

HYTR0N RADIO

Harvester

&

Preferred and Common

speculative

are

few

a

low-

additional

suggestions:
International
Mack

Tel.

&

Notice is hereby given that pursuant to pro¬
of the Articles of Organization, as

Spiegel
Hill &

In

conclusion

tribution is

Sullivan

until

major

dis¬

evident, I continue to

HELP

WANTED

TRADER
of

the

houses

oldest
has

established

an

opening

over-the-

for

an

ex¬

Trader
who has an established
An
efficient and active trading
department and excellent research facilities
will be at the disposal of the man we choose.
clientele.

A

liberal

a

drawing

commission

Replies will be held
Box G 1019,

Chronicle,

will

account of

25

be

$150.00

paid against
week.

per

in strictest

Radio & EJgctronics
Corp. (herein called the company) and reso¬
lutions duly adopted by the Board of Direc¬
tors, the Company has called for redemption
on November 22, 1950, at the redemption price
of $8.80 per share, plus accrued dividend, all
the outstanding shares of its 6% Cumulative
Convertible Preferred Stock ($8. Par Value).
Holders of the above described shares are
amended,

Truck

confidaace.

of

Place,

New

York

hereby notified to surrender said shares for
redemption to the Old Colony Trust Company,
Boston, Massachusetts, or the First National
Bank
of
Jersey
City, Jersey City, New
J ersey.
After November 22, 1950, all dividends on
the Preferred Shares will cease to accrue and
all rights with respect to these shares will
cease, except only the right of the holders to
receive the redemption price without interest.
Each share of the Preferred Stock is con¬
vertible into 1.7 shares of the Company's com¬
mon
stock at any time prior to the close of
business on the tenth day prior to said date
of redemption which conversion must be made
at the
Old Colony Trust Company, Boston,
Massachusetts, or at the First National Bank
of Jersey City, Jersey City, New Jersey.
LLOYD H.

COLUMBIA PICTURES

16, 1950.

CORPORATION
Preferred Dividend
of

Board

The
a

Directors

meeting held October

declared

1950,

of

dividend
share

Preferred

tive

ber
ers

15,
of

at

11,

quarterly
$1.06)4
per
a

the $4.25 Cumula¬

on

company,

Stock

payable

of the

Novem¬

1950, to stockhold¬
record

November

1,

1950.

The Board of Directors has this day declared
a

dividend

and

an

cents

of

extra

per

dividends

fifty

(50C)

dividend

cents per share,

of twenty-five (25tf)

share, on its Common Stock, both
payable on November 9, 1950. to

stockholders of record at the close of business
on

1950, declared

on

Safeway
October 11,

quarterly and an
Company's $5
Par Value Common Stock and reguh r
quarterly dividends on the 4% Pre¬
extra

dividend

a

the

on

ferred Stock and 5 % Preferred Stocl

dividend

The

Stock is

at

the

The additional
per

on

rate

the

Commo

of 60c per

extra

share

dividend is 30-

share. Both dividends are payab
stockholde

December 14, 1950 to
of record

at

the close of busine:

December 4,1950.
The Dividend

Common Dividends

Stock is
and

on

at

the

on

rate

the 4% Preferre
of $1.00 per

shai

the 5 % Preferred Stock at th

A.

1,1951 to stockholders of record

;

the closeofbusiness December 4,19'

SCHNEIDER,

MILTON L. SELBY, Secreta,

Vice-Pres. and Treas.

October 11, 1950.

•

:

of $1.25 per share. Both pr:
ferred dividends are payable Janua;

rate

October 26, 1950.

COFFltf
Treasurcr

7.
October

Stores, Incorporated,

Hytron

Commercial & Financial

Park

The Board of Directors of

6% Cumulative Convertible
Preferred Stock, $8. Par Value

visions

Tel.

Master Electric

Bunker

Stock Dividends

ELECTRONICS CORP.

more

Stored

INCORPORATED

Square D
In

One

Association

is

Rich

Edward E. Mathews

Philip

—

McRae

A. B.

International

counter

located

become

August

.

perienced

Bank,

With E. E. Mathews

§Wni*6n aMamtfacUmnq (Ea.

a

Thomaston

E.

&

(Special to The Financial Chronicle)

Mass.

Buckingham

Waddell

Framingham, Mass.

high plateaq for some
time and today's prices in many
stocks seem soundly supported by
current earnings and dividends.

Tbe

Ohio—George

October 16, 1950

Bridgeport Brass

LIQUIDATION NOTICE

BOSTON,

with

will

McCalls

Dow-Jones.

on

Exchanges,

Mich. —Clarence

is

Reed, Inc. of Kansas City, Mo.

Nov. 1.

on

Lincoln

Supply

Simmons

reports

profits begins to take a real
dive, business is likely to

and

(Special to The Financial Chronicle)

High Street. Mr. Currier has been

vember

nose

stay

Stock

York

New

Kramer

Freuhauf Trailer

(3) In general until the margin
of

Midwest

the

With J. F. Jordan Co.
with

McGraw Hill

promise to make excellent read¬
ing and reach a new all-time peak
on

of

Continental Can

strong* supporting
severe setback. Be¬
quarter

members

J.

Maine.

to

priced field

third

10 South La Salle Street,

Machinery
Bigelow Sanford

sold-

extremely generous

Co.,

Food

provide a much stronger
technical
position and tend ' to

and

(Special to The Financial Chronicle)
,

CHICAGO, 111.—Paul H. Davis
&

ship

Air Reduction

re¬

ex¬

be

(Special to The Financial Chronicle)

Currier

Co.,

Building.

MUSKEGON.

Pittston

many

The flood of year-end

should

With August Lorenz

COLUMBUS,

El¬

with

Investment

Kales-Kramer
Kales

D.

affiliated

Joins Waddell & Reed

Paul H. Davis Partner

George T. Currier Is

were

Jersey Zinc

National

&

York

BOSTON,

clared

follows:
New

New

With Lincoln E. McRae

in

position to carry much higher.

out bulls

(2)

and

v

advice

same

taken

mentioned

Carreau

Stock Exchange.

distribution

in this group such as Repub¬
and Jones & Laughlin are in

I

in

Street,

become

disturbed

sues

a

partner

has

City, members of the New York

no

distribution

the

limit reactions.

Wall

DETROIT, Mich.—John
liott

admit Hatfield Smith to partner¬

applies to the steels. No important

better

These

positions

(Special to The Financial Chronicle)

re¬

least, long-term

held.

important distribu¬
tion is evident in this
leading is¬
sue such as took place in 1946 or
so

the indus¬

the sidelines for

a

63

more
apparent. For example,
General Motors seems pretty high,

(1) Professional skepticism and
what
may
be
called
"fickle
on

purchases

for the present at

S.

Co.,

investment
be

not

Joins Kales-Kramer

membership of the late
Turner, on Nov. 1 will

Wallis

are

,

money"

change

action caused by surprise news to

the stocks in each of these
groups,
and new purchases might be tem¬

rails.

maining

of

groups

should be profitable.

Underwood Typewriter
Western Auto Supply

on

and

intermediate

any

in

Boeing,

present

Admit

to

Corcoran, who will

acquire the New York Stock Ex¬

American

Supporting a longer term bull¬
opinion are three reasons for
concluding
that any
correction
should be limited to a figure of
trials and 63-65 Dow-Jones

stocks

J.

become
averages;

overlooked

though they have been re¬
actionary of late. Higher prices

ish

on

mis¬

the performance of

on

use

Fairbanks Morse

Dow-Jones

atten¬

and

the

of

unit,

a

or no

deceptive

actions

concentrate

as

even

likely.

214-216

act

one

group that might be advantage¬
ously, shifted into the Tobaccos or
some

to

I advise

)

Eastern

lines.

refuses

market

Shoe.

are
pretty well sold
eventually should have

substantial

Carreau
Andrew

are

Airlines

and

atti¬

espe¬

Transportation,
New
York
Air
Brake, Budd, American Locomo¬
tive

bullish

.

ing Picture stocks: Loew's, Warner
Brothers
and
Paramount.
The
still

selectively

a

.

Field, Gimbels, Montgomery Ward,
Allied Stores and Associated Dry
Goods.

advise

tude toward the market. Since the

con¬

eventually
be
ex¬
pected. They are the Liquors: Na¬
tional Distillers,
Distillers Sea¬

than

more

specific,
of stocks

confident

flying

prices

more

groups

show

to

are

lic

such expected
might do well

any

Traders

lighten

or

continue

seems

just before
probable...

should

reaction.

and

tinue

a

So much
for the
background.
My outlook for the present mar¬
is

stocks

out,

technical approach.

ket

To be,even

manage¬

much easier

43

rr

October

11, 1950.

■'

44

The Commercial and Financial Chronicle

(1528)

.

.

Thursday, October 19, 1950

.

still objects, it

BUSINESS BUZZ

less
is

is understood, un*
regulation
in a single
Federal

holding

company

invested

supervisory agency.

on...

«

*

*

Although maturities of E bonds

Behind-the-Scene Interpretations

during calendar 1951 will total
only some $1.1 billion in calendar
1951, they will increase sharply
each year thereafter, to a single

And You

Capital

from the Nation's

of

peak

year

billion

$6

some

in

1954.

WASHINGTbN, D. C.—That W.
Symington, officially "co¬

Stuart

controls,
or intends to become the "czar"
these controls, is the distinct

ordinator" of the defense
is

of

possibility which is raised by two
of

of that official's office.

moves

Thus if Mr.

Symington becomes
"um¬

merely the President's

not

control

all
action

fact the fount of

but in

cies,

authority, then

no

of the control agen¬
validity until and
approved by Mr. Syming¬

taken by any

has

cies

unless

any

ton.

Once

under¬

is

situation

this

stood, industry may be inclined to
deal

little

as

and

possible with, say,
Authority,

as

Production

National

to Mr.

appeal directly

Sym-

whose approval
other pervasive
order is meaningless.
|
ington,

without

allocation

any

Mr.

or

Symington is the chief ex¬
of the National Security

ecutive

supposed

to

Board

That

Board.

Resources

policies

the

set

is

of

civilian mobilization for the mili¬

Thus
Mr.
Symington was the logical
person to name also "coordinator"

tary preparedness program.

of

the

nounce

Notwithstanding the com¬
the Board continued to

easy.

merely to

serve

ties

the

over

civilian

economy

should be applied.
One of Mr. Symington's actions
which etched his role

the fount

as

of control authority was his action
in

regard to controls

ment credit

amending Regulation W to apply
the strictest
terms required, in
and

heat

office

had

and

better

their

technical
of

scores

are

affair.

bases

upon

into effect.

regulations

„

went

The prescribed

mini¬
down payments and maxi¬

mum

mum

terms

were

reached

ences

between

of

instalment

after
the

long

loans

confer¬

appliance and

lending industries
on
the
hand, and Federal Reserve
■:A-thorities on the other.

one
au-

After

The

terms

the

actually

as

set

midway

"toughest"

terms

were

between
of World

War II, and the easiest terms just

prior to expiration of the regula¬
tion in the postwar era. The ini¬
tial regulations were designed to
curb the expansion in

such lend¬

ing. They were not intended to
adjust to a great scarcity of ap¬
pliances and automobiles, for the

military

three

remarkable

production

program

has

not

actually got into operation to
the point where officials
know

four

to

weeks

cooperation

"private credit," the two
of

official
set of

a

power

came

sources

with

up

mortgage loan curbs.

for

information

his

and

presumably for his pro-forma aptproval.

Instead

proposed

to

schedule
offer

Mr.

throw
of

out

changes

to

mortgage
one

the

Mr. Symington;

ac¬

they

source

the

subject

though he

as

had what

the

"original

jurisdiction."

Mr.

suaded

the

curbs.

In any case, Mr. Symington

treated

case

and

source,

another

to

whole

not offered with any

were

insistence by

cording

the

window

the

"tougher"

According

Symington

lawyers would call

Symington

to

accept

this

In

was

per¬

virtually

recommendations

all

of

submitted

initially by the Reserve Board and
Housing
and
Home
Finance
Agency
diction

those both by law and

over

Executive
no

agencies having juris¬

—

order.

And

there

was

dispute between the two to be

umpired by Mr. Symington.
#

they want to limit out¬
put of autos, washing machines,
etc.

When
the

the

Sept.

18

Board

promulgated

regulations

it

gave

the industries concerned the clear

For

those

who1 have

a

period

of

or

four

less

not
more

months.

than

two

likely for three
It

asserted

was

1948.

anti-inflationary measure, tem¬

fol¬

government has as

Thus

there

was

no

point in

gave some indication of how
were

working.

nationally will

October
not

be

until late in November.

asked

government to inflate the housing

terials

business.

lars"

The estimate

(3)

800,000

of

(1)

Controls,

prescribed

or

strictor

therein

for

forced

with

regard

im¬

supported

houses. This

spending, officially-favored wage
boosts for labor, and other
official

ministrative discretion




law

and

850,000 dwelling units of all kinds
which would be built in calendar
1951 under these and later restric¬

tions

rental housing credit, are

on

made

that the

vailed

broad

the

on

credit terms

same

1948

in

will

volume

same

assumption
pre¬

as

about

allow

of

building

as

have

during

that

no sure

feeling that this will work

out that way,

be

that

of

1950

the

great
been

on

payments

the

inflationary

built

have

been

(2)

and

over

The

in

the

British

it

down

operating
the

case,

building boom will fall flat

on

Oct.

Broadway,

for

spent in

member

on

Plan

continue

current

dollar of

one

four

indebtedness,

re¬

dollars
and

of

that

a

normal ratio of reserves to shortterm debt

is

to

one

on

its

face.

the

and

(4) Regardless of whether offi¬
have guessed
wrong,
they
have
no
intention of
reversing
of

the

year.

after

first

the

This does not

that they will

mean

expect to ease the

regulations if they prove too tight
tighten them if they prove too
lose, as soon as January', but that
or

January is

the

first

date

,

President Truman is reported to
be

awaiting

tional

the

November

na¬

election returns before de¬

With
LOS
W.

Reed

has

where

say.
near

the regula¬

tions would be made much stricter

"free

lost

is

export

of

that

view

they

business

staff

of

(Special to The Financial Chronicle)

DENVER,
Howard

Colo.

has

on

are

which

—

joined

Security Building.

behind

his

profits tax

backing
law

for

of

an

Samuel
the

Service

G.

staff

of

Corporation,
.

enact¬

ment this year.
*

Although

*

For

*

"liberals"

§ome

are

talking about getting a new bank
holding company regulation bill
enacted

early next year, this

pros¬

Largo Appreciation Potential
WE SUGGEST

RIVERSIDE CEMENT CO.

pect is discounted in most quar¬
ters.
Members
of
the
Banking
Committee' of

the

Senate

finally

meeting of minds

a

definitions

of

what

is

a

on

a

holding

what is a non-bank¬
affiliate that should be sold
by a bank holding company. This

company and

ing

embodied in

was

point

dollars"

the

King Merritt & Co., Inc., Chamber
of Commerce Bldg.

siasm

ulating about a change, they
(5) In case of total war or

British

Mc¬

Cal.—Robert

joined

Investment

reached

The

Stock

W.

King Merritt

ANGELES,

ciding whether to put real enthu¬

strict regulation bill with explicit

of course,

Shethar,

York

Charles

one.

there will be any validity to spec¬

war,

New

Laughlin, who will acquire the
Exchange membership of the late
Ray A. Van Clief.

cials

until

120

Joins Investment Service

excess

themselves

at

New

of

Exchange,

viewpoint

every

formed

Partners will be John B.

should

point, only has

be

offices

ma¬

whole, it is the British view¬

serves

will

dol¬

despite the favorable foreign ex¬
reserves. The sterling area
a

Co.
with

,

the

be

is

change
as

&

26

York City,
to
engage in the securities business.

This

Marshall

matter,

that

Shethar

"free

The

British

is

in

the

effect

Shethar & Co. in N. Y.

S.

the British chose.

another

aid,

aid

above

furnished.

and may or may not coincide with
the "Chronicle's" own viewsj

and

repayment

If this is the

year.

may

up

low

very

en¬

by

Senator

A.

a

bill introduced

Willis

Robertson

(D., Va.). Senator Robertson
nounced,

HAnover 2-0050

an¬

however, that the Fed¬

Reserve Board

with

his

would not go

bill.

The

Teletype—NY 1-971
Firm Trading Markets

CUSS B ((MiM) STOCK
A

leading producer of cement
in
fast-growing Southern
California.

Analysis of this Company and
a

review of the Cement Indua-,

try available on request.

Selling about

$9.5Q

LERNER & CO.
Inv.atm.nt Sacuritiaa

II Psst Office Sqsare, Bsstss 9
Tal.

Mat*.

HUbbnrd 2-1890

Board

Allied Electric Products
Baker

FOREIGN SECURITIES

Lithium

or non¬

loans

as an

A11 Issues

McBee

on

anti-

Raulang

Jack £r Heintz

Corp.

Company

r arl marks & po. inc.
FOREIGN SECURITIES

not forbidden by
undertaken by ad¬

measure.

re-

So

U.

boom

housing

long

and

terms which
this

they admit. It

has

sustained

Officials

year.

was

was

them to expand their loanable

they could

dollars."

'*free

could

any way

to

conventional

on

these

acquired

credit

fense Production Act merely for¬
bids application of these restric¬
government

keep

"new"

housing construction, will be

direct controls to
compensate for
the
evils, of high

Inflationary policies, immediately

to

money

along

broader

for

suspended two years of
laws and regulations sponsored by

S.

big

a

the

to what

U.

of

program.

by

rearming,

of

way

for

their

existing houses. FHA and VA will
Meanwhile, the boys withjji the
require, the same minimum down
Administration who want to use
payments, etc., on used as on new
government

with

do

eral

of

approached

summer as

needed to compensate the country

they
figures tions
only

available

last

consequence

rearmament

when

noted

some

the

British

in short order.

even

operation

be

porarily

existing
houses in loans insured by FHA
considering tightening them until
or
guaranteed by VA.
The De¬
one full month of their
that

will

minutely from the stand¬
point of the housing construction
business, these new real estate
mortgage regulations, there are

understanding that these regula¬ plications:
tions would stand
unchanged for
months, and

not

lowed

way

in

total

«

*

how much

rough

a

an

the

offered to Mr. Sym¬

were

the terms of
housing mortgages
under these
restrictions are only a little less
liberal than those which prevailed

of

between

to

being

(This column is intended to

backstops.

Ray Foley, the spokesman
for
"government credit" and the Fed¬
eral Reserve Beard, representing

were.

/.interpreted

official

the

outside

is

from

fleet the "behind the scene" interpretation from the nation's Capita I

mortgage

mortgage credit is

estates

exceedingly

marketable security, for

a

disposition

ing market issues.

that in

Real
an

is

there

funds under the policy of support¬

attempted assumption of
"original jurisdiction" was in re¬
lation to Regulation X, the con¬
estate

hand,

by commercial banks, which could
use

The other instance of Mr. Sym¬

real

other

the

obligations

ington's

These

18 the first of the in¬

the

minds

credit.

conceivable
angle thereof.

involve

though it meant making the
Reserve Board look rediculous.

on

is

inducement takes, that it will

the

even

trols

in¬

little thought that whatever form

Chairman Tom

change

rein¬
or

bonds. It

every

On

the

others to think they

and

McCabe

bonds,

G

or

is studying
plan offered

every

intense from his

so

to cause

to

ob¬

new

said that the Treasury

not
officially
by Mr. Symington, but

was

as

theni in F

II,

of

change

bonds

in

in cash,

vest

was

"ordered"
the

the

course

regulation

encourage

already have the right

take their funds

vest them in new E

by control authorities.

cussed

Of

Holders

than dis¬

civilian output are more

loans.

credit

an¬

upon

ligations.

on

main, during World War
before limitation orders

the

ington

On Sept.

stalment

to

hit

E

to

instal¬

over

maturing

Symington's office, the
Board suddenly capitulated over
the week end and reversed itself,

or

trols

of

to

terms

new

or

holders

Mr.

which

arbitrator of disputes between
bureaus as to how and when con¬

has

reinvest their proceeds

There

"umpire"

as

it

special inducement or induce¬
the way of new securi¬

any

Finally, under intense pressure

government insurance and
Throughout
officialdom
here, guarantees may be obtained from
the government alone, without rec¬
however, it was understood that
Mr. Symington in dealing with onciling these with the differing
matters delegated by Executive ways various private institutions
make mortgage loans
order to other control agencies, variously
was

spring

next

whether

ments in

!

controls.

by

ready

plaints,

Act

Production

Defense

be

too

stick to its position.

from

pire" in the settlement of disputes
between or among control agen¬

in¬

were

curbs

credit

Nevertheless, the Treasury may

initial

its

that

Board

stalment

behind-the-scenes

recent

the

began carping at the Federal Re¬
serve

SPECIALISTS

Hill, Thompson & Co., Inc.
Trading Department

50 Broad Street

New York 4, N. Y.

70 WALL

STREET, N. Y. S

-

Mr. Foley candidly admits

Tel. WHitehall 4-4540

.