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STOCK EXCHANGE PRACTICES
HEARINGS
BEFORE THE
COMMITTEE ON BANKING AND CURRENCY
UNITED STATES SENATE
SEVENTY-THIRD CONGRESS
FIRST SESSION
ON
S.Res. 84
(72d CONGRESS)
A RESOLUTION TO INVESTIGATE PRACTICES OF STOCK
EXCHANGES WITH RESPECT TO THE BUYING AND
SELLING AND THE BORROWING AND LENDING
OF LISTED SECURITIES
AND
S.Res. 56
(73d CONGRESS)
A RESOLUTION TO INVESTIGATE THE MATTER OF BANKING OPERATIONS AND PRACTICES, THE ISSUANCE
AND SALE OF SECURITIES, AND THE TRADING
THEREIN
PART 1
MAY 23, 24, and 25, 1933
Printed for the use of the Committee on Banking and Currency
175541
U N I T E D STATES
GOVERNMENT P R I N T I N G O F F I C E
WASHINGTON : 1934
COMMITTEE ON BANKING AND CURRENCY
DUNCAN U. FLETCHER, Florida, Chairman
CARTER GLASS, Virginia
PETER NORBECK, South Dakota
ROBERT F. WAGNER, New York
PHILLIPS LEE GOLDSBOROUGH, Maryland
ALBEN W. BARKLEY, Kentucky
JOHN G. TOWNSEND, JE., Delaware
ROBERT J. BULKLEY, Ohio
FREDERIC C. WALCOTT, Connecticut
THOMAS P. GORE, Oklahoma
ROBERT D. CAREY, Wyoming
EDWARD P. COSTIGAN, Colorado
JAMES COUZENS, Michigan
ROBERT R. REYNOLDS, North Carolina
FREDERICK STEIWER, Oregon
JAMES F. BYRNES, South Carolina
HAMILTON F. KEAN, New Jersey
JOHN H. BANKHEAD, Alabama
WILLIAM GIBBS McADOO, California
ALVA B. ADAMS, Colorado
WILLIAM L. HILL, Clerk
R. H. SPARKMAN, Acting Clerk
II
CONTENTS
Testimony of—
g
J. P. Morgan,, a member of the firm of J. P. Morgan & Co., New
York City
3, 26, 53, 89, 128, 131,198
Russell C. Leffingwell, a member of the firm of J. P. Morgan & Co.,
New York City
25
L. A. Keyes, manager of J. P. Morgan & Co., New York City
71
George Whitney, a partner of the firm of J. P. Morgan & Co., 23 Wall
Street, New York City
.
132, 154, 110, 201
BANKING, FINANCING, AND SECUKITIES SALES
PEACTICES
TUESDAY, MAY 23, 1933
UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE
ON BANKING AND CURRENCY,
Washington, D.C.
The subcommittee met, pursuant to the call of the chairman at 10
o'clock a.m., in the hearing room of the committee, Room 301 Senate
Office Building, Senator Duncan XL Fletcher, presiding.
Present: Senators Fletcher (chairman), Glass, Barkley, Costigan,
Townsend, and Couzens.
Present also: Senators Bulkley, Gore, Reynolds, Byrnes, Bankhead, McAdoo, Adams, Goldsborough, Walcott, and Steiwer.
Present also: Ferdinand Pecora, counsel to the committee, Julius
Silver, David Saperstein, and James B. McDonough, Jr., associate
counsel to the committee. John W. Davis, counsel for J. P. Morgan
& Co., Randall J. LeBouef, Jr., and Earle J. Machold, counsel for the
United Corporation and for George H. Howard, president of the
United Corporation.
The CHAIRMAN. The committee will come to order. It is a little
unprecedented perhaps but might be just as well to swear in the
official reporters of the committee. They will please stand, hold
up their right hand and be sworn: You, and each of you, solemnly
swear that you will accurately write in shorthand and true and
complete typewritten transcript make of all the proceedings of the
committee. So help you God.
Mr. HART. I do.
Mr. CARLSON. I do.
Mr. WILFONG. I do.
The CHAIRMAN. Let
*
the proceedings today show as hearings resumed on what is known as the investigation of stock exchange
practices, under resolutions of the Senate, particularly Senate Resolution 56, which will be made a part of the record at this point:
SENATE RESOLUTION 56
Resolved, That the Committee on Banking and Currency, or any duly authorized subcommittee thereof, in addition to the authority granted under S.Res.
84, Seventy-second Congress, agreed to March 4, 1932, and continued in force
by S.Res. 239, Seventy-second Congress, agreed to June 21, 1932, and further
continued by S.Res. 371, Seventy-second Congress, agreed to February 28,
1933, shall have authority and hereby is directed—
(1) To make a thorough and complete investigation of the operation by any
person, firm, copartnership, company, association, corporation, or other entity,
1
Z
STOCK EXCHANGE PRACTICES
of the business of banking, financing, and extending credit; and of the business
of issuing, offering, or selling securities;
(2) To make a thorough and complete investigation of the business conduct
and practices of security exchanges and of the members thereof;
(3) To make a thorough and complete investigation of the practices with
respect to the buying and selling and the borrowing and lending of securities
which are traded in upon the various security exchanges, or on the over-thecounter market, or on any other market; and of the values of such securities;
and
(4) To make a thorough and complete investigation of the effect of all such
business operations and practices upon interstate and foreign commerce, upon
the industrial and commercial credit structure of the United States, upon the
operation of the national banking system and the Federal Reserve System, and
upon the market for securities of the United States Government, and the desirability of the exercise of the taxing power of the United States with respect to
any such business and any such securities, and the desirability of limiting or
prohibiting the use of the mails, the telegraph, the telephone, the radio, and
any other facilities of interstate commerce or communication with respect to
any such operations and practices deemed fraudulent or contrary to the public
interest.
For the purpose of this resolution the committee, or any duly authorized
subcommittee thereof, is authorized to hold such hearings, to sit and act at
such times and places, either in the District of Columbia or elsewhere, during
the first session of the Seventy-third Congress or any recess thereof, and until
the beginning of the second session thereof, to employ such experts, and clerical, stenographic, and other assistants, to require by subpena or otherwise the
attendance of such witnesses and the production and impounding of such books,
papers, and documents, to administer such oaths, and to take such testimony
and to make such expenditures, as it deems advisable. The cost of stenographic services to report such hearings shall not be in excess of 25 cents per
hundred words. The expenses of the investigation shall be paid out of the
sum heretofore made available for the investigation authorized under S.Res. 84,
S.Res. 239, and S.Res. 371, Seventy-second Congress.
The CHAIRMAN. Let the record show as the members of the subcommittee those which have heretofore been named in the report;
also counsel for the committee, Mr. Pecora and his assistants, witnesses who have been subpenaed, and others.
Now, Mr. Pecora, who is your first witness?
Mr. PECORA. Mr. J. P. Morgan.
The CHAIRMAN. Mr. Morgan, will you be sworn ?
Mr. MORGAN. Certainly.
The CHAIRMAN. Hold up your right hand. You solemnly swear
that you will tell the truth, the whole truth, and nothing but the
truth regarding the matters now tander consideration by the committee, so help you God.
Mr. MORGAN. I do.
The CHAIRMAN. YOU might take a seat at the committee table
opposite the committee reporter. Proceed, Mr. Pecora.
Senator BAREXEY. Mr. Chairman, I understand that Mr. Morgan
wants to make a preliminary statement before he is examined by
counsel for the committee.
Mr. PECORA. HOW long will it take?
Senator BARKLEY. IS it lengthy?
Mr. DAVIS. It is not very lengthy.
Senator COUZENS. Why not let counsel for the committee handle
the matter ?
The CHAIRMAN. Mr. Morgan, do you desire to make any preliminary statement?
Mr. MORGAN. I should like to do so, Mr. Chairman, if I might.
The CHAIRMAN. I think the committee will permit it.
STOCK EXCHANGE PEACTICES
3
Senator BARKLEY. Mr. Chairman, let there be order in the room.
Senator MCADOO. Mr. Chairman, cannot we try to get order in the
room ? Nobody can hear the proceedings.
The CHAIRMAN. Will the officers please see that we have order in
the room. Now, you may proceed, Mr. Morgan.
TESTIMONY OF J. P. MORGAN, A MEMBER OF THE FIRM OF J. P.
MORGAN & CO., NEW YORK CITY
Mr. MORGAN. It is our desire, naturally, that we should help the
committee as much as we can to perform their wishes, and I have
made up a short statement of my own views in regard to the duties
and uses of private bankers, and I should be very glad to read it to
the committee. It is very short; or if the committee prefers I
will turn it in as a part of the record. But I should prefer to read it.
The CHAIRMAN. I think it is quite in order for you to read it, Mr.
Morgan.
Mr. MORGAN. All right, sir.
The CHAIRMAN. We would like to hear it.
Mr. MORGAN. Our desire being to be of use to the committee, I have
ventured to frame a brief statement of my views on the "subject of
the duties and uses of private bankers, which I hope the committee
wdll receive as an outline and, if it so desires, discuss with me or
with some of my partners.
In the first place, what are the differences between the rights and
privileges of a private banker and an incorporated bank. As I see
it, they consist chiefly in the fact that an incorporated bank receives
from the Government, Federal, or State, from which its charter
comes, certain privileges, and for those privileges it has to conform
to certain laws and regulations of the Government, applying only
to the incorporated bank's business. The private banker has none
of these privileges, but as he does not have to conform to any special
Government regulation, he has a somewhat greater freedom of action.
The private banker is a member of a profession which has been
practiced since the Middle Ages. In the process of time there has
grown up a code of professional ethics and customs, on the observance of which depend his reputation, his fortune, and his usefulness
to the community in which he works.
Some private bankers, as indeed is the case in some of the other
professions, are not as observant of this code as they should be; but
if, in the exercise of his profession, the private banker disregards
this code, which could never be expressed in legislation, but has a
force far greater than any law, he will sacrifice his credit. This
credit is his most valuable! possession; it is the result of years of
fair and honorable dealing and, while it may be quickly lost, once
lost cannot be restored for a long time, if ever.
Senator BYRNES (interposing). Mr. Chairman, there is no
use of our having this hearing unless there is some order in the
room.
The CHAIRMAN. The people must be seated or retire from the
room.
Senator BARKLEY. I move that the doorkeeper be ordered to keep
the door shut and not to open it under any circumstances.
4
STOCK EXCHANGE PRACTICES
A NEWSPAPER REPORTER. Oh, Senator Barkley, we must be getting
in and out regularly in order to send our reports.
Senator MCADOO. I also desire to suggest that the photographers
desist from taking any more photographs.
Senator COTJZENS. Mr. Chairman, I ask that the sergeant-at-arms
order the photographers not to make any more photographs and
cease to bother us with this clicking of their cameras.
The CHAIRMAN. YOU may now proceed, Mr. Morgan.
Mr. MORGAN. The banker must at all times so conduct himself
as to justify the confidence of his clients in him and thus preserve
it for his successors.
If I may be permitted to speak of the firm, of which I have the
honor to be the senior partner, I should'state that at all times the
idea of doing only first class business, and that in a first-class way,
has been before our minds. We have never been satisfied with
simply keeping within the law, but have constantly sought so to
act that we might fully observe the professional code, and so maintain the credit and reputation which has been handed down to us
from our predecessors in the firm. Since we have no more power
of knowing the future than any other men, we have made many
mistakes—who has not during the past 5 years—but our mistakes
have been errors of judgment and not of principle.
Another most important duty of the private banker is to take
special care that his banking position in regard to his deposits is
at all times sufficiently strong, knowing as he does that none of the
aids provided by the Government for incorporated banks, such as
the Federal Reserve System or the Reconstruction Finance Corporation, are at his disposal.
The private banker has at least^one other duty; he must be ready
and willing at all times to give disinterested advice to his clients to
the best of his ability. If he feels unable to give his advice without
reference to his own interests he must frankly say so. The belief in
the integrity of his advice is a great part of the credit of which I
have spoken above, as being the best possession of any firm.
So far as to the duties. I will now pass on to the uses of private
bankers. These seem to me to be closely related to the fact that, as
they are risking their own money and doing their own work, they
may properly undertake certain responsibilities and businesses which
the management of an incorporated bank might not be justified in
dealing with. Subject±o the paramount need of keeping their banking position toward their depositors sound and liquid, they can in
a very prompt and effective way assist in the development of the
industries and productions of this largely industrialized world.
They can also come to the aid of a general situation, or of their
friends and clients, in times of panic and distress, to an extent that
an incorporated bank might well feel it had not a right to do with
its stockholders' money.
Another very important use of the private banker is to serve as
a channel whereby industry may be provided with capital to meet
its needs for expansion and development. To this end the private
banker can serve well, since, as he has at stake not only his clients'
interests but his own reputation, he is likely to be specially careful,
If he makes a public sale and puts his own name at the foot of the
prospectus he has a continuing obligation of the strongest kind to
STOCK EXCHANGE PRACTICES
O
see, so far as he can, that nothing is done which will interfere
with the full carrying out by the obligor of the contract with the
holder of the security. To accomplish this it is frequently desirable that the private banker should be a director of the company,
the securities of which he has sold.
As to the charge that is frequently and, as I believe, carelessly
made that bankers force their way into boards of directors, I can
only say that, in my experience of over 40 years, I cannot remember
any partner of the house taking a directorship except at the earnest
request of the board of directors of the company in question. It
is often useful for the directors of a company who are not financial
experts to have an expert of that sort, in whom they have confidence,
at hand for consultation. This is why I regret the tendency of so
much present day legislation which endeavors to prevent bankers
from being directors of one thing or another; or which throws on
directors such liabilities for errors for which they could not be responsible as to make it too dangerous for any man of experience
or means to assume such responsibilities.
We must not lost sight of the fact that the steady supply of capital
for industry is an essential of our system, and that anything which
may hinder the flow of such a supply, or needlessly diminish the confidence of the investor in the safety of his investments, is undesirable.
At the present moment, owing to the destruction of confidence in
this time of depression, there is no flow of capital into industries,
and consequently no investment possible for the savings of the people
which are turned over daily to savings banks and insurance companies to be invested. Just at present these are the only sources from
which industry can obtain its needed capital, as the savings of the
incomes of private persons have been so greatly reduced by the depression and by the extreme weight of taxation on incomes and
estates; and as the depression, for the first time as far as I know
in the history of the world, is so widespread no country can lend
money in any other.
Though, at the present time, there is no demand for capital for
industry, this condition will pass, and we should not, by any means,
force the organization for distribution of securities out of business,
lest when there is again a legitimate demand for capital it be found
that the machinery of distribution has disappeared. No private
banker, whether he is, as we are, a wholesale merchant of securities
or whether he deals directly with the ultimate investor, could continue in the business if he had no other sort of business to fall back
on in such times as the present.
The question has been raised whether a private banker should
be permitted to accept deposits. The laws of the State of New
York very wisely, as I think, and under careful restrictions have
sanctioned the practice. Those restrictions prevent, among other
things, our holding ourselves out as depositaries for the public and
from paying interest on deposits of less than $7,500. The bulk
of our deposits has come from our having done work for some client,
or because we are the paying agents for coupons, or the custodians
of sinking funds. If we, for instance, should be deprived of the
right to receive deposits which clients wish to leave with us, we
should very probably have to disband a large part of our organization and thus should be less ab]e to render in the future that im-
6
STOCK EXCHANGE PRACTICES
portant service in the supply of capital for the development of the
country which we have rendered in the past.
In regard to the presence of private bankers on the boards of
directors of other banking institutions, I believe it to be true that
none of the directorships held by any private banker in other banking institutions is held at his request, but because of the strong
desire of those in charge of the institution of which he becomes a
director. This certainly is the case in our own office and I believe
in other cases too, although of course I cannot speak for anybody
but our own firm. Personally, I have always been averse to banking directorships for my partners, but I feel constrained reluctantly
to consent, because of my belief that it is one of the duties of a private banker to be of use in the general affairs of the community,
and that the only way people can be helped is in the way they wish
to be helped. Therefore, if friends in whom we have confidence
ask us to serve them by advising them, we are bound to give them
the best advice we can. No law could prevent anyone from discussing problems with, and seeking advice from, friends in whose judgment he has a confidence which is the result of years of experience
and cooperation, and I do not see any need for legislation which
makes such consultation more difficult.
The private banker is also useful in offering a sort of neutral territory where, at times, thej management of incorporated banks may
meet and discuss the general problems without rivalry or competition. I believe if you were to ask the heads of all the great banks in
New York who have had experience of both good and bad times,
you would be assured that the private bankers, by offering that
neutral ground, have served a very useful purpose, and would have
been much missed had they been forced out of business by law,
either State of Federal.
To sum up, I state without hesitation that I consider the private
banker a national asset and not a national danger. As to the theory
that he may become too powerful, it must be remembered that any
power which he has comes, not from the possession of large means,
but from the confidence of the people in his character and credit, and
that that power, having no force to back it, would dispppear at once
if people thought that the character had changed or the credit had
diminished—not financial credit, but that which comes from the
respect and esteem of the community.
Mr. PECORA. Mr. Morgan, have you stated in the record your residence ?
Mr. MORGAN. NO. My residence is at Glen Cove, N.Y.
Mr. PECORA. And what is your business address ?
Mr. MORGAN. 23 Wall Street.
Mr. PECORA. What is }^our business or profession ?
Mr. MORGAN. Private banker.
Mr. PECORA. Are you in business for yourself or a member of any
firm or copartnership?
Mr. MORGAN. I am a member of the firm of J. P. Morgan & Co.,
and of Drexel & Co., which are one firm; and have also a partnership interest in the two foreign houses of the house of J. P. Morgan
& Co.
Mr. PECORA. What are the names of those two foreign houses?
STOCK EXCHANGE PRACTICES
7
Mr. MORGAN. Morgan, Grenfell & Co. of London, and Morgan &
Co., in Paris.
Mr. PECORA. Are the two latter companies copartnerships, Mr.
Morgan ?
Mr. MORGAN. Well, in London, it is a company under the unlimited liability company law. In Paris it is a copartnership.
Mr. PECORA. HOW long has the firm of J. P. Morgan & Co. been
in existence?
Mr. MORGAN. They began on the 31st of December, 1904, if I
remember rightly.
Mr. PECORA. Have you been a member of the firm since that time ?
Mr. MORGAN. Yes.
Mr. PECORA. Were
you a member of any other firm engaged in
the banking business prior to 1904?
Mr. MORGAN. That was 1894.
Mr. PECORA. I thought you said 1904.
Mr. MORGAN. Well, I meant 1894. I was wrong. Yes; I was a
partner of Drexel, Morgan & Co., and of Drexel & Co., which were
the predecessors of J. P. Morgan & Co.
Mr. PECORA. Might I have a copy of the statement which you read
into the record at the outset of this hearing ?
Mr. MORGAN. Certainly. Let us have some copies.
Senator GORE. Have they been distributed ?
Senator REYNOLDS. NO.
Senator GORE. Have you copies for the members of the committee ?
Mr. DAVIS. Yes, Senator Gore; we have. We will pass them
around to the members of the committee.
Mr. PECORA. Mr. Morgan, will you state the general nature of the
business conducted by the firm of J. P. Morgan & Co. ?
Mr. MORGAN. A general banking business, such as is conducted
under the law of New York by a private banker. We take deposits
from people who wish to deposit with us. We at times issue securities. We buy and sell exchange. We issue letters of credit. We take
orders which we have executedxon the stock exchange. In fact, we
do a general banking business.
Mr. PECORA. A general banking and investment business?
Mr. MORGAN. Yes. But the investment is not the largest part of
our business, in my opinion.
Mr. PECORA. HOW many individuals compose the firm of J. P.
Morgan & Co. at the present time ?
Mr. MORGAN. That is a most difficult question to answer. I thinjk
there are 20. You have them listed for you there. I think it is 20.
Mr. PECORA. Has it since its institution in 1894 consisted of 20
partners ?
Mr. MORGAN. Oh, no. We have gradually added as we needed
them.
Mr. PECORA. At the present time, from the statement you read
into the record, I understand that you are the senior partner of the
firm?
Mr. MORGAN. I am the senior partner.
Mr. PECORA. HOW long has the firm been constituted as it now
exists ?
Mr. MORGAN. 1916,1 believe, the 31st of March.
8
STOCK EXCHANGE PRACTICES
Mr. PECORA. Has it had the same copartners continuously since
that time ?
Mr. MORGAN. Oh, no. We have taken on new ones, we have lost
some by death and some by retirement. It is like any other big
machine.
Mr. PECORA. Well, I asked you how long the firm had been constituted as it now exists.
Mr. MORGAN. Three years, is it ? When was the last time a partner
was added?
Mr. WHITNEY. January 2, 1932.
Mr. MORGAN. TWO years.
Mr. PECORA. Will you designate or give the names of your copartners in that firm?
Mr. MORGAN. Have you got a list there, somebody? I never can
repeat a whole list from memory. I am sorry to give you that
answer, Mr. Pecora.
Mr. PECORA. All right. Let us have them.
Mr. MORGAN. A list of partners of J. P. Morgan & Co. at the end
of December 31,1931—and that does not take in Mr. Dickey, does it?
Mr. WHITNEY. Mr. Charles D. Dickey.
Mr. PECORA. All right. Let us have the list.
Mr. MORGAN. Myself, E. T. Stotesbury, Charles Steele, Thomas
W. Lamont, Horatio G. Lloyd, Dwight W. Morrow—no, he retired.
Thomas Cochran, Julius S. Morgan, George Whitney, Thomas S.
Gates—no, he has retired. Russell C. Loffingwell, Francis D. Bartow, Arthur M. Anderson, William Ewing, Harold Stanley, H. S.
Morgan, Thomas S. Lamont, H. P. Davison, Thomas Newhall,
Edward Hopkinson, Jr., S. Parker Gilbert, and Charles D. Dickey.
Mr. PECORA. When did Mr. Dickey become a partner?
Mr. MORGAN. On the 2d of January 1932.
Mr. PECORA. Are there any written articles of copartnership ?
Mr. MORGAN. Oh, yes.
Mr. PECORA. And do
those articles of copartnership define the
respective rights and interests of the various partners ?
Mr. MORGAN. Yes; they do. Yes.
Mr. PECORA. And they set forth, do they, the basis upon which
the partners contribute to the capital of the firm?
Mr. MORGAN. They have an outline of it, but it is not complete.
Mr. PECORA. Have you a copy of the articles of copartnership here,
Mr. Morgan ?
Mr. MORGAN. NO.
Mr. PECORA. Has
any of your associates, if you know, who are
gathered about the room here, a copy of those articles of copartnership ?
Mr. MORGAN. NO. They have not.
Mr. PECORA. Could a copy of those articles be made available to
the committee ?
Mr. DAVIS. I think, Mr. Chairman, that we should not be required
to do that. I cannot see that it would in any way illuminate this
work. These gentlemen are general partners, and they stand bound
each for all and all for each.
Senator COSTIGAN. What is the objection to furnishing them?
Mr. PECORA. I do not know.
STOCK EXCHANGE PRACTICES
9
Mr. DAVIS. The objection is that it seems purely a matter between
the partners themselves. It cannot have any relevancy to any public
interest in this matter as long as it is understood that they are
all general partners, and all equally bound, that a partner is bound
for the entire obligations of the firm.
Mr. PECORA. That is the statement of counsel. I think the liabilities would be fixed and determined by the articles of copartnership
themselves. And I think the committee is entitled to have them.
Mr. DAVIS. If I might suggest, why don't you ask the witness if
they are not all general partners and all bound for it ?
Mr. PECORA. I should rather have the document to speak for itself.
Senator BARKLEY. Might I ask, Mr. Davis: Under the law of
New York whether there is any place where articles of copartnership
are filed or recorded ?
Mr. DAVIS. There is not. It is purely a private matter; unless a
copartnership is of limited character, and then notice must be given.
But if there is no filing there is no limitation.
The CHAIRMAN. DO those articles set out the rights and interests
of each individual partner, or are they just general articles of copartnership without specifying the rights and interests of each
individual partner ?
Mr. DAVIS. Never having seen the articles myself I cannot sayy
but I would say that the articles naturally provide what the interests
of the partners shall be in the firm. But they do not limit the
liabilities of the partners for the firm's obligations.
Senator BARKLEY. DO they provide in an automatic way whereby
a new partner is taken in, or is there a new article added?
Mr. MORGAN. Yes.
Mr. DAVIS. There is a new article each time.
Senator BARKLEY. They have a new article each time?
Mr. DAVIS. Yes, sir; in taking in a new partner there
is a new
article added.
Mr. PECORA. It seems to me the document called for, to be produced, is essential to the obtaining by this committee of necessary
information with regard to the operations and practices of the
banking firm of which the witness has stated he is the senior partner, and which firm he has also stated is engaged in the general
banking business.
The CHAIRMAN. What is the sense of the committee on that
subject?
Senator BYRNES. What is the object of the question?
The CHAIRMAN. What was that ?
Senator BYRNES. What is the object of the question? I did not
hear it if it was stated.
Mr. PECORA. It is a question of the relationship between profits,,
capital, and losses, and I think is an important matter for this
committee to inquire into in any investigation into the practices
of banking firms. This banking firm, as has been shown by the
testimony already given by the witness, receives deposits from the
public, or, as he put it, from whoever chooses to leave deposits with
them.
Senator COUZENS. Might I suggest that this matter be decided in.
executive session?
10
STOCK EXCHANGE PRACTICES
The CHAIRMAN. Very well.
Senator STEIWEE. I think that is most appropriate. Now might I
ask counsel a question: To what phase of this investigation would
this information relate or be pertinent?
Mr. PECORA. The question of liability of the individual partners.
This is a firm which accepts deposits from the public.
Mr. DAVIS. Isn't it true, Mr. Pecora, that under the laws of New
York unless they comply with the statute to affect limitation by
recordation, that they are all liable for the total liabilities of the
firm? There can not be any doubt about that, can there?
Mr. PECORA. That may be, and undoubtedly is true, Mr. Davis,
but
Senator COUZENS (interposing). We have no record of it here.
Mr. PECORA. NO.
The CHAIRMAN.
Can. you proceed with something else, Mr.
Pecora ?
Mr. PECORA. IS it intended to decide that matter in executive session ? If so, we will pass it for the time being.
The CHAIRMAN. We will pass this question for the present and
consider it in executive session.
Mr. PECORA. Mr. Morgan, who prepared the statement which you
read into the record?
Mr. MORGAN. Myself.
Mr. PECORA. Did }^ou prepare it after a conference with your
partners?
Mr. MORGAN. Well, it was suggested by one of them that it might
be useful. And I asked various of them to look it over and see
whether I had made duplications, or something of that sort. But
I did it myself entirely.
Mr. PECORA. Did any of your partners express any dissent from
any of the views or statements embodied in this statement?
Mr. MORGAN. None of them.
Senator COUZENS. Might I ask a question, Mr. Chairman?
The CHAIRMAN. Yes.
Senator COUZENS. Does
/
this represent the general intent of all
private bankers?
Mr. MORGAN. I cannot speak for anybody but ourselves.
Senator COUZENS. I understand; but in reading through the statement there appears many times a reference to private bankers, and
therefore it seems to be all-inclusive.
Mr. MORGAN. Well, it is my view of the duties and uses of private
bankers. I cannot answer as to
Senator COUZENS (interposing). You do not know whether this
applies to all private bankers?
Mr. MORGAN. I do not know whether all private bankers take
the same view of their duties and responsibilities.
Senator COUZENS. SO I think it might be understood that this
does not represent the conduct or obligations or standing of all
private bankers?
Mr. MORGAN. I cannot say that it does or does not.
Senator COUZENS. I only wanted to make clear that this could
not stand as a statement applicable to all private bankers.
STOCK EXCHANGE PEACTICES
11
Mr. PECORA. In other words, this statement represents your views
as well as the views of your partners in the firm of J. P. Morgan
&Co.?
Mr. MORGAN. Yes, sir.
Mr. PECORA. IS the business
of J. P. Morgan & Co. departmentalized among its partners?
Mr. MORGAN. Not in any formal way; no.
Mr. PECORA. IS it in any informal way?
Mr. MORGAN. NO. If a subject comes up, and we have somebody
who knows more about that kind of subject than any of the rest of
us, he generally takes charge of it.
Mr. PECORA. Well, what subjects, then, are especially assigned to
individual partners under that informal arrangement?
Mr. MORGAN. AS they come up they are assigned to them.
Mr. PECORA. Well for instance, what subject or subjects would be
especially assigned to yourself?
Mr. MORGAN. Well, I do not get any assigned to me now. I am
more or less retired.
Mr. PECORA. DO you make the assignments yourself?
Mr. MORGAN. N O ; we do it as a firm. Every act that we do is
done as a firm. As a matter of fact, I used to be very active in the
firm, and as I became older I found that I had some very useful and
some very, very good partners, and I leave it mostly to them.
Senator BARKLEY. YOU do not admit that you are old enough to
retire, do you, Mr. Morgan?
Mr. MORGAN. Pretty nearly.
Mr. PECORA. YOU do not want the committee to understand that
you have retired from the general supervision of the firm, do you?
Mr. MORGAN. NO. I have general supervision, and I accept complete responsibility, as we all have to do.
Mr. PECORA. What matters or subjects of firm business are assigned to any other partner in your firm, if you can tell us?
Mr. MORGAN. Well, I really do not know. Very often it would
depend upon who is there.
Senator GORE. Could you divide the work, if you cannot assign
it, to those who are in the different departments ? What are the departments themselves, regardless of who have charge of them?
Mr. MORGAN. Such as
Senator GORE (continuing). Deposits, foreign loans, domestic
loans, foreign exchange, whatever it is.
Mr. MORGAN. Sales of securities, general banking, exchange, credit
letters, and all that sort of thing.
Senator REYNOLDS. Mr. Chairman, I should like to ask him one
question.
The CHAIRMAN. All right.
Senator REYNOLDS. Mr. Morgan, who has charge of the business
of buying foreign securities and marketing them in this country?
Mr. MORGAN. Well, we have them all taken in individually, more
or less, but I think Mr. Lamont is the one who has done more of
that. He appeared before a committee down here 6 months ago or
a year ago and gave a full statement.
Senator GORE. That was the Finance Committee?
Mr. MORGAN. Yes.
12
STOCK EXCHANGE PRACTICES
Mr. PECORA. I S that Mr. Thomas W. Lamont?
Mr. MORGAN. Yes, sir; Mr. Thomas W. Lamont.
Senator GORE. What is the amount of your deposits? I should
like to know that at this point.
Mr. MORGAN. What was that ?
Senator GORE. The amount of your deposits.
Mr. MORGAN. The amount of our deposits?
Senator GORE. Yes, sir.
Mr. MORGAN. In the two houses about $250,000,000 or thereabouts.
It varies.
Mr. DAVIS. We have given that exact figure to counsel for the
committee.
Senator GORE. Then that was given before I came in.
Mr. DAVIS. We gave him a statement.
Senator REYNOLDS. NO. That has not been developed so far>
Senator Gore.
Mr. DAVIS. We have given counsel for the committee a full statement.
Mr. PECORA. DO the copartners of your firm hold meetings or
conferences at regular intervals for the discussion and transaction
of the firm's business?
Mr. MORGAN. For discussion; yes. Transaction is generally done
with outsiders, so that they do not come into it. But for the discussion of business; yes.
Mr. PECORA. HOW frequently are those meetings of the partners
held?
Mr. MORGAN. Every week day but Saturday.
Mr. PECORA. Every day but Saturday?
Mr. MORGAN. Every week day but Saturday.
Mr. PECORA. Are any minutes kept
Mr. MORGAN (interposing). No.
Mr. PECORA (continuing). Of the proceedings or discussions of
your partners at those meetings ?
Mr. MORGAN. NO.
Mr. PECORA. IS any
written record of any kind kept of the proceedings and discussions at those meetings ?
Mr. MORGAN. Only the names of those who are there.
Senator COUZENS. DO you have any bylaws ?
Mr. MORGAN. NO.
Mr. PECORA. The
only record kept is that which would show the
names of the partners attending each conference; is that it ?
Mr. MORGAN. Yes.
Mr. PECORA. NO record is kept of the deliberations or proceedings ?
Mr. MORGAN. None whatever.
Senator COUZENS. Nor of the conclusions ?
Mr. MORGAN. Or of the conclusions.
Mr. PECORA. Has that always been the rule ?
Mr. MORGAN. That has always been the rule.
Mr. PECORA. AS long as you can recall ?
Mr. MORGAN. This plan of having meetings was started about 22
or 23 years ago. At the first meeting it was decided that no minutes
should be kept.
Mr. PECORA. Prior to that time were any minutes kept ?
STOCK EXCHANGE PRACTICES
13
Mr. MORGAN. We did not have any meetings.
Senator COTJZENS. Was your father at the head of it at that time?
Mr. MORGAN. My father was at the head of it at that time. But
he did not usually come down early enough to get to the meetings.
He never attended one.
The CHAIRMAN. Are all of the partners present at every meeting ?
Mr. MORGAN. Every partner, unless he has something else that he
must do.
The CHAIRMAN. HOW many partners generally attend?
Mr. MORGAN. Oh, it depends upon who is there in New York. Or
if the Philadelphia partner is over there in New York he comes in,
too. There may be 15 present.
Mr. PECORA. YOU stated that in 1894 it was decided not to keep
minutes of those meetings.
Mr. MORGAN. Not in 1894. I said about 20 years ago, when we
began having meetings. Up to that time we never had them. And
we found that it was rather difficult to get along without having all
know what was going along, and when we got rather numerous we
decided it would be a good plan to have those meetings.
Mr. PECORA. What was the reason for not keeping any minutes or
other written record of the proceedings of the meetings of your
partners?
Mr. MORGAN. Well, for reasons of convenience. It would take
one man's time to write them up, and they wouldn't be of any use
to you.
Mr. PECORA. Would they serve as good a purpose as do the minutes of meetings of boards of corporations ?
Mr. MORGAN. Oh, no. Because you do not have to keep a record
of anything, like with a corporation you would have to have a vote
on a thing. In our organization you do not have to have a vote.
Mr. PECORA. IS that the only reason why it was decided not to keep
minutes of your meetings?
Mr. MORGAN. That is the only reason so far as I ever heard.
Mr. PECORA. When a question arises as to what action took place
at a meeting of your partners, how is the question determined, according to the recollection of the partners ?
Mr. MORGANN. Yes. And I must say that I have never known of
their recollections to vary materially at all.
Mr. PECORA. All recollections are uniformly good ?
Mr. MORGAN. Yes.
Mr. PECORA. Are all
of the partners of the firm known as J. P.
Morgan & Co. also partners of the firm known as Drexel & Co. ?
Mr. MORGAN. Yes. In fact, it is one firm.
Mr. PECORA. It is onefirm?
Mr. MORGAN. It is one firm, doing business in two places with two
names.
Mr. PECORA. Where is the place of business of the firm of Drexel
& Co., or rather, your firm under its name of Drexel & Co.?
Mr. MORGAN. The place of business of Drexel & Co.—it is in Philadelphia at Fifteenth and Chestnut Streets.
Mr. PECORA. Are there any independent auditing or accounting or
bookkeeping departments kept in the Philadelphia office of Drexel
&Co.?
175541—33—PT 1
2
14
STOCK EXCHANGE PRACTICES
Mr. MORGAN. Oh, yes. They run their own bookkeeping, their
own establishment.
Mr. PECORA. Which members of the firm are resident in the city
of Philadelphia and actively look after the immediate interests and
business of the Philadelphia office?
Mr. MORGAN. Mr. Stotesbury, Mr. Lloyd, Mr. Newbold, Mr. Hopkinson, and Mr. Dickey. There are also in Philadelphia one or two
others interested only in the Philadelphia side.
Senator REYNOLDS. Mr. Chairman, I would like to ask Mr. Morgan
a question.
The CHAIRMAN. Proceed.
Senator REYNOLDS. Mr. Morgan, I believe you stated to the committee a moment ago that your organization kept no record of what
took place at any of the meetings.
Mr. MORGAN. Yes.
Senator REYNOLDS.
Let us suppose that at the particular meeting
time of one of the sessions a couple of your partners happened not
to be present, and two months after that they wanted to find out
what had taken place at that particular meeting, how would you
advise them as to what had taken place at that time?
Mr. MORGAN. I should refer them to the books to see what transactions had gone on.
Senator REYNOLDS. Refer them to the books ?
Mr. MORGAN. Refer them to the firm's books.
Senator REYNOLDS. Refer them to the firm's books ?
Mr. MORGAN. Of account; yes.
Senator REYNOLDS. Then the minutes of each particular meeting
are recorded by way of what took place on that particular date ?
Mr. MORGAN. Yes.
Senator REYNOLDS.
And as a consequence thereof they serve as the
minutes of the meeting?
Mr. MORGAN. NO. The books show actual transactions completed.
Senator REYNOLDS. Yes.
Mr. MORGAN. And they could find out from those what transactions had been completed they did not happen to know about. But
most of them make inquiries when they come back: " How about
that thing? " " How does this thing stand? " and so on, you see.
Senator REYNOLDS. NOW, the matters that you discuss that day,
do those transactions take place on that day ?
Mr. MORGAN. Not necessarily.
Senator REYNOLDS. Well, then, how do you keep a record of the
matters that you discuss on that particular meeting day if the transactions do not take place then ?
Mr. MORGAN. We do not. Because the business moves along, and
the next day or the next, or three days afterward the interview with
the client has taken place and the partner in charge reports to
that meeting.
Senator REYNOLDS. Well, Mr. Morgan, you do have a record?
You meet every day, do you not ?
Mr. MORGAN. Yes.
Senator REYNOLDS.
And of course you do keep a record of the
names of the members of the firm that attend that meeting?
Mr. MORGAN. Yes.
STOCK EXCHANGE PEACTICES
Senator REYNOLDS. YOU keep their names ?
Mr. MORGAN. Yes.
Senator REYNOLDS. But that is all?
Mr. MORGAN. That is all.
Senator REYNOLDS. Nothing else?
Mr. MORGAN. Nothing else.
Senator REYNOLDS. NOW, naturally, you have
15
a stenographer pres-
ent at each one of your meetings, do you not ?
Mr. MORGAN. Oh, no.
Senator REYNOLDS. YOU do not have a stenographer at all?
Mr. MORGAN. NO.
Senator REYNOLDS. And your firm keeps no record whatsover?
Mr. MORGAN. Of what goes on at the partners' meetings; no.
Senator REYNOLDS. All right. That is all, Mr. Morgan.
Senator GLASS. Mr. Chairman, let me ask a question.
The CHAIRMAN. Yes.
Senator GLASS. Although a member of the subcommittee I have
been through such a mass of other legislative matters that I have
not been able to attend the meetings. I would like to know if the
counsel in charge has conferred with the subcommittee and has given
us any indication of what it is he proposes to prove, in order that
we may understand the significance of questions asked here ?
Mr. PECORA. Senator, I haveSenator GLASS. In other words, of what interest is it to the subcommittee or to anybody as to the exact location of the house of
Drexel in Philadelphia ?
Mr. PECORA. That question, Senator, was simply an incidental
question to the ascertainment of the firm of J. P. Morgan & Co. and
Drexel & Co., its places of business, names of the members of the
firm, and its legal status.
Senator GLASS. Mr. Morgan stated that it was the same, and that
Drexel & Co. were located in Philadelphia.
Mr. PECORA. Yes. I did not pursue that any further, having elicited that information for the record.
Senator GLASS. Well, then, be good enough to answer my question as to whether you have indicated to the subcommittee what
testimony you propose and expect to bring out.
Mr. PECORA. I have not indicated it in any regular meeting of
the subcommittee. I have on occasion conferred with the chairman
of the committee, Senator Glass, and indicated to him in a very
general way the lines of inquiry that I was pursuing as counsel for
the committee.
Senator GLASS. I, myself, would like to understand the significance
of the questions being asked; whether they are to elicit information
supposed to be useful to the Banking and Currency Committee and
the Congress in enacting legislation or whether they are just in the
form for a court inquiry ?
The CHAIRMAN. Counsel laid the foundation for the question and
asked the questions directly on that.
Senator REYNOLDS. Mr. Chairman, I would like to ask a question.
The CHAIRMAN. Proceed.
Senator REYNOLDS. Mr. Morgan, have you any objection to providing this committee with the articles of copartnership ?
16
STOCK EXCHANGE PRACTICES
Mr. MORGAN. I would greatly prefer not to do so.
Senator COSTIGAN. What is the basis of the objection?
Mr. MORGAN. The basis of the objection is that that ceases to be
an inquiry into the affairs of a firm and becomes an inquiry into eachindividual partner's personal affairs, and I do not understand that
those are part of this investigation.
Senator MCADOO. Mr. Chairman, as I understand it, that question,
has been relegated to an executive committee now and it seems to be™
useless to discuss it at this time.
The CHAIRMAN. Yes; it has. No; it is not necessary to discuss it
now. Let us proceed, Mr. Pecora.
Senator GORE. DO these articles undertake to define or limit theduties, the functions, or activities of your firm?
Mr. MORGAN. NO.
Senator BARKLEY. Or the obligations?
Mr. MORGAN. Oh, no obligations. Except
to give their entire timeto the business.
Senator BARKLEY. I mean the financial liability ?
Mr. MORGAN. The financial liability is not specified because it is*
complete for every single member.
Senator BARKLEY. Regardless of the size of each man's interest in
the partnership he is liable for the whole?
Mr. MORGAN. Absolutely.
Senator COSTIGAN. DO they not develop your relations to the
public ?
Mr. MORGAN. N O ; not at all.
Senator MCADOO. Mr. Morgan,
it is a joint and several liability,.
is it not ?
Mr. MORGAN. Absolutely.
Senator MCADOO. That is all there is to it?
Mr. MORGAN. Complete.
Senator COUZENS. In that connection, Mr. Morgan, you said there
were several partners in Philadelphia.
Mr. MORGAN. Yes.
Senator COUZENS. That do not appear in the New York firm?
Mr. MORGAN. Yes.
Senator COUZENS. Well, how can they be just as counsel, Mr-
Davis, has said, all for one and one for all, if there is a division between the two houses?
Mr. MORGAN. They would be liable. They are partners in Philadelphia in the earnings of Philadelphia. But they are liable like
everybody else for all the debts of all the houses.
Senator COUZENS. Mr. Davis, you did not make that plain.
Mr. MORGAN (after conferring with his counsel, Mr. Davis). Only
of Drexel & Co. I was wrong, Senator. I beg your pardon.
Senator COUZENS. SO, Mr. Davis did not make it quite accurate
when he said they were all for one and one for all, because it appears now that there are partners in Philadelphia that are not
responsible for the others?
Mr. MORGAN. Well, as there are in London and as there are in
Paris.
Senator COUZENS. Yes.
Mr. DAVIS. I think, Senator, as long as I used that perhaps in
accurate statement that perhaps
STOCK EXCHANGE PRACTICES
17
Senator GORE. The partners are the same in these concerns, but
their responsibilities are distinct? Each firm has its distinct responsibilities, distinct from the others?
Senator COUZENS. Mr. Davis started to answer a query, Senator.
Senator GORE. I beg your pardon.
Mr. DAVIS. I started to answer this question that perhaps under
the strict application of the rule of law of electus personorum, of
the rule of partnerships, the firm of Drexel & Co. is separate from
J. P. Morgan & Co., because it has, I believe, two junior partners
who were elected specifically to that firm, and because of that, if
we were speaking in terms of strict law, that might create a separate
legal entity. But the two firms are treated as one and the same,
except for this interest of the two juniors.
Senator COTJZENS. I S that true with regard to the foreign companies ?
Mr. MORGAN. NO, it is not true.
Senator BARKLEY. Does not that then make it necessary to have
.•a separate copartnership for the Philadelphia office?
Mr. MORGAN. Yes.
Senator BARKLEY.
And a separate copartnership for the London
and Paris offices?
Mr. MORGAN. That is quite true.
Senator BARKLEY. SO they are not branch houses of one copartnoi i?p
Mr. MORGAN. NO.
Senator COTJZENS. SO they are not one for all and
Mr. DAVIS. I just am advised by Mr. Whitney
all for one.
that we filed in
Philadelphia, under the Pennsylvania law, an agreement in Philadelphia, a fact of which I was not advised.
Senator COSTIGAN. Which agreement did you file there?
Mr. DAVIS. Drexel & Co. It is a separate partnership in that
sense, although not so treated.
The CHAIRMAN. YOU have 4 separate partnership agreements; 1
in New York, 1 in Philadelphia, 1 in London, and 1 in Paris.
Senator COSTIGAN. Are they on file anywhere, the London arid
Paris agreements ?
Mr. DAVIS. I should like Mr. Leffingwell to answer as to the status
of the London and Paris firms.
Senator COSTIGAN. May I ask whether the London and Paris
agreements are on file anywhere?
Mr. DAVIS. DO you mean London and Paris?
Senator COSTIGAN. Yes.
Mr. MORGAN. The one in London, I can answer that question, sir.
The one in London, I know about that. We conform to the companies law in England.
Senator COSTIGAN. There are articles of incorporation?
Mr. MORGAN. There are articles of incorporation, and stock issued.
Senator COSTIGAN. And those are on file?
Mr. MORGAN. Those are on file in London. In Paris they are
registered under the French law, but which is more complicated
than I can understand.
Senator COSTIGAN. Are they available for public inspection where
registered ?
18
STOCK EXCHANGE PRACTICES
Mr. MORGAN. I believe so.
Senator GORE. And the ones in Philadelphia are also?
Mr. MORGAN. SO I understand.
Senator GORE. Yes; so then there would be no objection to filing
those?
Mr. MORGAN. May I ask Mr. Whitney to explain that, because I
do not know this Philadelphia arrangement?
Mr. WHITNEY. The situation is that there is 1 firm of 20 partners
The CHAIRMAN. What is the name ?
Mr. WHITNEY. Mr. George Whitney.
Senator MCADOO. May I ask if we can have order? We cannot
hear down here what the witness is saying.
The CHAIRMAN. Let us have order here. The people must sit
down or move out, or move in and get seated, and let us be quiet.
Senator MCADOO. The chief disturbance seems to be in the hall.
If that could be quieted.
Mr. PECORA. I would suggest for the record that Mr. Whitney be
sworn if he is going to make some statements for the record.
The CHAIRMAN. DO you solemnly swear, Mr. Whitney, that the
evidence you will give in this hearing will be the truth, the whole
truth, and nothing but the truth, so help you God?
Mr. WHITNEY. I do. The situation is there are 20 partners in
the firm of J. P. Morgan & Co. and Drexel & Co. Their liabilities
are complete and undivided—complete liabilities.
Senator MCADOO. Speak a little louder, please.
Mr. WHITNEY. Complete liabilities for the obligations of both the
firms of J. P. Morgan & Co. and Drexel & Co. In Philadelphia,
under the Pennsylvania law, there are four—I think—men who are
so-called " partners " in Drexel & Co. and liable for the full obligations of Drexel & Co., but they have nothing to do with J. P. Morgan
<& Co. We have to file under the Pennsylvania law a certificate of
copartnership in Pennsylvania, and in that there is a list of the
partners, 20 partners in both firms, and I think it is 4 who are
partners merely in Philadelphia. But the liability of the 20 partners of J. P. Morgan & Co. is complete and several as to the obligations of both J. P. Morgan & Co. and Drexel & Co.
Senator GORE. Are they distinct legal entities ? What I am trying
to get at is this: If they sued the New York concern and got a
judgment against them would the Philadelphia concern be liable?
I could not get the point of distinction.
Mr. WHITNEY. I did not quite get that.
Senator ADAMS. Let the reporter read the question.
(Thereupon the last question by Senator Gore was read by the
reporter as above recorded.)
Mr. WHITNEY. The five Philadelphia resident partners, who are
also partners in J. P. Morgan & Co., would be liable; yes. The four
other junior partners in Drexel & Co. would not be" liable for the
obligations of J. P. Morgan & Co.
Senator ADAMS. YOU set up a separate capital structure in your
Philadelphia office from your New York office?
Mr. WHITNEY. On our books, yes. It is run entirely separate from
the New York office, as a distinct entity, so far as the books are
concerned.
STOCK EXCHANGE PRACTICES
19
Senator ADAMS. The deposits made there are made merely on the
Philadelphia books?
Mr. WHITNEY. Yes. Two different sources. They come together
through the 20 partners.
Senator GORE. I still do not understand whether their obligations
are common, are joint or not.
Mr. WHITNEY. They are common, sir, as far as the 20 partners of
J. P. Morgan & Co.
Senator GORE. In the two firms?
Mr. WHITNEY. In the two firms, which is the list which Mr. Morgan read to you. Then there are in addition to those 20, so far as
Drexel & Co. are concerned—there are 4 others who are liable merely
for the obligations of Drexel & Co.
Senator GORE . They are limited partners.
Mr. PECORA. May we have the names of those four, Mr. Whitney ?
Mr. WHITNEY:. They have been furnished to you. They are
Arthur E. Newbold, H. Gates Lloyd, Jr., Edward H. York, Jr., and
Perry E. Hall.
Senator EEYNOLDS. Mr. Witness, talk a little louder.
Mr, WHITNEY. Arthur E. Newbold, H. Gates Lloyd, Jr., Edward,
H. York, Jr., and Perry E. Hall.
Mr. PECORA. Mr. Morgan, what is the end of the fiscal year
adopted by J. P. Morgan & Co. ?
Mr. MORGAN. Generally the 31st of December. It is the 31st of
December.
Mr. PECORA. NOW, at the end of the last fiscal year your firm was
in receipt of deposit accounts which it maintained for the account
of customers, was it not—depositors ?
Mr. MORGAN. It had deposit accounts; yes.
Mr. PECORA. DO you know what the aggregate amount was of
those deposit accounts at the end of the last fiscal year ?
Mr. MORGAN. December 31, 1932, $340,000,000.
Mr. PECORA. What was the capital of the firm on that date ?
Mr. MORGAN. $53,194,000, and odd.
Mr. PECORA. Does that capital represent contributions thereto of
all the partners?
Mr. MORGAN. Its net worth. The net worth is what answers to
capital. And that means the balance standing to the credit of the
partners' accounts beyond the total amount of the liabilities of the
firm.
Senator COUZENS. I do not think that answer is quite complete.
Senator BARKLEY. In that bookkeeping process do you count
deposits as liabilities?
Mr. MORGAN. DO I? I do not think that question is very necessary, Senator.
Senator GORE. What reserve do you carry against your deposits?
Does it vary, or do you have a fixed rule? A fixed minimum?
Mr. MORGAN. DO we have what?
Senator GORE. DO you have a fixed minimum ?
Senator COSTIGAN. Of reserve against your deposits ?
Mr. MORGAN. It has all been given to the committee. We do
not carry a legal reserve.
Senator GORE. SO I understand.
20
STOCK EXCHANGE PRACTICES
Mr. MORGAN. But at that moment we had cash on hand and in
bank of $33,800,000, call loans of $7,300,000, and United States
Government securities of $224,000,000.
Senator COUZENS. DO you pay interest on those deposits?
Mr. MORGAN. Oh, yes.
Senator COTJZENS. Uniform rates?
Mr. MORGAN. We pay rates—just what the clearing house pays.
Senator COUZENS. Does it vary with different customers?
Mr. MORGAN. NO.
Senator COUZENS. What would be the position if we passed the
Glass bill prohibiting interest to be paid on commercial deposits
in commercial banks, and you were not required not to pay interest
on those deposits? I assume that the deposits would flow to your
bank, would they not?
Mr. MORGAN. And we were able to pay interest on the deposits?
Senator COUZENS. Yes.
Mr. MORGAN. If we could find an investment for it.
Senator COUZENS. I mean, if the Glass bill should pass and interest be prohibited from being paid by commercial banks on demand deposits, then the deposits would automatically flow to the
private banks where they did pay interest, would they not?
Mr. MORGAN. Probably. I think they would.
Senator COUZENS. Yes.
Mr. MORGAN. HOW much the private bankers would be able to
paying interest I do not know.
Senator COUZENS. Well, of course that would vary according to
conditions.
Mr. MORGAN. Yes.
The CHAIRMAN. I t
would apply to all banks. The others could
not do it any more than they could.
Senator GLASS. Under another provision of the bill a private
banker engaged principally in the investment business could not
receive deposits.
Senator BARKLEY. Mr. Chairman, may I suggest that the Glass
bill is on the calendar of the Senate, and I would like to know if
we are going into hearings on that bill, or are we going to pursue
the stock market investigation?
Senator COUZENS. Well, I might point out to the Senator from
Kentucky that there are many features of the Glass bill which
have relation to this investigation and it is perfectly pertinent to
ask questions.
The CHAIRMAN. Proceed, Mr. Pecora.
Senator GORE. Mr. Morgan, this is the point. You stated the
amount of your deposits and cash on hand and your securities held.
Will you give the amount of your loans ?
Mr. MORGAN. I think that we have already given the whole balance sheet.
Senator GORE. Have you?
Mr. MORGAN. TO counsel.
Senator GORE. Well, I did not know that.
Mr. MORGAN. The whole statement to counsel.
Senator GORE. I beg your pardon.
Mr. MORGAN. And I think it is hardly worth while to give it out
of its place.
STOCK EXCHANGE PRACTICES
21
Senator GORE. All right. Go ahead.
Senator BARKLEY. The difference is that we are making a record
here, and what you have given counsel privately does not go into
the record.
Senator GORE. A man reading the record alone does not have it if
is not placed in the record.
The CHAIRMAN. Put that in the record.
Mr. MORGAN. If you will allow me I will put this into the record,
sir.
The CHAIRMAN. Very well.
Mr. MORGAN. DO you want it read into the record? Shall I read
it ? It is pretty hard to follow.
The CHAIRMAN. Let us put it in the record.
Senator GORE. Put it in the record; yes.
Mr. MORGAN. Have it inserted in the record ? All right.
Senator GOLDSBOROTJGH. I suggest that counsel for the committee
be allowed to continue his questioning.
The CHAIRMAN. Well, the counsel is ready, but the Senators are
interrupting him. The counsel is ready to proceed, but at the time
he proceeds somebody asks a question, and we cannot very well stop
that. Go ahead, Mr. Pecora.
Mr. PECORA. Mr. Morgan, do you recall that during the month of
March of this year, as counsel for this committee I addressed what
might be called a questionnaire to yourfirm%
Mr. MORGAN. Yes.
Mr. PECORA. And
among the questions shown on that questionnaire was one which I will read to you, known as " question 16 ",
calling for the balance sheets of the firms of J. P. Morgan & Co. and
Drexel & Co., showing assets, liabilities, and capitalization at the
end of each fiscal year during the period commencing with the
1st of January 1927, terminating on the 31st of December 1932.
Did your firm in response to that question submit or render to me
the statement which I now show you and which is captioned: " Consolidated statement of condition of J. P. Morgan & Co. and Drexel
& Co."?
Mr. MORGAN. We have a copy of that; yes.
Mr. PECORA. I mean, I want to put that in the record. Have it
marked.
Mr. MORGAN. I understand. Then you will put that into evidence?
Mr. PECORA. Yes.
Mr. MORGAN. That
Mr. PECORA. NOW,
will be all right. That is correct.
I offer that in evidence and ask that it be
spread on the minutes of the hearing.
The CHAIRMAN. That will be done.
(Consolidated statement of condition J. P. Morgan & Co. and
Drexel & Co. is Ijere printed in the record in full,, as follows:)
fcO
Consolidated statement of condition / . P . Morgan & Co. and Drexel & Co.
ASSETS
Cash on hand and in banks
Call loans.
_
TJ. S. Government securities
_._
Acceptances of other banks and bankers
_.
State and municipal bonds
_
Corporate bonds
_
_.
Corporate stocks
...
Other investments
Loans:
Time
—
Demand
Banking houses
Accrued interest receivable
Acceptances sold under our guarantee per contra.
Customers liability account of acceptances per contra.
Foreign exchange, per contra.^
Total..
Dec. 31,1927
Dec. 31,1928
Dec. 31,1929
Jan. 2, 1931
Jan. 2,1932
$44,502,403. 03
54,320,000.00
178,152,075. 89
$59, 476,918. 24
79, 050, 000. 00
165, 667,994.49
$67,461,469. 73
8,425, 000. 00
190, 739,957 32
64, 577, 005.43
7, 072,801.18
64,281,479.74
27, 631, 636.97
82, 752, 582. 41
21,403. 738. 52
57.822, 593. 90
124, 841. 69
$44, 531,897. 66
21,075, 000.00
110,821,189. 69
15,671. 20
12,173, 741. 20
10, 031, 368. 25
22, 607,957. 56
471,174. 85
$33, 857,665.95
7, 325,000. 00
224,580,150. 03
163, 340,854. 03
26,019,843.93
40,989,357. 21
9,327,470. 73
$42, 031, 527. 67
109,935, 000. 00
113, 397, 933. 76
14,365, 263.59
103,981, 950. 65
15, 789, 649. 59
68, 546, 325. 22
12, 643, 341. 24
..86,895,651.70
34,071,119. 98
8,309,504.47
1,806,637.51
43, 329,916.90
39,001, 772.81
8, 593, 304.12
1, 898, 277. 57
66, 384, 784. 73
92, 232, 402.18
9,471, 637. 45
86,489, 535. 77
55,419, 267. 26
9, 661, 470. 78
8,947. 60
34,836,442.07
47,869,164.93
9, 691,304.12
3, 558,751. 23
12,398,937.19
20, 681, 366. 33
35, 779,192. 53
62, 771,917. 34
69, 553, 613.15
9, 471, 304.12
1, 668, 065. 44
18, 465,338. 55
20, 061,175. 65
30, 631, 698. 32
45, 092, 618. 78
21, 854, 208. 09
40,143, 568. 89
21, 684,166. 75
37, 575, 400.15
11,397,271.20
10,645,958.29
664, 292,606. 90
629, 773,822. 06
680, 381, 938. 83
703,909, 403. 69
432, 566, 788. 70
424,708,095. 56
71,638,314.32
562,406,896. 60
14,000.000. 00
53,965. 61
91, 555,934.99
481,188, 646.91
118, 604,183. 75
492, 292, 666. 39
91,843,140. 28
503, 898,014.82
52,959,772.70
319,405,848. 57
53,194,076.80
340,047, 701.88
310,989.45
3,800.493.18
12,398,937.19
20,939,058.18
35, 779,192. 53
192, 027. 06
18,466, 338. 56
20,195,024. 55
30,631, 698. 32
409, 639. 87
45, 092, 618. 78
22, 522, 421. 05
40,143, 568.89
22,390, 925. 23
37, 575,400.13
12, 820,358. 59
18, 645,958. 29
664,292,606.90
629, 773,822.06
680,381,938. 63
703,909,403.69
432, 566. 788. 70
424, 708,095. 56
Dec. 31,1932
6,745. 299. 56
15, 073,885. 29
13,875,028. 21
810,925.91
O
W
X
a
LIABILITIES
New Worth
Deposits. __
Bills payable
Accrued interest payable
_.
Acceptances sold under our guarantee, per contra.
Acceptances payable, per contra. _
Foreign exchange, per contra
Total-
236, 842. 07
o
STOCK EXCHANGE PRACTICES
23
Mr. PECORA. NOW may I have that back, please, Mr. Reporter.
Has your firm always paid interest on the demand deposits entrusted to it?
Mr. MORGAN.- SO far as I know.
Mr. PECORA. YOU believe you know that that is so, do you not ?
Mr. MORGAN. Well, I think—I can remember it for 40 years. I
do not know what happened before that.
Mr. PECORA. Well, I am speaking of the firm of which you are the
rsenior partner.
Mr. MORGAN. Yes,
sir.
Mr. PECORA. Since 1904.
Mr. MORGAN. Yes. That has always paid the interest.
Senator BULKLEY. HOW does the rate compare with that paid by
the commercial banks?
Mr. MORGAN. It used to vary for a year or so, and then after 18—
after the war I got a movelment going to have the clearing house
banks agree together to charge the same rate of interest, and when
they did that we came in with them.
Senator MCADOO. YOU mean to allow the same rate of interest, do
you not, Mr. Morgan?
Mr. MORGAN. HOW?
Senator MCADOO. YOU
mean to allow the same rate of interest,
do you not?
Mr. MORGAN. TO pay the same rate of interest.
Senator MCADOO. YOU said to charge.
Mr. MORGAN. I meant to say allow.
Senator MCADOO. DO you know what the rate of interest is on
the average in the normal
years ? I mean in normal years ?
Mr. MORGAN. I t has4 varied greatly. It has been up as high as
%y2 percent and it is down now to about one half of 1 percent.
Senator MCADOO. I am speaking of the average in normal years.
About 2 percent?
Mr. MOGRAN. It might be about that. Likely. I do not know
ivhen you are going to find a normal year, Senator.
Senator MCADOO. Not recently, I admit.
Senator COUZENS. I am informed that a different shorthand reporter is coming in at this point, and I suggest that he be sworn.
The CHAIRMAN. YOU solemnly swear that you will accurately write
in shorthand and true and complete typewritten transcript make of
all the proceedings of the committee that you report, so help you
God?
The SHORTHAND REPORTER (Mr. Randolph). I do.
Senator GLASS. Mr. Morgan, suppose the various banks of New
York were prohibited from charging interest on deposits ?
Senator COUZENS. Did you mean from paying interest on deposits ?
Mr. MORGAN. YOU mean from paying interest on deposits ? I don't
think that we should.
Senator GLASS. I am asking you if you think they do.
Mr. MORGAN. I could not tell that, Senator. I am sorry.
Senator GLASS. I cannot either. I want you to guess for me.
Mr. MORGAN. I cannot guess under oath, Senator; I am frank to
you.
.It Imh U. Sell, if Uw UK,.
24
STOCK EXCHANGE PRACTICES
Mr. PECORA. Mr. Morgan, are any of the members of your fiim
members of the board of directors or board of trustees of any bank
or trust company?
Mr. MORGAN. I have a whole list here. I think you have it before
you.
Mr. PECORA. We have to get it into the record, and I want to da
it through the medium of these questions.
Mr. MORGAN. I am perfectly willing.
Senator TOWNSEND. I suggest the list be put in the record.
The CHAIRMAN. He may answer the question.
Mr. MORGAN. Mr. Lamont is a director of the Guaranty Trust
Co. of New York; Mr. Thomas Cochran of the
Mr. PECORA (interposing). One moment. There are two Mr»
Lamonts. Will you designate which one you are now referring to?
Mr. MORGAN. Mr. Thomas W. Lamont is a director of the Guaranty Trust Co. of New York. Mr. Thomas Cochran is a director
of the Bankers Trust Co. Mr. George Whitney is a director or
trustee for the Bank for Savings of the city of New York, and a
director of the Guaranty Trust Co. of New York. Mr. Arthur
Anderson is a director of the New York Trust Co.
Mr. William Ewing of the Bankers Trust Co.; Mr. H. P. Davison of the New York Trust Co.; Mr. S. Parker Gilbert of the Bankers Trust Co., and Mr. C. D. Dickey of the City Bank Farmers
Trust Co. He has been a director of that for a good many years.
In Philadelphia Mr. Stotesbury is a director of the Girard Trust
Co.—or member of the board of managers—and a director of the
Fidelity Philadelphia Trust Co.
Mr. Horatio Lloyd is a director of the Pennsylvania company for
insurance of lives and granting annuities,- and a director ot the
Main Line Trust Co.
Mr. Edward Hopkinson, Jr., is a director of the Germantown
Trust Co., of the Philadelphia Savings Fund Society, a member of
the board of managers of that, and a member of the board of managers of the Girard Co. Mr. Dickey in Philadelphia is a member of
the Indemnity Trust Co., a director, and of the Western Savings
Fund Society. He is a member of the board of managers. Mr.
Gates Lloyd, Jr., partner in Philadelphia, is a director of the
Northern Trust Co.
Mr. PECORA. Mr. Morgan, has the banking firm of J. P. Morgan &
Co. ever been subject to any power of inspection or visitation or
examination by the banking authorities of the State of New York?
Mr. MORGAN. I am not certain how the exact legal situation of that
stands. They have the right, I understand, to examine us far enough
to see that we keep the rules which exempt us from examination.
Mr. PECORA. What are those rules which exempt you from examination ?
Mr. MOEGAN. Will you mind if I ask Mr. Leffingwell to answer
these questions, because he is much better posted on this banking law
than I am.
STOCK EXCHANGE PRACTICES
25
TESTIMONY OF EXISSEXL C. IEFFINGWEIL, A MEMBER OF THE
FIEM OF J. P. MORGAN & CO., NEW YORK CITY
The CHAIRMAN. Will you raise your right hand, Mr. Leffingwell?
[Request complied with.] You solemnly swear that you will tell
the truth, the whole truth, and nothing but the truth, regarding the
matters now under consideration by the committee, so help me God.
Mr. LEFFINGWELL. I swear.
Mr. PECORA. Mr. Leffingwell, Mr. Morgan has suggested that the
question asked him with regard to the rules which exempt the firm
of J. P. Morgan & Co. from examination at the hands of the banking
authorities of the State of New York be addressed to you as one who
can better answer it. Would you please answer it ?
•
Mr. LEFFINGWELL. TO the best of my ability and. speaking from
memory of the statute law of the State, it is roughly that private
bankers who do not pay interest on deposits in excess of $7,500 a
year—under $7,500 a year—who do not advertise themselves as
bankers and who do not receive average deposits—and the language
of the statute I cannot carry in memory—of less than $500, were not
subject to examination, but that the Superintendent of Banks is
empowered to make such examination as he may desire of any private
banking house to ascertain whether the nature of its business is such
as to subject it to examination.
I am speaking from memory of the statute, which covers a couple
of pages. No doubt you are familiar with it also, Mr. Pecora.
Mr. PECORA. DO you recall, Mr. Leffingwell, when those provisions
were embodied in the New York statute ?
Mr. LEFFINGWELL. Well, they have had a long history, I should
think going back for 20 or 30 years. I do not speak exactly. They
grew out of the experience of the city with small private bankers
dealing with immigrants, and it was felt necessary that those who
dealt with such bankers should have protection.
The CHAIRMAN. DO the State authorities examine Morgan & Co.?
Is it their practice to make any examination as to Morgan & Co. ?
Mr. LEFFINGWELL. I do not think so, Senator.
The CHAIRMAN. YOU indicated they had authority to do it, but,
as I understand, they do not do it.
Mr. LEFFINGWELL. They have authority to examine any banking
house for the purpose of ascertaining whether it should be subjected to examination^ Senator, and they are constantly under invitation to make such examination, but the practices in that respect
of our firm are such that I should think the question would scarcely
arise in the mind of the superintendent.
I am reminded, if you can, Mr. Pecora, that there is one other limitation than I spoke of in relation to the private banking firms;
third, a banker who receives money in such sums that the average
of all separate deposits from all depositors during 12 months is less
than a thousand dollars; and the further one, one who receives
money for transmission in amounts of less than $500 unless he shall
have posted Government collateral.
Mr. PECORA. The firm of J. P. Morgan & Co. has always seen to
it that it complied with those regulations of the New York State
26
STOCK EXCHANGE PRACTICES
banking laws which would exempt it from examination by the State
superintendent of banks, has it not ?
Mr. LEFFINGWELL. I should hardly put it that way. The nature'
of our business is such that I should think that it was at all times
not subject to examination by the superintendent of banks except for
the purpose of ascertaining whether the business was of that character.
Mr. PECORA. YOU receive an authorization certificate to do business
as private bankers from the State superintendent of banks, do yom
not?
Mr. LEFFINGWELL. I don't remember, Mr. Pecora.
Senator GORE. Did I understand you to say you do not pay interest on deposits of less than $7,500?
Mr. LEFFINGWELL. Yes, Senator Gore. We do not.
Mr. PECORA. I will resume the examination of Mr. Morgan.
TESTIMONY OF J. P. MORGAN—Resumed
Mr. PECORA. Mr. Morgan, is there any minimum sum which thefirm of J. P. Morgan & Co. will receive as a demand deposit or a
minimum balance rather for the depositor to carry?
Mr. MORGAN. Well, we do not like the little deposit accounts with,
many drawings and that sort of thing, because they are simply an
expense without any return. We discourage them all we can.
Mr. PECORA. And your firm fixes a minimum amount for balances
of demand deposits ?
Mr. MORGAN. It used to be understood that we had—that people
would keep a couple of thousand dollars, roughly, but it has never
gone down to anything like that as a rule. The average is much
more than that.
Mr. PECORA. Has it any rule as to any maximum amount of
balance that it will permit a depositor to maintain in a demand
deposit account?
Mr. MORGAN. At times, yes. We have had to make such a
limitation.
Mr. PECORA. Has it at the present time ?
Mr. MORGAN. NO. At the present time I do not think there is
any such limitation existing.
Mr. PECORA. Your firm, of course, is not subject to examinations
by any other authority than the banking authorities of the State
of New York, is it ?
Mr. MORGAN. NO. It, as a matter of fact, does report its condition every year in very great detail to the Federal Reserve Bank
of New York. That is done because the Federal Reserve bank
wished to be in position to buy our bills and felt that it must have
the information.
Mr. PECORA. For how many years has your firm submitted such
reports or statements to the Federal Reserve Bank of New York?
Mr. MORGAN. Well, for the last 5 years certainly in great detail.
Before that they were more or less informal.
Mr. PECORA. YOU know, don't you, that those statements or reports
are submitted in strict confidence to the Federal Reserve bank
by your firm ?
STOCK EXCHANGE PKACTICES
27
Mr. MORGAN. I know it.
Mr. PECORA. Have you copies here, Mr. Morgan, of those statements
that have been so submitted or rendered for the past 5 years ?
Mr. MORGAN (addressing an associate). Have we them here? No;
we have not.
Senator BULKLEY. Does the Federal Eeserve bank make any examination of your firm ?
Mr. MORGAN. NO. Senator, if I might comment, you must remember that there is nobody so interested in knowing that our accounts
are right as ourselves.
Senator BULKLEY. My question was not argumentative.
Mr. MORGAN. NO ; I know that.
Senator BARKLEY. I did not understand why you said you made
these reports to the Federal Reserve bank.
Mr. MORGAN. Because the Federal Reserve bank is almost the
only market for bankers' bills, and they do not like to buy bankers'
bills unless they know something about their condition.
Mr. PECORA. May I ask Mr. Davis off the record if copies of those
statements are here ?
Mr. DAVIS. They are not here.
Mr. PECORA. YOU indicated to me you. would permit the auditors
for the committee to have access to those in order to check that
against the balance sheets.
Mr. DAVIS. That is right. I repeat that, and if your auditors
want them you will get them.
Mr. PECORA. Well, can it be made available here during the day
or tomorrow ?
Mr. DAVIS. Yes.
Mr. PECORA. Very well, sir.
Mr. DAVIS. I should like if
you get them to have one of our men
explain the—reconcile the two statements, about certain items in
one statement are given one name and are embodied in a different
name in the other, although the totals of the items and the reconciliation are the same.
Mr. PECORA. When will those copies of statements be available,
Mr. Davis ?
Mr. DAVIS. I think we can get that for you in 24 hours—48 hours.
Mr. PECORA. All right. Thank you.
Mr. DAVIS. I am sorry it was not done in New York, as I offered.
Mr. PECORA. Well, I understood that they would be turned over to
the auditors.
Mr. DAVES. I understood perfectly that they were there for the
auditors to dispose of it. That is exactly what I told you.
Senator COUZENS. Did I understand that the Federal Reserve
bank over
Senator REYNOLDS (interposing). Mr. Morgan, have the banking
authorities of the State of New York ever made any investigation
of your private banking business?
Mr. MORGAN. NO ; not that I know of.
Senator COUZENS. I understand the Federal Reserve bank at no
time checks your statement; in other words, they took it for granted
that it was all right.
Mr. MORGAN. I think so. Of course, we explain it to them.
28
STOCK EXCHANGE PRACTICES
Senator COUZENS. Yes; but I mean they never went into your office
to prove the accuracy of the statement filed ?
Mr. MORGAN. Oh, no. They have never asked to.
Senator COUZENS. Beg your pardon?
Mr. MORGAN. They never asked to.
Senator COUZENS. N O ; I did not allege that. I was just finding
out whether they did or not.
Mr. MORGAN. Yes.
Senator COUZENS. In
other words, they are very meticulous about
examining the statements of
Mr. MORGAN (interposing). Oh, yes; they are very careful about
that.
Senator COUZENS (continuing). Of incorporated banks, and I
wondered why they were so lenient with the Morgan house.
Senator GLASS. They have no legal authority to examine the
Morgan house.
Senator COUZENS. Yes; but they insist upon a statement which
they act upon, nevertheless.
Senator GLASS. That is simply because they have business transactions with the Morgan company, and they want to know the status
of their business before they buy any of their bills.
Senator COUZENS. And of course they take the statement that
Morgan & Co. file as the status of their business without any auditing.
Senator GLASS. Exactly. But I say they have no legal right to
peremptory examination of the bank.
Senator COUZENS. N O ; and they have no legal right to examine
that statement of Morgan & Co. if Morgan & Co. do not want to
hand it to them.
Senator GLASS. None whatsoever.
Senator COUZENS. But still they go on and transact business.
Senator GLASS. Yes.
Senator MCADOO. Isn't it customary when bills are bought that
way by a bank to accept statements from this company from whom
they purchase the bills ?
Mr. MORGAN. Yes.
Senator MCADOO. They
do not make examination. It is manifestly impossible.
Senator GLASS. They examine the bills rather than the bank.
Senator COUZENS. Why do they demand a statement of the bank,
then, if they confine their examination to the bills?
Senator GLASS. They do not demand it, but I understand the
house of Morgan furnishes it.
Senator ADAMS. Senator Couzens, you will find banks generally
where they are buying commercial paper ask for a statement for
the buyer; that is, a company requiring a statement for the buyer,
and it is very race that those things ar* audited. It is assumed
that they are dealing with responsible people.
The CHAIRMAN. We will have to go ahead with the inquiry.
Mr. PECORA. Mr. Morgan, are the statements that have been submitted by your firm to the Federal Reserve bank in the same general
form as the statement in evidence here called the consolidated
statement of condition?
STOCK EXCHANGE PRACTICES
29
Mr. MORGAN. In the same general form; yes.
Mr* PECORA. Same general form?
Mr. MORGAN.
Mr. PECORA.
Yes.
There is no breakdown of this statement ever made
for the Federal Reserve bank?
Mr. MORGAN. It is talked over with them, but they do not make
any statement. I do not know what they do about that.
Mr. PECORA. NOW, Mr. Morgan, are you or any of your partners
members of the board of directors of any corporation doing an interstate business?
Mr. MORGAN. Doing an interstate business?
Mr. PECORA. Yes, sir; or engaged in interstate commerce.
Mr. MORGAN. This has also been furnished. This is another part
that you want to get onto the record?
Mr. PECORA. Yes, sir.
Mr. MORGAN. I am a director of the Steel Corporation.
Senator MCADOO. YOU mean the United States Steel Corporation?
Mr. MORGAN. United States Steel Corporation; First Security Co.;
Discount Corporation of New York; the Pullman, Inc., and the
Pullman Co.; the Aetna Insurance Co. of Hartford and some subsidiaries of it; the Century Indemnity Co., and the World Fire &
Marine Insurance Co. Those are the two subsidiaries.
Mr. Stotesbury is a director of the Reading Co. and its subsidiaries, of which there are 3. Of the Beaver Coal Co.
Mr. PECORA. Will you state the 3 subsidiaries of the Reading Co.?
Mr. MORGAN. New York & Long Branch Railway Co., Philadelphia & Reading Terminal Railroad Co., and Philadelphia, Newtown
& New York Railroad Co.
Of the Beaver Coal Co., he is a director; of the Lehigh & Hudson
River Railway Co., a director; New York & Middle Coal Field
Railroad Co., a director; of the Second & Third Street Passenger
Railway Co., a director; Transportation Mutual Insurance Co., a
director; Highland Coal Co., director; Wyoming Valley Water Supply Co., director; National Storage Co., a director; Bellevue-Stratford Hotel Co., a director. Is that an interstate business? Beaver
Coal Corporation, a director.
Charles Steele is a director of the Atchison, Topeka & Santa Fe
Railway Co. and of the Cerro de Pasco Copper Corporation.
Thomas W. Lamont is a director of the United States Steel Corporation, of the Northern Pacific Railway Co., Chicago & Erie
Railroad Co., the Crowell Publishing Co., the First Security Co.
of the City of New York, director; of the International Agricultural
Corporation, director.
You have resigned from the International Harvester Co., haven't
you?
Mr.
LAMONT.
Yes.
Mr. MORGAN. He was on the International Harvester Co. but has
resigned recently. I would like to cut that out of this.
Of Lamont, Corliss & Co., Southwestern Construction Co., National Railways of Mexico, Foreign Finance Corporation, and American Securities Investing Corporation.
175541—33—PT 1
3
30
STOCK EXCHANGE PRACTICES
Mr. Horatio G. Lloyd is a director of the Philadelphia Electric
Co. and its subsidiaries, which are the Philadelphia Electric Power
Co. and the Susquehanna Power Co.
A director of the General Asphalt Co., of the Bell Telephone Co.
of Pennsylvania, of the Diamond States Telephone Co.
Mr. Thomas Cochran is a director of the General Electric Co. and
its subsidiaries, the International General Electric Co., Inc., of the
Kennecott Copper Corporation and its subsidiaries, the Copper
Biver and Northwestern Eailway Co., Braden Copper Co., the
Alaska Steamship Co., the Alaska Development & Mineral Co., and
the Nevada Northern Eailway Co.
He is a director also of the Astor Safe Deposit Co., Foreign
Finance Corporation, and American Foreign Securities Co.
J. S. Morgan is a director of the United States Steel Corporation,
of the General Motors Corporation, and of the Foreign Finance
Corporation.
Mr. George Whitney is a director of the General Motors Corporation, of the Kennecott Copper Corporation and its subsidiaries,
which are the same as—no, they are different—the Alaska Steamship Co., Alaska Development & Mineral Co., the Braden Copper
Co., Copper Eiver & Northwestern Eailway Co., the Utah
Copper Co.
He is a director of the Consolidated Gas Co. of New York, trustee—he is a trustee of it, and of the New York Edison Co. he is a
director.
The United Corporation and its subsidiary, the New York United
Corporation, director; Texas Gulf Sulphur Co.; Pullman, Inc., and
Pullman Co., the Johns-Manville Corporation, a director; the Continental Oil Co., director; Foreign Finance Corporation, director;
New Jersey & New York Eailroad Co., director; the American
Branch of the Eoyal Exchange Assurance and its subsidiaries; the
Car & General Insurance Co., Ltd., the United States branch. He
is a member of the financial advisory board. Provident Fire Insurance Co., he is a director; and State Assurance Co., Ltd., United
States branch, he is a member of the financial advisory board. Those
are the subsidiaries of the Eoyal Exchange Assurance.
He is a director of the Willow Corporation and of the American
Securities Investing Corporation.
Mr. PECORA. Mr. Whitney is also president of the Willow Corporation, is he ?
Mr. MORGAN. President and director; yes.
Senator GORE. I S J. S. Morgan related to you ?
Mr. MORGAN. My
son.
Mr. Eussell C. Leffingwell is a director of the Northern Pacific
Eailway Co., International Telephone & Telegraph Corporation and
its subsidiaries, All America Cables, Inc., and the Postal Telegraph
& Cable Corporation.
He is a director of the North British & Mercantile Insurance
Co., Ltd., of London and Edinburgh, of New York, and its subsidiary, the Mercantile Insurance Co. of America.
Mr. Francis D. Bartow is a director of the Johns-Manville Corporation, a New York director—oh, he is a director of the American
Eadiator & Standard Sanitary Corporation; director of the 150 Wil
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31
liam Street Corporation. He is treasurer and director of the Willow Corporation. He is of Home Life Insurance Co. a director.
He is a director of the International General Electric Co. and the
United Electric Securities Co.
Mr. Arthur M. Anderson is a director of the International Telephone & Telegraph Corporation and subsidiary, Postal Telegraph
& Cable Co. He is a director of the United States Guarantee Co.,
a director of the New York, Susquehanna & Western Railroad Co.,
a director of the General Steel Castings Corporation, a director
of the Western Pacific Railroad Corporation, president and director
of the Foreign Finance Corporation.
Mr. William Ewing is a director of the Standard Brands, Inc.,
a director of the Utah Copper Co., a director of the J. I. Case
Threshing Machine Co., director of the Associated Dry Goods Corporation and of Lord & Taylor, which is a subsidiary, and director
of the Richmond-Washington Co.
Harold Stanley is a director of the Columbia Gas & Electric
Corporation, Niagara Hudson Power Corporation, the United Corporation and subsidiary, New York Utilities Corporation.
Mr. Henry S. Morgan is a director of the Kennecott Coppper
Corporation and its subsidiaries, the Braden Copper Co., Copper
River & Northwestern Railway Co., the Utah Copper Co., and the
Alaska Steamship Co.
Mr. PECORA. IS Mr. H. S. Morgan related to you, Mr. Morgan?
Mr. MORGAN. He is my younger son.
Mr. T. S. Lamont is a director of the Texas Gulf Sulphur Co., k
director of the Phelps Dodge Corporation, director of the Continental Oil Co., and the Great Lakes Pipe Line Co., which is a
subsidiary of it.
Mr. PECORA. IS Mr. T. S. Lamont related to Mr. T. W. Lamont i
Mr. MORGAN. He is a son of Mr. T. W. Lamont.
Mr. H. F. Davison is a director of the Standard Brands, Inc., and
the Montgomery Ward & Co.
In Philadelphia Mr. Thomas Newhall is a director of the Baldwin
Locomotive Works and its subsidiaries, which are the Midvale Co.,
Baldwin-Southwark Corporation, Standard Steel Work Co., Southwark Foundry & Machinery Co., the Whitcomb Locomotive Co.,
Federal Steel Foundry Co., Cramp Brass & Iron Foundry Co.,
I. P. Morris & De La Vergne, Inc., Baldwin Locomotive Securities
Corporation.
Those are all subsidiaries of the Baldwin Locomotive Works.
He is a director of the General Steel Castings Corporation, of the
Philadelphia & Reading Coal & Iron Corporation, and its subsidiary,
the Philadelphia & Reading Coal & Iron Co.; and of Sharp & Dohme,
Inc., he is a director.
Mr. Edward Hopkinson, Jr., is a director of the United Corporation and subsidiary, New York United Corporation. He is a director of the United Gas Improvement Co., of the Pennsylvania Fire
Insurance Co., of the Frankford & Southwark Philadelphia City
Passenger Railway Co., of the Keystone Watch Case Corporation,
of the Second and Third Street Passenger Railway Co., of the Riverside Metal Co., Philadelphia Electric Co., and subsidiaries, the
Philadelphia Electric Power Co., the Susquehanna Power Co., and
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STOCK EXCHANGE PBACTICES
the Susquehanna Electric Co., those three being subsidiaries of the
Philadelphia Electric Co. Public Service Corporation of New
Jersey, he is a director of also.
Mr. S. Parker Gilbert is a director of the Lehigh Valley Coal Corporation and its subsidiary, the Lehigh Valley Coal Sales Co. That
is not in Philadelphia; that is New York.
Mr. Charles D. Dickey is a director of the Fire Association of
Philadelphia and subsidiaries, Reliance Insurance Co., of Philadelphia, the Victory Insurance Co. of Philadelphia, the Beaver
Coal Corporation, the American Pulley Co., Sharp & Dohme, Inc.,
the Stonega Coke & Coal Co., and the United Gas Improvement Co.
Arthur E. Newbold, Jr., is a director of the Philadelphia & Reading Coal & Iron Corporation and its subsidiary, the Philadelphia &
Reading Coal & Iron Co. He is also a director of the Markle Corporation and subsidiaries, the Hazle Brook Coal Co. and the JeddoHighland Coal Co. He is a director of the Wilkes-Barre & Hazleton Corporation, and Wilkes-Barre Corporation.
Gates Lloyd, Jr., is a director of Charles E. Hires Co., of the
Markle Corporation and its subsidiaries, the Hazle Brook Coal Co.,
and Jeddo-Highland Coal Co.
Perry E. Hall is a director of the Northern Pacific Railroad Co.,
the Philadelphia Steel & Wire Corporation.
Edward H. York, Jr., is a director of the Lehigh Valley Coal Sales
Co., the DeBardeleben Coal Corporation, of the Markle Corporation
and its subsidiary, the Hazle Brook Coal Co.; of Franklin County
Coal Corporation, Inc., and Bee Line Transportation Co.
That, I think, is the lot.
Senator BULKLEY. IS that a complete list of all directorships held
in corporations doing an interstate business?
Mr. MORGAN. SO I understand. I had it made up for that purpose.
Senator STEIWER. Are the members of J. P. Morgan Co., the
banking house, also partners in other financial institutions?
Mr. MORGAN. NO ; except those that I mentioned. That is to say,
Paris and London.
Senator STEIWER. Those are directorships, as I understand your
testimony. I am inquiring now merely about partnership relations.
Mr. MORGAN. NO ; we have no other partnership relations.
Mr. PECORA. By the way, Mr. Morgan, how many of the partners
of J. P. Morgan and Drexel & Co. are also members of the firm
called Morgan, Grenfell & Co. of London?
Mr. MORGAN. All but those four names who are Philadelphia partners, who are only in Philadelphia.
Mr. PECORA. Are there any persons who are members of the firm
or company of Morgan, Grenfell & Co. of London who are not partners of J. P. Morgan & Co. or Drexel & Co. ?
Mr. MORGAN. Oh, yes. We have a very strong staff over there.
Mr. PECORA. A large staff?
Mr. MORGAN. Well, a strong lot of partners.
Mr. PECORA. Yes.
Mr. MORGAN. Mr.
E. C. Grenfell, a member of Parliament, and
Mr. Vivian H. Smith, who is a man of very high position and who
is the head also of the great Royal Exchange Assurance Co.
STOCK EXCHANGE PEACTICES
33
We have Sir Thomas Cadow, a baronet, who has done very fine
work in India in business and different places all around.
We have Mr. Randall-Smith and the Honorable Francis Eodd—
Mr. Charles Whigham.
Senator GORE. What is this member of Parliament's name?
Mr. MORGAN. Grenfell, G-r-e-n-f-e-1-l.
Senator GORE. HOW did he get elected, Mr. Morgan?
Mr. MORGAN. He is the senior member of the city of London,
Senator Gore. He gets in without a contest right along.
Senator MCADOO. Maybe he is elected without a contest because
he is neither a Democrat nor a Republican.
Senator GLASS. Mr. Morgan, does your concern find it desirable
to have these directorships and managerial positions in this multiplicity of corporations because it tranacts business with them and
makes loans to them?
Mr. MORGAN. I think that the real reason why we are on most of
them is the reason that I gave in my little note here, little statement;
that is, that they are most of them corporations for which we haive
done work in the past and consequently feel ourselves—feel it necessary if they want us to go on the boards to give them financial advie^
when they ask for it.
Senator GORE. NOW, do they borrow money from you or do you
handle securities for them or both from time to time ?
Mr. MORGAN. Both, sometimes. It depends what they want to
have done.
Senator GORE. Are members of your firm in London also members of a good many directorates ?
Mr. MORGAN. N O ; they have no other firm memberships. They
are only partners in London.
Senator GORE. I mean different corporations and concerns in
London are
Mr. MORGAN (interposing). They have no partnerships. They
have directorships.
Senator GORE. I understand. I meant the directors of your company in London
Mr. MORGAN (interposing). Yes.
Senator GORE. Are they also members of numerous directorates
there?
Mr. MORGAN. Yes. Mr. Grenfell is director of the Bank of England besides being a member of Parliament.
Senator GORE. The same is true in France ?
Mr. MORGAN. The same is true in France, although less so.
Senator MCADOO. Mr. Morgan, does your firm have a dominating
interest in the policies of these various corporations in which the
members of the firm are directors?
Mr. MDRGAN. We have no more domination than one vote gives us?
Senator MCADOO.
Senator GORE. Unless they are borrowers?
Mr. MORGAN. Even if they are borrowers.
Mr. PECORA. Mr. Morgan, are all of the partners of the firm of
J. P. Morgan & Co.-Drexel also partners of the firm of Morgan & Co.
in Paris ?
Mr. MORGAN. Yes. We are partners there as firms?
Mr. PECORA. AS a firm ?
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STOCK EXCHANGE PRACTICES
Mr. MORGAN. AS firms.
Mr. PECORA. Are there any other partners of Morgan & Co. of
Paris?
Mr. MORGAN. Yes.
Mr. PECORA. Who
Mr. MORGAN. Let
are they?
me see—I will get that list. Have you got
that?
Mr.
PECORA. NO ; I haven't got that.
Mr. MORGAN. Mr. — ask
Mr. PECORA. I will be very happy
to get the information from
any one of you gentlemen.
Mr. MORGAN. Mr. J. R. Carter and Mr. Endine—Mr. B. S. Carter and Mr. Aragon and Mr. Pasceo Didien—and Mr. B. S. Carter,
Mr. A. B. Aragon. It is the hardest thing in the world for me to
say a list. I apologize.
Mr. PECORA. Under the partnership interest or arrangement between the firms of J. P. Morgan & Co. and Drexel & Co. are the
partners of J. P. Morgan & Co. and Drexel & Co. individually and
severally liable for the debts and obligations of the firm of Morgan
&Co. of Paris?
Mr. MORGAN.
Mr. PECORA.
Yes.
There is no corresponding liability, is there, on the
part of those members of Morgan & Co. who are not partners of
J. P. Morgan & Co. of Drexel & Co.; is there ?
Mr. MORGAN. N O ; no partners. They have no liability for J. P.
Morgan & Co. or Drexel & Co.
Mr. PECORA. NO.
The CHAIRMAN. DO
these members of your firm who are directors
of these various corporations respectively take an active interest in
the affairs of those corporations ? Do they attend the meetings of the
directors? Do they have an active interests, or are they just used
for advertising purposes?
Mr. MORGAN. Oh, no. I might say I almost wish it was, Mr.
Chairman.
Mr. PECORA. Mr. Morgan, when your firm obtains credit from the
Federal Keserve bank
Mr. MORGAN (interposing). We never have.
Mr. PECORA. Or when it sells credit to the Federal Reserve bank,
do you disclose to them the fact that partners of your firm are severally and individually liable for these foreign firms, obligations,
and liabilities of the foreign firms ?
Mr. MORGAN. Yes, they know that statement. When we show them
our statement that is
Mr. PECORA (interposing). Does the statement set that forth?
Mr. MORGAN. HOW? The statement, I think, sets that forth [addressing an associate], doesn't it? Yes, it does.
*
Mr. PECORA. The obligations are set forth in the consolidated
statement of condition, and this consolidated balance sheet which
has been put into the record here as exhibit A of this hearing would
indicate those liabilities ?
Mr. MORGAN. NO. NO liability has been incurred as yet. It is a
possible liability in case everything goes wrong. We have capital
in both those places, of course, and that is not included, but the
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capital is there
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STOCK EXCHANGE PRACTICES
35
Mr. PECORA (interposing). That refers to the capital invested in
Morgan, Grenfell & Co. of London ?
Mr. MORGAN. Yes.
Mr. PECORA. And Morgan
& Co. of Paris is included in this consolidated balance sheet
Mr. MORGAN (interposing). No.
Mr. PECORA. For the 6 fiscal years that are shown there?
Mr. MORGAN. NO ; it is not included.
Mr. PECORA. DO you know the amount of liabilities that the
members of your firm have individually and severally on account
of these foreign firms ?
Mr. MORGAN. .We know their statements, of course.
Mr. PECORA. IS there anyone here from your firm who can include
during the recess of this session
Mr. MORGAN (interposing). No; we haven't got the records here.
Mr. PECORA (continuing). A list of those liabilities in the consolidated balance sheet ?
Mr. MORGAN. We never make up the consolidated balance sheet
that way.
Senator COUZENS. When you make your returns to the Commissioner of Internal Revenue or the Internal Revenue Bureau, do they
come down and audit the partners' accounts at your firm ?
Mr. MORGAN. Oh, yes.
Mr. PECORA. Mr. Morgan,
who determines the policies of the firm
of Morgan, Grenf ell & Co., of London?
Mr. MORGAN. The London partners mostly.
Mr. PECORA. Just the London partners?
Mr. MORGAN. The London partners mostly, yes; although we are
in real close touch with them all the time. I have the advantage;
you see, I lived over there for 8 years and worked over there for 8
years, and most of these men I know very well and have worked with.
So we do not have any misunderstandings.
Mr. PECORA. I S there an understanding that the policies of that
firm or company are under the direction and control of the London
partners whose names you have given?
Mr. MORGAN. Yes. They are in charge of the business.
Mr. PECORA. Members of your firm share a liability individually
and severally
Mr. MORGAN (interposing). We share a liability.
Mr. PECORA (continuing). For the liabilities of that firm?
Mr. MORGAN. Yes.
Mr. PECORA. SO that
the capital of your firm could be very seriously impaired by losses incurred through the operation of that
London firm?
Mr. MORGAN. I suppose it could.
Mr. PECORA. Yes. And that is likewise true with respect to
the——
Mr. MORGAN (interposing). That is likewise true
Mr. PECORA. Of the Paris firm of Morgan & Co. ?
Mr. MORGAN. Or with Drexel & Co.—anybody—or with ourselves.
Mr. PECORA. Does Morgan & Co. maintain any deposit account
with Morgan, Grenf ell & Co. ?
Mr. MORGAN. We have had money on deposit over there often.
I do
not know what the present condition of that is.
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STOCK EXCHANGE PRACTICES
Mr. PECORA. What would be the general range of the amount of
those deposits, say, for the past 5 years ?
Mr. MORGAN. Oh, I could not guess that.
Mr. PECORA. Can you tell us approximately?
Mr. MORGAN. I do not think I could even do that, because it varies
a great deal from time to time, of course.
Mr. PECORA. What is the range? What would you say would be
the range for the last 5 years ?
Mr. MORGAN. Have you got any figures [addressing an associate]
that would help me about that?
Mr. WHITNEY. N O ; I could not remember from my head. It has
been a purely working balance. I did not understand, Mr. Pecora,
that you mean the range or they maintain ?
Mr. PECORA. YOU maintain, J. P. Morgan & Co.
Mr. WHITNEY. Purely working balance against financial, commercial transactions, letters of credit, foreign exchange, and all those
different things
Mr. PECORA (interposing). Well, I want to get the range.
Mr. WHITNEY. I unfortunately do not carry details like that in
my head. I can find out the range. Perhaps a half a million
dollars.
Mr. PECORA. Are you speaking of the balance at the present time ?
Mr. WHITNEY. N O ; I could not guess, but I should think about
that. I could find out very easily for you.
Mr. PECORA. I wish you would, sir.
Mr. WHITNEY. It is very simple. But it is just a working balance
that fluctuates up and down all the time.
Mr. PECORA. Does J. P. Morgan & Co. maintain a deposit account
for Morgan, Grenfell & Co. here ?
Mr. MORGAN. Very often.
Mr. PECORA. And also for Morgan & Co. of Paris ?
Mr. MORGAN. Yes. I t is part of our deposits as shown in the
Mr. PECORA (interposing). Are they included in the item of deposits shown on this consolidated balance; sheet?
Mr. MORGAN.
Yes.
Senator MCADOO. Mr. Morgan, will you tell us what portion of
these deposits shown on the balance sheet are domestic and what
are foreign?
Mr. MORGAN. I could not tell you that figure now.
Senator MCADOO. YOU could give it to us, I suppose?
Mr. MORGAN. Oh, it could be got, yes.
Senator MCADOO. I would be glad if you put it in the record.
Mr. MORGAN. Say, the 31st of December last year, is that the idea ?
Senator MCADOO. That would do.
Mr. WHITNEY. Or now?
Senator MCADOO. Then and now; just an idea as to how these
deposits run as to foreign and domestic.
Mr. MORGAN. They have changed a good deal. I should like to
fix the date if you don't mind.
Senator MCADOO. I was speaking of December 31, if there is no
objection.
Mr. MORGAN. All right; December 31. We will get that.
Mr. PECORA. In the balance sheet furnished to me and which
has been read into the record, Mr. Morgan, it appears that at the
STOCK EXCHANGE PRACTICES
37
end of the last fiscal year the firms of J. P. Morgan & Co. and
Drexel & Co. had among its assets7 corporate bonds of a figure of
$15,073,885.29.
Mr. MORGAN.
Mr. PECORA.
Yes.
Does that value represent market value or cost as
of the end of the fiscal year?
Mr. MORGAN. Market value.
Mr. PECORA. IS that true of all the other items shown on this balance sheet relating to securities on hand?
Mr. MORGAN.
Mr. PEC6RA.
Yes.
Such as the item of corporate stocks and other
investments ?
Mr. MORGAN. That is true of them all.
Mr. PECORA. NOW, in looking over this consolidated balance sheet,
Mr. Morgan, I notice that there is no statement of condition as of
the end of the fiscal year 1930, the calendar year which corresponds
to your fiscal year 1930. Can you account for that?
Mr. MORGAN. I don't know about that. A new partner came in
on the 2d of January, and I don't suppose he gave the 31st—we
did not figure it in there because it was practically the same as
the 2d of January. But a new partner came in on January 2, 1931.
The two days we did not bother about. I think that that is the
reason why it was not put in there. We did figure our accounts on
the 31st of December.
Mr. WHITNEY. A new partner came in on January 2. We put
it up the same way as we did to the Federal Reserve bank. We
took that as a real valuation, so we took that date, and that was set
forth in the statement given to the Federal Reserve banks. That
question came up, and it is the same date and approximate figures.
Mr. PECORA. NOW, Mr. Morgan, was a statement of financial condition made up by your firm as of the end of the calendar year
1930?
Mr. MORGAN. Yes; I think so.
Mr. PECORA. I S that here?
Mr. MORGAN. HOW?
Mr. PECORA. Can a copy of that be introduced ?
Mr. MORGAN. Then I am wrong about it. There was not one.
Mr. PECORA. There was not one?
Mr. MORGAN. NO. DO you want that matter explained—because
Mr. Keyes can do it much better than.I can.
Mr. PECORA. What is the relationship of Mr. Keyes to your firm?
Mr. MORGAN. Mr. Keyes is a sort of general office manager and
most confidential clerk.
Mr. PECORA. TO your knowledge was a statement of the financial
condition of the firm prepared as of December 31, 1930?
Mr. MORGAN. I do not have any knowledge about it, no recollection.
Mr. PECORA. Was one prepared as of the 2d day of January 1931 ?
Mr. MORGAN. There was.
Mr. PECORA. DO you know the reason why that date was adopted
for the balance sheet or statement of conditionMr. MORGAN (interposing). Because a new partnerMr. PECORA (interposing). And embraced the calendar year 1930
instead of the date of December 31, 1930?
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STOCK EXCHANGE PRACTICES
Mr. MORGAN. Simply because there was a new partner coming in
I believe. I don't know any other reason.
Mr. PECORA. IS that the only reason?
Mr. MORGAN. SO far as I know.
Mr. PECORA. Who was the new partner that came in there ?
Mr. MORGAN. Mr. Parker Gilbert.
Mr. PECORA. Was the statement of financial condition as of January 2, 1931, about the same as would have been as of December 31*
1930, had a statement been drawn as of that date?
Mr. MORGAN. I am informed that it would have been about the
same.
Mr. PECORA. Mr. Morgan, did your firm make a tax return, a
return for income-tax purposes, for the fiscal year of 1930?
Mr. MORGAN. I presume we did; the calendar year 1930.
Mr. PECORA. For the calendar year 1930 ?
Mr. MORGAN. Yes. We do not make a firm return on income tax,
do we [addressing an associate] ? Oh, we do.
Mr. PECORA. DO you know whether the firm of J. P. Morgan &
Co. made put another return for income-tax purposes as of the
2d day of January 1931, which was only 2 days after the end of the
calendar year 1930?
Mr. MORGAN (addressing an associate). Did we? Yes, we did.
Senator BARKLEY. HOW could you include those 2 days in January
in your income-tax report for 1930?
Mr. MORGAN. We did not include them in the income-tax report
for 1930.
Mr. PECORA. What would be the object of making it for that
date?
Mr. MORGAN. Huh?
Senator BARKLEY. Eegardless of any new partnership, your income-tax report would have been the same for 1930, and it did not
have to be made out until the middle of March ?
Mr. MORGAN. But it was made out as of December 31, 1930. We
had two accounting periods.
Senator BARKLEY. I don't know just how important that is, but
it does not seem to me a few days amounted to much.
Mr. MORGAN. I do not think it did amount to much.
Senator GLASS. Mr. Morgan
Mr. MORGAN. Yes.
Senator GLASS. Does
the Internal Eevenue Bureau, through its
expert examiners, inquire into your income-tax returns?
Mr. MORGAN. Oh, yes, sir. He has done it for the last 20 years,
I think, ever since there was an income tax.
Senator GLASS. Did he express any suspicion or institute any
investigation of this 2 days' variation in your report ?
Mr. MORGAN. I think he received an explanation of the reason
why it was done from Mr. Keyes, which I think he accepted as
being correct and in order. That is what I understand. They are
all there through 1930 [addressing an associate], aren't they? Yes.
Senator GLASS. I do not know just where we are headed, how we
are going there. I have just had the privilege of reading your
statement to the committee before I got in; with some of the things
I do not agree at all. But whether your statement or my disagreehttp://fraser.stlouisfed.org/
ment has any pertinent relation to this inquiry I suppose I shall
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STOCK EXCHANGE PRACTICES
39
find out in time. You say that in the first place you risk your own
money. Is that especially accurate ?
Mr. MORGAN. I say that we do what?
Senator GLASS. That your firm risks its own money. I understood
that you received deposits to the extent of
Mr. MORGAN (interposing). We do.
Senator GLASS (continuing). Three hundred millions of dollars
plus.
Mr. MORGAN. We do.
Senator GLASS. Well, somebody else's money you risk too, isn't
Mr. MORGAN. Well, we keep that in the banking fund. We do
it?
not
risk our depositors' money in speculative investments.
Senator GLASS. Well, you loan it, don't you?
Mr. MORGAN. Only
Senator GLASS (interposing). You don't keep it there as dead
lumber; you loan your deposits just as an association does?
Mr. MORGAN. We loan it with a great deal more care. That is it.
Senator GLASS. Oh, I am not questioning that, but I think that is
an inaccurate expression of your activity there. You do not simply
risk your own money; you loap. your depositors' money. You risk
that to the extent that any risk is involved ?
Mr. MORGAN. TO the extent that that risk is involved; yes.
Senator GLASS. 3STOW, you say here on page 2 that you are compelled to keep a strong position and that the private banker is compelled to keep a strong position, knowing, as he does, that none of
the aids provided by the Government for incorporated banks, such
as the Federal Reserve System or the Reconstruction Finance Corporation, are at its disposal. Do you think that is exactly right?
Mr. MORGAN. I have not intended that they are at our disposal
in any way.
Senator GLASS. Have you any idea, can you approximate the
volume of bills sold by your concern to the Federal Reserve banks ?
Mr. MORGAN. Well, I don't know how much it would run to over
a period of years. It is something like—it is probably fifteen or
twenty millions outstanding, on an average, of acceptances.
Senator GLASS. Isn't that availing yourself of the privileges of
the Federal Reserve System?
Mr. MORGAN. It does go up to 30. No, because after all, you can
sell them to the banks quite well.
Senator GLASS. Yes, I know, but that is availing yourself of
the
Mr. MORGAN (interposing). Oh, we never have sold—we have only
once sold them, I am informed, directly to the Federal Reserve
bank.
Senator BARKLEY. Did they buy them as an investment ?
Mr. MORGAN. They bought them as an investment.
Senator GLASS. Yes, but that is availing of the facilities of the
Federal Reserve bank. But the point I want to arrive at is to dissipate a popular error, and that is that the Government of the United
States neither owns a dollar of proprietary interest in the Federal
Reserve Banking System nor does it provide the Federal Reserve
Banking System any aid. What aid do you think it provides them ?
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STOCK EXCHANGE PRACTICES
Mr. MORGAN. The Government is an aid provided—the Government provides an aid to the incorporated banks of the Federal Reserve System.
Senator GLASS. Oh, no; the Government does not provide that;
the banks themselves provide that. The Government does not own
a dollar of the stock under the Federal Reserve Banking Act.
Mr. MORGAN. But under that very admirable law, the Federal Reserve law, the banks are incorporated by the United States.
Senator GLASS. Yes. But so far as the Government aiding it, the
only aid that the Government does is to institute a system of espionage in them.
Mr. MORGAN. Yes; but the provision of the Federal Reserve bank
is a very great aid by the Government to the national bank, a very
great aid, and it was devised for that purpose, Senator.
Senator GLASS. It is an aid not extended by the Government of
the United States; it is an aid by the banks to themselves. They
own the Federal Reserve System. The Government simply has a
supervisory control over it.
Mr. MORGAN. I know, but when the Government has complete
control over it I think that
Senator GLASS (interposing). It has not complete control; it has
supervisory control.
Mr. MORGAN. Very nearly so.
Senator GLASS. It has supervisory control. But how does the
Government aid it?
Mr. MORGAN. I do not say the Government aids the Federal
Reserve bank itself. I say that the Government provides the
Federal Reserve banks, gives authority to make them Federal Reserve
banks. It is a great aid to the Federal Reserve System. I still
think so.
Senator GLASS. The Government gives authority to the banks
themselves to organize a Federal Reserve bank.
Mr. MORGAN. Yes; that is a great help.
Senator GLASS. And avail themselves of the facilities
Mr. MORGAN. Yes.
Senator GLASS. That
is not any financial aid by the Government.
Now, some people talk about the right of issue. Federal Reserve
banks have not the right to issue. The Government has the right of
issue upon the request of the Federal Reserve bank, and you know
perfectly well that the member banks of the system did not want that
done, don't you ?
Mr. MORGAN. NO ; I did not know about that at all, sir.
Senator GLASS. In other words, the responsibility of the Government for a Federal Reserve bank note is so absolutely remote as to
scarcely be detected. In other words, the Government issues a note
and it interposes all of the assets and facilities of the 12 Federal
Reserve banks to liquidate that note before the Government assumes
any responsibility whatsoever—isn't that so?
Mr. MORGAN.
Yes.
Does that mean—I do not quite understand the thing in that way—
but does that mean that the Government is really the endorser of
the note?
Senator GLASS. Does that what?
STOCK EXCHANGE PRACTICES
41
Mr. MORGAN. Does that mean that the Government is really an
endorser of the note ?
Senator GLASS. Yes. But this endorsement is not worth a flip of
the hand for it has to be paid 20 times over before it reaches Government responsibility.
Mr. MORGAN. That is not an endorsement ?
Senator GLASS. It was just an idle theory that was put there. It
was the only scientific mar upon the then Federal Reserve Bank
Act. There have been a devil of a lot of mars put on it since, I can
tell you that.
Mr. MORGAN. Well, I am sorry that I started this mare's nest.
Senator GLASS. And do you say that private bankers have not
access to the Reconstruction Finance Corporation?
Mr. MORGAN. I have not known that they have.
Senator GLASS. May be you have never availed yourself of it.
But everything on the face of God's green earth has access to the
Reconstruction Finance Corporation, I should say. [Laughter.]
Mr. MORGAN. I am sorry I am the only exception, then.
Senator GLASS. All that you would have to do would be to come
down here and tell them your tale of woe in order to borrow the
Government money at the expense of the taxpayers of the United
States.
Senator COUZENS. And I might point out that in the case of the
railroads J. P. Morgan & Co. have received the benefit of the Reconstruction Finance Corporation. They have received loans, the
railroads have, from the Reconstruction Finance Corporation.
Mr. MORGAN. But we did not.
Senator COUZENS. They paid you
off with the money that they
got from the Reconstruction Finance Corporation.
Mr. MORGAN. When the money was due.
Senator COUZENS. In no way else could you have got it.
Mr. MORGAN. Well, we could have foreclosed.
Senator COUZENS. But you could not have got the money by foreclosing, because they did not have any money to pay you with.
Senator GLASS. I should like to say that I included the railroads
in my very comprehensive question.
Senator COUZENS. I simply want the record to show that the house
of Morgan has gotten money because the railroads came down here
and got money.
Mr. MORGAN. I beg your pardon, but doing what?
Senator COUZENS. The railroads came down here and got money
from the Reconstruction Finance Corporation.
Mr. MORGAN. YOU said something about controlled the railroads,
I thought.
Senator COUZENS. I should like to have that point brought out.
Mr. PECORA. We will probably bring it out before the hearings
are over.
The CHAIRMAN. Mr. Morgan, do I understand it to be your
theory that the better system would be a system of private banks
rather than the system that we now have?
Mr. MORGAN. Oh, I think both have their places.
The CHAIRMAN. DO you think we ought to have both ?
Mr. MORGAN. I hope we will have both, will continue to do so.
42
STOCK EXCHANGE PRACTICES
The CHAIRMAN. I did not know but what your line of thought
was that really the better system would be a private banking system
and take the Government out of the matter.
Mr. MORGAN. Oh, I was not suggesting that.
Senator BARKLEY. I understand that your position is one of justifying private bankers without attacking public bankers, is that it?
Mr. MORGAN. That is exactly what I am doing.
Mr; PECORA. Mr. Morgan, you know that your firm filed an income tax statement or return for a portion of the calendar year
1930, embraced between the dates January 1 and June 30, both inclusive; and also filed a separate return for the balance of that
calendar year, that is to say, for the period between July 1, 1930,
and December 31, 1930, both inclusive, do you not?
Senator GORE. State those dates again?
Mr. MORGAN. I do not know anything about income tax questions
at all, sir, I am sorry to tell you.
Mr. PECORA. Well, you stated a few moments ago when I was
questioning you about the making of these returns, that a balance
sheet was not taken as of the end of the calendar year 1930 because
a new partner came into the firm on the 2d of January, 1931, and
that hence a balance sheet was taken as of that date. Do you
recall that testimony?
Mr. MORGAN. I recall that testimony. I made that on statements
that were made to me, and perhaps I was not entirely correct, but I
think I was. That is correct, sir, I find.
Mr. PECORA. DO you know that your firm made a return for income-tax purposes for the 2-day period between January 1 and
January 2, 1931?
Mr. MORGAN. I think it is very probable but I do not know it.
Mr. PECORA. YOU stated before that the condition which would be
shown as of January 2, 1931, would be about the same as the condition that would be shown as of December 31, 1930; do you recall
that?
Mr. MORGAN. NO.
Mr. PECORA. DO you know that in the income-tax return filed by
your firm for the 2-day period of January 1 and January 2, 1931,
deductions were claimed by way of losses for that 2-day period
amounting to $21,071,862.94?
Mr. MORGAN. I do not know about the thing at all.
Mr. PECORA. Well, that isn't an item of such small consequence
that the partners would not know of it, is it Mr. Morgan ?
Mr. MORGAN. I really do not know anything whatever about the
income-tax statements of the office. They are all made up apart
from me and I cannot base an examination on them.
Mr. PECORA. DO you know of any loss that accrued to the firm of
J. P. Morgan & Co. for the two days of January 1 and January 2,
1931; do you?
Mr. MORGAN. Well, do I know of that loss?
Mr; PECORA. Of any loss which accrued to the firm on account
of the business it transacted in those two days ?
Mr. DAVIS. Mr. Chairman, may I suggest that, if the committee
thinks it important to go into these income-tax matters, and that
it is relevant, and inasmuch as Mr. Morgan has said it was all done
STOCK EXCHANGE PBACTICES
43
by Mr. Keyes, the office manager, who is here and is prepared to
respond to any questions Mr. Pecora may want to inquire of him.
The CHAIRMAN. He might state any losses that occurred.
Senator GLASS. Mr. Chairman, Mr. Morgan has stated distinctly
that he does not know anything about it. It seems to me we ought
to have the man before the committee who knows about the matter.
Mr. MORGAN. And the man is here.
Mr. DAVIS. The man is here, and is quite ready for it if you want
to go into it with him.
Mr. PECORA. Mr. Morgan, did the firm of J. P. Morgan & Co. do
business for the 2 days of January 1 and January 2, 1931, which
resulted in any considerable loss to them, to your knowledge?
Mr. MORGAN. NO, sir.
Mr. PECORA. It did not?
Mr. MORGAN. The loss did
not result at that time. The loss was
taken at that time. But I do not want to discuss this because I
have not the books before me and I cannot talk about it. I do not
know anything about it. But if you will inquire of Mr. Keyes, and
he has all of the records, you can get all of the information about
the thing from him. He can give it to you perfectly easily.
Mr. PECORA. Mr. Keyes is an employee of the firm and not a partner, is he not?
Mr. MORGAN. Yes,
sir.
Mr. PECORA. And his position is that of general manager?
Mr. MORGAN. Yes.
Mr. PECORA. And as general manager he carries out the decisions
and policies of the partners, does he not ?
Mr. MORGAN. Yes.
Mr. PECORA. AS a partner, did the firm of J. P. Morgan & Co.
transact any business on January 1 and January 2, 1931, that you
have any knowledge of ?
Mr. MORGAN. I want to get the answer to this right: We revalued
the securities, didn't we? (Inquiring of some of his own people.)
The CHAIRMAN. Those were not holidays if they did business.
Mr. PECORA. One day was a holiday.
Mr. MORGAN. I cannot say.
Mr. PECORA. Was any decision arrived at in a conference of the
partners of J. P. Morgan & Co. which led to the filing of an incometax return in behalf of that firm for that 2-day period?
Mr. MORGAN. I was probably not present at the time it was not
taken. I don't know.
Mr. PECORA. Have you any knowledge at all of any such decision
having been reached by the members of the firm ?
Mr. MORGAN. I assume it was reached, because it was there.
Mr. PECORA. Have you any knowledge of making such a thing ?
Mr. MORGAN. I have not.
Senator GLASS. Mr. Chairman, I respectfully submit that Mr.
Morgan has stated over and over again that he has no knowledge
of this income-tax business, but that the general manager of the
firm, who is here, has complete knowledge of it. I do not see any
use in the world, or anything to be gained by badgering Mr. Morgan
about his knowledge or lack of knowledge of that particular item.
44
STOCK EXCHANGE PRACTICES
Mr, PECORA. Mr. Chairman, I certainly have no desire to badger
Mr. Morgan or any other witness. I am simply asking him questions
as a witness.
Senator GLASS. Yes; but you are repeating the questions over and
over again, questions that have already been answered.
Mr. PECORA. I beg pardon, Senator Glass, but
Senator GLASS (continuing). He has repeatedly answered that
question.
Mr. PECORA. I do not recall asking Mr. Morgan any question twice.
A succeeding question may have related to the former subject, or
to a question previously propounded.
Senator GLASS. They are questions with the same background.
Senator GORE. I should like to know what the background is of
the figure $20,000,000 loss. I should like to have some information
about that subject. I do not see how an income-tax return can be
made for two days.
Senator BARKLEY. Was an income tax return for those two days
made separately because you could not include them in your 1930
report because the law fixes it for the calendar year, and for those
two days the firm was the same as it had been in 1930, but you could
not include those two days in your 1931 report because it was a
different firm after the second of January?
Mr. MORGAN. That is exactly what I understand to be the case.
Senator BARKLEY. And you included those two days because you
had to make a separate report for the reason that they were the
only two days in 1931 when the firm as it existed in the year 1930
was the same, is that correct?
Mr. MORGAN. That is correct.
Senator COUZENS. But you revalued your securities during that
time?
Mr. MORGAN. Yes; we revalued the securities.
Senator COUZENS. And that created a loss. That did not have
anything to do with the new partnership ?
Mr. MORGAN. We had to revalue the securities at that time because
a new partner came in.
Senator COUZENS. Then Mr. Morgan did understand about that.
Now he states that he knows something about that.
Mr. MORGAN. I do not understand what the difficulty was.
Senator GLASS. He was asked that question and has answered.
Senator ADAMS. Mr. Chairman, might I ask a question of Mr.
Pecora? As I understand, the partnership itself makes reports
not for the purpose of paying a tax as a partnership but for the
purpose of furnishing information, and the tax is paid by the individual partners?
Mr. PECORA. Yes, sir.
Senator MCADOO. On their distributary shares.
Mr. PECORA. Yes, sir. Apparently now, Mr. Chairman,
the witness has some knowledge of the revaluation of securities composing
the asests of the partnership as of January 2, 1931. Is that correct,
Mr. Morgan; have you any such knowledge ?
Mr. MORGAN. I have no knowledge that I could go back to and
cite to you; no.
STOCK EXCHANGE PRACTICES
45
Senator BARKLEY. Could Mr. Keyes give full information as to
that loss and the revaluation ?
Mr. MORGAN. Perfectly.
Mr. PECORA. DO you know at what figure the securities owned by
the firm were valued as of the end of the calendar year 1930 ?
Mr. MORGAN. NO.
Mr. PECORA. Were
they valued at the market or at cost on that
date?
Mr. MORGAN. They were not valued on that date. They were not
valued at that date.
Mr. PECORA. Was there a write-off due to depreciation of the value
of the securities that J. P. Morgan & Co. owned as assets as of the
end of the calendar year 1930?
Mr. MORGAN. I do not know.
Mr. PECORA. DO you know who signed the partnership income-tax
return ?
Mr. MORGAN. I have no doubt that I did.
Mr. PECORA. For the calendar year 1930?
Mr. MORGAN. Yes. But I have not the slightest recollection of it.
Mr. PECORA. Did you sign it for the 2-day period January 1 and
2, 1931?
Mr. MORGAN. I do not remember.
Mr. PECORA. Sir?
Mr. MORGAN. I do not remember.
Mr. PECORA. DO JOU know who prepared those returns ?
Mr.
MORGAN.
Yes.
Mr. PECORA. Who?
Mr. MORGAN. Mr. Keyes.
Senator GLASS. Again I should like to ask you, Mr. Morgan: Do
not the expert examiners of the Interiial Revenue Bureau review all
these matters ?
Mr. MORGAN. I understand so.
Senator GLASS. In examining your income-tax return ?
Mr. MORGAN. Yes. I understand they have done so. I was told
the other day that we were clear up to 1931, was it?
Mr. KEYES, 1930.
Mr. MORGAN. 1931 is now being examined.
Senator COTJZENS. I might point out that they
also examined Mr.
Charles Mitchell's income-tax return.
Senator GLASS. Well, that is an implication that I am not participating in.
Senator COTJZENS. NO, and I am not participating in it either, but
I do object to the fact that this examination is to be curtailed any
more than the examination of Mr. Charles Mitchell was curtailed.
I want the testimony to go through.
Senator GLASS. I won't curtail the examination, but as a member
of the subcommittee I claim the right to know something in advance
of what would be proven here, and I was not given any information
whatsoever.
Senator COUZENS. And I do not wish the examination to be stopped. And I will say that I, too, did not get any information, and I
relied upon the chairman of the committee for it.
175541—33—PT 1
4
46
STOCK EXCHANGE PRACTICES
The CHAIRMAN. I will say that I tried to get the members of the
subcommittee together time and again, and could not find them
every time by any means.
Mr. PECORA. I wish to say that whenever I received a request from
any member of tjie committee, that information I gladly furnished.
Senator GLASS. And how could a member of the subcommittee ask
you for information when he has no conception of what is to be
found out?
The CHAIRMAN. Well, let us go on with the examination of the
witness.
Senator GLASS. We will go on with the examination, but a member of the subcommittee has a right to interrupt with questions to
find out what it is all about, and as long as I am a member of the
subcommittee I will do it.
Senator COUZENS. And so will I.
Mr. PECORA. Mr. Morgan, do you know how much time was devoted by any member of the Internal Eevenue Department on the
income tax returns filed by your concern ?
Mr. MORGAN. N O ; I have no knowledge whatever of what goes on
about the income-tax matters, as I told you before. That is all done
without my intervention at all.
Senator GLASS. I will say to Mr. Pecora and to the Senator from
Michigan (Mr. Couzens) that if they want to do so they can indict
me. I do not know anything more about my income tax than the
man in the moon. I employ an expert accountant, an accredited
and attested accountant, certified by the State of Virginia, to make
out my income-tax return, and then I sign on the dotted line.
Senator COUZENS. And I assume that Mr. Mitchell did the same
thing.
Senator GLASS. And if you think that is dishonest, then go ahead
with it.
Senator COUZENS. I resent the inclusion of that insinuation in
that remark, because I have charged nothing wrong to Mr. Lamont
or to Mr. Morgan. I have known Mr. Lamont for years. But I
resent any one witness being treated differently than any other
witness, whether it happens to be Mr. Morgan or anyone else.
Senator GLASS. I do not care anything about Mr. Morgan. I
never saw him but once before in jny life. My whole contention is
as to the matter of procedure.
Senator BARKLEY. Mr. Chairman, I suggest that these personal
differences be referred for consideration in an executive session.
Senator COUZENS. SO do I.
Senator GLASS. And I am not dissenting.
Mr. DAVIS. Mr. Chairman, I should like to submit that as to all
these income-tax questions, the expert who made out the returns,
who is the manager of the firm, who knows the business in detail,
is here ready to respond; I offer him to the committee.
Mr. PECORA. I submit that we are entitled to find out whether
the senior member of the firm knows anything about the negotiations or the business of the firm which resulted in a $21,000,000 loss
plus for two days' business transactions of a banking firm accepting
deposits from the public and from public corporations.
Mr. DAVIS. That statement, with great respect to the distinguished
counsel, is a pure figment of the imagination. The man who made
STOCK EXCHANGE PEACTICES
47
the figures is here and knows how it was done, while Mr. Morgan has
told you that he does not know.
Mr. PECORA. It is not a figment of my imagination when I refer
to the file of the records.
Mr. DAVIS. Oh, all right.
Senator GORE. Let us get the facts in the records, and the background, and then we can reason on it and quarrel on it, too, if you
want to.
The CHAIRMAN. GO ahead with the examination.
Mr. PECORA. Mr. Morgan, I want to ask you definitely: Do you
know of any business transactions of operations that resulted in a
loss of—$21,071,862.94 to the firm of J. P. Morgan & Co. for the two
days of January 1 and January 2, 1931 ?
Mr. MORGAN. I have already told you, sir, that I do not know.
Mr. PECORA. YOU do not know ?
Mr. MORGAN. NO.
Senator GORE. Mr.
Pecora, is it a fact that such a loss occurred?
I am trying to get into the record the facts and background. I can
appreciate the importance and the priority of bringing it out. Are
you trying to elicit the facts, or do you have the facts already ?
Mr. PECORA. I have the fact only as indicated by the income-tax
return filed in behalf of J. P. Morgan & Co. for the 2-day period,
January 1 and January 2, 1931, and a comparison of that return
with one filed in behalf of that firm for the last 6 months of the
preceding calendar year, terminating December 31, 1930.
Senator GORE. And it shows that discrepancy or difference ?
Mr. PECORA. Yes, sir.
Senator GORE. Does anybody
have that information except Mr.
Keyes ?
The CHAIRMAN. He is asking Mr. Morgan if he knows about it,
and he can say yes or no.
Senator BYRNES. Mr. Chairman, I want to submit that that is
perfectly proper. Counsel may ask the witness and if the witness
answer^ " no ", then if counsel wants the information from the
gentleman who has it, he can let him answer.
Senator GLASS. NOW, you can go into executive session if you want
to make suggestions of that sort, Senator Byrnes.
The CHAIRMAN. Mr. Pecora has a perfect right to ask Mr. Morgan
what he knows about it, and that is all that he has done.
Senator GLASS. And when Mr. Morgan answers over and over
again that he does not know anything about it, what is the use of
asking him again?
The CHAIRMAN. He asked Mr. Morgan if he knows about it.
Senator GLASS. He asked him over and over again if he did not
know about it.
Mr. PECORA. At one time, when Senator Couzens asked Mr. Morgan a question, the answer indicated some knowledge of the general
subject, and then I followed that up.
The CHAIRMAN. GO ahead, Mr. Pecora.
Mr. PECORA. Mr. Morgan, do you know that returns made in behalf of the individual members of your firm, income-tax returns,
have been accepted without examination on various occasions?
Mr. MORGAN. I do not know anything about it.
48
STOCK EXCHANGE PRACTICES
Mr. PECORA. Have you ever heard of the making of this statement on the record of the income-tax return filed in behalf of Mrs.
Margaret Y. Newbold, care J. P. Morgan & Co., 23 Wall Street,
which I will read:
Returned without examination for the reason that the return was prepared
in the office of J. P. Morgan & Co., and it has been our experience that any
schedule made by that office is correct. The books of the taxpayer are
located in Philadelphia, and if necessary Schedule C may be verified in that
city. This office, however, recommends that the return be accepted as filed.
C. M. SHEPPAED,
Internal
Revenue
Agent.
Did you ever know of that?
Mr. MORGAN. NO.
Mr. PECORA. DO you
know that the records of the Income Tax
Dep artment
Senator COUZENS (interposing). What year was that?
Mr. PECORA. 1928.
Senator GORE. Where does Mr. Sheppard
Mr. PECORA. I do not know, sir. I am
hold out?
simply reading from a
photostatic copy of the record.
Senator GORE. In New York, I suppose, or for that district ?
Mr. PECORA. I imagine he is a revenue agent either in New York
or Washington.
Senator GORE. And you do not know whether he is still in office
or not ?
Mr. PECORA. I did not. And this statement bears date August 15,
1930.
Senator GLASS. Have you had any contact with Mr. Sheppard,
Mr. Pecora?
Mr. PECORA. NO, sir.
Senator GLASS. Have
you made any effort to have contact with
him?
Mr. PECORA. NO, sir.
Senator GLASS. TO ascertain the meaning of it ?
Mr. PECORA. The meaning seems to me to be plain.
The language
used by him seems quite plain, and I have not asked him to explain
anything about it, because I do not consider it is ambiguous. Furthermore., the return bears the stamp on its face:
No field examination necessary.
Senator BARKLEY. These notations are all made by agents of the
Government after the income-tax return has been made out by the
taxpayer ?
Mr. PECORA. Yes, sir.
Senator BARKLEY. And has left his hands?
Mr. PECORA. Yes, sir. Furthermore, may
I state, Senator, that
the records of the Income Tax Bureau show that only 1 day was
spent on the partnership return of J. P. Morgan & Co. and of Drexel
& Co., of Philadelphia, filed for the year 1930.
Mr. DAVIS. I S it unfair to ask distinguished counsel if he is
testifying as a witness ?
Mr. PECORA. I am giving the results of the examination of official
reports and data in the bureau.
Mr. DAVIS. Are you testifying as a witness ?
STOCK EXCHANGE PRACTICES
49
Mr. PECORA. I am putting this statement in the record, and stating where it came from, Mr. Davis.
Senator COUZENS. And the committee will decide that question,
not counsel for the house of Morgan.
The CHAIRMAN. Yes. You may proceed, Mr. Pecora.
Mr. PECORA. Mr. Morgan, don't you know as a matter of fact one
of the reasons for the filing of this income-tax return in behalf of
the firm for the 2-day period of January 1 to January 2,1931, showing losses of over $21,000,000, enabled your firm, or would enable
your firm under the income-tax law in effect at the time this return
was made and filed, to carry forward those losses of over $21,000,000
against the taxable income for the ensuing two years, that is, for
the years 1932 and 1933?
Mr. MORGAN. NO ; I do not know that of my own knowledge.
Mr. PECORA. Well, I will ask further questions of Mr. Keyes about
this subject later. Now, Mr. Morgan, have you prepared a list at
the request of counsel for the committee, or has your firm caused
such a list to be prepared, showing the names of all corporations
maintaining demand deposit accounts with your firm with balances
averaging $1,000,000 or more?
Mr. MORGAN. Yes; we have done that, I believe.
Mr. PECORA. Will you produce the list ?
Mr. MORGAN. This is for J. P. Morgan & Co., and this does not
involve Drexel & Co., or anything else.
Mr. PECORA. All right.
Mr. MORGAN. It says:
CORPORATIONS ENGAGED IN INTERSTATE COMMERCE HAVING AN AVERAGE DAILY
BALANCE OF $1,000,000 OR OVER DURING ANY YEAB OF THE PERIOD FROM JANUUARY 1, 1927, TO DECEMBER 31, 1932, INCLUSIVE
Alaska Development & Mineral Co.
Alaska Steamship Co.
Alleghany Corporation.
American Car & Foundry Co.
American Telephone & Telegraph Co.
The Atchison, Topeka & Santa Fe Railway Co.
Celanese Corporation of America.
The Chesapeake & Ohio Railway Co.
Chicago, Burlington & Quincy Railroad Co.
Chicago & Western Indiana Railroad Co.
The Cincinnati, New Orleans & Texas Pacific Railway Co.
The Commonwealth & Southern Corporation.
Continental Oil Co. of Delaware.
E. I. du Pont de Nemours & Co., Inc.
Erie Railroad Co.
General Electric Co.
General Mills, Inc.
General Motors Corporation.
Humble Oil & Refining Co.
Ingersoll-Rand Co.
International Telephone & Telegraph Corporation.
Johns-Manville Corporation.
The M. W. Kellogg Co.
Kennecott Copper Corporation.
Louisville & Nashville Railroad Co.
Marland Oil Co.
Montgomery Ward & Co.
New York Central Railroad Co.
Digitized for Niagara
FRASER Hudson Power Corporation.
Northern Pacific Railwav Co.
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STOCK EXCHANGE PRACTICES
Pere Marquette Railway Go.
Pullman Car & Manufacturing Corporation.
Royal Baking Powder Co.
Southern Railway Co.
Standard Brands, Inc.
Standard Oil Co. of New Jersey.
Texas Gulf Sulphur Co.
United States Steel Corporation.
And the next page is Drexel & Co.:
Baldwin Locomotive Works.
Barber Asphalt Co.
Bethlehem Steel Co.
General Steel Castings, construction account.
Kent (Atwater) Manufacturing Co.
Keystone Watch Case Co.
Lehigh Valley Coal Co.
Lehigh Valley Railroad Co.
The Midvale Co.
Philadelphia & Reading Coal & Iron Co.
Reading Co.
Reading Iron Co.
Standard Brands, Inc.
United Gas Improvement Co.
Senator COTJZENS. For what period were those average balances?
For how long?
Mr. MORGAN. It says an average daily balance of $1,000,000 or
over during any year of the period.
Senator COTJZENS. For the whole year?
Mr. MORGAN. Yes, sir.
Mr. PECORA. During any
one year, Senator Couzens, of the 5-year
period.
Senator COUZENS. I understand now.
Senator GORE. These are mostly concerns on whose boards of
directors appear some of the names of your partners, largely ?
Mr. MORGAN, Very probably. I might say that they are all companies for which we worked.
Mr. PECORA. These corporations for the most part are corporations
that your firm has been financing for in the past, is that right ?
Mr. MORGAN. Yes.
Mr. PECORA. NOW,
have you caused to be prepared a list of all
corporations maintaining demand deposit accounts with your firm
with a balance of $100,000 or more?
Mr. MORGAN. I think we have.
Mr. DAVIS. Mr. Pecora, I think we have that, if you will just give
me a minute.
Mr. PECORA. All right. That would be in answer to question 34
that we propounded to you.
Mr. DAVIS. We have it now.
Mr. PECORA. YOU may go ahead and answer the question, Mr.
Morgan.
Mr. MORGAN (reading) :
" Corporations engaged in interstate commerce having an average yearly
balance of $100,000 or over during any year of the period from January 1,
1927, to December 31, 1931, inclusive:
Acewood Petroleum Corporation
(interposing). Mr. Chairman, is it necessary to
Could it be inserted ?
Senator GORE
have that read ?
STOCK EXCHANGE PEACTICES
51
Mr. PECORA. YOU mean in order to get it on the record?
Senator GORE. If there is any point as to any particular name, all
right. But why not simply put it on the record and save time ?
Mr. PECORA. Suppose I offer in evidence the lists of such names as
have been furnished to me by the firm of J. P. Morgan & Co. ? I
will offer in evidence the actual documents which the firm furnished
me.
(In order to complete the record the balance of the names on the
list of $100,000 or over is here copied as follows:)
All American Cables, Inc.
Allied Power & Light Corporation of Delaware.
The American Brake Shoe & Foundry Co.
American Car & Foundry Securities Corporation.
American Tobacco Co.
Amoskeag Manufacturing Co., D. W. Jarvis, agent.
Associated Dry Goods Corporation.
Atlantic Coast Line Railroad Co.
Atlantic Transport Co.
The Babcock & Wilcos Co.
Bendix Aviation Corporation.
The Borden Co.
J. I. Case Co.
Celluloid Corporation.
Cerro de Pasco Copper Corporation.
Chile Copper Co.
Cincinnati Northern Railroad Co.
The Cleveland, Cincinnati, Chicago & St. Louis Railway <1o.
The Colorado & Southern Railway Co.
Columbia Phonograph Co., Inc.
The Commercial Cable Co.
Congoleum-Nairn, Inc.
Continental Can Co., Inc.
Copper River & Northerwestern Railway Co.
The Cream of Wheat Corporation.
The Cream of Wheat Sales Co.
Crowell Publishing Co.
Detroit River Tunnel Co.
Diamond Power Specialty Corporation.
Eastman Kodak Co. of New Jersey.
Federal Steel Co.
The Firestone Tire & Rubber Co.
The Fleischmann Co.
Fort Worth & Denver City Railway Co.
Samuel Fox's Sons, Inc.
General Motors Acceptance Corporation.
General Steel Castings Corporation.
The B. F. Goodrich Co.
Graham Bros. Corporation.
Grover Loening Co., Inc.
Hartford Fire Insurance Co.
Hercules Powder Co.
Hocking Valley Railway Co.
International Harvester Co.
International Mercantile Marine Co.
International Standard Electric Corporal ion.
The Koppers Co. of Delaware.
Long Dock Co.
MacLeod & Co., Inc.
Magma Copper Co.
Maracaibo Oil Exploration Corporation.
Marsh & McLennan, Inc.
Merchants Despatch Transportation Co.
Missouri Pacific Railroad Co.
Digitized for Mobile
FRASER& Ohio Railroad Co.
52
STOCK EXCHANGE PBACTICES
Mother Lode Coalition Mines Co.
New England Car Co.
The New England Steamship Co.
The New York, New Haven & Hartford Railroad Co.
Northwestern Improvement Co.
Peabody Coal Co.
Penn-Ohio Edison Co.
Pennsylvania Coal Co.
Phelps Dodge Corporation.
The Proctor & Gamble Co.
Pullman, Inc.
St. Joseph Lead Co.
Scovill Manufacturing Co.
Jacques Seligmann & Co., Inc.
Simms Petroleum Co., Inc.
Standard Oil Co. of New York, Inc.
Standard Steel Car Corporation.
Stonega Coke & Coal Co.
Sulphur Export Corporation.
Terminal Railroad Association of St. Louis.
The Texas and Pacific Railway Co.
United Cigar Stores Co. of America.
United Verde Extension Mining Co.
West Publishing Co.
West Virginia Pulp & Paper Co.
Westmoreland Coal Co.
The Yale & Towne Manufacturing Co.
Mr. DAVIS. Mr. Morgan might identify it by reading the first and
last names on the list.
Senator GORE. I do not object to his reading it, except to save time.
That is my point.
Senator BTJLKLEY. Have those been identified by the witness ?
Mr. PECORA. DO you want to look at the last exhibit, Senator
Bulkley?
Senator BULKLEY. Yes.
The CHAIRMAN. Mark those exhibits 2 and 3.
(The exhibits had previously been marked as requested.)
Mr. PECORA. Mr. Morgan, when you read off the list of various
corporations on the boards of which either you or partners of yourself sat I tallied the number and reached the total of 167 directorships; 167 directorships held by members of your firm. Does that
correspond with your knowledge?
Mr. MORGAN. If that corresponds with the list that is right. I
do not know the number.
The CHAIRMAN. We had better have an executive session of the
committee, and we will take a recess until 2 o'clock. Clear the room.
(Thereupon, at 12:45 p.m. the committee took a recess until 2
o'clock p.m. the same day, Tuesday, May 23, 1933.)
AFTER RECESS
The subcommittee of the Committee on Banking and Currency of
the United States Senate reconvened at 2 o'clock p.m., Tuesday,
May 23,1933, at the expiration of the noon recess.
The CHAIRMAN. Let the committee come to order, please. The
subcommittee in considering the question of calling for the partnership agreement decided to ask Mr. Morgan, through his counsel, to
produce the agreement so that the subcommittee can in executive
STOCK EXCHANGE PRACTICES
53
session discuss the question and decide on the subject of the admission of this agreement, and determine the question of future use for
it. We will ask that that be done, so that we can go into that matter
in executive session, when the agreement is produced before the
committee.
Mr. DAVIS. That will be done as soon as we can get it.
The CHAIRMAN. That can be done at such time as you can get it.
Mr. DAVIS. That will be done, sir.
The CHAIRMAN. YOU may proceed, Mr. Pecora.
TESTIMONY OF J. P. MORGAN, A MEMBER OF THE FIRM OF J. P.
MORGAN ft CO., NEW YORK CITY—Resumed
Mr. PECORA. Mr. Morgan, as the senior partner of the firms of
J. P. Morgan & Co. and Drexel & Co. am I justified in assuming
that you have a substantial participation in the income and profits of
those firms?
Mr. MORGAN. I have, sir.
Mr. PECORA. NOW, according to the income-tax returns personally
made by you for the calendar year 1930, were you taxed upon any
taxable income?
Mr. MORGAN. I do not remember my income-tax return for 1930,
sir.
Mr. PECORA. YOU recall that according to your return you had no
net taxable income for that year?
Mr. MORGAN. In that case—that is made up on a mathematical
basis out of the figures in the books. I do not know anything about it.
Mr. PECORA. Well, do you know whether or not you paid an income
tax for the calendar year 1930 ?
Mr. MORGAN. I cannot remember, but I can find out.
Mr. PECORA. Can you remember whether or not you paid one for
the calendar year 1931?
Mr. MORGAN. I did not, I know, that year.
Mr. PECORA. And do you know whether or not you paid an income
tax for the calendar year 1932 ?
Mr. MORGAN. NO.
Senator COUZENS.
Does your " No " mean that you did not, or
that you do not know whether you did?
Mr. MORGAN. My " No " means that I did not pay any income tax.
I might remind you, Mr. Pecora, that if I have a substantial interest
in the profits of the concern I also have a substantial interest in the
losses. Which might account for some of my troubles.
Mr. PECORA. I S it within your knowledge that the aggregate
amount of income taxes paid by the members of the firms of J. P.
Morgan & Co. and Drexel & Co. for the calendar year 1930 was about
$47,000 or $48,000?
Mr. MORGAN. Not within my knowledge. I do not know about
the other men's returns.
Mr. PECORA. IS it within your knowledge that the aggregate
amount of income taxes paid for the calendar year 1931 by the members of the firms of J. P. Morgan & Co. and Drexel & Co. was zero ?
Mr. MORGAN. I believe it to be true, but I do not know. I don't
see their income-tax returns.
54
STOCK EXCHANGE PRACTICES
Mr. PECORA. NOW, according to an analysis of your testimony this
morning with respect to the number of directorates held by the
members of your firm; that number was 167 ?
Mr. MORGAN. SO you told me.
Mr. PECORA. YOU individually are a director in seven corporations
which you enumerated?
Mr. MORGAN. Whatever the ones I enumerated. I do not remember how many.
Mr. PECORA. One of those is known as the First Security Co. of
the city of New York?
Mr. MORGAN. Yes,
Mr. PECORA. That
sir.
company is a security affiliate of the First National Bank in the city of New York, is it not ?
Mr. MORGAN. Yes.
Mr. PECORA. DO you
know whether or not the members of your
firm who sit on these boards, who hold 167 directorates attend with
regularity the meetings of the various boards of directors of which
they are members?
Mr. MORGAN. I presume they attend with as much regularity as
they can; yes.
Mr. PECORA. And the corporations upon which they sit as directors are diversified in character, are they not? That is, they include
railroad companies, insurance companies, chartered banks, industrial
corporations, and so forth?
Mr. MORGAN. Yes.
Mr. PECORA. NOW I
take it that the business operations and transactions of your firm are of very considerable magnitude, are they
not?
Mr. MORGAN. Frequently; yes.
Mr. PECORA. DO you feel that in view of the volume and variety
of business transacted by your firm that its individual partners
can do full justice to their duties as directors in these 167 places
that they hold as directors for the various corporations on which
they sit?
Mr. MORGAN. I presume they do or they would be asked to go off
the boards.
Mr. PECORA. DO you, speaking for yourself, attend regularly the
meetings of the boards of directors of the various corporations on
which you sit?
Mr. MORGAN. Whenever I am in New York I always go to them,
if I possibly can.
Mr. PECORA. Are your absences from the city of New York of
considerable duration or extent in the course of the year?
Mr. MORGAN. Yes; they are apt to be about 4 months in the year.
Mr. PECORA. DO you know whether that is true of others of your
partners who sit as directors on many of these boards of these
companies ?
Mr. MORGAN. Which is true? That they are absent a great deal
or that they go to the board ?
Mr. PECORA. What is that?
Mr. MORGAN. That they are absent a great deal or that they go to
the board?
Mr. PECORA. Yes; that they are absent a great deal ?
STOCK EXCHANGE PRACTICES
55
Mr. MORGAN. They are not absent as much, as I am, as a rule,
except in such cases of sickness; something of that sort.
Mr. PECORA. At various meetings and conferences and discussions
of the members of the firm of J. P. Morgan & Co. are matters brought
up for discussion relating to the business affairs of the various banks
and corporations upon which your partners sit?
Mr. MORGAN. At times. When the company has a critical question
up, a question of policy, they are very apt to ask the director of the
company, or he himself will come and do it naturally, to get the
general opinion of the firm as he represents the firm on the board, so
to speak.
Mr. PECORA. YOU recognize, of course, that a director of a corporation, particularly if it is a corporation actively engaged in business,
occupies a position of trusteeship to that corporation, do you not?
Mr. MORGAN. Well, within limits, in my opinion.
Mr. PECORA. And would you define those limits?
Mr. MORGAN. Well, I think you will have to go, to define it—what
are the affirmative duties of a director ?
Mr. PECORA. I prefer to take your answer on that in view of your
experience as a director, Mr. Morgan.
Mr. MORGAN. Well, my idea of the duties of a director is to watch
the company, to pay strict attention to the general policies of the
company, but the most important duty of the director is to get an
executive power, a president and the executive officers of the company, and then see that they go on and do their duties. It can be no
director's duty to run the company. I t must be the duty of the
executives. The duty of the board is not to run the company and
mess into the little details of running it.
Mr. PECORA. The directors have the power to define and determine
the policies of the company, have they not ?
Mr. MORGAN. Yes; they do as a rule.
Mr. PECORA. And that power and that policy is carried out by the
executive officers in accordance with the wishes of the board of directors, as a rule, is it not?
Mr. MORGAN. AS a rule; yes. But as a rule the policies are generally brought up for discussion by the executive so that the directors
and the executive are not in opposition to each other.
Mr. PECORA. But the decisions as to policies are made by the
directors ?
Mr. MORGAN. By the directors, with the executive, too. As a rule,
the president is a director also.
Mr. PECORA. DO you recognize that there is any limitation whatsoever upon the duties of trusteeship which a director owes his company to discharge his duties in the manner best calculated to promote the interests of the company ?
Mr. MORGAN. If his duties are such as I have laid down, yes; I
think you are quite right.
Senator COUZENS. May I ask Mr. Morgan at that point: In discussing these matters with your partners, what sort of policies
are discussed? Mainly financial?
Mr. MORGAN. Well, I should think, for instance, in these last
times the question might come up in this way with such and such
a company: Should we go on paying the dividend or should we cut
56
STOCK EXCHANGE PRACTICES
it down? What is the best policy? Now, we are not quite certain.
And
Senator COTTZENS. I say, it is a financial policy ?
Mr. MORGAN. That is a financial policy. Well, most of the questions that come to the directors that are my partners are financial
questions, obviously.
Senator COTJZENS. Are there any cases where the policy of the
company might conflict with the policy of the Morgan house who
had a director on the company ?
Mr. MORGAN. Oh, I think they might very well.
Mr. PECORA. Well, in such instances, Mr. Morgan, is there not
an anomaly in the situation of a partner of your firm discussing a
matter of policy in behalf of the firm or for the interest of the
firm which may be in conflict with the policy or interest of a corporation upon which thpt member may sit as a director?
Mr. MORGAN. NO. There is no impropriety. He knows what he
has to do.
Mr. PECORA. NO ; I did not ask about impropriety. But conflict
of interest?
Senator ADAMS. Mr. Morgan, may I ask you one question? Pardon me for interrupting. The list of directorships held by the members of your firm covers a large proportion of the big industrial
interests of the country. Now, are they distributed purely accidentally because of their individual stock holdings in these companies, or is it a method or manner of assignment so that your
organization is really represented on these different boards?
Mr. MORGAN. It substantially is a representation of the firm, but
it is generally done by the man who knows the most about the
company.
Senator ADAMS. They are the representatives of the firm on these
boards ?
Mr. MORGAN. They are rather the representatives of the firm, because a mercantile company or a manufacturing company—the directors are not necessarily financial people. And it is an advantage
to them to have somebody they can consult in whom they have confidence, and they can consult us that way.
Mr. PECORA. Well, Mr. Morgan, your partners as members of the
firm owe a duty to the firm to conserve its interests, do they not ?
Mr. MORGAN. Yes, a duty to themselves, so to speak.
Mr. PECORA. Yes.
Mr. MORGAN. Yes.
Mr. PECORA. And they
have a selfish interest in the discharge of
that duty to the best of their ability as participants in the firm's
profits or income ?
Mr. MORGAN. Yes.
Mr. PECORA. I S that right ?
Mr. MORGAN. That may be so.
Mr. PECORA. Yes. Now, as directors
of any corporation they owe
a corresponding duty at least to the corporation, do they not?
Mr. MORGAN. Yes.
Mr. PECORA. YOU
said this morning, if I correctly recall your
testimony, in substance that most of the corporations upon the
boards of which your partners sit are corporations with which your
firm has had or still has business transactions or dealings ?
STOCK EXCHANGE PRACTICES
57
Mr. MORGAN. Quite often.
Mr. PECORA. And generally speaking is it fair to say that the
nature of those business transactions or dealings is the financing of
those corporations or the promotion of any of its issues?
Mr. MORGAN. I t might be. It might not. I t might be a simple
deposit interest.
Mr. PECORA. But it also might be what I have indicated?
Mr. MORGAN. I t might be, certainly.
Mr. PECORA. NOW, in those instances where your firm has done
the financing for the corporation upon the board of directors of
which may sit any of the members of your firm, does not that member of your firm have to take a position on a question of financing
which is done for the corporation by your firm with respect to the
terms of that financing?
Mr. MORGAN. I did not get that quite.
Mr. DAVIS. Will you read that?
Mr. PECORA. Well, let us take the case of a corporation on the
board of directors of which sits a member of your firm.
Mr. MORGAN.
Mr. PECORA.
Yes.
Mr. MORGAN.
Mr. PECORA.
Yes.
Mr. MORGAN.
Mr. PECORA.
Yes.
Let us assume that that corporation is negotiating
for financing in its behalf with your firm.
The question of the terms upon which the financing
is to be done becomes an important one both to the firm and to the
corporation, does it not?
And that member of your firm who may also be a
director of that particular corporation must take a position as
director for the best interests of the company
Mr. MORGAN. Yes.
Mr. PECORA (continuing).
And as a partner of your firm for the
best interests of your firm, must he not?
Mr. MORGAN. They need not necessarily conflict, need they?
Mr. PECORA. But they may very easily conflict, may they not?
Mr. MORGAN. I do not see it.
Mr. PECORA. I S it not conceivable
that your firm may insist
upon financing terms that may not be advantageous to the corporation ?
Mr. MORGAN. Why, no. Their interest is to have the corporation
financed to the best advantage of the corporation.
Mr.» PECORA. And upon the lowest possible terms to the corporation?
Mr. MORGAN.
Mr. PECORA.
Yes.
But the interests of your firm would be best served
by doing the financing in the safest possible way and for the greatest amount of profit or commission, would it not ?
Mr. MORGAN. N O ; it should not. Certainly not. You seem to
think that we do not want to go on doing business. We do want
to go on doing business.
Mr. PECORA. YOU want to go on doing business profitable to yourselves ?
Mr. MORGAN. Not only profitable to ourselves, but you cannot go
on with any good business that only one side makes any money on.
58
STOCK EXCHANGE PRACTICES
Mr. PECORA. IS not the matter of the terms upon which the financing of a corporation may proceed a question that resolves itself frequently into differences of opinion or conflicts between the interests
of the corporation and the banker?
Mr. MORGAN. I have not seen it.
Mr. PECORA. Well, whether or not you have seen it, is it conceivable
to yati that such a situation could easily arise in any given case 1
Mr. MORGAN. Then the corporation need not finance with us if it
does not want to. We cannot make it.
Mr. PECORA. But where a corporation desires to negotiate with
you for its financing, that is, with your firm, does it not put the
member of your firm, who is also a director of the corporation, in
the position of having to take sides ?
Mr. MORGAN. NO ; I do not think that you get my meaning about
this thing. Or I do not see eye to eye with you in your statement
about it. When you are dealing with a client for securities you
both of you have the same object, that is, that the securities shall be
put out at the highest possible price to be creditable, that is may
be creditable so the corporation is satisfied, and second, you must
be paid a sufficient amount, not too much, for taking the responsibility of putting it out. Those two things. And your minds always
meet with the corporate fellows. Isn't that so, George? (Turning
to a man sitting behind him.)
Senator COTJZENS. May I ask at that point: Is there any instance
that you know of where there is a director of Kuhn, Loeb or Dillon, Read & Co. sitting on the same board with your partners?
Mr. MORGAN. I do not know whether they do or not.
Senator COUZENS. It would hardly be likely, would it?
Mr. MORGAN. I do not know. It might be.
Senator COUZENS. YOU do not know of any case?
Mr. MORGAN. I do not know whether there is or not.
The CHAIRMAN. W°ulci it be true, Mr. Morgan, if one of these
corporations on which your partner is a director undertakes to
finance a certain scheme or plan and is unable to do it through
your house, that they would be able to do it through another house?
Mr. MORGAN. Why not ? If they wanted to.
The CHAIRMAN. Simply because the other house would not take
it because Morgan & Co. would not take it.
Mr. MORGAN. Well, I cannot help that. It is a great compliment
to us. I am very much obliged to you, sir. But the difficulty that
Mr. Pecora has got in his mind
Mr. PECORA. NO ; I have no difficulty in my mind.
Mr. MORGAN. I see. But what you wanted to imply was that there
could be a difficulty between our firm and the company of which the
partner was a director.
Mr. PECORA. I do not recede from that opinion either.
Mr. MORGAN. NO ; I understand you do not. When the Steel Co.
was formed 30 years ago or more, my father, who was instrumental
in putting it together, said, " Look here, we are going to have a very
strong board of directors. Those directors are all of them engaged
in large business. They include bankers and steel men and all
sorts of business. Now ", he says, " it is infallible that as the company goes on, which has an enormous capital and big business—it
STOCK EXCHANGE PRACTICES
59
is infallible that they will have to do financing or purchasing of
materials from some of their directors, and therefore we are going to put it into the bylaws that they are permitted to do so,
if a majority of the finance committee or the board of directors—
the interested party not voting—wish it done." And that was put
into those bylaws, and it has been there ever since.
Mr. PECORA. Well, Mr. Morgan, if a corporation seeks to have some
financing done for it by a private banker, it would naturally desire
to have the financing done on the lowest possible terms to itself,
would it not?
Mr. MORGAN. I have seen it so and I have seen it not so. What
they want to do is to put it out so it will stay out and be creditable
to them.
Mr. PECORA. But they want it to be put out safely and profitably,
but on the lawest possible terms to themselves, that is natural, is it
not?
Mr. MORGAN. Yes; that is right.
Mr. PECORA. And is it not equally natural that the banker who
is negotiating to do the financing for such a corporation would seek
to do that financing upon the best possible terms to himself?
Mr. MORGAN. Well, it would depend on your definition of "best
possible terms to himself."
Mr. PECORA. Well, the most profitable.
Mr. MORGAN. DO you mean the lowest price, and he will screw 2 or
3 more percent on it ? Why, no; I don't believe so.
Mr. PECORA. I mean on the most profitable terms to the banker
Mr. MORGAN. NO.
Mr. PECORA (continuing).
Consistent with safety and good business principles?
Mr. MORGAN. I t might be you will find that those points are very
near together with both the company and the banker.
Mr. PECORA. Well, the margin may be a slight one. The margin
of differences might be slight.
Mr. MORGAN.
Yes.
Mr. PECORA. But is it not conceivable to you that there is a
margin ?
Mr. MORGAN. Well, it is possible that there would be. In that
case they would settle it between themselves, the company and the
bankers.
Mr. PECORA. Exactly. That is, those representing the company
conducting the negotiations with those representing the prospective
banker would settle it between themselves?
Mr. MORGAN.
Yes.
Mr. PECORA. And in an instance where a member of your firm was
also a member of the board of directors of a corporation seeking to
do its financing through your firm, he would have to help settle it
for tiie interests of the corporation on the one side; and the interests
of your firm on the other, would he not?
Mr. MORGAN. Yes. He probably would sin on the side of the
corporation, I should think, from what I know of him.
Senator BARKLEY. May I ask a question there ? Do you recognize
any difference between a direct loan by your company to any corporation upon which theire is a member of the board of directors who
60
STOCK EXCHANGE PRACTICES
is also in your firm, and the selling of securities issued by thav
corporation through your firm as an agency?
Mr. MORGAN. Oh, yes; there is a great difference.
Senator BARKLEY. SO that the likelihood of a member of your firm
leaning toward your firm in a direct loan to the corporation would
be greater than where you are simply negotiating for the sale of
securities ?
Mr. MORGAN. I do not think it would be greater. A loan is a thing
that has a reasonable and very closely measurable value or rate.
Senator BARKLEY. When you loan money directly to a corporation
on whose board there is a member of your firm do you loan at the
same terms as to any other corporation %
Mr. MORGAN. Yes.
Senator BARKLEY. YOU
give them no advantage because of that
fact?
Mr. MORGAN. I t would not make any difference to them.
Senator BULKLEY. DO all those corporations on whose boards you
are represented do their financing exclusively through your firm ?
Mr. MORGAN. NO, sir. Nobody does their financing exclusively
through our firm.
Senator BULKLEY. NO one?
Mr. MORGAN. NO. We have no agreement with any one to do that.
Senator BULKLEY. Well, as a practical matter they do it, do they
not?
Mr. MORGAN. Well, I should fancy—I do not know. Yes; I think
they probably would.
Senator BULKLEY. Can you think of some important instance
where they finance through some other firm ?
Mr. MORGAN. Yes; I can give the New York Central Eailroad,
for instance. I have frequently seen them go elsewhere.
Senator BULKLEY. They have?
Mr. MORGAN. Yes.
Senator COUZENS. Have you had a member on their board ?
Mr. MORGAN. We dicl for many, many years.
'
Senator COUZENS. At the time that they financed elsewhere ?
Mr. MORGAN. Yes. At the time that the firm financed the New
York Central.
Senator COUZENS. Well, but I mean is when they went elsewhere?
Mr. MORGAN. When they went elsewhere; yes.
Senator COUZENS. YOU still had a member on their board ?
Mr. MORGAN. Oh, yes.
Senator GORE. Did your
partnership, Mr. Morgan, have a representative on the board of directors of the Marland Oil Co.?
Mr. MORGAN. Yes, sir. I think we had on one of those boards.
Senator GORE. Did you have a member on that board of directors
in 1923?
Mr. MORGAN. I do not know, sir. I have not got the data here.
Senator GORE. YOU made a loan to that concern, did you not, of
about $30,000,000 in the summer of 1923?
Mr. MORGAN. I am sorry, Senator Gore, but I do not know that
part of the business. We have the records, I suppose.
Senator GORE. Well, I see. I was just laying the predicate to ask
you this, Mr. Morgan. Have the data prepared and place in the
STOCK EXCHANGE PRACTICES
61
record a complete history of that transaction. It was a loan of
$30,000,000, I think, to the Marland Oil Co. I think it was made
in the summer of 1923, and I wish you would show in your statement
Mr. MORGAN. Senator Gore, Mr. Whitney is right here, and he
knows all the details of that and will be glad to answer you if y^u
wish.
Senator GORE. N O ; I won't take the time. If that is true I will
wait. But I want to get in the record a complete history of that
transaction showing how much was ever advanced on that loan at
any one time; how much interest was charged and received on the
loan; how much money the Marland Co. ever got on that loan.
Mr. MORGAN. All right, sir; that can be done anyhow. We will
have that ready for you.
Senator GORE. Yes, sir.
Mr. PECORA. Mr. Morgan, take the case of a corporation that has
as a director a member of your firm and to which your firm has
made a loan. When the question arises as to the repayment or renewal or collateralization of that loan isn't that director frequently
called upon as a director to take a position inconsistent with the
interests of the firm and vice versa?
Mr. MORGAN. I do not think so. I do not see that the relations
between a company and its directors, no matter what their associations are, is one of antagonism and strife. I have worked with a lot
of corporations, and I have always found that we have always
worked together rather comfortably, and that we always came to
accord very easily. I do not recall a case when there were any serious
differences.
Mr. PECORA. I assume that the firm or its individual members
have interests or ownership of stock in these corporations upon
which your members sit as directors.
Mr. MORGAN. Sometimes, and sometimes they have very little, the
remains of some old transaction and their directorship stays on.
Mr. PECORA. Sometimes a stock interest is a very substantial one?
Mr. MORGAN. Not often. We are not an investment trust, you
know.
Mr. PECORA. NO.
Mr. MORGAN. At
times, of course, the firm owns considerable or
large amounts of stocks.
Mr. PECORA. Mr. Morgan, have you caused to be prepared, in
response to a request which I made of your firm, in the last few
weeks a list showing the names of all depositors, whether individual
or corporation, who maintained demand deposit balances of $100,000
of more with your firm ?
Mr. MORGAN. That is not the one that we had, is it? [Inquiring
of some of his own people.]
Mr. DAVIS. Mr. Chairman, might I answer that question, because
I think probably Mr. Morgan does not know about those preparations? I think that is now in preparation, Mr. Pecora.
Mr. PECORA. When will it be ready?
Mr. DAVIS. It will be down tomorrow, I think.
Mr. PECORA. I thank you.
175541—33—PT 1
5
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STOCK EXCHANGE PRACTICES
Mr. MORGAN. YOU mean by that question, like these other things
we have given you, that it shall be the average balance for the
year of $100,000, or at any moment, do you mean ?
Mr. PECOKA. At any time during the year, maintained that balance.
Mr. MORGAN. Oh, that will take a little time.
Mr. PECORA. I think we agreed upon the average, didn't we, Mr.
Davis?
Mr. DAVIS. Yes. If it is not here tomorrow, it will be here soon.
Mr. PECORA. Originally I asked for the other information, and
Mr. Davis and I agreed on this.
Mr. DAVIS. It will be here tomorrow or at any rate before the end
of the week, and when it is here I will have something to say
about it.
Mr. PECORA. All right. Now, hasn't the situation, arisen on occasion, Mr. Morgan, where a corporation like a railroad company, upon
the board of directors of which sits a member of your firm, is in
the market for a very substantial amount of equipment, supplies, and
so forth, like rails, and there are other members of your firm who
sit on the boards of directors of steel-producing and manufacturing
companies ? That is so, isn't it ?
Mr. MORGAN. I presume so.
Mr. PECORA. NOW, your firm, in addition to accepting demand
deposits from individuals and corporations or other entities^ also
makes loans to individuals, does it not ?
Mr.- MORGAN. At times; yes.
Mr. PEOORA. Has your firm in the last 5 or 6 years made any personal loans to individuals who at the time were executive officers or
directors of any chartered banks?
Mr. MORGAN.
Yes.
Mr. PECORA. Has a list been prepared of the individuals to whom
such loans have been made ?
Mr. MORGAN.
Mr. PECORA.
Yes.
I show you a typewritten document that I understand was prepared by your firm in response to my request for the
names of all officers and directors of any banks or trust companies to>
whom either the firm of J. P. Morgan & Co. or the firm of Drexel &
Co. have made any personal loans or advances? Will you kindly
look at it, Mr. Morgan, and see if you can identify it as a list so
prepared by your firm.
Mr. MORGAN. It is all right, sir, I am told.
Mr. PECORA. Mr. Chairman, I now offer that list in evidence.
Mr. DAVIS. Mr. Chairman, may I say just a word about that?
The
CHAIRMAN.
Yes.
Mr. DAVIS. At Mr. Pecora's request and recognizing it as coming
in the name of this committee, we gave him a list of borrowers,,
depositors, purchasers, and so on. We told him, of course, that we
did that because he was speaking in the name of the committee
and had the power of subpena. We also stated, however, that of
course that information was not entirely our own; that the borrower, lender, or depositor had rights in it himself and that we
did not wish to be put in the attitude of voluntarily breaching
the confidence, which I take it every banker holds to his customers.
STOCK EXCHANGE PKACTICES
63
That is our attitude now. We have no objection, there is none on
our part, to its disclosure, but we should like the committee to
consider whether or not the gentlemen whose names are on this
and other lists should or should not, in the opinion of the committee, be made public. So far as we are concerned, I repeat, it
is wholly immaterial to us. But I am concerned that we should
be in the attitude of discharging what we believe to be the ethics
of the business of banking, and of not varying from them, except
by the mandate of this committee.
Senator BULKLEY. What information are you referring to now?
Mr. DAVIS. These loans.
Senator BULKLEY. IS that all?
Mr. DAVIS. That is all now. But we have others of the same
character.
Senator BULKLEY. I move, Mr. Chairman, that that matter be
deferred until the committee in executive session can consider it.
Senator GLASS. I second the motion. I do not believe that a
congressional committee has the right to ask my bank what loans
I have, and whether I have paid them off or not.
Mr. PECORA. Senator, may I say in response to that observation
that these names are names of officers of chartered banks, commercial
banks, in the city of New York and elsewhere, banks whose business
to a certain extent brings them in competition with the banking
business of this private banking firm ? I think the committee in its
inquiry into the conduct and operations of banking, whether conducted by commercial or chartered banks or by a private banking
firm, should ascertain whether or not there is that peculiar kind of
relationship which would flow from the extension by a private bank
or banker of individual credits to executive officers of competing
commercial banks.
Senator GLASS. I do not agree with you.
Senator BULKLEY. I should like to avoid arguing over that, and
I move that it be referred to the committee for action in executive
session, or rather that it be deferred by the committee to be considered in executive session.
The CHAIRMAN. All in favor of that motion will make it known
by saying " aye." (A number of ayes.) Those opposed will say
" no." (One or two noes.) It is carried, and so ordered.
Senator COUZENS. Was there any reason why the amounts were
left out, only names being given, or was that not requested?
Mr. DAVIS. The amounts were not requested.
Mr. PECORA. N O ; the amounts were not requested. We merely
asked for the names.
The CHAIRMAN. Mr. Morgan, I understand that your house does
not regard it as unethical or improper or questionable anyway to
make loans to officers of national and other banks.
Mr. MORGAN. Certainly not. We do not regard it as improper at:
all. And why should we ?
The CHAIRMAN. Well, I wanted to know your view.
Mr. MORGAN. That is my feeling about it.
The CHAIRMAN. Well, it is a question whether officers of banksthat cannot borrow from their own banks should have any right
to go to other banks and be accommodated, and the other banks get
favors
from them.
64
STOCK EXCHANGE PRACTICES
Senator GLASS. They are frequently not permitted to borrow from
their own bank.
The CHAIRMAN.
Senator GLASS.
Yes.
Then, why shouldn't they borrow from J. P.
Morgan & Co., or from John Townsend sitting there, or from Senator Couzens, or anybody else who runs a bank?
The CHAIRMAN. Well, that is the question.
Mr. PECORA. Well, I submit that it may be a question of policy
for Congress to consider, whether or not that right should be continued.
The CHAIRMAN. All right. Mr. Morgan says that he makes these
loans.
Mr. MORGAN. We do make these loans, and we make them because
we believe the people should have the money; that we should loan
money if these gentlemen want it. They are friends of ours, and
we know that they are good, sound, straight fellows.
Senator GLASS. Whether friends of yours or not, if you want to
make a loan and charge the discount and make money out of it,
why not?
Mr. MORGAN. I quite agree with you, Senator Glass, and I am
much obliged to you for making that clearer.
The CHAIRMAN. YOU may proceed, Mr. Pecora.
Mr. PECORA. Mr. Morgan, are any of these loans that are now open
and which your firm has made to any individual who is an executive
officer or director of a commercial bank, overdue and unpaid?
Mr. MORGAN. Yes.
Mr. PECORA. Are any of them undercollateralized ?
Mr. MORGAN. Yes.
Senator BARKLEY. Were they when the loan was made ?
Mr. MORGAN. NO.
Senator BYRNES. Have you called for additional collateral ?
Mr. MORGAN. There is not much use speaking for it or calling
for
it sometimes.
Mr. PECORA. Has that call always been responded to, Mr. Morgan?
Mr. MORGAN. NO. At times it is impossible.
Senator GLASS. It may be unsafe, but is it regarded as unethical
:for a bank to make loans without collateral security ?
Mr. MORGAN. NO ; I do not think it is.
Senator GLASS. I note here that these loans cover a period of 5
;years..
Mr. MORGAN. That was what the question to us was.
Senator GLASS. An aggregate of 60. In other words, about 12
loans .a year.
Mr. PECORA. That does not necessarily follow, Senator Glass, because I do not know how many of these gentlemen have more than
one loan.
Senator GLASS. I am talking about individuals. If 5 into 60 does
not go 12 times, then I do not know my arithmetic.
Mr. PECORA. I thought your comment referred to the number of
loans.
Senator GLASS. NO. It referred to the number of individuals to
whom
loans had been made. It seems a rather peculiar situation to
me,
who
have been accused, cussed out by bankers for trying to
http://fraser.stlouisfed.org/
control
ithem,
that I should be here insisting upon fair play.
Federal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
65
Mr. MORGAN. Well, may I say for one that you have done a splendid work, in the interest of justice, and I am much obliged to you.
Mr. PECORA. Mr. Chairman, in view of the order of proof which I
have fixed for this session, might I suggest that the committee hold
its executive session and pass upon this question before I proceed
further with the examination.
Senator STEIWER. Might I interrupt at this point to ask counsel a
question ?
The CHAIRMAN. Certainly.
Senator STEIWER. May I ask counsel if there are other like questions that will be presented as we proceed ? That is, is there other
information desired by counsel concerning which counsel for Mr.
Morgan may suggest that the information ought not to be divulged ?
Mr. PECORA. I believe there is. Mr. Davis, isn't that true?
Mr.
DAVIS.
Yes.
Senator STEIWER. Cannot we develop all of that and pass upon all
of that at one time rather than to pass upon these matters piecemeal?
Mr. Chairman?
The CHAIRMAN. Perhaps it might be a good idea.
Senator BULKLEY. Would it be convenient now to say what they
are, so that we can decide them all at once?
Mr. PECORA. I do not know what objections counsel for the firm
of J. P. Morgan & Co. are going to advance.
Mr. DAVIS. I will state them now, Mr. Pecora, if it is desired. I
think we understand each other perfectly.
^ Mr. PECORA. Well, I do not know your present mind and should
like for you to state it.
Mr. DAVIS. My present mind is this, Mr. Chairman and gentlemen
of the committee: Mr. Pecora has asked us for a list of individual
depositors—well, he asked first for the corporate depositors, and we
gave him that information. We thought that perhaps a corporation
is not particularly sensitive of its private affairs in these days of
regulation
Mr. PECORA (interposing). May I qualify that statement?
Mr. DAVIS. Yes.
Mr. PECORA. Individual
and corporate depositors with average
balances of $100,000 or more.
Mr. DAVIS. Quite right. Then Mr. Pecora followed with other
requests of individuals or firms who are depositors for certain stated
amounts. He asked for loans made to officers of banks. In each
instance we furnished the list as requested. He asked us for the
names of purchasers of certain securities, individuals who had purchased certain securities. We gave him that. So that you have
before you, or will have—is it as much as half a dozen, possibly,
Mr. Pecora, lists of transactions with individuals as purchasers or as
depositors or as borrowers.
Now, in each case, of course, our position is that that individual
was dealing with his banker, and that he has some rights as to
whether or not his personal transaction shall be made a matter of
public record. I repeat that so far as J. P. Morgan & Co. are concerned we have no objection to all of them being stated, but we do
feel that as bankers occupying this confidential relationship with
these individuals whose rights are not ours to dispose of at our pleas
66
STOCK EXCHANGE PRACTICES
ure, we must submit to the committee the question whether or not
they wish information of these individual persons spread upon your
records. And we earnestly hope that the committee will consider
that question with serious regard for the rights of privacy which
every individual as a birthright is entitled to enjoy—unless, indeed,
he is an individual who has put himself outside the law and the law
is calling upon him to face some charge involving some ulterior purpose or arrangement. That is our position. It is our position on
this list and will be on the other lists.
Senator STEIWER. What are the lists to which you specifically urge
that objection? Now, you have named already the individual depositor list.
Mr. DAVIS. Yes, sir.
Senator STEIWER. What other
Mr. DAVIS. YOU have before
list or lists do you refer to?
you now the individual borrowing
list. You have not yet before you the list of individual depositors.
There is a list of individual purchasers of some four or five or six
securities in different corporations.
Senator STEIWER. Has that been furnished?
Mr. DAVIS. That has all been placed in Mr. Pecora's hands.
Senator STEIWER. I am not arguing about the things that are furnished, but the things that you consider it would be objectionable
for you voluntarily to furnish. So far, as I understand you, you
name the list of individual depositors as one of the lists you would
rather not produce. What other lists are there that you would
rather not produce, and which have been asked for by Mr. Pecora?
Mr. DAVIS. We have given to Mr. Pecora every list that he has
requested with the single exception of one which, as I mentioned
just now, is in course of preparation. In other words, these individual depositors having balances of more than $100,000, which
will be here in the course of a day or two. We have responded to
every request that Mr. Pecora has made for information, and given
him all of these lists, He has them. I stated to him at the time
that I could not put my client in the position of voluntarily, of their
own motion, divulging individual secrets of individual men.
Senator STEIWER. Let me interrupt right there: I think you have
made that perfectly clear, but I am not so clear as to what the identity of the lists may be.
Mr. DAVIS. Well, I have tried to describe them by classes.
Senator BYRNES. He has offered them, but he objects to their
being made public.
Senator STEIWER. Are you objecting to their reception in evidence,
I mean of all these lists ?
Mr. DAVIS. Oh, no. I am afraid I have not yet made myself clear.
Senator STEIWER. Perhaps you have, but I am not catching it or
something.
Mr. DAVIS. I am objecting to lists where there is a 2-party transaction, between ourselves on the one hand and an individual citizen
on the other, and where we do not have that individual's consent to
publish his private business. We bring these lists here, and we put
upon the committee, with your permission, the responsibility of
saying whether the transactions of those individuals shall be made a
matter of public record; It is not our responsibility, gentlemen of
the
committee. It is yours.
STOCK EXCHANGE PRACTICES
67
Senator ADAMS. Mr. Davis, on this question of the lists. On that
list there is a list of names and that might lead into some appropriate field of investigation. That is something that is properly before
the committee, and would lead to some legislative activity. You
would not object to that, as I understand, but you object to the list
as a whole.
Mr. DAVES. My attitude is not one of objection, but one of refusing
to take the responsibility of consenting, and I respectfully
Senator GORE (interposing). Mr. Pecora has those lists now?
Mr.
DAVIS. Yes,
sir.
Senator GORE. Your point is that you do not want them placed
on record?
Mr. DAVIS. My point is that I am not going to put my clients in
the position as bankers of voluntarily, of their own mere motion,
or their own mere convenience, of filing with the committee
Senator GORE (interposing). You want the committee to take that
responsibility.
Mr. DAVIS. It is the committee's responsibility. That is my point.
Unless there is something among these names that does lead to some
investigation, I think these individual gentlemen are entitled to
their right of privacy.
Senator GLASS. If I may ask, what more point is there in furnishing you with a $100,000 depositor than in furnishing you with a
$50,000 depositor or a $10,000 depositor? Why should the private
business of my neighbor be exposed because he is fortunate enough
to negotiate a loan of $100,000 and my private business be preserved
inviolate because I am unfortunate enough not to get a loan of more
than $50,000 or of $10,000, as the case would more likely be, if at all?
Mr. DAVIS. Senator Glass is looking at me, and if he addresses that
inquiry to me, I will say there is no difference whatever.
Senator GORE. I can see why a depositor might not want it to be
made public unless he can get ahead of the sheriff, or something of
that kind.
Mr. DAVIS. And sometimes the borrower is against it.
Senator GLASS. I did not hear Senator Gore's remark, but I would
say it was pretty good.
Senator STEIWER. Am I right in my understanding that this is a
general ethical objection which you have interposed, and which you
have now explained very clearly, goes to all the lists that you have
furnished privately to Mr. Pecora?
Mr. DAVIS. Oh, my, no.
Senator STEIWER. IS my
understanding correct that it goes to all
lists that are bilateral in character and which involve business on
the part of your firm and one of its customers on the other?
Mr. DAVIS. Yes,
sir.
Mr. MORGAN. Yes; individual customers.
The CHAIRMAN. I suggest that Mr. Pecora propose each one of
these lists, and then they can be referred to the executive session as
we get to them. Let him describe each list that he has asked for and
to which reference has been made by Mr. Davis.
Senator BULKLEY. With the understanding that the committee, in
executive session, will decide whether they are to be made publio
or not.
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STOCK EXCHANGE PRACTICES
The CHAIRMAN. Yes, sir; as to all of them.
Mr. PECORA. In view of the fact that Mr. Davis has made a statement on the public record at this hearing, may I make a statement of
the reasons why I called for this information, and why I think it
should be tendered and spread on the record of the committee ?
The CHAIRMAN. YOU
may.
Mr. PECORA. YOU will observe that with regard to the last list
I did not call upon J. P. Morgan & Co. to produce a list of all
individuals regardless of their position or station in life to whom
that firm had made loans. I called simply in that question for the
names of all individuals to whom they had made loans who were
executive officers or directors of commercial banks which from the
nature of the banking business avowedly conducted by this firm,
competed with this firm in the banking field. The other lists to
which Mr. Davis has made reference are lists of individuals to whom
J. P. Morgan & Co. has given the privilege of subscribing to the
capital shares of corporations, which were launched or sponsored or
floated by J. P. Morgan & Co. or in which they had a participation
interest. This committee has heard frequently, and has read frequently, the charge and the statement or the allegation that a tremendous power is exercised, not only in the field of banking and of
finance but over the industrial field in this country by private banking firms. That charge has been made upon the floor "of both Houses
of this Congress. The information I have asked for, and which
unless the committee prevents me I will have spread upon the
record of these hearings, is information which in my humble opinion
tends to disclose the existence of such power and the channels
through which the power is exercised, and the reasons for it.
Senator GLASS. Right on that point I might say that the banking
bill now pending in both houses of Congress, or that pending in the
Senate, prohibits—listen to me, Mr. Pecora.
Mr. PECORA. I am listening to you.
Senator GLASS. With your back to me.
Mr. PECORA. I am sorry.
Senator GLASS. Prohibits any official of a commercial bank a member of the Federal Reserve system from borrowing money from his
own bank. And if he may not, as you seem to object, borrow money
from any competing bank, where is he to get a loan for his business?
Mr. PECORA. It may be when the facts are shown that the legal
restrictions upon borrowing from his own bank might be removed.
Senator GLASS. It does not yet apply, but we will try to have it
apply, to prohibit executive officers from borrowing money from
their own banks.
Mr. PECORA. Very well. Let us get all the information on the
subject that we can. «
Senator GLASS. And if they cannot borrow from their own bank,
and if all other banks in the community are competing banks, where
will they get a loan?
Mr. PECORA. They can get it from other commercial banks subject to the approval of their own board.
Senator GLASS. They are competing banks. Why borrow from
commercial banks and not borrow from private banks?
STOCK EXCHANGE PRACTICES
69
Mr. PECORA. I respectfully submit that this committee should
get all the information that can be gathered, or that may be presented, from which it may formulate a conclusion whether or not
a private bank or a private banking firm should be permitted without restrictions of any kind to make loans to individuals who are
officers of commercial banks. It is not difficult to argue from the
fact that such individual accommodation is extended, that a peculiar
relationship, intimacy of dealings will result, and that that may
bring about an intimacy of friendliness of opinion which may assist
in
Senator GLASS (interposing). It is not difficult to suspect that;
no. But you have not yet answered my question: If the law shall
prohibit, as we }3ropose to prohibit, officers of commercial banks,
members of the Federal Eeserve System, from borrowing or seeking
loans from their own banks, where are they to borrow ?
Mr. PECORA. Well, I will say that
Senator ADAMS (interposing). Is not it a matter of principle, Mr.
Pecora, regardless of the individuals? That is, if the policy is
wrong to permit a private bank to loan to executive officers of a
competing bank, that continues to be wrong regardless of the individuals. And do we need a host of individual instances in order
to demonstrate the principle?
Mr. PECORA Why, certainly it is so. It may emphasize the value
of the principle, to know the identity of bank officers that may or
may not come under the influence of a private banking firm, because
those officers have received individual accommodation from the
making of those loans.
Senator BARKXEY. Mr. Chairman, I suggest that all of these arguments be made in executive session.
Senator ADAMS. I have no objection at all, but I wanted to get
that point clear.
The CHAIRMAN. That is what we propose to do; to thresh it out
in executive session. But I can see where this might furnish testimony to support the Glass bill or other banking legislation. But
we will consider all that in executive session. What I suggest is
that Mr. Pecora offer these different lists, which will be referred for
action to the executive session.
Mr. PECORA. Mr. Chairman, may I suggest, in view of the fact
that I have other questions to ask this witness regarding other lists,
which, from the statement of Mr. Davis, will draw forth his objection to the introduction of those lists in evidence, that we settle this
question now in executive session before I will be expected to proceed
further with an examination of the witness here.
The CHAIRMAN. I am trying to get all the information that we
need to act upon in the executive session.
Mr. PECORA. Mr. Chairman, it is now a quarter past 3, and I think
the balance of the time during the afternoon might particularly well
be spent in executive session.
Senator COUZENS. I move that we now go into executive session to
consider these matters.
The CHAIRMAN. All in favor of that motion will say " aye "
Senator BARKLEY (interposing). Mr. Chairman, in view of the
crowd that we have here in this room, and the difficulty of getting
70
STOCK EXCHANGE PRACTICES
them out and back again, is there any other inquiry that could take
up the balance of the afternoon, and then let us have the executive
session after we finish that, or tomorrow morning ?
Senator COUZENS. It will take until 4 o'clock, and I think that
is long enough to work. I renew my motion to go into executive
session.
The CHAIRMAN. All in favor of that motion will make it known
by saying " aye." (A number of " ayes.") Those opposed will say
" no." (A number of " noes.") The " noes " seem to have it.
Senator BARKLEY. I S it proposed to take up the rest of the day in
executive session ?
Senator COUZENS. Yes.
Senator BARKLEY. Then I have no objection to going into executive session.
Mr. PECORA. I think it will take the rest of the day, in view of
what I, at least, concede to be the importance of the questions
raised.
Senator COUZENS. And you cannot examine the witness without
using those lists.
Mr. PECORA. NO, sir. It would seriously interfere with our examination of this witness.
The CHAIRMAN. I will put the question again. All in favor of
now going into executive session will raise the right hand.
Senator BYRNES. Senator Barkley, I thought you made a proposal
not to go into executive session at this time ?
Senator BARKLEY. Well, they say it will take the rest of the day
for consideration in executive session. If that is the case, I have no
objection.
Senator GORE. Does Mr. Pecora feel that he cannot proceed without these lists %
The CHAIRMAN. He wants this matter settled first. All opposed
to going into executive session at this time will raise the right hand.
(Several Senators raised their right hand.) The committee has
decided to go into executive session to consider these matters.
Mr. MORGAN. Mr. Chairman, may I make one request at this
time?
The
CHAIRMAN.
Yes.
Mr. MORGAN. AS the matter was left this morning, as to my ignorance of the accounts
Senator BYRNES (interposing.) Mr. Chairman, let us have order.
The CHAIRMAN. We will have order in the room.
Mr. MORGAN. In my ignorance of the accounts which I am not
personnally responsible ior, Mr. Pecora left or produced the
effect
The CHAIRMAN (interposing). Let us have order in the room.
Mr. MORGAN. Counsel for the committee produced the effect of a
hiding or concealing or misappropriation or misapplication of certain loans or funds in connection with income-tax matters. I said
that Mr. Keyes was here, but that matter was left with no explanation. I said that Mr. Keyes was here and had a full explanation,
and I would like now to ask that the committee decide that that
question, in fairness to us, must be answered, and that Mr. Keyes be
asked to testify on that matter as soon as it is convenient to the
pommittee and Mr Pecora.
STOCK EXCHANGE PRACTICES
7!
The CHAIRMAN. That will be done.
Mr. PECORA. And I have already indicated that I proposed to
follow up the question of that income tax return with Mr. Keyes.
Mr. MORGAN. Well, I could not so understand, or at least I did
not understand that you left it that way this morning.
Mr. PECORA. That is what I said this morning.
Senator BARKLEY. In view of the fact that at the morning session
there was an implication possibly carried through the newspapers of
the country and which will be published tomorrow without any explanation, it seems to me in fairness Mr. Keyes ought to be allowed
to make that explanation now, so that the two stories can go out
together.
The CHAIRMAN. It would take some little time to go through an
examination of Mr. Keyes, but if you want to confine him to that
particular matter, you might do it.
Senator GORE. YOU might hear him on that.
Mr. PECORA. All right. I will agree to the suggestion, and I will
ask that the present witness, Mr. Morgan, be excused for the time
being and that Mr. Keyes take the stand.
TESTIMONY OF L. A. KEYES, MANAGER J. P. MORGAN & CO., NEW
YORK CITY
The CHAIRMAN. Mr. Keyes, you will be sworn. Please stand, hold
up your right hand, and be sworn. You solemnly swear that yon
will tell the truth, the whole truth, and nothing but the truth regarding the matters now under consideration by the committee. So
help you God.
Mr. KEYES. I do.
Mr. PECORA. Mr. Keyes,
are you associated with the firm of J. P .
Morgan & Co.?
^Mr. KEYES. Yes, sir.
Mr. PECORA. In what capacity?
Mr. KEYES. Manager.
Mr. PECORA. HOW long have you been the manager of the firm?
Mr. KEYES. About 16 years.
Mr. PECORA. What are your general duties as manager?
Mr. KEYES. Supervision of the office, supervisor of all the books
and accounts and records, and charge of the personnel.
Mr. PECORA. Among your duties did it fall to your lot to prepare
the income-tax returns that have been filed in behalf of the firm?
Mr. KEYES. Yes, sir.
Mr. PECORA. And did
you prepare all the returns that have been
filed in the past 16 years in behalf of the firm ?
Mr. KEYES. All those relating to the partnership and the individual partners.
Mr. PECORA. YOU also prepared the returns for the individual
partners, did you ?
Mr. KEYES. Yes, sir.
Mr. PECORA. NOW, in
view of that let me ask you if it is not the
fact that for the year 1930 the returns in behalf of the individual
partners
Mr. KEYES. Will you repeat the question, Mr. Pecora ?
Digitized forMr.
FRASER
PECORA. I thought Mr. Davis was interrupting you.
72
STOCK EXCHANGE PEACTICES
Mr. KEYES. He asked me to speak louder.
Mr. DAVIS. The gentleman back here asked him to raise his voice
and I relayed that message.
Mr. PECORA. Well, I have difficulty in hearing him, too. Now,
where were we ?
The SHORTHAND REPORTER (reading) :
In view of that, let me ask you if it is not the fact that for the year 1930
the returns in behalf of the individual partners—
That is as far as it went.
Mr. PECORA. Required them to pay income taxes aggregating not
more than $48,000?
Mr. KEYES. That is approximately right. I have not the figures
before me, but that is substantially correct.
Mr. PECORA. And is it the fact that the income-tax returns, which
you prepared or caused to be prepared for all of the individual
partners for the calendar year 1931, required them to pay no amount
of income tax in excess of $1,600?
Mr. KEYES. 1931?
Mr. PECORA. Let me
modify that question: Is it a fact that according to the income-tax returns that were prepared or caused to be
prepared by you in behalf of the individual members of the partnership for the calendar year 1931 no income taxes whatsoever were
paid by any of the individual partners ?
Mr. KEYES. That is right.
Mr. PECORA. And is that true likewise with respect to the calendar
year 1932?
Mr. KEYES. Yes, sir.
Senator ADAMS. What was the answer?
Mr. KEYES. Yes, sir.
Mr. PECORA. For the calendar year 1930
I cannot quite hear.
did the firm file or cause
to be filed more than one return for the firm ?
Mr. KEYES. Yes, sir. We had a double closing that year.
Mr. PECORA. What were the respective dates of those two closings ?
Mr. KEYES. January 1 to June 30; July 1 to December 31.
Senator COUZENS. Why was that?
Mr. KEYES. The reason for that was that Mr. Thomas S. Gates
had retired on June 30, 1930, and that constituted a dissolution of
the partners as it existed at the date of a new one that commenced
-business on July 1, 1930.
Senator GORE. Was that prearranged for any particular purpose
or just happened in the regular course?
Mr. KEYES. NO, sir; that happened in the regular course.
Mr. PECORA. Well, have you a copy of the return for the latter
period of that calendar year?
Mr. KEYES. NO, sir; I have not with me. I have not, with me.
Mr. PECORA. In the return for the period terminating on December 31, 1930, do you recall whether there was shown an item referring
to losses amounting to $817,558.89 which the firm had incurred?
Mr. KEYES. For what period is that?
Mr. PECORA. From July 1, 1930, to December 31, 1930 ?
Mr. KEYES. I do not recall the exact figure, but if it is in that
return I assume it is right.
STOCK EXCHANGE PRACTICES
78
Mr. PECORA. Well, does that figure suggest the approximate figure ?
Mr. KEYES. Yes; that is approximately right.
Mr. PECORA. NOW, when that loss was ascertained and stated to be
around $817,000 for that half-year period were those assets of the
firm consisting of securities valued at the then market?
Mr. KEYES. On December 31 they were not valued.
Mr. PECORA. They were not valued?
Mr. KEYES. NO, sir.
Mr. PECORA. Why
not.
Mr. KEYES. Because the
revenue act would not allow them to revalue. There was no change in partnership on December 31, 1930.
There was a change in partnership on June 30,1930. Then there was
another change in partnership on January 2, 1931, by the admission
of Mr. S. Parker Gilbert, at which time the assets were revalued.
There was another change in partnership on January 2, 1932.
Mr. PECORA. Please do not go so fast. Let us get through with
the 1931 period first. What was the basis of value in the prior
years 1for the securities that were among the capital assets?
Mr. KEYES. The basis was always the same as in the year you are
talking about.
Mr. PECORA. What was it, market value?
Mr. KEYES. Market value, coupled with the change of partnership.
Mr. PECORA. Well, the change in partnership did not change the
market value, did it ?
Mr. KEYES. Oh, no, it does not change the market value, but the
market value has a great bearing on the change of partnership.
Senator BYRNES. What do you mean by that?
Mr. KEYES. When the whole firm dissolved there had to be a
valuation so that you determine the rights of the retiring partners
and the relative rights of the incoming partners.
Senator ADAMS. There is no relationship, though, between the
change of partnership and market value; it is simply between the
fixing of market value on your books ?
Mr. KEYES. That is right, and as between the partners on that
day.
Senator GORE. That has no bearing on the income-tax return.
Mr. KEYES. Well, it constituted a closed transaction under our
history with the Department of Internal Revenue.
Senator CAREY. It would be the same as a sale, wouldn't it I
Mr. KEYES. Pardon me?
Senator CAREY. It was the same as a sale?
Mr. KEYES. It was substantially the same as a sale; yes, sir.;
Senator GORE. Did you take your losses as of that date ?
Mr. KEYES. Yes. Yes; and paid the profit.
Mr. PECORA. HOW were those securities under capital assets of
the firm valued for the purpose of making out the income-tax return
filed by the firm for the calendar year 1927?
Mr. KEYES. At the end of 1927 there was again a change of partnership. In fact, there was a double closing again or two accounting periods.
Mr. PECORA. NO ; I asked you how they were valued.
Mr. KEYES. Market.
Digitized forMr.
FRASER
PECORA. At market?
74
STOCK EXCHANGE PRACTICES
Mr. KEYES. Yes, sir.
Mr. PECORA. And how
were they valued in making out the incometax return for the period for the calendar year 1928 ?
Mr. KEYES. At market.
Mr. PECORA. At the end of the year?
Mr. KEYES. At the end of the year, also coupled with a change
of partnership.
Mr. PECORA. And how were they valued in making out the return
for the calendar year 1929 for the firm?
Mr. KEYES. Again coupled with a change of partnership they were
valued at market.
Mr. PECORA. NOW, when you reached the end of the calendar year
1930 did you depart from that method of valuation ?
Mr. KEYES. N O ; we had no change of partnership.
Mr. PECORA. Did you have a change of partnership that became
effective 2 days later?
Mr. KEYES. Yes, sir; because
Mr. PECORA (interposing). Then on what basis were the securities
valued as of the end of the calendar year 1930 ?
Mr. KEYES. They were not valued at the end of the calendar year
1930.
Mr. PECORA. Not valued at all?
Mr. KEYES. Yes, sir.
Senator ADAMS. YOU
carried the value that you had on your
books at that time without change?
Mr. KEYES. That is right. That is correct, Senator.
Mr. PECORA. That is, they were valued as of the value shown
on the books for some preceding date ?
Mr, KEYES. Just carried forward as they are without change.
Mr. PECORA. Without change?
Mr. KEYES. Certainly.
Mr. PECORA. Would that method correctly reflect the income of the
firm for that period ?
Mr. KEYES. Yes, sir; it would.
Senator BARKLEY. May I ask you this, regardless of fluctuation in
market prices of securities, you make no revaluation except when
ithere is a change in the firm ?
Mr. KEYES. That has been our history, Senator, right through;
yes, sir.
Senator COUZENS. When that happens the Internal Revenue Buxeau does not raise any objection to your revaluation, is that it?
Mr. KEYES. They have gone over it very thoroughly, Senator,
;and have gone into the question on three or four occasions.
Senator ADAMS. YOU are compelled to make a revaluation, are
you not, when you close one partnership and start another? It is
not optional on your part; isn't it compulsory that you make a
revaluation ?
Mr. KEYES. There is some doubt in the law. Different methods
were adopted by the Bureau of Internal Eevenue, but once the
method was adopted you cannot depart from the method.
Senator ADAMS. But did you understand it would have been optional on your part to have adopted one method or another ?
Mr. KEYES. NO, sir. I think not.
STOCK EXCHANGE PRACTICES
75
Mr. PECORA. NOW, you have just said, Mr. Keyes, that once a
method is adopted by a firm, it cannot depart from that method?
Mr. KEYES. Right.
Mr. PECORA. Didn't you in substance depart from that method
in filing the return for the latter half of the calendar year 1930?
Mr. KEYES. NO, sir.
Mr. PECORA. When
you did not value the securities at the then
market ?
Mr. KEYES. NO, sir; we did not depart from it.
Mr. PECORA. Did you value them at market when you ascertained
or reported this loss of $817,000 plus ?
Mr. KEYES. That loss is not a revaluation, Mr. Pecora.
Mr. PECORA. What is it?
Mr. KEYES. That is an ascertained, realized loss upon closed
transactions for assets sold.
Mr. PECORA. Then there was no revaluation at all made of the
capital assets consisting of securities as of December 31, 1930?
Mr. KEYES. That is correct.
Senator BAREXEY. May I ask there: Had the value depreciated
or declined during that 6 months?
Mr. KEYES. It had declined.
Mr. PECORA. Very substantially?
Mr, KEYES. Yes, sir; very.
Senator BYRNES. Yes; but that was an ascertained loss by reason
of a closed transaction?
Mr. KEYES. On certain business; yes, sir.
Senator BAREXEY. YOU made no revaluation so as to take a loss on
your income-tax report in that period?
Mr. KEYES. N O ; it would be coupled with an admission of a
partner.
Senator GORE. Let me get this: These revaluations seem to happen
with a good deal of rhythm as to time, and this revaluation, did that
reduce your income taxes, compared with what they would otherwise have been but for the revaluation ?
Mr. KEYES. NO, Senator; it would not have made any difference
in the final analysis.
Senatoi; GORE. It made no difference in the amount of income tax
paid by the firm, or rather the members of the firm ?
Mr. KEYES. NO, -sir.
Senator GORE. Then
it was not prearranged to bring about the
reduction in taxes?
Mr. KEYES. It so happened that a loss under the revenue act you
were permitted to carry forward, and that loss was sustained from
the trade of business.
Senator GORE. YOU mean where you bought stocks and sold them
for less than you bought them, of course you could take that loss; is
that what you mean ?
Mr. KEYES. Yes, sir.
Senator GORE. This revaluation
when your firm changes, I do not
get the reaction of that on your income-tax set-up, if any. Did it
have any? Take this on January 2, 1931, instead of December 31.
Did that make any difference in your income-tax returns ?
Mr. KEYES. NO ; I think not.
76
STOCK EXCHANGE PRACTICES
Senator GORE. Filed back in 1929 when the firm revalued?
Mr. KEYES. On December 31, coupled with the partnership change,
they paid a very substantial tax on increase of values.
Senator GORE. And you notice these changes occur—I guess that
is not unreasonable—about the middle of the year, in the fiscal year,
and in the calendar year. That was not prearranged in any instance
with a view to cutting down income taxes ?
Mr. KEYES. NO ; I would say not.
Senator BARKLEY. Let me get this: Regardless of the date of any
change in the firm for income-tax purposes, the old firm went out of
business ?
Mr. KEYES. Yes, sir.
Senator BARKLEY. Just
as completely as if it did not continue
under a new name or with a new personnel ?
Mr. KEYES. Yes, sir.
Senator BARKLEY. SO
that the new firm could not take credit
either for profits or for losses that occurred to the old firm prior to
the reorganization?
Mr. KEYES. That is right.
Senator BARKLEY. SO that the 2d day of January or the 30th day
of June just happened to be the date on which these changes occurred7
but it might have happened any other date ?
Mr. KEYES. Yes,
Senator GLASS.
sir.
Mr. Keyes, the impression, as indicated by
Morgan, has been made that in some mysterious way between
31st day of December 1930 and the 2d day of January 1931, a
in excess of $21,000,000 had occurred. That income statement
in strict accord with the revenue laws and requirements?
Mr. KEYES. Yes, sir.
Senator GLASS. Did the
Mr.
the
loss
was
Internal Eevenue Bureau examiners take
note of that and make inquiry about it ?
Mr. KEYES. They are making inquiry now, Senator. The 1931
in the normal course of events would have been made along late in
the summer or in the fall, but they started making their examination about a month ago. Prior to 1931, the year 1930 was very
thoroughly checked up and gone over very carefully, and that double
closing or double accounting period, as we call it in the bureau,
has been passed and approved. We again had a double accounting
period and a double closing in 1926 on account of the death of Mr.
Porter.
Senator BYRNES. Will you talk louder? I know these gentlemen
over here cannot hear you.
Mr. KEYES. We had a double closing or a double accounting period
in 1926, when the period included the income that accrued up to
November 30, the day that Mr. Porter died. We had a double accounting period or a double closing in 19^5, when Mr. Stettinius
died. We had a double accounting period the year before that, when
Mr. Baker died. In fact, the present articles began on March 11,
1916, when the first one came up about a double accounting period,,
and that period and that method has been very consistently adhered
to ever since.
Senator GORE. And that double accounting had no effect on the
income-tax payment in the long run by the members of the firm?
STOCK EXCHANGE PRACTICES
77
Mr. KEYES. NO, sir; none at all, sir.
Senator GLASS. Have the examiners of the Internal Kevemie
Bureau raised any objection to that procedure?
Mr. KEYES. They are questioning us as to whether we had any
right, so to speak, to even include things by way of revaluation now
when the partnership changes, but they say positively that the loss
could not be deducted on December 31, 1930, by way of revaluation
between the two partners.
Senator GORE. Have you had any information from the Internal
Revenue Bureau that it suspects your concern of having manipulated its figures so as to show a loss in excess of $21,000,000.
Mr. KEYES. NO, sir; none at all, and the very purpose of filing two*
returns as we have—we keep a separate accounting period—-is to
lay the full facts before the Bureau of Internal Revenue.
Mr. PECORA. NOW, Mr. Keyes, if the securities composed of the
capital assets of the firm had been valued as of the 31st day of December 1930 at market value, would not the loss have been some
$21,000,000 greater than the loss of $817,000 that was reported in
the return for the period of July 1, 1930, to December 31, 1930?
Mr. KEYES. We had no right to revalue it.
Mr. PECORA. I did not ask you that; I asked you if the loss would
not have been reported as some $21,000,000 in excess of this figure of
$817,000 plus.
Mr. KEYES. It would not have been reported, but I will grant you
that the loss is there on the books on December 31,1930.
Mr. PECORA. NOW, the reason why that loss was not reported on a
basis of a revaluation of the securities at the market price of December 31, 1930, if I correctly understood your previous testimony,
was because of the change of partnership that took effect on January
2,1931?
^
.
.
'
.
Mr. KEYES. Plus the fact that there is nothing in regulation 72
that would justify putting that loss in in December 1930.
Mr. PECORA. All right; but that factor of the change of personnel
of the partnership played a part in it, didn't it?
Mr. KEYES. NO; I don't agree with you.
Mr. PECORA. NO?
Mr. KEYES. NO.
Mr. PECORA. Well,
you said in answer to my previous question
that that was the fact, plus regulation 72?
Mr. KEYES. That is right.
Mr. PECORA. What change actually took place in the personnel of
the firm on January 2, 1981 ?
Mr. KEYES. The admission—on January 2, 1931, there was a new
partner admitted.
Mr. PECORA. Who was it?
Mr. KEYES. Mr. Charles D.
Dickey—I beg your pardon, Mr. S.
Parker Gilbert.
Mr. PECORA. And have you any knowledge as to when the decision
was reached to admit him into the partnership?
Mr. KEYES. NO, sir; I have not.
Mr. PECORA. Had you heard as manager of the firm at any time
prior to the second day of July, 1931, that Mr. Gilbert was coming
into the firm on that date ?
175541—33—PT 1
6
78
STOCK EXCHANGE PRACTICES
Mr. KEYES. Yes; I heard that.
Mr. DAVIS. July or January?
Mr. PECORA. Yes; I meant January, not July. How long before
January 2, 1931, had you heard that?
Mr. KEYES. I don't remember.
Mr. PECORA. Was it prior to December 31, 1930, that you heard it ?
Mr. KEYES. Yes.
Mr. PECORA. IS that
the only change in the personnel of the firm
that took place at that time ?
Mr. KEYES. That is all.
Mr. PECORA. NOW, January 1, 1931, was a legal holiday in the
State of New York, as you know, isn't it?
Mr. KEYES. Yes; that is right ?
Mr. PECORA. New Year's?
Mr. KEYES. Yes.
Mr. PECORA. Did
the firm of J. P. Morgan & Co. and of Drexel
& Co. transact any business on that holiday ?
Mr. KEYES. NO, sir; none of them.
Mr. PECORA. Well now, on January 2, 1931, the change in the
personnel of the firm that has already been referred to by you took
effect?
Mr. KEYES. At the close of business.
Mr. PECORA. At the close of business. Now, what business was
transacted on the 2d day of January 1931, by the firm of J. P.
Morgan & Co. prior to the admission of Mr. Gilbert as a partner
at the close of business on that day ?
Mr. KEYES. I could not tell you, Mr. Pecora, what was done that
day.
Mr. PECORA. Well, you prepared the income tax return for the
firm?
Mr. KEYES. Yes, sir.
Mr. PECORA. That was
filed for the period of time represented by
January 1 and 2, 1931—didn't you?
Mr. KEYES. Yes, sir.
Mr. PECORA. And in
that return you include in the income an
item of profits, commissions, brokerage, et cetera, of $2,249,632.97?
Mr,
KEYES.
Yes.
Senator GORE. What is that? What does that represent?
Mr. PECORA. Profits, commissions, brokerage, et cetera, of the
firm for January 1 and 2, 1931.
Now, in view of the fact that January 1, 1931, was a legal holiday
on which, as you said, the firm transacted no business, are you still
unable to tell us what business was transacted by the firm on the
2d day of January 1931 that enabled it to receive an income consisting of profits, commissions, brokerage, et cetera, of nearly $2,250,000?
Mr. KEYES. On January 2, 1931, without referring to the bookst
I would say that they transacted the normal routine banking business. January 2, 1931, is a very large interest and coupon payment
date. Some of those amounts represent commissions that were entered into. The bulk of that represents increase in revaluation,
coupled with the change in partnership.
Senator BARKLEY. DO you mean to say that on the 2d of January
you had both a decline and an increase in the value of your assets?
STOCK EXCHANGE PKACTICES
79
Mr. KEYES. Yes5 sir; undoubtedly. There were no doubt some assets that had shown an increase and those were included and shown
on the income side.
Senator BAREXEY. I know, but the same assets that had come over
from the previous day from the old firm to the new one ?
Mr. KEYES. NO ; the previous firm, Senator, was June 1930, on the
revaluation.
Senator BARKLEY. Then as I understand, you took those that had
declined and charged that loss of $21,000,000?
Mr. KEYES. Yes, sir.
Senator BARKLEY. Against
the old firm, and those that had gone
up you credited that to the new firm ?
Mr. KEYES. NO, sir. No, Senator. The old firm. Both ways.
Senator BARKLEY. Was the $21,000,000 the net loss after considering increases since the previous June ?
Mr. KEYES. I have not my figures here, but I am not sure whether
that was net or not. I think Mr. Pecora has our return.
Mr. PECORA. Well, these profits, commissions, brokerage, et cetera,
amounted to nearly two and a quarter million dollars estimated and
reported on a payment basis or on an accrual basis on this income
tax return for January 1 and 2, 1931 ?
Mr. KEYES. On a payment basis, but there was very little that
would be included by way of accrual on commissions.
Mr. PECORA. NOW, what transaction or operation that took place
on January 2, 1931, resulted in the loss of $21,071,862.95 that I
understand was reported by the firm in the income-tax return which
is filed for those 2 days ?
Mr. KEYES. That again represents the decline in assets from the
prior closing period of June 30, 1930, when Mr. Gates was admitted,
and the assets were revalued—when Mr. Gates retired from the firm,
on January 2, 1931, when Mr. Gilbert was admitted to the firm.
Mr. PECORA. Had Mr. Gilbert been admitted into the firm onjthe
31st of December 1930, this revaluation at market would have likewise shown a.loss of some $21,000,000, would it not?
Mr. KEYES. Yes.
Mr. PECORA. And
had the admission of Mr. Gilbert to the firm
taken place 2 days prior to January 2, 1931, this resultant loss by
the revaluation at market of the securities of over $21,000,000 would
have had to be included in the income-tax return for the firm for
the latter part of the calendar year 1930, would it not?
Mr. KEYES. Would have been any day prior to 1931, the closing
as of that day.
Mr. PECORA. Yes. And under the income-tax law as existed at
that time, namely, December 31, 1930, the firm would only have
been allowed the right to carry forward these losses of $21,000,000
plus for the succeeding two calendar years ?
Mr. KEYES. Yes, sir.
Mr. PECORA. That is, the year 1931 and 1932?
Mr. KEYES. That is right.
Mr. PECORA. And consequently because Mr.
Gilbert's admission
into the firm took place on January 2, 1931, instead of December
31, 1930, your firm, by the filing of this return, was in the position
of having the right to carry forward against possible taxable in-
80
STOCK EXCHANGE PRACTICES
come for the years 1932 and 1933 this loss of over $21,000,000; is not
that right?
Mr. KEYES. Mr. Gilbert being admitted January 2, that is the
date that you would take for the establishment of that loss.
Mr. PECORA. Exactly. If the admission had been on December
31 instead of 2 days later, the firm would not have the right to
offset against possible taxable income for the year 1933 any part
of this loss of $21,000,000 or more?
Mr. KEYES. That would have been true if Mr. Gilbert had been
admitted any day prior to December 31. But they had the right
to carry it forward 2 years.
Senator BAEKLEY. In other words, you got 1 year's extension in
the period of which it might be carried forward by this January
the 2d transaction instead of December 31 ?
Mr. KEYES. Yes; by his admission January 2.
Senator BARKLEY. Yes.
The CHAIRMAN. YOU made a deduction on account of loss in your
income tax of this $21,000,000?
Mr. KEYES. Yes, sir.
The CHAIRMAN. When ?
Mr. KEYES. In 1931.
The CHAIRMAN. What time in 1931 ?
Mr. KEYES. We filed two returns for
the partnership, one at theclose of business January 2, 1931, and the second covering the period
of January 3 to December 31, and both of those returns followed
through into the individual partnership returns, as required under
the revenue act.
Senator GLASS. AS far as you know and have been advised up to
date, you filed your return in strict accordance with the revenue act ?
Mr. KEYES. Yes, sir; and we have taken the best advice, I am sure..
We have been advised that our return is in strict accordance with
the revenue act and proper and correct.
Senator GLASS. And up to this time there has been no criticism
of the transaction by the Internal Revenue Bureau ?
Mr. KEYES. NO, sir; none at all, Senator.
Senator COUZENS. I thought you testified a while ago that they
did question your method of changing the values.
Mr. KEYES. NO. They questioned, Senator Couzens, whether under
the new revenue act as it was passed after January 6, 1932—whether
under the new revenue act we could continue to make any deduction
for a revaluation based upon a change of partnership.
Senator BARKLEY. But that would not affect the law in 1931 ?
Mr.
KEYES. NO,
sir.
Senator GLASS. DO you know any large taxpayer, or small taxpayer, either, who does not avail himself of any permissibility of
the law which enables him to reduce his income tax?
Mr. KEYES. In my tax practice I do not, Senator. The taxpayer
is always ready to take good advice as to any proper and lawful
methods that he may take to reduce taxes.
Senator GLASS. Did you ever know the Government to collect a
dollar that it did not take the citizen $2 to get it back from it if
it was not right?
Mr. KEYES. That I have not quite checked up yet.
STOCK EXCHANGE PRACTICES
81
Senator COTJZENS. I can state that that is not a fact.
Mr. PECORA. I understood you to say before in answer to a question that the Income Tax Bureau is now engaged in some kind of
inquiry into these returns that have been the subject of this examination. Is that so, Mr. Keyes, or did I misunderstand you ?
Mr. KEYES. They are engaged in the same kind of an inquiry that
they have made every year. We have had an income-tax inspector
come into our office annually ever since 1916.
Mr. PECOEA. Well, are they now engaged in making an inquiry, so
far as you know, into the income-tax return filed in behalf of the
firm for the calendar year 1930 and for these two days of January 1
and 2 of the year 1931?
Mr. KEYES. The internal-revenue agent was in our office checking
up the partnership returns and the individual returns, the same as
they had done in prior years. I know nothing of any special inquiry.
Mr. PECOEA. Didn't you say in the course of your earlier testimony
that within the past month some such inquiry had been instituted?
Mr. KEYES. Yes; it is bound to be. Our partnership return is the
subject of inspection.
,
Mr. PECORA. Was an investigation made or examination made by
any of the field agents of this return prior to this year?
Mr. KEYES. NO, sir. And normally the examination would not be
made prior to this year.
Mr. PECORA. YOU mean the period of 2 years as a rule elapsed
Mr. KEYES (interposing). Yes, sir; I mean exactly
Mr. PECORA (continuing). Before the making of an examination
by a field agent ?
Mr. KEYES. It is not 2 years; it is only—it is a year and a half,
and that has been the period right through from the start.
Mr. PECORA. IS it a year and a half ?
Mr. KEYES. Yes, sir.
Mr. PECOEA. January
1931 to April or May 1933 is a year and a
half?
Mr. KEYES. The return is to be filed in March. The return for
1931 is filed in March 1932, and the 2-year period in the act that you
probably have in mind commences to operate on March 15, 1932.
Senator BYRNES. Well, one minute; let me get that right. This
return in question was January 2, 1931?
Mr. KEYES. Yes, sir.
Senator BYRNES. And
because of this provision in the law, any
loss then ascertained could be deducted from any profit for the next
calendar y^ar, 1932 or 1933 ?
Mr. KEYES. Yes; by the carry-forward provision of the act.
Senator BYRNES. By the carry-forward?
Mr. KEYES. Yes, sir.
Senator BYRNES. NOW,
if the question has not been asked, what
income tax, if any, did you pay in 1932 ?
Mr. KEYES. There were not any taxes paid in 1932.
Senator BYRNES. Then if no taxes were paid, the carrying forward
of the loss of 21 million to the calendar year 1932 did not affect you
because you had no profit?
Mr. KEYES. That is right.
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STOCK EXCHANGE PRACTICES
Senator BYRNES. And the question as to whether by that procedure you profited will depend upon whether you have profits under
the income-tax law for the calendar year 1933?
Mr. KEYES. Yes, sir.
Senator BYRNES. If you
had profits and you could deduct 21 million from those profits, it would affect your income tax for the
calendar year 1933?
Mr. KEYES. Yes, sir.
Senator BYRNES. That is the situation.
Senator ADAMS. Was part of this $21,000,000
deducted in 1932?
Did you make up a part of that?
Mr. KEYES. NO, sir.
Senator ADAMS. YOU did not need that?
Mr. KEYES. NO. sir.
Senator ADAMS. YOU had loss enough?
Mr. "KEYES. Yes.
Senator BARKLEY. YOU mean you had no
profits at all after deducting nothing?
Mr. KEYES. NO, sir; after deducting nothing, and there was none
of that carried forward.
Senator GORE. YOU were lucky.
Mr. PECORA. YOU did not need this loss as an offset to taxable
income in the year 1930, did you, in order to avoid a liability for
payment of income taxes ?
Mr. KEYES. NO, sir.
Senator BARKLEY. YOU mean 1930?
Mr. PECORA. 1930. Didn't need it
that year. The losses were
there—that is right, isn't it, Mr. Keyes ?
Mr. KEYES. Beg pardon? Well, we paid, some of the partners
did pay, a tax in 1930.
Mr. PECORA. Yes; but they paid those not on account of income
of the firm, firm transactions, isn't that so ?
Mr. KEYES. Well, a partner's return covers all of his income, including the firm. It is all combined under one individual return.
Senator BYRNES. May I interrupt you one moment? Whether or
not you profited by this revaluation as a partner went out of the
firm and there was a dissolution would depend upon whether or not
upon that date of the dissolution of the partnership there was afo
increase in the value of the capital assets; is that right ?
Mr. KEYES. Yes, sir.
Senator BYRNES. NOW,
in these very changes in 1927, for instance,,
when, by reason of the dissolution June the 30th, you filed an income-tax return, did it affect you so as to cause you to pay less or
more taxes ?
Mr. KEYES. NO, sir; it affected us very adversely and caused us
to pay very much more taxes by being required to mark up the
securities.
Senator BYRNES. Well, how about the next time, 1928? I would
like to know whether by reason of these dissolutions and these returns being filed on each occasion you profited or lost.
Mr. KEYES. The same in 1928, Senator. The increase in market
value was greater.
Senator BYRNES. Was greater?
STOCK EXCHANGE PEACTICES
8X
Mr. KEYES. Yes, sir.
Senator BYRNES. In 1928?
Mr. KEYES. In 1928, and also in 1929.
Senator BYRNES. Then the next time,
was that June the 30th?
Did you have——
Mr. KEYES. June the 30th
Senator BYRNES. In 1930.
Mr. KEYES. June the 30th was about even over the values as it
had existed on December 31, 1929.
Senator BYRNES. Then we have referred to the 1931 without it.
Mr. KEYES. Yes, sir.
Senator BYRNES. January the
Mr. KEYES. May I also add to
2d.
that that there was taxable income
that was realized on that second period in 1931 going from January
3d to December 31, which was quite a substantial set-off to that
21 million?
Senator BYRNES. I did not get that. How is that?
Mr. KEYES. The period of January 3
Senator BYRNES. Yes.
Mr. KEYES. TO December 31, 1931
Senator BYRNES. Yes.
Mr. KEYES. Showed an increase in income that was quite a set-off
to the 21 million.
Senator GORE. That is, the 21 million absorbed the profits ?
Senator BYRNES. What you mean is that the 21 billion absorbed1
some of the profits,_as Senator Gore said, for that year?
Mr. KEYES. For the later period of the year; yes, sir.
Senator BARKLEY. It is just the other way around, isn't it, that
you had a profit but it was not sufficient to absorb the $21,000,000*
loss?
Mr. KEYES. That is it.
Senator BARKLEY. And the question whether you actually gained
anything by this 2-day period will depend a good deal on whether
you have enough income in 1933 from which you can deduct this
$21,000,000?
Mr. KEYES. Yes, sir.
Senator BYRNES. That is the whole
Senator GORE. DO you know how
question on that.
much of the $21,000,000 was
absorbed by your profits in 1931?
Mr. KEYES. I did not get that.
Senator GORE. DO you know how much of the $21,000,000 losses
taken on January 2, i931, were absorbed by your profits during the
remainder of that year till December 31, 193i ?
Mr. KEYES. I do not recall the exact figure, but I think it some
three or four million dollars.
Senator BYRNES. Which would leave it about $18,000,000 to carry
forward to 1933 there?
Mr. KEYES. Before it is carried forward it has to go through a
distribution into the partners' individual returns. I t is a very complicated picture to compute as to the amount that could be carried
forward.
Senator GLASS. Mr. Keyes, Mr. Parker Gilbert is a man of some
reputation, isn't he ?
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STOCK EXCHANGE PRACTICES
Mr. KEYES. Yes, sir.
Senator GLASS. He
was formerly an Under Secretary of the
Treasury, was he not?
Mr. KEYES. Yes, sir.
Senator GLASS. And he
afterward was put in charge of this foreign
financing of the Young plan, was he not, and he is still a member
of the firm?
Mr. KEYES. Yes, sir.
Senator GLASS. He was not a
Mr. KEYES. NO, sir; quite the
Senator GLASS. Not put in for
dummy member of the firm then?
contrary.
the purpose of affecting the income
account ?
Mr. KEYES. NO, sir.
Senator BARKLEY. Still in the firm, is he?
Mr. KEYES. Yes, sir; still in the firm.
Mr. PECORA. Mr. Keyes, are you familiar with
the report made by
Revenue Agent Newell C. Shields under date of October 15, 1932,
in which he makes the following comment or statement with respect
to the income-tax returns that have been the subject of your testimony
vthis afternoon:
Since the inception of the income tax law taxpayer—
By taxpayer is meant J. P. Morgan & Co.—
-has terminated the partnership on December 31st of each year, and each year
the old partnership has sold all of its assets to the new partnership at the
market values of December 31. Following this theory the tax returns have
reflected the profits based on the market valuation placed on the assets at the
end of each year. This procedure has had the effect of inventorying at market,
although taxpayer contends that they are on a strictly cost basis.
The year 1930 produced the first deviation from this procedure, as the partnership in existence January 1, 1930 was dissolved on June 30, 1930', and a new
partnership found on July 1, 1930. This new partnership was not dissolved
until January 2, 1931. The tax returns for the first six months' partnership includes the losses and gains sustained through the sale of all of the
assets at market values of June 30 to the new partnership. On the other
hand, the return of the partnership in existence from July 1, 1930, to January 2, 1931, has carried its assets at cost (since no sale was made to a new
"firm on December 31, 1930), such cost being the values of July first at which
assets were taken over from the old firm with subsequent purchases at cost.
The importance to taxpayer of the correctness of their basis of reporting
lies in the fact that there was a tremendous shrinkage in the value of their
assets on December 31, 1930. If a new firm had been organized at that time
the loss for 1930 would have been so large that it would have been improbable
that the statutory could have been absorbed by the income of the two succeeding years. By forming a new firm on January 2, 1931, and recording the
losses based on the sale of the assets to the new firm, the loss became a 1931
loss, which, under the then existing law could have been carried forward to
apply against 1933 income.
Do you agree with the statements embodied in that portion of this
report ?
Mr. KEYES. Mr. Pecora, I never saw that report, and I would like
to know to whom that report is made.
Mr. PECORA. By Mr. Newell C. Shields.
Mr. KEYES. TO whom?
Mr. PECORA. Apparently to his bureau.
Mr. KEYES. Well, we never saw the report.
Mr. PECORA. Well, do you agree with the statements and comments
;and conclusions that are set forth
STOCK EXCHANGE PRACTICES
85
Mr. KETES. I do not agree with them.
Mr. PECORA (continuing). In this report, as I have read them to
you?
Mr. KEYES. Taking them item by item I do not agree with the
statement that he makes about our having established an accounting
method for December 31 without mentioning in there that that is
coupled with a change of copartnership. That is not mentioned in
there. Mr. Shields has not examined our returns rightly.
Mr. PECORA. There was nothing to prevent your firm from making
a return for the 6 months' period terminating on December 31, 1930,
which would have included a revaluation of the securities among
its assets on that date, was there ?
Mr. KEYES. Without the admission of a partner ?
Mr. PECORA. Without the admission of a partner.
Mr. KEYES. There certainly was. Regulations 72.
Mr. PECORA. Have you got that Regulation 72 with you?
Mr. KEYES. NO ; I have not. No.
Senator COTTZENS. That in effect prevents the taking of a loss until
it occurs, does it not?
Mr. KEYES. Exactly. And no individual who might have some
bonds and stock in his pocket has any right to say that he is going
to mark them down in his tax return. And they have not qualified
as dealers in securities so that they can inventory the cost or market^
which ever was lower.
Mr. PECORA. What?
Mr. KEYES. We have not qualified under the tax laws as a dealer
in securities who can inventory the cost or market, whichever is the
lower.
Mr. PECORA. Are you not dealers in securities ?
Mr. KEYES. NO ; not within the meaning of the tax law. We have
never qualified as such. That is a very narrow and limited definition, that " dealer in securities ", and we could not qualify if we
wanted to, because that is limited primarily to securities sold to
customers.
Mr. PECORA. DO you know whether any of the individual partners have qualified as dealers in securities within the meaning and
intent of the provisions of the tax law ?
Mr. KEYES. I know they have not.
Senator BYRNES. In other words, the only way you can get a loss
is that the loss must be ascertained by the actual sale, unless there
is a dissolution of the partnership?
Mr. KEYES. Yes, sir.
Senator BYRNES. When
you can file a statement based upon the
valuation of your assets, is that right?
Mr. KEYES. Exactly, Senator. That is correct.
Senator COTTZENS. Well, is not the inference there, as I understood the reading by Mr. Pecora, that they changed corporations
every few years regardless of whether there were new partners
taken in ? Is that true ?
Mr. KEYES. That they changed corporations?
Senator COUZENS. That is, that they sold out to a new partnership ?
Mr. KEYES. TO a partnership; yes, sir. That the valuation of the
partnership interest as it existed before the change constituted a
transaction.
Digitizedclosed
for FRASER
86
STOCK EXCHANGE PRACTICES
Senator COUZENS. Yes. But what I am trying to get at
Mr. KEYES. But not every December 31, sir.
Senator COUZENS. NO; I am not speaking of any date. If I
remember correctly what Mr. Pecora read, the inference was that a
new partnership was created every year or so, regardless of whether
there were any new partners taken in, so as to create a new status for
income tax.
Mr. KEYES. NO, sir. I understood the inference merely to be that
we had revalued on December 31, whether a new partner was taken
in or not, or whether there was any change in partnership.
Senator BYRNES. NO; I agree with Senator Couzens. The question is, Whether the change of partnership occurring every year
was done with the intent on June 30 or on December 31 of permitting
this revaluation and thereby taking a loss ?
Senator COUZENS. Well, it is perfectly practicable and perfectly
easily done to create a new partnership every year when it is advantageous to' do so, and sell out to the new partnership if it creates a
loss in the interest of the partners. I am not charging that is done,
but that is a very simple procedure.
Senator BYRNES. We are just asking for the facts.
Senator COUZENS. Yes.
Mr. PECORA. SO, whether or not it was done with any such intent,
as was indicated by Senator Byrnes' question, the actual result was
that it enabled the firm to carry forward through the calendar years
of 1932 and 1933 these losses of $21,000,000?
Mr. KEYES. We did not carry them forward, Mr. Pecora.
Mr. PECORA. What is that?
Mr. KEYES. We did not carry them forward. Our income-tax
returns
Mr. PECORA. YOU did not have to, but you could have if the income
of the firm during the calendar years of 1932 and 1933 were to
yield profits or income in excess of $21,000,000.
Mr. KEYES. Or, perhaps, that remaining period in 1931.
Mr. PECORA. Yes.
Mr. KEYES. Which happened to an extent.
Senator GLASS. Well, if that could have been done, and should it
have been done, and the law permitted it to be done, the fault, if any,
is in the law and not in any intent on the part of your firm to cheat
the Government; is that not so ?
Mr. KEYES. Well, Senator Glass, I think that the selection of partners is covered by partnership law, and electus personorum goes as
to time as well as to persons. So that the partnership would have
the right to admit the partners on the dates that they select. And,
following your question through, that if, on the change of copartnership, we would have to have a revaluation, then the fault would
be in the law if on the following December 31 the law did not compel us to have another revaluation whether you had a change in
the partnership or not.
Mr. PECORA. Mr. Keyes, let me ask you this. Do you know of
any time prior to the year 1931 when the firm of J. P. Morgan &
Co. took in a new partner
Mr. KEYES. Yes,
sir.
Mr. PECORA (continuing).—On
the 2d of January of any year?
STOCK EXCHANGE PRACTICES
87
Mr. KETES. Not on the 2d of January. It was on March 31, 1916.
The present articles are dated that date. It is not tradition entirely that it is done on December 31.
Senator BYRNES. Let me ask you this: Several times during this
period you say one of the partners died?
Mr. KEYES. Yes, sir.
Senator BYRNES. On
each of those occasions a return was filed as
the result of the dissolution resulting from the death, is that right?
Mr. KEYES. Yes, sir; that is right.
Senator GLASS. He did not die on purpose ?
Senator BYRNES. HOW many times was there a reorganization by
reason of death?
Mr. KEYES. There were two separate accounting periods in 1926
by the death of Mr. Porter; in 1925 by the death of Mr. Stettinius;
in 1924 by the death of Mr. Bacon; in 1922 by the death of Mr.
Davison; in 1920 by the death of Mr. Newbold. We had a change
in 1927 by the retirement of the late Mr. Dwight W. Morrow, which
occurred in September 1927. And that return was a substantial
write-up and an increase in value which had to be included because
of the dissolution of the partnership.
Senator COUZENS. What tax did you have to pay that year?
Mr. KEYES. Well, we would have to figure it out, Senator, because
the tax is commuted right into the final return, but the total was quite
a substantial sum. Some six or seven millions dollars, the total.
Mr. PECORA. Mr. Keyes, I understand that no deceased partner
died purposely on any particular date. But the date of January 2,
1931, was advisedly fixed as the date of the admission of Mr. Gilbert into the firm, was it not?
Mr. KEYES. I think it is the partners' privilege to fix the date of
the admission into the firm.
Mr. PECORA. I say it was fixed for that date, was it not? That
was not a mere accident; it was the result of deliberation and decision, was it not?
Mr. KEYES. Yes, sir.
Senator COUZENS. IS that
Mr. PECORA. That is all
all?
on this subject with this witness; yes,
sir.
Senator COUZENS. Let us go into executive session, Mr. Chairman.
Senator GLASS (presiding). The chairman, Senator Fletcher, is
detained on the floor of the Senate with legislative matters.
Senator COUZENS. He wants us to go into executive session and
deal with this subject while he is away.
Senator GLASS. Very well. If there be no dissent we will go into
executive session. Those witnesses under subpena who have not yet
submitted themselves to examination will return at 10 o'clock tomorrow morning.
(Thereupon, at 4:25 p.m., an adjournment was taken until 10
o'clock a.m.. the next day, Wednesday, May 24, 1933.)
STOCK EXCHANGE PEACTICE8
WEDNESDAY, MAY 24, 1933
UNITED STATES SENATE,
SUBCOMMITTEE OF THE
COMMITTEE ON BANKING AND CURRENCY,
Washington, D.C.
The subcommittee met, pursuant to adjournment on yesterday, at
JO a.m., in room 301, Senate Office Building, Senator Duncan U.
Fletcher presiding.
Present: Senators Fletcher (chairman), Glass, Barkley, Costigan,
Townsend, and Couzens.
Present also: Senators Bulkley, Gore, Eeynolds, Byrnes, Bankhead, McAdoo, Adams, Goldsborough, Kean, and Steiwer.
Present also: Ferdinand Pecora, counsel to the committee, Julius
Silver, David Saperstein, and James B. McDonough, Jr., associate
counsel to the committee. John W. Davis, counsel for J. P. Morgan
& Co., Randall J. LeBoeuf, Jr., and Earle J. Machold, counsel for
the United Corporation and for George H. Howard, president of the
United Corporation.
The CHAIRMAN. The committee will please come to order. Everybody will be seated. Let there be quiet in the room. Mr. Pecora,
call your next witness.
Mr. PECORA. Will Mr. Morgan resume the stand, please?
TESTIMONY OF J. P. MOKGAN—Eesumed
Mr. PECORA. Mr. Morgan, in the course of your examination on
yesterday you were asked certain questions as to whether or not
your firm had made any loans to individuals who were officers or
directors of commercial banks. And a list was shown yoii containing the names, or said to contain the names of such individuals. It
was then suggested that the matter of receiving this list in evidence
and spreading it upon the record of the committee be referred to an
executive session of the committee, which was held, and the committee decided to receive the list. Will you kindly look at that list
and see if you can identify it as a true and complete list of all names
of individuals who were officers or directors of banks, and who
received loans from J. P. Morgan & Co., or Drexel & Co., during
the 5-year period from January 1, 1927, to December 31, 1931.
Mr. MORGAN. I identify the list.
Mr. PECORA. I beg pardon?
Mr. MORGAN. I identify the list. Do you wish me to read it ?
Mr. PECORA. Well; I will take the list. Is that a complete list of
such loans ?
89
90
STOCK EXCHANGE PRACTICES
Mr.
Mr.
MORGAN. SO I am informed.
PECORA. DO you know who prepared it?
Mr. MORGAN. NO.
Mr. PECORA. It was prepared by someone in
the office of the firm
of J. P. Morgan & Co., was it notf
Mr. MORGAN. Yes; it was prepared in the office of the firm. We
submitted it as a whole list.
Mr. PECORA. NOW, as I read the names on this list will you be kind
enough to tell us the bank with respect to which each individual was
identified or connected as either an officer or director ?
Mr. MORGAN. I am not sure I can do it, but I will refer to some of
my associates here for information.
Mr. PECORA. YOU may acquire the information in the course of
your answers from any of your associates. I shall be happy to have
you do it.
Mr. MORGAN. All right. I thank you.
Mr. PECORA. E. F. Carry.
Mr. MORGAN. With the Continental Bank of Chicago. And he is
dead.
Mr. PECORA. W. P. Conway.
Mr. MORGAN. With the Guaranty Trust Co. of New York.
Mr. PECORA. John W. Davis.
Mr. MORGAN. Guaranty Trust Co. of New York.
Mr. PECORA. Norman H. Davis.
Mr. MORGAN. The Bank of New York and Trust Co.
Mr. PECORA. Charles G. Dawes.
Mr. MORGAN. With the Central Trust Co. of Chicago, I believe.
Mr. PECORA. That is the Central Trust Co. of Illinois, isn't it ?
Mr. MORGAN. Yes; I believe so.
Mr. PECORA. F. C. Dumaine.
Mr. MORGAN. The First National Bank of Boston. He is a director. In all these cases, except Conway and Dawes, they are the only
ones who are officers of banks. The others are directors.
Mr. PECORA. Arteiiius L, Gates, Harvy D. Gibson, Mortimer N.~
Buckner, joint account.
Mr. MORGAN. New York Trust Co.
Mr. PECORA. Mr. Gates is connected with the New York Trust Co..
and Mr. Gibson with the Manufacturers Trust Co., isn't that so?
Mr. MORGAN. Yes; he is now. Yes; he is now with the New York
Trust Co., I believe.
Mr. PECORA. And Mortimer N. Buckner?
Mr. MORGAN. Also with the New York Trust Co.
Mr. PECORA. I S he president of the Clearing House Association of
Banks at the present time ?
Mr. MORGAN. This year I believe he is.
Mr. PECORA. Philip G. Gossler.
Mr. MOGRAN. Guaranty Trust Co. A director.
Mr. PECORA. Albert H. Harris.
Mr. MORGAN. With the Guaranty Trust Co. Also a director. And
he is dead.
Mr. PECORA. Clifford M. Leonard.
Mr. MORGAN. I confess that I do not know who he is. I shall have
Digitized forto
FRASER
find out.
STOCK EXCHANGE PEACTICES
9t
Mr. WHITNEY. None of us knows what bank he was with.
Mr. PECORA. H. E. Manville.
Mr. MORGAN. Who is he with ?
Mr. WHITNEY. Well, he is with a bank up at Pleasantville, N.Y..
The Pleasantville National Bank, I believe. A director.
Mr. PECORA. Edgar L. Marston.
Mr. WHITNEY. With the Guaranty Trust Co.
Mr. MORGAN. He was when the loan was made, with the GuarantyTrust Co., a director.
Mr. PECORA. Theodore F. Merseles.
Mr. MORGAN. He is dead.
Mr. WHITNEY. When this loan was made he was with the Seaboard
National Bank.
Mr. PECORA. And that was merged with the Chase National Bank,,
I believe ?
Mr. WHITNEY. It was merged originally with the Euitable Trust
Co., and subsequently that Trust Co. went with the Chase National
Bank.
Mr. PECORA. Albert G. Milbank.
Mr. MORGAN. When that loan was made he was a director of the
Seaboard National Bank, wasn't he?
Mr. WHITNEY. Yes; I believe so.
Mr. MORGAN. He was a director at that time of the Seaboard National Bank, and afterwards became a director of the Equitable
Trust Co., and afterwards a director of the Chase National Bank.
That loan has been paid off.
Mr. PECORA. Charles E. Mitchell.
Mr. MORGAN. He is the head of the City Bank.
Mr. PECORA. YOU mean he was.
Mr. MORGAN. He was the head of the City Bank; yes.
Mr. PECORA. Of the National City Bank.
Mr. MORGAN. Yes; of the National City Bank.
Mr. PECORA. F. K. Morrow, what bank was he with?
Mr. MORGAN. DO you know, Mr. Whitney ?
Mr. WHITNEY. 1 do not know.
Mr. MORGAN. We will have to> find out for you.
Mr. PECORA. All right. Now, G. M. P. Murphy.
Mr. MORGAN. With the Guaranty Trust Co. and the New York
Trust Co.
Mr. PECORA. Seward Prosser.
Mr. MORGAN. HOW about William C. Prosser ?
Mr. PECORA. Oh, William C. Prosser.
Mr. MORGAN. He is the head of the Guaranty Trust Co. of New
York.
Mr. PECORA. Seward Prosser.
Mr. MORGAN. He is the head or is the chairman of the board^
isn't he, of the Bankers Trust Co.?
Mr. WHITNEY. I believe so.
Mr. PECORA. Lansing P. Reed.
Mr. MORGAN. He is a director of the Guaranty Trust Co.
Mr. PECORA. What was that?
Mr. MORGAN. I will say that Mr. Eeed is a director of the Guaranty Trust Co.
92
STOCK EXCHANGE PRACTICES
Mr. PECORA. Samuel W. Rayburn.
Mr. MORGAN. I was just asking about him. I do not know what
bank he is in. He was in the Guaranty Trust Co. in 1929 as a
director.
Mr. PECORA. H. C. Stevens.
Mr. MORGAN. He was with the Guaranty Trust Co., I believe, an
officer of the Guaranty Trust Co.
Mr. PECORA. Myron C. Taylor.
Mr. MORGAN. He is a director of the First National Bank in
Ifew York.
Mr. PECORA. I S he also occupying an executive position in the
United States Steel Corporation?
Mr. MORGAN. He is chairman of the board and chairman of the
finance committee.
Mr. PECORA. A. A. Tilney.
Mr. MORGAN. A. A. Tilney is with the Bankers' Trust Co.
Mr. PECORA. He is vice-president, isn't he ?
Mr. MORGAN. HOW about that, Mr. Whitney?
Mr. WHITNEY. I think he is vice-chairman of the board.
Mr. MORGAN. I do not know.
Mr. PECORA. Richard Whitney.
Mr. MORGAN. With the Corn Exchange National Bank.
Mr. PECORA. In that the gentleman who is also the president of
the New York Stock Exchange?
Mr. MORGAN. Yes.
Mr. DAVIS. Mr. Pecora,
wouldn't it be worth while for the sake of
the record to make known how1 many of the loans are now outstanding ?
Mr. PECORA. I will do that. Very few in number, I believe.
Senator COUZENS. Why not detrmine that as you go along?
Mr. PECORA. Well, I have a classification here in that respect,
Senator Couzens. I want to get the whole list in first, and I believe
only a few are not paid off.
Senator COUZENS. All right.
Mr. PECORA. NOW, Mr. Morgan, according to the information that
was furnished to me by your office with regard to these loans, they
have all been paid off with the exception of one made to Norman H.
Davis, one to F. C. Dumaine, a loan made jointly to Artemus L.
Gates, Harvy D. Gibson, and Mortimer N. Buckner, one made to
Charles E. Mitchell, one made to Seward Prosser, one made to Lansing P. Reed, one made to H. C. Stevens, and one made to Richard
Whitney. Does that conform to your knowledge?
Mr. MORGAN. That conforms to my list. But I have no knowledge
except as I get it from the list. I am going by the list.
Mr. PECORA. Your knowledge is based upon a list which has been
prepared by your office and a copy of which as been furnished to me ?
Mr. MORGAN. Yes,
sir.
Mr. PECORA. When was the Norman H. Davis loan made?
Mr. MORGAN. This list does not show.
Mr. PECORA. Could you answer that question, Mr. Whitney?
Mr. WHITNEY. I think not.
Mr. DAVIS. These are dates of payments.
Mr. PECCKRA. I know that.
STOCK EXCHANGE PRACTICES
93
Mr. WHITNEY. I could not give you the dates. The dates that
would assist you might be as to the qualifying shares for directors
of these banks. As to that information, I can probably find it.
Mr. PECORA. Have you the data here?
Mr. WHITNEY. I can get it. This is a very small loan.
Mr. PECORA. Could we have it?
Mr. WHITNEY. The date that the loan was made ?
Mr. PECORA. Yes.
Mr. WHITNEY. I can get it for you, probably, after lunch.
Mr. MORGAN. It is onty the outstanding loans ?
Mr. PECORA. I am confining myself now to the outstanding loans.
Mr. MORGAN. We have the dates of the outstanding loans, as I
understand. We can get that.
Mr. PECORA. Mr. Morgan, have you any personal knowledge or
information concerning the loan made to F. C. Dumaine, which is
still outstanding?
Mr. MORGAN. Oh, I have no personal knowledge of it at all.
Mr. PECORA. Have you any information about it?
Mr. MORGAN. NO.
Mr. WHITNEY. DO you want it now ?
Mr. PECORA. Can you get it and give it to Mr. Morgan?
Mr. WHITNEY. It is a long story.
Mr. PECORA. Then I will wait until you take the stand.
Mr. DAVIS. Instead of relaying the information through
Mr.
Morgan I think we would make better progress if you were to take
it first-hand.
Mr. PECORA. All right. Mr. Morgan, have you any personal
knowledge or information concerning the particulars of a loan
made to Charles E. Mitchell, which is still outstanding in whole or
in part?
Mr. MORGAN. I have no accurate knowledge, no. I again make
the same suggestion that Mr. Davis made before.
Mr. PECORA. I ask you the same question with respect to the loan
made to Seward Prosser, which is still outstanding.
Mr. MORGAN. I will have to make the same answer to all these
questions, Mr. Pecora.
Mr. PECORA. TO all of them?
Mr. MORGAN. Yes, sir; Mr. Pecora.
Mr. PECORA. Mr. Whitney, will you get this information by this
afternoon?
Mr. WHITNEY. DO you mean that you want the dates when the
loans were made ?
Mr. PECORA. And how collateralized.
Mr. WHITNEY. I am not sure I can get you that information by
this afternoon. But I can get you the dates. I will do the best I
can, Mr. Pecora.
Mr. PECORA. All right.
Mr. WHITNEY. I do not know whether I can get the collateral.
Mr. PECORA. YOU can get the dates as to all of these loans, can you
not?
Mr. WHITNEY. Yes; very substantially, I should say.
Senator KEAN. Mr. Chairman, we cannot hear counsel down here.
175541—33—PT 1
7
94
STOCK EXCHANGE PKACTICES
Mr. PECORA. I was merely suggesting to Mr. Whitney that he get
certain data from the files of his office in New York.
Senator KEAN. Yes; but we would like to hear what you are
asking.
Mr. PECORA. SO that he may be in position to testify, perhaps this
afternoon.
The CHAIRMAN. YOU may proceed, Mr. Pecora.
Mr. PECORA. Mr. Morgan, with respect to chartered or commercial
banks, you are familiar with the legal provisions which limit the
amount of a loan which a bank may make to an individual or single
borrower, are you not ?
Mr. MORGAN. Well, I am roughly familiar with them, yes, but I
have never worked with an incorporated bank, so that I never had
to very closely post myself on that matter.
Mr. PECORA. DO you approve the principles of those provisions?
Mr. MORGAN. Well, I do not know that I should—I do not know
them well enough to pass upon them. Besides, they are matters
of legislation, and things which a bank must conform to.
Mr. PECORA. Of course, but I am not asking you the question,
whether or not banks must conform to the laws; I am asking for your
opinion, if you will give it, of the reasonableness of such laws.
Mr. MORGAN. I have no opinion on that matter.
Mr. PECORA. YOU have no opinion on that?
Mr. MORGAN. On the reasonableness of any law, no.
Mr. PECORA. Have you any opinion on the reasonableness of the
law which limits a commercial bank to a definite percentage of its
capital and surplus?
Mr. MORGAN. NO.
Mr. PECORA. In making a loan to a single borrower?
Mr. MORGAN. NO. I have no opinion on that.
Mr. PECORA. YOU are unable to tell this committee
whether or
not the principle of such enactments in your opinion is sound?
Mr. MORGAN. Well, it is a matter of opinion. I cannot testify
on oath on matters of opinion that might be changed at any
minute.
Mr. PECORA. YOU can, if you are asked to give it as a matter
of opinion; and I think your counsel will agree to that.
Mr. DAVIS. I think that is entirely at the option of the witness.
No man can be made to express an opinion.
Mr. PECORA. If he has an opinion I would be glad to have the
benefit of it.
Mr. MORGAN. I have no opinion on it.
Senator GLASS. What difference would it make whether Mr.
Morgan had an opinion on the subject or not? It has been the
judgment of the Congress for the last 40 years that there should be
a limitation of 10 percent.
Mr. MORGAN. Well, Senator Glass
Senator GLASS (continuing). And I do not think that any opinion
which Mr. Morgan might express on the subject here would' alter the
judgment of the Congress.
Mr. MORGAN. I quite agree wth you, Senator Glass.
Mr. PECORA. I do# not know whether or not Congress would be
influenced
by an opinion of anybody whose experience might have
been
such
as
to qualify him to render a pretty sound opinion.
STOCK EXCHANGE PRACTICES
95
Senator GLASS. Congress enacts its legislation after making its
own inquiry, and with the experience developed in the banking
business.
Mr. PECORA. The witness was permitted to put on the record on
yesterday a long statement, which is made up principally of his
opinions upon the matters set forth.
Senator GLASS. TO which I was the only member of the committee
who disagreed.
Mr. PECORA. Well, the witness says he has no opinion on that
subject, and that disposes of that matter.
The CHAIRMAN. Proceed.
Mr. PECORA. Mr. Morgan, have you any opinion as to the wisdom
or reasonableness of applying such a principle by legislation to the
conduct of private banks, the business of private banks or bankers ?
Mr. MORGAN. My opinion is that it would not be necessary, probably. It is merely an opinion.
Mr. PECORA. Why wouldn't it be necessary? Why do you think
it would not be necessary?
Mr. MORGAN. Because of the fact that there is a great deal of
property back of the private banker, involved in his business, although not actually on his books, all of his entire fortune and living
is at the disposal of the firm if it goes wrong.
Mr. PECORA. Where is there any public record of that property
worth ?
Mr. MORGAN. There is no public record of it.
Mr. PECORA. YOU know that even under the laws of the State of
New York some private bankers are subject to examination by
the State Superintendent of Banks, do you not?
Mr. MORGAN. Yes;
Mr. PECORA. YOU
I
do.
do know that it has been proposed in the Legislature of the State of New York at various times to make all private
bankers subject to that power of visitation and examination at the
hands of the State Superintendent of Banks, do you not?
Mr. MORGAN. I understand that it has been frequently suggested.
Mr. PECORA. Has your firm opposed the enactment of such legislation.
Mr. MORGAN. We have no power to oppose any legislation, sir.
Mr. PECORA. YOU have the right to present your views to legislative committees that are considering matters of legislation. You
know that, don't you, Mr. Morgan ?
Mr. MORGAN. Well, we have the right to do so, but we do not
always do it.
Mr. PECORA. Well, has your firm done it with respect to measures
of the kind I have just referred to?
Mr. MORGAN. I do not think we have. I do not know of it of my
own knowledge.
Mr. PECORA. The business of your firm is that of banking, among
other things ?
Mr. MORGAN. Among other things.
Mr. PECORA. It does not advertise itself as conducting a banking
business or as being bankers, does it?
Mr. MORGAN. NO. We may not do that.
96
STOCK EXCHANGE PRACTICES
Mr. PECORA. It may do that, but if it does do that it becomes subject to examination by the State Superintendent of Banks of New
York State?
Mr. MORGAN. Quite so.
Mr. PECORA. IS that the reason it does not do that—in order to
avoid being subject to such examination?
Mr. MORGAN. I think probably—I do not know the reason why we
do not do it, but it would be a natural conclusion that that would be
the case; yes.
Mr. PECORA. TO your mind is it not a certainty rather than a natural conclusion that that is the case ?
Mr. MORGAN. That what?
Mr. PECORA. Isn't that a certainty rather than a conclusion?
Mr. MORGAN. We wish to keep within the provisions of the law
which frees us from that thing; yes. That is undoubtedly so.
Mr. PECORA. Why do you object to that sort of examination that
all commercial banks chartered by the State of New York are subjected to under the laws of that State?
Mr. MORGAN. I object to it because of the breach of confidence
which—the lack of the—I object to it because of the fact that our
relations with our clients are much more confidential, in my opinion,
than the relations with an incorporated bank can be. And
Mr. PECORA. For what reasons are they more confidential than
those existing between a commercial bank and its depositors and
customers ?
Senator STEIWEE. Mr. Chairman, may I interrupt just a minute?
Had the witness finished his answer to the last question before the
one just now propounded?
Mr. MORGAN. DO you mean the question as to whether we did follow
the law to avoid being examined ? Is that it ?
Senator STEIWER. I understood you to state one reason, and then I
thought I heard you say the word " and ", and I thought you were
going to state another reason.
Mr. PECORA. If I interrupted you I am sorry.
Mr. MORGAN. NO. I will stand on that.
Senator STEIWER. That is what I wanted to know.
Mr. PECORA. Suppose we go back to the record. Read the question
and the answer.
(Thereupon the reporter read the question and answer as above
recorded, as follows:
Mr. PECOEA. Why do you object to that sort of examination that all commercial banks chartered by the State of New York are subjected to under the
laws of that State?
Mr. MOEGAN. I object to it because of the breach of confidence which—the
lack of the—I object to it because of the fact that our relations with our clients
are much more confidential, in my opinion, than the relations with an incorporated bank can be. And
Mr. PECORA. Did you intend to say anything else in answer to that
question, Mr. Morgan?
Mr. MORGAN. NO. I should like if the stuttering part were cut
out in my answer to that question. I am not used to this form of
examination, Mr. Pecora, and I do not get my words quite straight
always.
STOCK EXCHANGE PRACTICES
97
Mr. PECORA. I will adapt it to any form that you are used to,
Mr. Morgan, to facilitate it.
Senator KEAN. Your bank, Mr. Morgan, is not a commercial bank
in the sense that you are discounting paper daily for commercial
purposes ?
Mr. MORGAN. NO.
Senator KEAN. That
makes the difference between the two kinds
of banks.
Senator GLASS. Mr. Morgan, let me ask you a simple question that
requires only a simple answer. If the State authorities of New York
should regard the conduct of your bank as endangering the public
interest, in contrast with the conduct of commercial banks, is it
not perfectly competent for the State authorities of New York,
through their general assembly, with the approval of the Governor,
to alter the law accordingly ?
Mr. MORGAN. I presume so, sir.
Senator GLASS. It looks to me like we have the State Legislature
of New York under inquisition here.
Mr. PECORA. Did the Senator overlook the testimony given by
the witness a few moments ago to the effect that such legislation has
been opposed.
Mr. DAVIS. The witness gave no such testimony. The witness said
he does not know.
Senator GLASS. Well, if there be such testimony; suppose it has
been opposed—it has not been enacted, has it ?
Mr. PECORA. Congress might deem it wise to enact such legislation with regard to bankers whose business is interstate.
Senator GLASS. I do not think Congress has any constitutional
right or jurisdiction to do anything of the kind.
Mr. PECORA. Well, that is a question of law.
The CHAIRMAN. Well, we are proceeding on that theory, that
they are doing interstate business and using the mails. I do not
think there is any question that Congress has the jurisdiction to
pass such legislation.
Senator GLASS. Well, has there been any proposal in the two
years and a half that we have had banking legislation under consideration to preclude them from the use of the mails or from
interstate commerce?
The CHAIRMAN. NO
Senator GLASS. If there has been I
The CHAIRMAN. There has been a
do not know it.
special subcommittee on banking that has been supposed to get out banking legislation that has
been two years on it and it has not done it yet.
Senator GLASS. Yes; we have proposed banking legislation that
the Congress has not enacted. And there has not been an idle hour
since we were charged with it—not an idle hour.
The CHAIRMAN. That is the reason we are holding the hearings
to get the foundation for legislation. That is the object. Otherwise we might as well quit. The whole purpose of this thing is
to get the proper foundation for banking legislation.
Senator GLASS. Yes; I concede that to be the purpose, but I do
not concede that to be the result.
Senator BYRNES. Mr. Chairman, what was the question %
98
STOCK EXCHANGE PRACTICES
The CHAIRMAN. GO ahead, Mr. Peeora.
Senator BYRNES. I did not hear the question of counsel.
The CHAIRMAN. Let us go on with the questions.
Mr. PECORA. Kead the question. I think I recall it. Mr. Morgan,
what features are connected with the relations between your private
banking firm and its clients which make the relations between them
of a more confidential nature than those recognized to exist between
commercial or chartered banks and their clients?
Mr. MORGAN. Chiefly the fact that we have no board of directors.
We have no officers that are hired to look out for the business of
the shareholders. We have no shareholders. Consequently we can
do things immediately without anybody but the partners and the
people who make records in the office knowing anything about it.
And a great many people do not like their private affairs shown
to directors, although I think as a rule they are not really shown to
them in these big banks. I do not know anything about that.
Senator COUZENS. I think that is true.
Mr. PECORA. DO you think the laws which enable the State authority or Federal authority to examine a commercial bank are based
primarily on the fact that those banks have boards of directors and
have stockholders, or do you think that they are based in part at least
upon the fact that those banks handle the deposits of people
generally ?
Mr. MORGAN. The banks are incorporated, and under the incorporation they have certain rights. Also certain obligations which are
the price that they pay, so to speak, for those rights. I have had a
little table made up to show the two things. I will have a copy of
that furnished to you if you like, sir.
Mr. PECORA. A copy of what, sir?
Mr. MORGAN. A copy of a statement that I had made up to show
what the relative rights and obligations are. Let me have that. [A
paper was handed the witness.] This shows the restrictions and disabilities of private banks; the limitations that are imposed on incorporated banks and the advantages they get from it.
Mr. DAVIS. Comparative.
Mr. MORGAN. A comparative statement.
Mr. PECORA. The one great function of banks, whether public or
private, is that of accepting deposits and making loans ?
Mr. MORGAN. Quite so.
Mr. PECORA. NOW, your private banking firm exercises both of
those functions?
Mr. MORGAN. Yes.
Mr. PECORA. They
are the principal functions exercised by commercial banks, are they not?
Mr. MORGAN. I suppose so. I do not know.
Mr. PECORA. DO you think that there is anything in the manner
in which your private banking firm exercises those functions that
makes the relations of your private banking firm with its clients more
confidential with respect to the exercise of those functions than are
the relations between a commercial bank and its clients ?
Mr. MORGAN. I do think so: yes.
Mr. PECORA. For. what reason, Mr. Morgan? What makes them
more confidential in the case of your private banking firm?
STOCK EXCHANGE PRACTICES
99
Mr. MORGAN. Well, it has always been held for the last—ever since
1 have known anything about the business and many years before
that that our relations with our clients were peculiarly personal and
confidential, and I have always believed that that was so and kept it
so as far as possible.
Mr. PECORA. NOW, Mr. Morgan
Mr. DAVIS. Mr. Pecora, may I interrupt a moment?
The CHAIRMAN. DO you care to have that statement go in the
record ?
Senator GOLDSBOROUGH. Mr. Chairman, Mr. Morgan has referred
to a statement showing comparison between private banks and corporate banks. I would suggest that the statement be put in the
record.
Mr. PECORA. That is all right.
The CHAIRMAN. Has Mr. Morgan offered it?
Mr. MORGAN. I have no objection.
The CHAIRMAN. All right.
Mr. PECORA. May I have a copy of it ?
Mr. MORGAN. I do not think you want it read. It is a tabulated
thing.
The CHAIRMAN. NO. Just put it in the record; that is all.
(The statement referred to is here printed in the record in full, as
follows:)
COMPARISON OF POWERS OF AND RESTRICTIONS ON NATIONAL BANKS, NEW YORK
STATE BANKS, AND LARGER NEW YORK PRIVATE BANKERS
" State bank" means any bank incorporated under laws of State of New
York. What is true of it is generally true of a New York trust company.
" Private banker", as used here, means only larger unincorporated New
York City banking institutions which do not come within section 150 of New
York Banking Law. Section 150 is the heart of the New York restrictions on
such private bankers. If a private banker falls within it he becomes subject
to State supervision and requirements, including examinations, quarterly reports,
the reserve requirements applying to banks, etc.
Section 150 applies to every unincorporated banker who either—
1. Uses the word " bank", " banker ", etc. on any sign, stationery, circular,
or advertising matter or who solicits deposits by signs or advertising; or
2. Pays interest on any deposit of less than $7,500 (not applying, however,
if aggregate of deposits of less than $7,500 receiving interest do not exceed
2 percent of banker's total deposits) ; or
3. Receives money in such sums that the average of all separate deposits
from all depositors during 12 months is less than $1,000; or
4. Receives money for transmission in amounts of less than $500—unless
$100,000 Government securities are deposited as security therefor.
(In general, private bankers, not being incorporated, do not depend upon
the State for their grant of powers and consequently have in general as broad
powers as those of individuals, except where expressly restricted by law.
No attempt has been made to enumerate such inherent general powers or
various less important differences between private bankers and incorporated
institutions not deemed material here.)
National banks
Restrictions and disabilities
New York State banks
Limited to capital (with further individual lia- Limited to capital (with further individual liability of stockholders for par value of their
bility of stockholders for par value of their
stock—unworkable as practical matter).
stock—unworkable as practical matter).
Examinations and reports. _ 2 examinations required each year. Must make 2 examinations required each year; also 4 quarterly reports which must be published in local
at least 3 reports each year and further special
newspaper. Superintendent may require any
reports as required by Comptroller, all in form
further reports all in prescribed form and may
prescribed by him. Reports to be published
subpena witnesses and require production of
in local newspaper. Must report all divirelevant papers. Unless surplus equals 20
dends declared and amounts of net earnings in
percent of capital must report all dividends
excess thereof, and report annually list of sharewith net earnings. Must keep books and
holders.
records in conformity with orders promulgated by Superintendent.
7 to 13 percent of demand deposits (13 percent in 12 to 18 percent (18 percent in New York City)
of demand deposits required (in case of trust
New York City) and 3 percent of time deposits
companies 10 to 15 percent—15 percent in New
required.
York City).
No restrictions
_
No restrictions
.
Receiving deposits..
Liability
Paying interest on deposits.
.do.
,_do.
Soliciting business by advertising as bank.
.do.
_do-
Receiving money for transmission.
-do_.
.-do..
Powers (in addition to four
last mentioned):
Loaning money
Federal Reserve membership and privileges.
Issuance of currency
Cannot loan more than one tenth of its capital
stock and surplus to one borrower. Also subject to restrictions as to loans on real estate, etc.
Required to members of Federal Reserve System, and consequently have privilege of rediscount and clearing.
Have authority to obtain and issue circulating
notes.
Private bankers (as denned above)
Unlimited personal liability.
No State or Federal examination or supervision,
except for State to determine whether banker is within scope of sec. 150. No publication of financial statement—such publication
would involve possible violation of advertising
restriction of sec. 150.
No particular reserve required.
Cannot, without becoming subject to State
supervision and requirements, receive deposits
if average of all deposits from all depositors
within 12 months is less than $1,000.
Cannot, without becoming subject to supervision
and requirements, pay interest on deposits of
less than $7,500—with a "saving margin provision" providing for exemption of deposits of
less than $7,500 if total of such deposits on which
interest paid does not exceed 2 percent of total
deposits.
Cannot, without becoming subject to State
supervision and requirements, solicit deposits
by means of signs or advertising or use word
"bank," "banker," etc., on any sign, stationery, circular, or advertising matter.
Cannot, without becoming subject to State supervision and requirements, receive for transmission an amount less than $500—unless
$100,000 Government securities deposited as
security therefor.
Cannot loan more than one tenth of its capital
stock and surplus to one borrower. Also subject to restrictions as to loans on real estate, etc.
May become members of Federal Reserve System and possess its privileges.
No restrictions.
No authority
No authority to issue currency.
.
O
O
Cannot be members of Federal Reserve System
and have rights consequent thereon.
H
O
O
w
fed
X
a
W
3>
a
o
GO
Have (when authorized by Federal Reserve Have same trust powers (where authorized by
Board) general fiduciary powers—to act as
superintendent of banks). State trust compatrustee, executor, administrator, guardian, renies have such powers without such authorizaceiver, etc.
tion.
Depositary of public May be designated as such by Secretary of Treas- May be designated as depositary of State funds
ury.
by State officers.
funds.
Owning stock of other In general cannot do so except to protect self on In general cannot do so except to protect self on
corporations.
bad debt, etc.
bad debt, etc. State trust company may own
stock, provided investment does not exceed 10
percent of its capital and surplus.
In
general
cannot
own
real
estate
except
for
own
In
general cannot own real estate except for own
Owning real estate
_
office building and except where purchased to
office building and except where purchased to
protect bad debt.
protect bad debt.
Trust powers..
No trust powers in real sense—but can act as
transfer agent, registrar orfiscalagent (as can
also national and State banks).
Cannot act as such depositary.
No restriction on ownership of stock.
No restrictions.
§
Q
W
X
a
W
I
3
>
a
H
i—i
o
102
STOCK EXCHANGE PRACTICES
Mr. PECORA. Who prepared this printed statement that is now
being spread upon the record, Mr. Morgan ?
Mr. MORGAN. One of our counsel, sir. It being a matter of the
law we got some counsel to do it for us.
Senator COUZENS. Mr. Morgan, is not this the practical situation,
that if a man or a corporation wants to deposit $100,000 he puts it in
your bank entirely on faith?
Mr. MORGAN. Yes.
Senator COUZENS. And
if he puts it in a commercial bank he has
published statements to guide him ?
Mr. MORGAN. Yes.
Senator COUZENS. That is one concrete difference, is it not ?
Mr. MORGAN. That is one concrete difference.
Senator COUZENS. SO I gather from you that your conclusions
are
that so long as you are a private bank that the depositor takes full
chances on the stability of the Morgan bank when he makes the
deposit without any records?
Mr. MORGAN. Yes.
Mr. PECORA. In the
course of the testimony you gave yesterday
you recall that you stated that a number of corporations engaged in
interstate business maintained deposit accounts with your firm which
at one time or other in the 5 years from 1927 to 1931, both inclusive,
had balances of a million dollars or more ?
Mr. MORGAN. Yes.
Mr. PECORA. Those
deposits are made in your bank without the
officers of those corporations who were responsible for the making
of those deposits having any knowledge of the actual financial worth
of your banking firm or of its constituent members ?
Mr. MORGAN. They are. They are. But they would be perfectly—
anybody would have the right to do it—could have a statement of
ours if he wanted it, if he asked for it. We would not have the
slightest objection to giving it to him.
Mr. PECORA. Have you ever given any such statement before?
Mr. MORGAN. They have never asked for it.
Mr. PECORA. Has any announcement ever been made before this
moment by any representative or partner of your banking firm tc
that effect?
Mr. MORGAN. Well, if you will look back at the Pujo investigation
when my father was on the stand he made the same statement.
Mr. PECORA. That investigation was the one held about 20 years
ago?
Mr. MORGAN. Yes.
Mr. PECORA. IS that the only publication of that policy, so far as
you know ?
Mr. MORGAN. That is the only public statement we have ever made
about anything.
Mr. PECORA. DO you recall, Mr. Morgan, that within the past 2
months I asked your firm as counsel for this committee to let me have
a balance sheet of the firm ?
Mr. MORGAN. I do recall it very well; yes, sir.
Mr. PECORA. And at the outset the position that was taken by
your firm, or its counsel, was that we were not entitled to it ?
Mr. DAVIS. I suggest that you strike out the word " firm " and
leave in the word " counsel."
STOCK EXCHANGE PRACTICES
103
Mr. PECORA. Well, the position was taken by the firm.
Mr. DAVIS. The counsel took that position.
Mr. PECORA. Well then, the postion was taken on behalf of the
firm by the firm's counsel.
Mr. DAVIS. That is absolutely correct.
Mr. MORGAN. I recall that.
Senator BARKLEY. I would like to ask you, Mr. Morgan, if it does
not interrupt, what happens when a new member comes into your
firm? For instance, Mr. Parker Gilbert, who came in on the 2d
of January 1931. Did he put in a certain amount of money that
would entitle him to a certain proportion of the profits of the firm ?
Mr. MORGAN. NO.
Senator BARKLEY.
What happened about that? What does happen ordinarily?
Mr. MORGAN. When he came in, and when each partner comes in
he signs the articles and he is assigned a certain proportion.
Senator BARKLEY. Of what?
Mr. MORGAN. Of the profits and losses.
Senator BARKLEY. Doesn't he put in any money ?
Mr. MORGAN. Not necessarily.
Senator BARKLEY. Does he not invest anything?
Mr. MORGAN. Not necessarily.
Senator BARKLEY. He just comes in and is enrolled as a partner?
Mr. MORGAN. AS a partner.
Senator BARKLEY. And without any investment on his part, and
shares in some proportion which is agreed to in the articles ?
Mr. MORGAN. Which is agreed upon at the time; yes.
Senator BARKLEY. In the profits ?
Mr. MORGAN. Yes.
Senator BARKLEY. And is obligated for the losses ?
Mr. MORGAN. Yes.
Senator BARKLEY. In the same proportion?
Mr. MORGAN. In the same proportion.
Senator BARKLEY. Of course his obligation is unlimited
so far as
the debts of the firm are concerned ?
Mr. MORGAN. Absolutely.
Senator BARKLEY. Regardless of whether he puts in any money
or not?
Mr. MORGAN. Yes.
Senator BARKLEY. SO
there is nothing in your firm that is analogous in any way to capital?
Mr. MORGAN. N O ; there is nothing of that kind. Well, I would
say—yes; there is the amount standing to the different partners'
credits.
Senator BARKLEY. Yes; but there is nothing standing to his credit
so far as investment is concerned ?
Mr. MORGAN. N O ; not before some earnings have come in.
Senator BARKLEY. What happens to those earnings when they
come in ? Does he get them ?
Mr. MORGAN. They are credited to his account.
Senator BARKLEY. DO they remain there in the firm or does he take
them out?
Mr. MORGAN. He generally leaves them in the firm, as much as he
He has to live.
Digitizedcan.
for FRASER
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STOCK EXCHANGE PRACTICES
Senator BARKLEY. Yes.
The CHAIRMAN. He agrees to perform certain service, I suppose?
Mr. MORGAN. He performs the general service of any general
partner.
Senator COUZENS. When he comes in, Mr. Morgan, do you get any
financial statement as to his financial responsibility?
Mr. MORGAN. NO.
Senator COUZENS. So he can share in the losses?
Mr. MORGAN. NO. We know him pretty well before
we get him
in, Senator.
Senator COUZENS. YOU have analyzed their worth before that?
Mr. MORGAN. We hope so. We think so.
Senator GLASS. The house of Morgan thought itself very fortunate
in getting such a man as Parker Gilbert, did it not?
Mr. MORGAN. Very fortunate.
Senator GLASS. In other words, he brought to the house an experience here and abroad that perhaps was not possessed by any other
member of the concern?
Mr. MORGAN. I think that is true. That is the main reason why
I wanted him.
Senator BARKLEY. Have you got any vacancies? [Laughter.]
Mr. MORGAN. Well, Senator, I am afraid there are plenty of us
these bad years, and there certainly is not any vacancy.
Senator COUZENS. Well, it is quite probable—it is quite possible,
at least, that a partner can come in because of the qualifications of
Mr. Parker Gilbert without having any net worth ?
Mr. MORGAN. Oh, yes; quite.
Senator COUZENS. SO he would not be able to share very extensively in any loss, would he?
Mr. MORGAN. Well, they would be charged to him and he would
earn them back.
Senator BULKLEY. In a general way, Mr. Morgan, your firm performs every banking function, does it not ?
Mr. MORGAN. Not in a general way. Only to the special people,
you see. We are not allowed to advertise ourselves as banking—as
receiving deposits. We do not apply for deposits.
Senator BULKLEY. And you do not designate yourselves as being
in any particular business at all, do you ?
Mr! MORGAN. NO.
Senator BULKLEY. AS
I recall it, at your place of business you
do not have any sign of any kind ?
Mr. MORGAN. We have no sign that we are a bank. We have our
name on the door, that is all.
Senator BULKLEY. And nothing but the name?
Mr. MORGAN. Nothing but the name.
Senator BULKLEY. And on your letterheads that you ordinarily
use ?
Mr. MORGAN. The same thing.
Senator BULKLEY. NO business stated thereon?
Mr. MORGAN. NO.
Senator COUZENS.
Are you listed among the banks? Is your
name listed among the banks?
Mr. MORGAN. We hope not. We have taken every precaution to
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Mr. PECORA. Mr. Morgan, is the name of the firm on any outer
door of the firm's office ?
Mr. MORGAN. It is not on the outer door. It is on the inner
door.
Mr. PECORA. Not visible from the street to any passer-by?
Mr. MORGAN. NO. Most of them know the address.
Mr. PECORA. YOU do not think the firm suffers any lack of prestige in the banking world because it does not advertise itself to
be bankers, do you ?
Mr. MORGAN. It does not seem to.
The CHAIRMAN. Mr. Morgan, may I get your idea about this:
You have spoken about the importance of preserving a private
banking system in connection with the other system, the public
system, the Federal system. May I ask, do you think it would be
advisable to provide a law, Federal or State or otherwise, in the
way of supervision or regulation of private banks or private investment institutions owned by private individuals? Do you think
that there ought to be any regulation or supervision provided by
law as to these institutions ?
Mr. MORGAN. I should not think so. I personally have not found
that the Government supervision has made such a great improvement in the banking world that I should feel that we need its help.
The banks are examined every 4 years, but I hear of banks that are
not quite right, and I hear of banks that are near the edge, and all
that sort of thing. And the investigations into them, the examinations of them, do not seem to make any difference.
The CHAIRMAN. We had about 10,000 failures in the last 10 years.
I do not recall any private bankers that have failed.
Mr. MORGAN. There have been very few.
Mr. PECORA. There have been a few in the city of New York.
Clark Brothers back in 1929.
Mr. MORGAN. Yes.
The CHAIRMAN. I
suppose you are doing a public banking business, and the public depositing money with you, and all that sort
of thing?
Mr. MORGAN. Oh, no; we are not going into the public banking
business.
The CHAIRMAN. But you are serving the public ?
Mr. MORGAN. Yes; but we are serving only our own clients who
are our clients by their own choice.
The CHAIRMAN. But you do not turn a man down; you do not
select your clients; you do not give them tickets and pass on them ?
Mr. MORGAN. Yes; we do.
The CHAIRMAN. YOU do?
Mr. MORGAN. Yes, indeed; we
The CHAIRMAN. I suppose if
do.
I went there, even though I had
never seen any member of the firm, and had $10,000 I wanted to
leave with the bank, you would take it in, wouldn't you ?
Mr. MORGAN. NO ; we should not do it.
The CHAIRMAN. YOU would not?
Mr. MORGAN. NO.
The CHAIRMAN. I
Mr. MORGAN. Not
Senator.
am quite sure then you would not
unless you came in with some introduction,.
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STOCK EXCHANGE PRACTICES
Senator MCADOO. Unless he were the chairman of the Banking
and Currency Committee.
Mr. MORGAN. That has been the rule for many, many years.
The CHAIRMAN. Then I am quite sure I could not borrow any
$10,000.
Mr. MORGAN. Not without an introduction.
The CHAIRMAN. Well, all that, however, does not dispense with
the actual functions of your bank. You are making loans otherwise. Do you make any loans on real estate?
Mr. MORGAN. We never have.
The CHAIRMAN. YOU do not make any ?
Mr. MORGAN. NO.
Senator BARKLEY.
Unless a man had some other business with
your firm besides depositing money why he cannot do business
with you; is that the situation ?
Mr. MORGAN. Well, if it is a man we know, a friend, a man who
knows one of the partners, or some reason or other comes in, and
he has the proper introduction, and we should take his money and
deal with him he might bring us business eventually.
Senator BERKLEY. Which is the largest proportion of your business, the banking business strictly in which you accept deposits and
make loans, or the security business in which you engage in the sale
and distribution and the underwriting of securities ?
Mr. MORGAN. I think that the larger part of our business is the
banking business, the straight banking business. And with the usual
letter of credit, in making loans abroad, and that sort of thing.
Senator COXJZENS. Your underwritings are a 'minor part of your
business ?
Mr. MORGAN. I would say the least profitable part. And in
volume I should say the least; yes.
Senator COUZENS. The lesser part ?
Mr. MORGAN. Yes.
Senator KFAN. Mr.
Morgan, is it not true that a large part of your
business is exchange too ?
Mr. MORGAN. We do not do a very large business in exchange,
but we do a certain amount for our clients.
Senator KEAN. Yes.
Senator STEIWER. Does your institution make a commercial loan
on an unsecured note to a business house ?
Mr. MORGAN. We have done it, but seldom. We have bought commercial paper in the old days.
Senator STEIWER. It is not your usual procedure?
Mr. MORGAN. It is not our usual procedure?
Senator BULKLEY. I t is not customary to make any real-estate
loans, Mr. Morgan ?
Mr. MORGAN. NO.
Senator BULKLEY.
The mortgage on Mr. Mitchell's home, was that
just additional security?
Mr. MORGAN. Additional collateral.
Senator BULKLEY. HOW did that happen to come in ?
Mr. MORGAN. It came in because Mr. Mitchell said " I cannot—I
have got so much now."
Senator BULKLEY. Well, that was called for later after the loan
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STOCK EXCHANGE PRACTICES
107
Mr. MORGAN. After the loan had existed for some time.
Senator COUZENS. Who introduced you to Mr. Mitchell, or Mr.
Mitchell to you, rather ?
Mr. MORGAN. Well, I can't remember that. It was a long time
ago, sir.
Senator COUZENS. I knew he had to have an introduction to get in.
Mr. MORGAN. Well, I knew Mr. Mitchell as the head of his bank
and intimately^ connected with us in many, many things.
Senator BARKLEY. It only requires one introduction?
Mr. MORGAN. HOW?
Senator BARKLEY. It
only requires one introduction, and that in
his case occurred years ago ?
Mr. MORGAN. Years ago.
Senator COUZENS. May I ask you another question, Mr. Morgan.
You dwelt at some length on the question of examination of these
banks and indicated I think with some force that the mere examination of a bank did not necessarily qualify it to accept public
deposits, is that correct?
Mr. MORGAN. Well, I meant to say—what I tried to say was that
the examination of the public bank, like everything human that
is done, is the carrying out of a law by a human being who may
not be quite successful.
Senator GLASS. Let me answer that question for you.
Senator COUZENS. But may I conclude with Mr. Morgan first?
I would like to ask: In view of the fact that this famous Federal
Reserve System had been examining the member banks over a
great many years, that has not insured the depositors in the member
banks of safety, has it ?
Mr. MORGAN. I do not know that it—it has not insured it, certainly.
Senator COUZENS. NO. In other words, there is just as much maladministration apparently in the member banks of the Federal
Reserve System as there has been in some of the State banks?
Mr. MORGAN. I do not think there is a great deal of maladministration, but the examinations have not prevented it.
Senator COUZENS. NO.
Senator GLASS. I was going to proceed to answer the question
for you more explicitly than you answered it yourself.
Mr. MORGAN. I am very glad to have you, sir.
Senator GLASS. I conjecture that you do not think much of the
examination of commercial banks, particularly national banks, when
the Comptroller of the Currency comes before the Banking and Currency Committee of the United States Senate and tells us that should
he enforce the law that he is sworn to enforce he would close half of
the national banks of the country ?
Mr. MORGAN. Well, I
Senator GLASS. That would indicate that the examinations are not
very effective, would it not?
Mr. MORGAN. It would seem so to me, sir. But, of course, I am
not here for the purpose of criticizing him, that I know of.
Senator GLASS. That answers the question, you concede, do you
not?
Senator COUZENS. It does not answer my question.
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The CHAIRMAN. AS I understand you, Mr. Morgan, it is that there
is no need, no requirement, no good reason, for any legislation looking to providing for supervision or regulation of private banks or
investment banks controlled privately; is that your view ?
Mr. MORGAN. I did not catch the drift of the latter question or the
last part of the question.
The CHAIRMAN. DO you think there is any need or any call for any
legislation with respect to private banks and investment banks
owned by individuals? Investment companies?
Mr. MORGAN. I do not know what you mean by investment banks.
The CHAIRMAN. Investment companies owned by individuals that
are doing a security business.
Mr. MORGAN. NO. My answer is I do not think there is any need
for investigation
The CHAIRMAN. For legislation?
Mr. MORGAN. For legislation.
The CHAIRMAN. AS to either investment bankers or private commercial banks?
Mr. MORGAN. NO, sir.
The CHAIRMAN. All right.
Senator BARKLEY. HOW many
private banks are there in New
York?
Mr. MORGAN. I do not know.
Senator BARKLEY. YOU know some of them, do you not?
Mr. MORGAN. I know some of them. There is Kuhn, Loeb & Co.,
and Dillon, Read & Co. that I believe are coming along here. And
Brown Brothers, Harriman & Co. Brown Brothers have been a
firm for longer than we have. Lehman Bros. I do not remember
the whole long list. There are eight or nine private banking firms
in New York.
Senator COUZENS. And they all accept deposits?
Mr. MORGAN. I believe all accept deposits. Do they not? [Addressing Mr. Whitney.]
Mr. WHITNEY. NO.
MORGAN. I thought they did.
Mr. WHITNEY. NO.
Mr. MORGAN. Well, I do not know about that, Senator.
Senator COUZENS. Maybe Mr. Whitney can tell us. Can you
Mr.
tell
us whether they all accept deposits ?
Mr. WHITNEY. Of course I really do not know, Senator, but my
impression is that some of them do not.
The CHAIRMAN. They could do it if they wanted to?
Mr. WHITNEY. Yes, certainly, if they wanted to. I am not sure.
The CHAIRMAN. And you could loan on real estate if you wanted
to, could you not? You have the right and the power to loan on
real estate?
Mr. WHITNEY. Yes.
Senator BARKLEY. Just
the same as anything else. You are not
regulated and controlled by law. You can loan or borrow on everything.
Mr. MORGAN. Your common-law rights begin to exist.
Senator BARKLEY. I mean, though, there is nothing to prevent
you from making loans on anything ?
STOCK EXCHANGE PKACTICES
109
Mr. MORGAN. N O ; nothing.
Mr. PECORA. May I ask, Mr. Morgan, if the articles of copartnership of your firm have been produced ?
Mr. MORGAN. They have not been produced yet, but
Mr. DAVIS. Beg your pardon?
Mr. PECORA. The articles of copartnership.
Mr. DAVIS. The messenger is on his way and we will have them
late in the afternoon, I think. I doubt whether we will get them
in time for the adjournment, though. But we will have them by
tomorrow morning.
Mr. PECORA. Are they not readily available at the New York
office?
Mr. DAVIS. Oh, yes.
Mr. PECORA. Why couldn't we have them today ?
Mr. DAVIS. I say a messenger is on his way with them.
I suppose
he left there this morning. I don't know.
Mr. PECORA. He might be here this afternoon?
Mr. DAVIS. They have to be taken, of course, from the vaults on a
time lock.
Mr. PECORA. NOW, Mr. Morgan, according to the consolidated
statement of condition or balance sheet submitted by your firm in
behalf of itself and Drexel & Co. on December 31, 1932, among its
assets were time loans of the aggregate value of $34,836,442,07 and
demand notes in an aggregate amount of $47,869,164.93. Do you
know whether or not all those loans are fully collateralized?
Mr. MORGAN. NO; but I understand that those that are not fully
collateralized are taken at the value of the collateral.
Mr. WHITNEY. There is a net figure of the full reserves that have
been made against value. There is no question whatever about the
value of certain unsecured loans. They might be definitely set and
perfectly good, but they are the loans that require collateral, and
that is the net figure of full reserve, bringing it down to actual
coverage value. In answer to that, those loans, that net figure, are
not under collateral except
Mr. PECORA (interposing). Now, is the loan to Charles E. Mitchell
undercollateralized ?
Mr. MORGAN. Well, it is not, is it [addressing an associate] ? I
do not know. We have held a reserve against him.
Mr. PECORA. But is the loan itself undercollateralized ?
Mr. MORGAN. The loan itself has less collateral than the original
loan would call for.
Mr. PECORA. IS the amount due and unpaid on account of the
principal of the loan greater than the market,value of whatever
collateral your firm holds against the loan?
Mr. MORGAN. It is.
Mr. PECORA. By what figure, approximately?
Mr. MORGAN. I don't know.
Mr. WHITNEY. May I answer the question?
Mr. MORGAN. Mr. Whitney is the authority on this thing.
Mr. PECORA. Mr. Whitney has heretofore been sworn.
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STOCK EXCHANGE PRACTICES
TESTIMONY OF GEOKGE WHITNEY—Besumed
Mr. WHITNEY. Mr. Pecora, you have asked two questions in this
connection: You have asked about this figure
Senator MCADOO. Mr. Whitney, will you speak a little louder?
Mr. WHITNEY. Mr. Pecora has asked two questions on it: He referred to these figures of time and demand loans and asked if those
loans were under collateral. Then he asked about Mr. Mitchell's
loans. Mr. Mitchell's loans
Mr. PECORA (interposing). One moment, Mr. Whitney. I asked
about Mr. Mitchell's loan in my last question.
Mr. WHITNEY. In your last question. This is the answer to Mr.
Mitchell's loan—it is under collateral. As reflected, however, in
these figures, there was a reserve set up against it, so that it is not
under collateral as affecting those figures. Does that answer your
question ?
The CHAIRMAN. YOU have your reserve to support your collateral ?
Mr. WHITNEY. Certainly.
Senator BARKLEY. Out of what reserve was that reserve set. up?
Mr. WHITNEY. Our own capital; net worth.
Senator BARKLEY. Your own capital?
Mr. WHITNEY. Our own capital, certainly.
Mr. PECORA. HOW much was set up for such reserve?
Mr. WHITNEY. About three and a half million dollars.
Mr. PECORA. On that one loan?
Mr. WHITNEY. On that one loan.
Mr. PECORA. And what is due and unpaid on it ?
Mr. WHITNEY. About five million eight.
Mr. PECORA. What was the
Mr. WHITNEY (interposing). I am speaking not exactly.
Mr. PECORA. But approximately?
Mr. WHITNEY. Yes.
Mr. PECORA. What was
Mr. WHITNEY. Oh, just
the highest amount of the loan?
over $6,000,000 to $250,000 above that. I
haven't got it exactly in mind, but it is approximately that, just over
$6,000,000. Since—you mean ever?
Mr. PECORA. Yes.
Mr. WHITNEY. Although
the original loan is for something over
$10,000,000, and then there was $4,000,000' of it paid which reduced
it in almost a week to about $6,000,000, and it is now about five
million eight. The original collateral is something over twice the
face of the loan.
Mr. PECORA. When you set up reserve out of your net worth you
are virtually setting it up out of capital, aren't you, out of what
constitutes the capital of the firm ?
Mr. WHITNEY. Certainly. Eeserves set up against these different
loans obviously reduce the figure of net worth.
Mr. PECORA. HOW much in the aggregate, according to the balance
sheet as of December 31, 1932, has been set up as reserve from net
~worth and deducted from net worth against loan accounts?
Mr. WHITNEY. Approximately $18,000,000.
Mr. PECORA. Eighteen million dollars. While you are testifying,
Mr. Whitney
STOCK EXCHANGE PRACTICES
111
Mr. WHITNEY (interposing). That is with the understanding, of
course, Mr. Pecora, that the 53 is after setting up the 18 million.
Mr. PECORA. Yes, I understood that.
Senator ADAMS. Mr. Whitney, just a matter of policy, many banks
when they have a loan which they think is less in value or there is
less amount to be collected simply charge the loan down. You pursue
the other policy of carrying the loan at its face value and charging it
against your net worth ?
Mr. WHITNEY. Until it is realized; yes, sir; because the obligation
running towards us has not been changed, but we want to keep our
books accurately, so we set up a reserve to reflect the true condition
of the loan on our own books.
Mr. PECORA. Mr. Whitney, you were present yesterday at the hearing at which testimony was given concerning a revaluation of securities composing assets of the firm on the 2d day of January 1931 ?
Mr. WHITNEY. .Yes, sir.
Mr. PECORA. Which revaluation
resulted in a loss of over 21 million dollars. Do you recall that testimony?
Mr. WHITNEY. I heard the testimony.
Mr. PECORA. YOU are familiar with it ?
Mr. WHITNEY. With the testimony ?
Mr. PECORA. Yes, sir.
Mr. WHITNEY. I heard the
Senator GLASS. Before you
testimony; yes, sir.
proceed with that, Mr. Pecora, I would
like to ask the witness a question on the other line. If I may inquire
into the private business of Morgan, why did you make that loan to
Mr. Mitchell?
Senator BULKLEY. We cannot hear you.
Senator MCADOO. What is the question ?
Senator GLASS. I asked, why did you make that loan to Mr.
Mitchell.
Mr. WHITNEY. Senator, that loan was made in the fall of 1929.
You remember—all of us I think remember—the 24th day of October 1929, the New York Stock Exchange had a very serious break
in prices. At that time, that day and the subsequent day, there was
a socalled stabilizing group formed by certain of the large New
York City banks, including ourselves, to try to make some order
out of the chaos that existed on the New York Stock Exchange, with
not the slightest desire to hold prices at any level, but just to create
a market so that business could go on and prevent a very serious
disaster.
You also remember at that time there was an undertaking between
the Corn Exchange Bank and the National City Bank which was
still subject to ratification by the stockholders looking to a merger
of those two banks. During those first days of the panic of 1929
-the National City Bank stock sold below the equivalent of the contract price of its exchange at the Corn Exchange Bank, which was
$450 a share.
On I think it was Monday the 28th of October 1929 Mr. Mitchell
expressed concern in the way that his stock of the National City
Bank was acting. The next day he inquired of us whether we would
be willing to lend him money in order that he could help support
the National City Bank stock, in the belief that when the panic was
over
things would improve—as a temporary loan. We agreed to do
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STOCK EXCHANGE PRACTICES
that in the interest of the situation, believing that Mr. Mitchell
was trying to help to carry through an undertaking which existed
between his bank and the Corn Exchange Bank, and we agreed at
that time to lend him 12 million of dollars, which would be collateraled with the National City Bank stock at 200. It was selling.
at about 400 at the time. He drew something over 10 million dollars
against that credit, and within a week I think something over four
million and a half of that was paid off, reducing it to the figure I
mentioned before of something over 6 million dollars.
Senator GLASS. Mr. Mitchell at that time was the dominating
figure in the National City Bank, was he not?
Mr. WHITNEY. Yes, sir.
Senator GLASS. And the
National City Bank at that time was
regarded, with a single exception, as the largest and strongest
commercial bank in the United States, was it not?
Mr. WHITNEY. Yes, sir; one of the largest and strongest.
Senator GLASS. What I am trying to develop is whether or not
you made that loan to this executive officer of this particular commercial bank with the idea that the House of Morgan might thereafter control the activities, operations, of National City Bank.
Mr. WHITNEY. We did not, sir. That was not in our mind at
all. We did it solely to assist in a very difficult situation, to assist
him in an effort we believed he was doing in the interest of the
situation, and we believed it was very important, if possible, at
that time.
Mr. PECORA. What was that effort of Mr. Mitchell that you
thought was important and on which you agreed to assist him?
Mr. WHITNEY. That he thought was important, and we thought
was a constructive effort—was to maintain the parity if he could
of his National City Bank stock against the contract with the Corn
Exchange Bank—not his contract, but the contract of his bank.
Mr. PECORA. YOU mean the contract of his bank. How was that
of interest to anyone but the stockholders of the two banks?
Mr. WHITNEY. I don't think it was.
Mr. PECORA. And Mr. Mitchell was a heavy stockholder of his
bank at that time, wasn't he ?
Mr. WHITNEY.
Yes.
Mr. PECORA. YOU know that when that plan for a consolidation or
merger of those two banks came up for action by the stockholders of
those institutions respectively the merger or consolidation was not
approved ?
Mr. WHITNEY. It was approved, but I believe I am correct in saying it was approved by the Corn Exchange Bank and not by the
stockholders of the City Bank.
Mr. PECORA. Isn't it just the other way around, Mr. Whitney ?
Mr. WHITNEY. 1 am pretty sure I am right, Mr. Pecora. You
may have looked it up, I have not for 4 years.
Mr. PECORA. DO you recall any action taken at a meeting of the
stockholders of the Corn Exchange Bank at which they ratified the
proposal to consolidate their bank Avith the National City Bank?
Mr. WHITNEY. DO I remember any meeting? I am not a stockholder of the Corn Exchange.
Mr. PECORA. Have you any knowledge in any capacity as a stock
holder or as one interested in finance?
STOCK EXCHANGE PRACTICES
113
Mr. WHITNEY. In the answer to your previous question I said my
recollection was the stockholders of the Corn Exchange Bank approved the merger. That is all I know about it.
Senator BARKLEY. Did this loan that you made to Mr. Mitchell,
both as to time and circumstance, have any relation to his announcement in the press that he or his bank were putting $25,000,000 into
the Stock Exchange to stabilize it ?
Mr. WHITNEY. NO. That was an entirely different time.
Senator GLASS. That was the year before?
-Mr. WHITNEY. That was the year before. No relation whatever.
Senator GLASS. That was when I wanted to put Mr. Mitchell out,
and I did not receive any great assistance from some of the Senators
mow who think he ought to be in jail.
Mr. WHITNEY. YOU might be interested, and the committee, Mr.
Pecora, if I just stated that we had no interest in any way in the
-National City Bank at the time we made this loan,
Mr. PECORA. AS a matter of fact, do you know how many shares
of the Corn Exchange Bank at that time had been acquired by Mr.
Mitchell in anticipation of this merger?
Mr. WHITNEY. NO, sir.
Mr. PECORA. And of his
getting whatever benefits might accrue
from an exchange of stock?
Mr. WHITNEY. By Mitchell personally, you mean?
Mr. PECORA. Yes.
Mr. WHITNEY. I had no knowledge.
Mr. PECORA. This loan to Mitchell
was made upon his personal
request, wasn't it?
Mr. WHITNEY. Certainly.
Mr. PECORA. And because of his personal interest as a stockholder
•of the National City Bank in effecting the merger?
Mr. WHITNEY. It is difficult to try to describe another man's motives, but he made it quite clear to us that he was more interested
at the time in his bank than he was his own personal holdings.
Mr. PECORA. And you and your partners considered it a piece of
great, constructive work to bring about or help bring about the
merger of those two banks?
Mr. WHITNEY. That was not in the situation at all, Mr. Pecora,
Ais I said before—I saidMr. PECORA (interposing). You said something about the plan
being of constructive value.
Mr. WHITNEY. NO, no; I said that we thought Mr. Mitchell's effort
was a constructive one.
Mr. PECORA. For whose benefit?
Mr. WHITNEY. For the benefit of the general situation.
Mr. PECORA. I don't quite understand what you mean by the " general situation." It is a bit too vague for me. What general situation
do 3^ou refer to?
Mr. WHITNEY. May I recall to your memory that in October 1929
there was a very serious stock market panic in New York?
Mr. PECORA. t have heard of it.
Mr. WHITNEY. This happened to be the fourth day of that panic.
Any very uncertain situation, such as the obligations of one of the
big banks of New York selling below their contract price, was ob
114
STOCK EXCHANGE PRACTICES
viously an upsetting factor, and it was that situation that we understood Mr. Mitchell tried to cure.
Senator BULKLEY. Wasn't it in connection with that same stock
market crash that Mr. Mitchell made his announcement that 25 million dollars would be available?
Mr. PECORA. That was the preceding March.
Mr. WHITNEY. NO ; that was 8 months before.
Senator GLASS. That was the year before.
Mr. PECORA. The preceding March.
Senator GLASS. It was right after the 1928 debacle.
The CHAIRMAN. When Mr. Mitchell paid the four million he withdrew a certain portion of his collateral of the National City Bank:
stock ?
Mr. WHITNEY. Yes. We delivered to the National City Co. under
his instruction.
Mr. PECORA. At that time what proportion of the net worth or
capital of the firm did that loan of $12,000,000 represent?
Mr. WHITNEY. Well, it was never # $12,000,000. $10,000,000 on.
December 31 of that year was something under 10 percent, and it
was actually only $6,000,000 at that time. So 11—about 6 percentAnd you will remember I said before it was at that time very substantial equity in margin.
Mr. PECORA. The equity consisted of the shares of the capital
stock of The National City Bank principally, didn't it?
Mr. WHITNEY. Yes.
Mr. PECORA. Any other kind of collateral?
Mr. WHITNEY. At that time I think not; no.
Mr. PECORA. And within 2 months after that
loan was made the
value of that collateral had depreciated to about one half of its
value at the time of the making of the loan ?
Mr. WHITNEY. If you have checked it. I have not checked it.
If you say so I will agree with you.
Senator BARKLEY. When did the stock decline to such an extent
that it was under collateral?
Mr. WHITNEY. Some time during the latter part of—the middle
part of 1930. Then of course Mr. Mitchell offered us additional
collateral, so that it was fully covered margin through the majority
of the year 1930.
Senator GLASS. I S it contemplated by legislation to prohibit a.
bank from making a bad loan ?
Mr. WHITNEY. I have not read that clause; no, sir.
The CHAIRMAN. I want to get this clear. You said something;
about National City Co. stock.
Mr. WHITNEY. I said we delivered the stock at Mr. Mitchell's instructions to the National City Co.
The CHAIRMAN. That was National City Bank stock?
Mr. WHITNEY. Yes, sir.
Senator BYRNES. Mr. Whitney,
what did you do with the stock
that was pledged as collateral ? You stated on this Mitchell loan
Mr. WHITNEY (interposing). What did we do with it?
Senator BYRNES. What did you do with it ? Do you still hold it t
Mr. WHITNEY. We held it as collateral against the loan.
Senator BYRNES. DO you still hold it?
STOCK EXCHANGE PRACTICES
115
Mr. WHITNEY. Yes, sir.
Senator BYRNES. None of it has been sold?
Mr. WHITNEY. •! don't know. We still hold
it, all the collateral
we have.
Senator GORE. IS that National City stock for the most part ?
Mr. WHITNEY. I could not hear, sir.
Senator GORE. Was that National City stock?
Mr. WHITNEY. National City Bank stock; yes, sir.
Mr. PECORA. Mr. Whitney, you said before that in the fiscal year
1932 some $18,000,000 was set up as a reserve against uncollateralized
loans.
Mr. WHITNEY. Well, reserve against loans; yes, sir.
Mr. PECORA. Against loans; and at the end of that fiscal year
the net worth of your firm was a little over $53,000,000?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. In view of
the fact that your firm as a firm of
private bankers found it necessary to apply the sum of $18,000,000
as a reserve against uncollateralized loans, don't you think it would
be a good provision, a wise provision, to apply some restriction upon
the making of loans by private bankers to an extent that might
impair their capital ?
Mr. WHITNEY. I don't see that that would have any particular
relation to the matter at all, Mr. Pecora. These reserves that we
have had to set up have been reserves against losses or depreciation
of collateral which have been brought about in almost every case
by the general condition of this country during the last three years.
Keserves have also, as you must know, been set up by all the incorporated banks, some to a greater, some to a lesser extent than we
have. I don't see that the mere fact of examination is going to stop
values depreciating in the country, and that is what caused our setting up reserves, and would have been equally true if these assets
had been held by the incorporated banks. That fact would not have
held them up.
Mr. PECORA. YOU don't mean to have the inference drawn from
your statement that you do not think examinations of any bank
serve any useful public purpose?
Mr. WHITNEY. Oh, I certainly do, and we would have no objection—or I would have no objection—to an examination being made
of us; but I don't think it would have prevented the necessity of
our setting up reserves.
Senator COUZENS. HOW long have you been a partner of Morgan ?
Mr. WHITNEY. Since December 31, 1919.
Senator GLASS. Mr. Chairman, right on that point may I interject this remark: I stated awhile ago to Mr. Morgan and have
stated several times on the floor of the Senate that the Comptroller
of the Currency came before the Banking and Currency Committee
of the Senate and textually stated to us that should he undertake to
enforce the law that he was sworn to enforce it would result in
closing up half of the national banks in the country. Perhaps I
ought to clarify that statement by saying that it was made 15
months ago, and I imagine would, not apply to those national banks
that are now in operation under the extraordinary power being
used by the Secretary of the Treasury of licensing banks to open.
116
SIOCK EXCHANGE PEACTICES
The inference is that banks which have been licensed to open are in
a sound condition.
Senator MCADOO. Mr. Whitney, as I understood it, you said that
your capital was about 53 million dollars.
Mr. WHITNEY. Yes, sir; that is, on December 31, 1932—net worth.
Senator MCADOO. Yes, net worth. Now, you had set up $18,000,000
by reserve, as I understand it?
Mr. WHITNEY. Yes, sir; approximately.
Senator MCADOO. Which is practically a 3 3 ^ percent reserve—
I mean 33% percent of your capital ?
Mr. WHITNEY. Why, no, sir; because that
Senator MCADOO (interposing). Eighteen millions, I mean, against
these loans.
Mr. WHITNEY. NO, sir; because the 53 figure is after having set
up the reserves. This is a net figure.
Senator MCADOO. Oh, that is the net?
Mr. WHITNEY. Yes.
Senator MCADOO. I
see. Let us call it 71, then. Your reserve,
then, in that case was about 25 percent, was it not?
Mr. WHITNEY. Yes, sir. Put it that way, yes.
Senator MCADOO. NOW, that is a very much larger reserve than
is required by chartered banks in the Federal Reserve System. The
reserve required of a member bank is something like 10 percent.
Senator ADAMS. This reserve is a different kind of reserve.
Senator MCADOO. I know it is, a different kind of reserve, reserve
against deposits, and this is a reserve against loans.
Mr. WHITNEY. Against possible losses, potential losses.
Senator MCADOO. It struck me as I heard you testify that it was
a very liberal provision for reserve against losses on these loans.
Mr. WHITNEY. That is something, Senator, we have no control
over. We have set up our reserves to meet each individual loan to
make that loan a sound loan. So it is not a question—it fluctuates
with the soundness of the loan.
Senator MCADOO. I understand that. What I was trying to get
at is this, whether it was not a matter of sound practice that you
were going even further than the ordinary chartered bank in the
proportions that you set up.
Senator ADAMS. If they set up 53 millions of reserves then that
would be—every time they increase those reserves they are that
much worse off, rather than better off.
Senator MCADOO. I understand that, but I am talking about looking at the other side of it. But the principal point is that with you
it is an unlimited liability of the partnership.
Mr. WHITNEY. Yes, sir.
Senator MCADOO. For all
Mr. WHITNEY. Yes, sir.
Senator MCADOO. Which,
that the partners are collectively worth ?
of course, stand back of every obligation
of the private banking house. With the incorporated bank }^ou have
a definite capital and surplus, and then you have a double liability
of the stockholders.
Mr. WHITNEY. Yes, sir.
Senator MCADOO. Beyond
I say it is unlimited,
that the liability ceases. Now with you
and therefore the same necessity for a legal
STOCK EXCHANGE PRACTICES
117
reserve required by an incorporated bank probably would not exist
with a strong private bank.
Mr. WHITNEY. Senator, may I—I think I agree
Senator MCADOO. I am only trying to get at the soundness of the
practice. That is all. Maybe I stated it the wrong way.
Mr. WHITNEY. We always keep in mind two things in connection
with our banking business, and one of the motives obviously for
that is the fact that it is an unlimited bank. One of them is not to
fool ourselves about the goodness of our assets. We believe that
our own examination is the strictest that at that time could be made
of ourselves of our own condition, because the man that has got his
money and reputation at stake obviously wants to know where he
stands.
The second thing is our liquidity, and you will notice on December 31 we were, approximately, going on the clearing-house basis
of liquidity, about 80 percent liquid.
Senator BARK-LEY. Mr. Whitney, you do not mean to leave the
impression on the committee, do you, that the combined private fortunes of all these 20 partners which are liable for their unlimited
liability of each of them and all of them amounted to only 53 million dollars?
Mr. WHITNEY. I did not infer that; no, sir. Did not mean to.
This is merely the amount each partner has on the. books of the firm?
outside investments
Senator BAEKLEY (interposing). It has nothing to do with the
background of their capacity to pay?
Mr. WHITNEY. Nothing whatever, sir. That is only the amount
on the books of the firm.
Mr. 'PECORA. Are there any records among the firm's records that
would indicate the financial responsibility
Mr. WHITNEY (interposing). Among the firm's records?
Mr. PECORA. Yes; thatMr. WHITNEY (interposing). I have not seen——
Mr. PECORA (continuing). Of the members of the firm?
Mr. WHITNEY. I have never seen anything to do with the firm's
records. We obviously know a good deal about each other.
Mr. PECORA. Well, in view of that, let me ask you this: Are any
members of the firm indebted to the firm ?
Mr. WHITNEY. Well, I have to check.
Mr. PECORA. Well, now, wouldn't you be likely to know that without having to check?
Mr. WHITNEY. I would rather check, Mr. Pecora.
Mr. PECORA. Check against what?
Mr. WHITNEY. Against the 'books.
Mr. PECORA. Don't you know without checking?
Mr. WHITNEY. I do not keep the books.
Mr. PECORA. Don't you know, without checking, whether or not
any of your partners owe the firm?
Mr. WHITNEY. I know it, but
Mr. PECORA. Which?
Mr. WHITNEY. I would rather not trust to my recollection.
Mr. PECORA. I have not asked you for the amount of the loan*
but for the fact as to whether any of your partners are indebted
118
STOCK EXCB.ANGE PRACTICES
to the firm. You said you knew whether or not that was the fact.
Tell us what the fact is in that respect.
Mr. WHITNEY. The answer is, yes.
Mr. PECORA. HOW many?
Mr. WHITNEY. That I do not know.
Senator MCADOO. Mr. Whitney, can you say what the collective
responsibility of the combined partnership is?
Mr. WHITNEY. I have no idea, Senator.
Senator MCADOO. YOU have no idea?
Mr. WHITNEY. I mean, not an idea that I would care to make a
guess.
Senator MCADOO. Would you give a guess?
Mr. WHITNEY. NO; I would rather not. I do not like guessing
under oath.
Senator BYRNES. May I ask you this with reference to the question
asked by counsel. A partner may be indebted to the firm by reason
of withdrawal, I assume, from the amount to his credit with the
firm?
Mr. WHITNEY. If he withdrew from the firm?
Senator BYRNES. If he overdrew the amount which had been
credited upon the books. That would not necessarily mean that you
were insolvent and of no value as a measure of safety toward
depositors ?
Mr. WHITNEY. That is right.
Senator ADAMS. Are the indebtedness of partners collateralized ?
Mr. WHITNEY. I could not answer that without checking, Senator.
I would like to. Of course, you understand that net worth is the
net worth of the firm; and the arrangement between the partners is
really not material here, because the net worth is what matters, so
far as the firm goes, the joint and several liabilities.
Senator BYRNES. But at no time do you attempt to secure from
the partners a statement as to the financial responsibility of the
partners ?
Mr. WHITNEY. I think you will find that we know in general;
yes. But so far as a statement goes, no. I do not want that to
imply ignorance of their general affairs; but as to a statement, the
answer is no.
Senator BYRNES. Your answer is that at no time do you secure
a statement?
Mr. WHITNEY. TO the best of my recollection; no.
Mr. PECORA. Are the indebtednesses of various partners to the
firm included in the balance sheet of the items of time or demand
loans ?
Mr. WHITNEY. They are not.
Mr. PECORA. They are not?
Mr. WHITNEY. They are not. I just said, Mr. Pecora, that the
debit balances of the partners serve to reduce the figures of the net
worth of the firm. If we set them up as loans they would be continued as an asset of the firm. That is not the way they are treated.
Mr. PECORA, Have you any objection to an auditor or an accountant of this committee examining your books with a view of breaking
down this balance sheet?
STOCK EXCHANGE PRACTICES
119
Mr. WHITNEY. AS a matter of fact, we are in process of having
an audit made now; not by this committee, but by Messrs. Price,
Waterhouse & Co.
Mr. PECORA. YOU have been in process of having an audit made
for the past several weeks, have you not?
Mr. WHITNEY. Yes; we started before we heard of- the summons
liere.
Mr. PECORA. YOU started, however, right after the questionnaire,
..so called, was sent by me to your firm, did you not ?
Mr. WHITNEY. Long before that—2 or 3 weeks before then.
Mr. PECORA. HOW many of those accountants from Price, Waterhouse & Co. have been auditing your books since that time?
Mr. WHITNEY. I have not got the remotest idea.
Mr. PECORA. Over a hundred ?
Mr. WHITNEY. I cannot answer that; but from my general knowledge of an audit, the first day when they come in there are generally
more than a hundred, and then that dwindles down, as you know
from .many other examinations. It dwindles off.
Mr. PECORA. HOW many are making the audit now ?
Mr. WHITNEY. I do not know.
Mr. PECORA. Who does—Mr. Keyes?
Mr. KEYES. I could not give you any idea.
Mr. PECORA. Approximately?
Mr. KEYES. There are still 5 or 6.
Senator GLASS. Are they white men or black?
Mr. KEYES. They are white men.
Mr. PECORA. HOW many of them were brought in from Price,
Waterhouse & Co. ? What was the largest number at any one time,
for the purpose of making this break-down of your balance sheet?
Mr. WHITNEY. That is not what they were brought in for.
Mr. PECORA. I thought that was what you said.
Mr. WHITNEY. NO ; I did not say that, thank you. I said that we
were having an audit made. I did not say anything about a breakdown.
Mr. PECORA. HOW many accountants—what was the largest number that came from Price, Waterhouse & Co. within the last 2 months
to make this audit? And don't tell us what their color was.
Mr. WHITNEY. Mr. Pecora, if you are interested in the number
that came in, for the first 2 days, over Saturday and Sunday, when
they took possession of our vaults, I think by the use of the telephone
during the recess we can call up and find out. I have already told
you that a great many came in, as is customary in any other bank,
to make an audit and a check of securities.
Mr. PECORA. Was there an outside firm of accountants which prepared this balance sheet which your firm furnished me?
" Mr. WHITNEY. NO, sir.
Mr. PECORA. That was made by your own force ?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Have you any information as to w^hen
this audit will
the completed by Price, Waterhouse & Co.'s men?
Mr. WHITNEY. I have an idea; yes.
Mr. PECORA. When?
Mr. WHITNEY. AS soon as the reconcilements come in.
120
STOCK EXCHANGE PRACTICES
Mr.
Mr.
Mr.
PECORA. When will that be, do you think?
WHITNEY. I do not know, Mr. Pecora.
PECORA. Have you any preliminary report from them?
Mr. WHITNEY. Yes.
Mr. PECORA. May we have a copy of that ?
Mr. WHITNEY. I will have to ask Messrs. Price, Waterhouse & Co,.
Mr. PECORA. YOU say you will have to ask Price, Waterhouse &
Co.?
Mr. WHITNEY. Yes. I would not want to give anything
Mr. PECORA. We will take it for what it is worth, not as a certified
report.
Mr. DAVIS. If Price, Waterhouse & Co.'s report is of any interest
to the committee, we will get the Price-Waterhouse certificate on it*
Mr. PECORA. All right.
Mr. DAVIS. If that is of interest to the committee. That is a
matter which I suppose the committee will decide.
Mr. PECORA. When do you suppose that will be, Mr. Davis?
When will it be obtained?
Mr. DAVIS. When does the committee want it?
Mr. PECORA. The sooner the better; as soon as it can be obtainedMr. DAVIS. IS that the will of the committee ?
Mr. WHITNEY. We will try to expedite it for you.
Mr. PECORA. Can we not get some definite statement from anybody there as to when this report will be received ?
Mr. WHITNEY. It would all depend upon the wishes of this committee.
Mr. PECORA. ISTo; the wishes of the committee have nothing to do
with the time within which it would be prepared.
Mr. WHITNEY. I think it would be very promptly.
Mr. PECORA. What do you mean—within the next two days ?
Mr. WHITNEY. Oh, yes.
Mr. PECORA. All right.
I ask that that be produced and furnished to the committee for
the record, Mr. Chairman.
Mr. WHITNEY. Did I understand correctly your question before,
about the preparation of this sheet—did you ask if it was checked
by outside auditors ?
Mr. PECORA. I asked if this balance sheet furnished to me was prepared by outside accountants.
Mr. WHITNEY. It was not.
PECORA. YOU answered it in that way.
WHITNEY. It was prepared by our office.
PECORA. YOU answered it.
WHITNEY. That is quite clear ?
Mr. PECORA. Yes, sir.
Senator COUZENS. There was one question that
Mr.
Mr.
Mr.
Mr.
you did not pursue—-and I do not know whether Mr. Whitney answered or not—and
that is whether or not they would permit our accountants to go in
and break down those books.
Mr. WHITNEY. I did not answer it, but I offered the report of
Price, Waterhouse & Co. in substitution.
Senator COUZENS. Would that be a breakdown?
Mr. WHITNEY. Yes, sir; the certificate is predicated upon a break
down as it happens to be as of March 31.
STOCK EXCHANGE PRACTICES
121
Mr. PECORA. Of this year?
Mr. WHITNEY. This year; yes.
Mr. PECORA. DO you know, Mr. Whitney, whether or not your firm
made any loans to any individual borrower in excess of 10 percent
of the net worth capital of the firm ?
Mr. WHITNEY. At the time it was made ?
Mr. PECORA. Any loan account, any individual loan account at any
time.
Mr. WHITNEY. Any individual ? I am sure not.
Mr. PECORA. Any individual loan account?
Mr. WHITNEY. We have never kept it on that basis, Mr. Pecora;
but my guess would be that we never have. I do not know of any.
I do not think we have.
Senator ADAMS. Would your Mitchell loan run over that 10 percent item?
Mr. WHITNEY. NO, sir; because I pointed out .that our net worth at
the end of 1929, December 31, was $118,000,000, and the amount we
loaned of it for a few days was slightly over $10,000,000, and it was
immediately reduced to $6,000,000, although it never actually got—
we do not figure it that way. We had no occasion to. As a matter of
fact, we did note
Senator COUZENS. With respect to net worth going from $118,000,000 to 5 or 6 million between those periods, that may be brought
about by distribution among the partners or by losses; is not that
correct ?
Mr. WHITNEY. Yes, sir, and payment of taxes.
Senator COUZENS. SO that this drop may be in one of those divisions, taxes or losses or distribution among the partners?
Mr. WHITNEY. Yes, sir.
Senator COUZENS. Have
you any figures indicating how this is
divided between taxes, losses, and distribution to partners?
Mr. WHITNEY. I have not; no, sir. But it is safe to hazard a
guess, I think, that the bulk of it is depreciation of securities and
depreciation of collateral securing loans. I can get that for you if
you would like me to.
The CHAIRMAN. What taxes do you refer to—income taxes?
Mr. WHITNEY. I referred to income taxes, because it really would
be answered by Senator Couzens' suggestion of distribution to the
partners.
The CHAIRMAN. And State taxes?
Mr. WHITNEY. Yes. On tax matters, Senator Fletcher, I will
have to refer to Mr. Keyes, because I do not know anything about
it.
Senator BARKLEY. There is no corporation tax that would apply
to your firm. It is composed of individuals?
Mr. WHITNEY. Yes, sir.
Senator COUZENS. But they have local and State taxes.
Mr. WHITNEY. But they are imposed individually.
Senator COUZENS. But that might reduce your surplus.
Mr. WHITNEY. Oh, certainly, sir. Mr. Keyes advises me
that the
partners collectively paid $11,000,000 in taxes in 1930 for the 1929
taxes.
Senator COUZENS. What did you distribute among the partners
that
year?
122
STOCK EXCHANGE PRACTICES
Mr. WHITNEY. I could not tell you.
Senator COTTZENS. YOU offered to give the information, and I
wondered if you had it now.
Senator ADAMS. Mr. Whitney, it is rather difficult to hear. Can
you not speak a little louder ?
Mr. WHITNEY. DO you want me to repeat my last answer ?
Senator ADAMS. I think not.
Mr. WHITNEY. In 1930 the partners individually paid Federal
income taxes to the extent of $11,000,000, which was withdrawn by
those partners from the firm.
Senator BARKLEY. That was the tax paid by the individual members, and all other taxes on all sources ?
Mr. WHITNEY. All sources; certainly.
Mr. PECORA. That was for the taxable year 1929 ?
Mr. WHITNEY. Yes,
Mr. PECORA. Since
sir.
that time very few, if any, of the partners
have paid any income tax at all up to the present time ?
Mr. WHITNEY. SO we heard yesterday.
Mr. PECORA. What you heard yesterday was in accordance with
your knowledge, was it not?
Mr. WHITNEY. I only have knowledge of my own.
Senator GLASS. And it would have been impertinent if you tried
to find it out from any of the others?
Mr. WHITNEY. Yes,
Senator GLASS. If
sir.
I had been your partner I would have told
you that.
Senator GORE. Can you break that down into any of the different
sources ?
Mr. WHITNEY. NO, sir; I cannot. I just volunteered that information to Senator Couzens, but I have no data of any kind to
support it.
Senator GORE. DO you know whether or not this is true? Is the
principal part of that income derived from the sale of securities?
Mr. WHITNEY. I just do not know, Senator Gore. I would answer
you if I did, but I do not know.
Senator GORE. Let me ask you this: Would it be practicable for
ou to furnish the committee a schedule of the stocks bought and sold
iy your concern during that year, the price at which bought and
the price at which sold?
Mr. WHITNEY. Mr. Pecora has asked for a great deal of information along that line.
Senator GORE. I thought probably he had. Is that included in
your question, Mr. Pecora?
Mr. PECORA. Senator, I could not hear your question of the witness. I am sorry.
Senator GORE. I was asking for a schedule of the purchase and
sale of stocks in 1929, the price at which bought, the price at which
sold, and the date of the purchase and sale.
Mr. PECORA. We have asked for such information. It has been
furnished and has been analyzed by accountants for the committee.
The analysis has not been entirely completed because of the mass
of material that was the subject of the analysis.
Senator GORE. I will not insist on my question, but will the
answer
probably develop the sales during September, October, and
STOCK EXCHANGE PRACTICES
125
November, 1929? I ask because I have heard suggestions made
about the transactions of this firm during that period, and I want
to get it into the record to see whether these are facts or not, because then we can draw some inferences from them.
Mr. WHITNEY. YOU are inquiring as to both purchases and sales
in the fall of 1929?
Senator GORE. Yes; the date of purchase, and so forth.
Mr. WHITNEY. Mr. Pecora has asked one question that deals very
pertinently with that, about a stock pool.
Senator GORE. I would not want to duplicate it or to take your
time. I would like to ask whether Mr. Pecora has asked you to*
submit a list of securities held by your firm on the 1st day of May
or of April of this year and stocks that were sold during September
and October, say, of 1929, which have been repurchased and which
were held on May 1.
Have you asked any question of that sort, Mr. Pecora?
Mr. PECORA. NO, sir.
Mr. WHITNEY. It was
not phrased quite like that, but a great deal
of it covers it.
Senator GORE. Whether securities sold in the fall of 1929 have been
repurchased and at what price ?
Mr. PECORA. Senator Gore, we have asked them for the following
information:
A list of all stock and bond issues in which either of said firms—
referring to J. P. Morgan & Co. and Drexel & Co.—has participated
in connection with the following details:
(a) Whether such participation was in the original firms group
to take care of wholesale distribution or any other group.
(b) All other detailed information similar to the classification embodied in the report of J. P. Morgan & Co. submitted to the Senate
Finance Committee which investigated foreign bond issues.
This question applies to those transactions for the 5-year period
commencing January I, 1927, and ending on December 31, 1931.
We also have asked for a list of all pools, joint accounts, and/or
syndicates in which either of said firms or representatives participated, giving the name of the security involved; names of all participants, and all details with respect to the amount of the participation
and profits and losses. That also for the same 5-year period.
I do not think, sir, that those two requests for information include
all of the transactions that you have in mind, if I correctly understood the Senator's question.
Mr. WHITNEY. But it is true, Mr. Pecora, that you have amplified
those questions in many instances, so that in a great many cases you
have asked for and have received the information covered by Senator
Gore's question.
Mr. PECORA. We have not the complete record of all those transactions.
Mr. WHITNEY. Oh,
Senator BARKLEY.
no.
I would like to ask you or Mr. Morgan, or
both, what relationship, if any, exists between your firm and the
New York Stock Exchange ?
Mr. MORGAN. My answer to that is that I have been a member of
the stock exchange since 1894, and the firm considers itself a member of the stock exchange.
124
STOCK EXCHANGE PRACTICES
Senator BARKLEY. DO you have a seat on the New York Stock
Exchange ?
Mr. MORGAN. Yes; I have a seat on the exchange. I have never
conducted a transaction on the stock exchange myself.
Mr. WHITNEY. We have two seats.
Senator BARKLEY. Are they in the name of the firm?
Mr. MORGAN. N O ; they are in the name of the individuals.
Senator ADAMS. Under the rules of the stock exchange they have
to be in the names of individuals ?
Mr. MORGAN. Yes, sir.
Senator BARKLEY. TWO
of your 20 members, then, have seats on
the stock exchange?
Mr. MORGAN. Yes.
Senator BARKLEY. YOU have had yours since 1894?
Mr. MORGAN. Yes.
Senator BARKLEY. And you have never used it?
Mr. MORGAN. I have never used it, but I have retained
membership. We have the advantage of the membership on the stock exchange.
Mr. WHITNEY. YOU mean, you have never traded on the floor.
Mr. MORGAN. I have never traded on the floor.
Senator BARKLEY. TO what extent has your firm dealt actively
on the stock exchange ?
Mr. MORGAN. We do not ourselves deal actively on the stock exchange at all.
Senator BARKLEY. DO you deal through brokers in the purchase
and sale of stocks?
Mr. MORGAN. Yes; always.
Senator BARKLEY. DO you deal for the firm or for your clients, or
both.
Mr. MORGAN. We do it for a client or for the firm, either way.
Mr. WHITNEY. Most of it is for clients.
Mr. MORGAN. Most of it is for clients, of course.
Senator BARKLEY. DO you know what proportion of your total
business and total profits arises out of your transactions on the stock
exchange ?
Mr. MORGAN. I do not know that offhand. I t would take a long
time to find it out.
Mr. WHITNEY. That is what we call a very good bread and butter
business.
Senator BYRNES. If the Senator ^s through, may I ask a question ?
Senator BARKLEY. I would like to ask Mr. Whitney, what is your
relation to the president of the stock exchange?
Mr. WHITNEY. A younger brother.
Senator BYRNES. I wanted to ask you a question with reference
to loans to individuals connected with banking institutions, such
as the loan to Mitchell.
Mr. WHITNEY. It was thought to be a temporary loan when it
was made, a clearance loan, as we call it.
Senator BYRNES. IS there any other loan approximating the
amount of the Mitchell loan?
Mr. WHITNEY. NO, sir.
STOCK EXCHANGE PRACTICES
125
The CHAIRMAN. What brokers do you usually deal with? You
spoke about transactions on the stock exchange and dealing through
brokers. Do you have any particular broker ?
Mr. MORGAN. We use dozens of them, just depending
Mr. WHITNEY. I t depends on what the security is, Senator.
Mr. MORGAN. I t depends on what the security is, very often.
The CHAIRMAN. I did not know but you had some particular
house that you dealt with.
\
Mr. WHITNEY. I happened to check that the other day, and there
are something like 32 houses. If it is bond business we use one set
of brokers, bond brokers, as they are called. If it is stocks, brokers
who specialize in certain stocks. It all depends upon the security.
Senator BARKLEY. Does your firm have any advantage over any
other bank in dealing with the stock exchange?
Mr. MORGAN. If we are members of the stock exchange we get our
business done for half the commission.
Mr. WHITNEY. The stock exchange practice is to charge a nonmember the full commission and we pay what is called a clearance
commission and retain the balance. We make a profit on the stock
exchange member account.
The CHAIRMAN. YOU have a seat?
Mr. MORGAN. Yes, sir. I have one, and my eldest son.
Senator BARKLEY. I S there any other advantage besides the fact
that you deal at half price
Mr. WHITNEY. That is not quite what it is. I t is in varying
amounts, but we do get the right to retain a portion of the commission.
Senator BARKLEY. Of course, no incorporated bank would have
a seat on the stock exchange; it has to be an individual?
Mr. WHITNEY. That is my understanding.
Senator BARKLEY. I S there any rule against a stockholder or
director of an incorporated bank having a seat on the stock
exchange ?
Mr. WHITNEY. I think you have gone into this fairly fully before,
but I think it is a rule that no member of a stock exchange firm
can have any other business. I think that is a rule of the stock
exchange. I do not think they permit their members, in other
words, to be officers of a bank, operating officers.
Senator BARKLEY. That is a rule and regulation of the exchange
itself; it is not in any law?
Mr. WHITNEY. Yes. I really ought not to have volunteered that,
because I do not know the rules of the stock exchange.
Mr. PECORA. I S not that rule in principle violated because of the
two partners of J. P. Morgan & Co. who hold memberships in the
New York Stock Exchange ?
Mr. WHITNEY. In what way ?
Mr. PECORA. That they conduct a general banking business and
investment in securities business and as a house of issue.
Mr. WHITNEY. That, Mr. Pecora, is not what I said. I said we
are members of the New York Stock Exchange. That is not our
only business. That is the rule to which I referred. If we were a
175541—33—PT 1
9
126
STOCK EXCHANGE PKACTICES
stock house, a member of an incorporated bank, I believe there is
a rule that would not permit us to do that. But we are members
of the stock exchange and we are engaged in the banking business.
Mr. PECORA. The thing that saves you, then, from the rule is the
fact that you are not a chartered bank ?
Mr. WHITNEY. Yes. I do not think that is put just as I would
put it. It is not a question of being saved from anything. We are
members of the New York Stock Exchange and do a general banking business. It is not prohibited under the rules of the stock
exchange.
Mr. PECORA. From time to time the governing authorities of the
New York Stock Exchange call upon the members to give them
certain information in reply to so-called questionnaires; is not
that so?
Mr. WHITNEY. They do.
Mr. PECORA. Has any member of the firm of J. P. Morgan & Co.
who holds a seat on the New York Stock Exchange ever been
required to answer such a questionnaire, to your knowledge ?
Mr. WHITNEY. They have never been either required or requested.
As you undoubtedly know, that rule as to questionnaires does not
apply to houses that do not do what is known as marginal business
in securities and stocks; and there are several members of the New
York Stock Exchange, including ourselves, who are not doing that
type of business and are not subject to the questionnaire.
Mr. PECORA. Who are the others?
Mr. WHITNEY. DO you happen to have a stock exchange directory
with you ?
Mr. PECORA. In addition to the two partners holding memberships
on the New York Stock Exchange, do any of your partners hold
memberships in any other stock exchange?
Mr. WHITNEY. Yes, sir. We hold a membership in the Boston
Stock Exchange; and if I can have an answer to my question I
can read them in. The exchange in Philadelphia. I think there
are two in Philadelphia, speaking from memory; but I would rather
read it.
Mr. PECORA. Are you now ready to answer ?
Mr. WHITNEY. Mr. Pecora, we hold 2 seats on the New York Stock
Exchange, 1 associate membership on the New York Curb Association, 1 membership on the Boston Stock Exchange, 2 in the Philadelphia Stock Exchange, and 1 in the Philadelphia Bourse, and 1 in
the Philadelphia Commercial Exchange.
Mr. PECORA. Mr. Whitney, going back to some testimony you gave
a short time ago, let me ask you again: Are you reasonably certain
that your firm at no time made a loan to any one borrower, whether
individual or corporate, in excess of 10 percent of its then net worth?
Mr. WHITNEY. My answer, I think, Mr. Pecora, made before would
still stand that I do not recollect; no. But I would not want to make
a definite statement. Frankly, I do not recollect any, and I don't
think we did have.
Mr. PECORA. Mr. Chairman, may I resume now with Mr. Morgan?
Senator GLASS (presiding). Yes.
STOCK EXCHANGE PRACTICES
127
Senator GORE. Mr. Pecora, before you leave that let me ask you if
the questions you have submitted will develop ah answer to this
inquiry: It has been alleged, and this is not a secret from anybody's
standpoint, that the House of Morgan in the fall of 1929 sold stock
in order to break the market, that they sold stock in order to scuttle
or sink the ship. Now, I can assume that they might answer that
they sold stock to get off the sinking ship, and that they had a right
to do that as much as anybody else.
Mr. WHITNEY. I think the answer to your question, if I understand it correctly, is to be found in this—well, I think you will findi
that the only stock transactions we had on the New York StockExchange in the month of October as a firm, but I would not want
to say that it is literally true, but it is practically true, were on the;
purchasing side.
Senator GORE. Yes, sir; I see. Well, I wanted to get that in they
record. I was asking Mr. Pecora whether his questions would
develop that fact.
Mr. WHITNEY. That was almost entirely connected with a stock
pool of 1929, to which I referred before.
Senator GORE. There was no effort to prop or bolster the market ?
Mr. WHITNEY. NO, sir; but to create some market on which in
the case of our investments and others, they could liquidate if they
found it necessary, but not to prop the market.
Senator GORE. It was published that it was a combination, and I
supposed that was justified.
Mr. WHITNEY. A combination of what?
Senator GORE. A combination on the part of New York bankers
in an effort to prop or bolster the market.
Mr. WHITNEY. I never heard those two verbs used. I heard the
word " stabilized
" used, but I never heard the words " prop " or
" bolster 55 used.
Senator GORE. Well, they were bandied about a good deal at that
time.
Senator GLASS. I think the word " stabilize " should be eliminated
from the dictionary, because there has never been any stabilization.
Senator GORE. Yes; I would join you in that wish, Senator Glass.
As I understand, Mr. Pecora's question will develop that matter.
Mr. WHITNEY. Yes; I think in large part.
Mr. PECORA. It does not mean that there were no attempts at all
to bolster or stabilize the market?
Mr. WHITNEY. DO you mean of the stock market or other things?'
Mr. PECORA. I mean the stock market.
Mr. WHITNEY. NO, sir.
Senator GLASS. We have
had a good many efforts at stabilization,,,
but we never had any evidence of such efforts succeeding.
Mr. PECORA. I think the record of the hearings held by this committee, I mean the last committee, will supply such evidence, of socalled stabilization operations, succeeding at least during the operations.
Senator GLASS. Gh, momentarily; yes. But stabilization means t o
keep something at a given point.
Senator COTTZENS. For how long.
128
STOCK EXCHANGE PRACTICES
Senator GLASS. It does not mean
Mr. PECORA. NOW, Mr.
Senator GLASS (interposing). I
to chuck it up and down.
am quite as familiar as you are
with the testimony that we have heard here, before this time.
Mr. PECORA. I have a rather vivid recollection of it, because 1
heard it.
Senator GLASS. And so did I, every word of it.
Mr. PECORA. I will now ask Mr. Morgan to resume the stand.
TESTIMONY OF J. P. MOEGAN, SENIOR MEMBER OP THE FIRM OF
J. P. MORGAN & CO., 23 WALL STREET, NEW YORK CITY—
Resumed
Mr. PECORA. Mr. Morgan, have you produced here a list showing
the names of all banks and trust companies in which J. P. Morgan
& Co. and Drexel & Co. maintained deposit accounts during the
5-year period from 1927 to 1931, both inclusive?
Mr. MORGAN. I understand so. I would like to see whether they
are the same.
Mr. PECORA. I will show you this list, which was given to me by
a representative of your firm before the hearings commenced. Will
you kindly look at it and tell us if that is the list in question?
Mr. MORGAN. Yes, sir.
Mr. PECORA. IS that a
complete and correct statement of such
banks and trust companies?
Mr. MORGAN. TO the best of my knowledge and belief, it is; yes.
Mr. PECORA. I offer this in evidence and ask that it be spread upon
the record.
Senator GLASS. If there is no objection that will be done.
(The list submitted, in response to question 4, such question being:
" Names of all banks and trust companies in which the said firms
maintained deposits during said period, and the amount of said
deposits at the present time in any of said banks and trust companies in which such deposits are still maintained; names of all
other banks or trust companies in which deposits are now maintained,
and the amount of such deposits," was marked " Committee Exhibit
No. 8, May 24, 1933 ", and is as follows:)
Banks and trust companies in which J. P. Morgan & Go. have maintained deposits since Jan. 1, 1921, together with balances of such accounts, Mar. 24,
19S3
Bankers Trust Co., New York
Chase National Bank, New York
Central Hanover Bank & Trust Co., New York
Chemical Bank & Trust Co., New York
Corn Exchange Bank & Trust Co., New York
First National Bank, New York
Grace National Bank, New York
Guaranty Trust Co., New York
Irving Trust Co., New York
National City Bank, New York
New York Trust Co., New York
Manufacturers Trust Co., New York (account opened Dec. 29,
1932)
First National Bank, Boston, Mass
National Shawmut Bank, Boston, Mass
$2,240,565.32
1, 411, 799. 78
1, 594,116. 52
1,113,180.03
938, 719. 97
2, 431, 732. 34
100,006.46
2,609,591.80
1, 399, 495. 72
1,265,921.74
1, 251, 734. 65
335, 878,12
109, 993. 55
243,508.06
STOCK EXCHANGE PRACTICES
129
Banks and trust companies in which J. P. Morgan & Go. have maintained deposits since Jan. 1, 1927, together ivith balances of such accounts, Mar. 24,
1933-—Contirme&
Second National Bank, Boston, Mass
New England Trust Co., Boston, Mass
American Exchange Irving Trust Co., New York. (Name
changed Feb. 1, 1929.)
Central Union Trust Co., New York. (Merged May 16, 1929.)
Hanover National Bank, New York. (Merged July 1, 1929.)
National Bank of Commerce, New York. (Merged May 6, 1929.)
National Park Bank, New York. (Merged Aug. 23, 1929.)
Farmers Loan & Trust Co., New York. ^ (Account closed July
19, 1929.)
Mechanics & Metals National Bank, branch. (Merged Oct. 31,
1927.)
Old Colony Trust Co., Boston, Mass. (Merged Jan. 2, 1930.)
Baltimore Trust Co. (formerly National Union Bank of Maryland). Account closed Feb. 19, 1932).
Continental-Illinois National Bank & Trust Co. of Chicago
Peoples-Pittsburgh Trust Co
Mellon National Bank, Pittsburgh
Union Trust Co., Pittsburgh
%
Philadelphia National Bank, Philadelphia
First National Bank, Philadelphia
Corn Exchange National Bank & Trust Co., Philadelphia
Fidelity-Philadelphia Trust Co
Girard Trust Co., Philadelphia
Pennsylvania Co., etc., Philadelphia
Integrity Trust Co., Philadelphia
_
Guarantee Trust & Safe Deposit Co., Philadelphia
Federal Reserve Bank of Philadelphia (account opened Mar.
8, 1933)
$150,437. 71
14,840.00
8, 465. 25
21, 361.99
88,064.08
84, 054. 46
3,140,846.19
2, 760, 441. 87
103, 736.36
363, 595.69
233, 959.16
694, 789. 59
1,087,500.00
None
47, 650. 00
Mr. PECORA. I want to get the date.
Mr. MORGAN. It is written right out on that. The date is March
24, 1933.
Mr. PECORA. I wiM. get that from the record.
Mr. MORGAN. That is a later date from any that you have had.
Senator COSTIGAN. March 24 of what year, Mr. Pecora ?
Mr. PECORA. March 24, 1933.
Mr. WHITNEY. That was the date when the questionnaire came out.
Mr. PECORA. According to the list, which has been marked " Committee Exhibit No. 8, May 24, 1933."
Mr. DAVIS. That is, in response to your question no. 4.
Mr. PECORA. Yes. According to this list the following balances
were maintained by the firm of J. P. Morgan & Co. on March 24,
1933, in the following banks, respectively:
Bankers Trust Co., New York
„ $2, 240, 565. 32
Chase National Bank, New York
1, 411, 799. 78
Central Hanover Bank & Trust Co., New York
1, 594,116. 52
Chemical Bank & Trust Co., New York
1,113,180. 03
Corn Exchange Bank Trust Co., New York
,
938, 719. 97
First National Bank, New York
2, 431, 732. 34
Grace National Bank, New York
100, 006. 46
Guaranty Trust Co., New York
2, 609, 591.80
Irving Trust Co., New York
1, 399, 495. 72
National City Bank, New York
1, 265, 921. 74
New York Trust Co., New York
1, 251, 734. 65
Manufacturers Trust Co., New York, account opened Dec. 29,
1932
335,878.12
First National Bank, Boston, Mass
109, 993. 55
Shawmut Bank, Boston, Mass
243, 508. 06
DigitizedNational
for FRASER
Second National Bank, Boston, Mass
150, 437. 71
http://fraser.stlouisfed.org/
New England Trust Co., Boston, Mass
14, 840. 00
Federal Reserve Bank of St. Louis
130
STOCK EXCHANGE PRACTICES.
During that 5-year period deposit accounts were maintained, with
balances unstated in this list in the following banks: American
Exchange Irving Trust Co., New York—
Mr. WHITNEY (interposing). They were all banks that were
merged.
Mr. PECORA. I will put all of this in the record.
Mr. WHITNEY. All right.
Mr. PECORA. American Exchange Irving Trust Co., New York, the
name of which bank was changed February 1, 1929.
Mr. WHITNEY. Yes, sir.
PECORA. I S that the Irving Trust Co. of today ?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Central Union Trust Co., New York,
Mr.
which bank
was merged on May 16, 1929.
Mr. WHITNEY. Yes.
Mr. PECORA, That bank
is what is now known as the Central Hanover Bank & Trust Co., is it not?
Mr. WHITNEY. Yes. And the Hanover National Bank is the next
one.
Mr. PECORA. Hanover National Bank, New York, which was
merged on July 1, 1929, with what is now known as " the Central
Hanover Bank & Trust Co."
Mr. WHITNEY.
Yes.
Mr. PECORA. National Bank of Commerce, New York, which was
merged on May 6, 1929, with the Guaranty Trust Co.
Mr. WHITNEY. Yes, sir.
Mr. PECORA. National Park Bank, New York, which was merged
on August 23, 1929, likewise with
Mr. WHITNEY. With the Chase National Bank.
Mr. PECORA. The Farmers Loan & Trust Co.,* New York, account
was closed on July 19, 1929.
Mr. WHITNEY. That was at the time when it became affiliated with
the National City Bank.
Mr. PECORA. Mechanics & Metals National Bank, branch, was
merged on October 31, 1927, with the Chase National Bank.
Mr. WHITNEY. With the Chase National Bank.
Mr. PECORA. Old Colony Trust Co., Boston, Mass., which was
merged on January 2,1930, with the First National Bank of Boston.
Mr. WHITNEY. With the First National Bank of Boston.
Senator COUZENS. YOU do not do any business with the Chase
National Bank, do you, Mr. Morgan?
Mr. MORGAN. We have an account there; yes.
Senator COUZENS. Well, I missed that.
Mr. WHITNEY. It is an account of $1,411,000, I believe.
Senator COUZENS. I S that known as the Rockefeller bank—the
Chase National Bank?
Mr. MORGAN. I do not know.
Senator COUZENS. I just asked the question because I see it quoted
in the newspapers that it is a Rockefeller bank.
Mr. MORGAN. It is understood that the Rockefeller interests have
a large amount of stock in the bank, but I do not know whether
they run it or not.
Senator COUZENS. Will we take a recess now, Mr. Chairman?
STOCK EXCHANGE PRACTICES
131
Senator GLASS (presiding). One moment.
(Thereupon there ensued a conference between the presiding
officer and Mr. Pecora.)
Senator COUZENS. Mr. Chairman, I move that we now take a
recess until 2 o'clock.
Senator GLASS (presiding). Senator Couzens moves a recess until
2 o'clock p.m. All in favor of that motion will make it known by
saying aye. (A number of ayes.) The contrary, no. (Silence.)
It is so ordered. And all witnesses under subpena will appear hear
at that time.
(Thereupon, at 12:20 p.m., Wednesday, May 24, 1933, the subcommittee recessed until 2 p.m. the same day.)
AFTERNOON SESSION
The subcommittee reconvened at 2 o'clock p.m., Wednesday, May
24,1933, at the expiration of the noon recess.
The CHAIRMAN. The committee will come to order. Mr. Morgan,
I believe, is still on the stand.
Mr. PECORA. Yes.
The CHAIRMAN. Proceed,
Mr. Pecora.
TESTIMONY OF J. P. MOEGABf—Resumed
Mr. PECORA. Mr. Morgan, you have already testified that for the
calendar years 1931 and 1932 you paid no income tax to the United
States Government. I wish to ask you if during either one of those
calendar years you paid an income tax to any other government for
any income received by you from within the jurisdiction of any such
government ?
Mr. MORGAN. I think so. In England.
Mr. PECORA. For what years? For each of those 2 years?
Mr. MORGAN. Each of them, I should think.
Mr. PECORA. That is for each of the years 1931 and 1932?
Mr. MORGAN. Yes.
Mr. PECORA. Are you
familiar with a corporation called the Al-
leghany Corporation?
Mr. MORGAN. NO.
Mr. PECORA. Haven't you ever heard of that corporation?
Mr. MORGAN. I have heard of that corporation.
Mr. PECORA. Did your firm have anything to do with the financing
of that corporation.
Mr. MORGAN. It did, sir. Yes; it did.
Mr. PECORA. Would you call that a
major financing operation
on the part of your firm?
Mr. MORGAN. It was certainly a very large one; yes.
Mr. PECORA. It was a large one. Are you familiar with any of
the details of it?
Mr. MORGAN. None whatever.
Mr. PECORA. None whatever? If I were to ask you any questions concerning the issue of stock by that corporation in connection with the financing of it by your firm would you be able to
answer any of the questions?
Mr. MORGAN. NO.
132
STOCK EXCHANGE PRACTICES
Mr. PECORA. On the basis of any knowledge that you possess?
Mr. MORGAN. N O ; none whatever.
Mr. PECORA. Which of your partners in your opinion is best qualified to answer such questions on the basis of personal knowledge?
Mr. MORGAN. Mr. George Whitney.
Mr. PECORA. Who?
Mr. MORGAN. Mr. George Whitney.
Mr. PECORA. Was this enterprise or this financing discussed at
any time among the members of the firm ?
Mr. MORGAN. Oh, I imagine so; yes.
Mr. PECORA. Well, did you not in that way acquire some information about it?
Mr. MORGAN. I do not remember what dates it was. I may have
been absent for most of the time. But as a matter of fact I do not
retain any knowledge that I could testify with.
Mr. PECORA. Well, I understand that the corporation in question
was organized on or about January 26, 1929. Does that date help
to refresh your recollection as to any of its details ?
Mr. MORGAN. NO. Just at that time I was ill for the latter part
of January, and the first of February I sailed for Europe for the
Young plan discussions and did not return until the first of June,
so that I was absent during the entire time.
Mr. PECORA. I see. Well, did you participate in any discussions
among the members of your firm with respect to the negotiations
that led to the financing of this corporation by your firm?
Mr. MORGAN. I think not. I do not recall it.
Mr. PECORA. Then I will ask that Mr. Whitney take the stand
so that I may pursue the examination with regard to the subject of
the Alleghany Corporation.
Mr. MORGAN. Shall I retire to the back ?
Mr. PECORA. Whatever suits your personal comfort.
Senator COSTIGAN. The witness is not excused ?
Mr. PECORA. Oh, no; not excused. Just withdrawn.
Mr. MORGAN. TO make more room, that is all.
(Mr. Morgan temporarily withdrew, and Mr. George Whitney
came forward.)
TESTIMONY OF GEORGE WHITNEY—Resumed
Mr. PECORA. Mr. Whitney, are you familiar with the corporation
called the Alleghany Corporation?
Mr. WHITNEY. I am.
Mr. PECORA. Did the firm
of J. P. Morgan & Co. do any financing
for that corporation at any time?
Mr. WHITNEY. It did.
Mr. PECORA. When was
Mr. WHITNEY. Well, I
that corporation organized?
suppose I would be permitted to refresh
my memory as to this?
Mr. PECORA. From any record you have, if you wish to.
Mr. DAVIS. May I suggest, Mr. Chairman, and counsel and the
witness, that when these trucks and cars go by we won't try to make
ourselves heard above them?
Mr. PECORA. I think that suggestion might be better conveyed to
http://fraser.stlouisfed.org/
the witness, whose voice is a little lower than mine.
Federal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
133
Mr. DAVIS. I hope the witness heard that.
Mr. WHITNEY. I did. Mr. Pecora, your question was, as I understand, about the formation of the Alleghany Corporation.
Mr. PECORA. Yes, sir.
Mr. WHITNEY. And what was the
Mr. PECORA. I asked if you would
date, you asked, if I recollect?
tell me when it was organized
or incorporated?
Mr. WHITNEY. DO you mean the actual date? I t was in January
'29.
Mr. PECORA. DO you mean January 29 of some year, or some date
in January of the year 1929?
Mr. WHITNEY. January, '29.. It might expedite matters if I
said that on January 28 J. P. Morgan & Co. entered into a contract
with the Messrs. Van Sweringen which contemplated the formation
of such corporation. We had nothing whatever to do with the
formation of such corporation.
Mr. PECORA. Have you the contract to which you have just made
reference ?
Mr. WHITNEY. We have not got the contract here, but we have
photostats of it which we have furnished you.
Mr. PECORA. Have you a photostat copy of it for your own
purposes of reference?
Mr. WHITNEY. They are here in Washington, but we have not
got them physically here.
Mr. PECORA. I take it, Mr. Whitney, you do not object to being
examined on the basis of what purports to be the photostatic copy
of that contract which your office furnished to me, do you?
Mr. WHITNEY. Not on the photostat we furnished you; no, sir.
Mr. PECORA. NO. I show you what purports to be a photostat
copy of a letter dated January 28, 1929, addressed to Messrs. J. P.
Morgan & Co., New York City, and signed by O. P. and M. J.
Van Sweringen. Kindly look at it and tell us if you recognize that
to be a photostatic copy of that letter furnished to me by your
office? [Handing same to the witness.]
Mr. WHITNEY. I do.
Mr. PECORA. I ask that
it be marked in evidence and spread upon
the record.
(Photostatic copy of letter dated Jan. 28, 1929, addressed to
Messrs. J. P. Morgan & Co., New York City, signed by O. P. and
M. J. Van Sweringen, was marked " Exhibit 9.")
Mr. PECORA. Mr. Chairman, in view of the relationship which this
document bears to the general line of examination that I propose
to conduct of this witness, I shall ask you to indulge me while I
read this letter. [Reading:]
JANUARY 28,
Messrs. J. P. MORGAN & Co.,
1929.
New York City.
We propose to form a new corporation (to be called the "Alleghany Corporation") for the purpose of purchasing and owning certain stock
interests in various companies, largely companies owning or controlling railway
properties, which holdings are now owned either by the Vaness Co., General
Securities Corporation, or by ourselves individually, with full power to such
corporation to sell and reinvest from time to time as the directors of the new
corporation may determine.
DEAR SIRS:
134
STOCK EXCHANGE PRACTICES
The stock interests to be acquired by the new corporation and the proposed
capitalization of such new corporation are to be substantially as set forth in
schedule A, attached hereto. The terms (not expressly provided for in said
schedule A) and validity of the charter of the new corporation, of the stocks,
the purchase warrants, and the bonds to be authorized and of the indenture
under which the bonds are to be issued, and the form of any and all corporate
proceedings in connection with the transactions outlined in said schedule A
and herein, shall be subject to the approval of your counsel.
This is to confirm the agreement between ourselves and yourselves as follows:
1. We will cause the new corporation to contract to sell and to deliver to
you upon the terms and conditions herein set forth, and you are to agree to
purchase the $35,000,000 principal amount of 5 percent bonds described in
schedule A for an aggregate price of $32,575,000 (being approximately 93.02
percent of the principal amount), plus the amount of interest accrued to the
date of the payment of the subscriptions .for such bonds made upon the public
offering which you are to make or cause to be made as below indicated.
It is understood by us that you purpose to form a syndicate which on or
before February 8, 1929, will make a public offering of the bonds subject to
due issue and the receipt thereof by you from the corporation, and that you
purpose to call for payment to yourselves of the subscriptions for such bonds
at the offering price on such date (not later than February 23,1929), as you shall
determine, and to issue to the subscribers making such payments bonds in temporary form (or your interim certificates evidencing interests in such temporary bonds) or, in case temporary bonds shall not have been theretofore delivered to you, you may deliver your interim receipts entitling the holders thereof
to the delivery of the bonds therein specified when issued and received by you
as aforesaid.
Upon delivery to you by the corporation on or before February 28, 1929 (but
not earlier than the date of payment of subscriptions upon the offering) of
the bonds in temporary or definitive form, you forthwith shall pay to the
corporation the purchase price therefor plus, in case you shall have theretofore delivered your interim receipts, 2% percent per annum upon such purchase
price from the date of payment of subscriptions upon the offering.
It is understood further that in case you shall have delivered your interim
receipts as aforesaid, you are to retain, pending the receipt by you of the
bonds, the amount of the subscriptions received by you for the benefit of the
holders of your interim receipts, and in case for any reason the corporation
shall not be able to make delivery of the bonds as aforesaid on February
28, 1929, or any later date agreed upon by the corporation with you, then
you shall be relieved, at your option, from all obligation hereunder and the
undersigned (a) will pay you such sums as when added to the subscription
price received by you from subscribers for the bonds together with the interest
thereon to be allowed by you at the rate of 2y2 percent per annum from the
said subscription-payment date, will enable you to repay to the holders of
your interim receipts the subscription price for the bonds, plus interest on
the principal amount of the bonds at the coupon rate from the subscriptionpayment date to the date when such moneys are so repaid to such holders,
the intent being to protect the subscribers for the bonds and their assigns
from losing the income from their investment because of the failure of he
corporation to make delivery of the bonds as provided herein; and also (h)
will reimburse to you the amount of any out-of-pocket expenses (including
counsel fees) incurred by yourselves or by any syndicate which you may
form in connection with the issue.
2. We will cause the new corporation to issue and to sell to you or to your
assigns $25,000,000 par value of the cumulative 5% percent preferred stock,
series A, more fully described in schedule A at $100 per share plus the amount
of any accrued dividend, and in connection with such stock to sell and deliver
to you, for the further consideration of $375,000 in cash, common-stock purchase
warrants described in said schedule A collectively entitling the holders to purchase at $30 per share in cash 375,000 shares of the common stock of the
corporation. It is understood that in the first instance such warrants shall
be attached to the certificates of the series A preferred stock so that the holders
of such preferred stock respectively will have a warrant for the purchase
of 1% shares of the common stock for each share of such preferred stock held
by him; such warrants to be nondetachable except upon redemption of preferred stock, all as set forth in said Schedule A.
3.
STOCK EXCHANGE PRACTICES
135
Will you follow this paragraph closely, Mr. Whitney, please,
because I am going to ask you some questions about it [reading:]
3. Ot the 3,500,000 shares of common stock to be initially issued, we will
cause the new corporation to sell to you 1,250,000 of such shares at $20 per
share, payable in cash. This stock is to be purchased by you for your own
account, but you are to be free to resell such stock in such manner and at
such price as may seem to you advisable.
(The letter^ exhibit 9, appears in full at the close of today's
hearing.)
Mr. PECORA. There is much more to this letter, but for the present
I will not take the time to read it. Now, is it not the fact that the
agreement set forth in the form of this letter—only a portion of
which I have read to you—the entire letter being in evidence—was
agreed to by J. P. Morgan & Co. on January 28, 1929 ?
Mr. WHITNEY. Yes.
Mr. PECORA. And the
financing of this corporation called the
Alleghany Corporation, thereafter proceeded upon the basis of the
terms and conditions set forth in this letter?
Mr. WHITNEY. I t
Mr. PECORA. Did
did.
J. P. Morgan & Co. take over in pursuance of
the provisions of paragraph no. 3, 1,250,000 shares of the common
stock of the Alleghany Corporation at $20 per share ?
Mr. WHITNEY. Yes.
Mr. PECORA. When did it do so ?
Mr. WHITNEY. On February 15, 1929.
Mr. PECORA. At that time had there been
any other shares of the
common stock of this corporation actually issued ?
Mr. WHITNEY. Common stock?
Mr. PECORA. Yes.
Mr. WHITNEY. Yes, sir.
Mr. PECORA. DO you know
to whom such other shares of common
stock were issued, having in mind that in accordance with the provisions of the agreement embodied in this letter the corporation was
authorized to issue initially a total of 3,500,000 shares of common
stock?
Mr. WHITNEY. I believe the additional stock was issued to those
corporations referred to in the beginning of that letter which the
Messrs. Van Sweringen state they will cause to form such a corporation, namely—you have them; I haven't got a copy before me, but
they are those mentioned in the opening paragraph. They received
in exchange for securities the balance of the common stock so issued
as of the same date, I understand.
Mr. PECORA. SO that this entire authorized issue of 3,500,000 shares
of the common stock of the Alleghany Corporation was distributed
1,250,000 shares to your firm and the balance to the companies that
you have referred to and to which specific reference is made in this
letter of agreement? Is that correct?
Mr. WHITNEY. Yes. Issued and paid for.
Mr. PECORA. Issued and paid for. Now, did your firm make any
sale, transfer, assignment, or other disposition of any portion of the
1,250,000 shares of the common stock of the Alleghany Corporation
which it received under this agreement at $20 per share ?
Mr. WHITNEY. YOU are still speaking of the common stock ?
136
STOCK EXCHANGE PRACTICES
Mr. PECORA. I am still speaking of the
Mr. WHITNEY. It did.
Mr. PECORA. DO you know when there
common stock.
was any public trading in
this common stock, that is, when public trading in it commenced?
Mr. WHITNEY. YOU mean by public trading, trading on the New
York Stock Exchange ?
Mr. PECORA. Trading on any public market.
Mr. WHITNEY. N O ; I have no recollection. I can probably get
that. The answer is no, Mr. Pecora. I don't know when the first
public trading existed. I suppose there was a when-issued market.
Mr. PECORA. Don't you recall that there was a when-issued market ?
Mr. WHITNEY. N O ; I do
not.
Mr. PECORA. Early in February 1929 ?
Mr. WHITNEY. We had no interest in the market.
Mr. PECORA. DO you mean that literally, Mr. Whitney, that you
had no interest in any public market for the stock ?
Mr. WHITNEY. For the common stock?
Mr. PECORA. Yes,
sir.
Mr. WHITNEY. None whatever. I mean it literally; yes.
Mr. PECORA. When you say you had no interest in it do you mean
that your firm had no transactions in any such public market?
Mr. WHITNEY. I mean that; and I mean that it was a matter of
when-issued market, that it was not sufficiently important to make
any impression upon my memory.
Mr. PECORA. But when-issued market for a large block of stock
such as this was certainly would be of interest to your firm, would
it not?
Mr. WHITNEY. Well, I didn't know there was a large market for
this stock.
Mr. PECORA. NO ; I said a when-issued market would be of interest
to your firm, in view of the fact that it held such a large block of this
common stock.
Mr. WHITNEY. And I said, Mr. Pecora, that it was not of sufficient
importance to have impressed it upon my memory, because I do not
remember there being such a market.
Mr. PECORA. Have you any data which you can use to refresh your
recollection ?
Mr. WHITNEY. I undoubtedly could procure a statement of when
it was listed on the New York Stock Exchange. I suppose there
must be some public record of when there was trading on a whenissued basis on the New York curb, but I don't know.
Mr. PECORA. When did you say your firm received these 1,250,000
shares ?
Mr. WHITNEY. February 15, 1929.
Mr. PECORA. Did your firm make any disposition of those shares
before that date on any when-issued basis or any other basis?
Mr. WHITNEY. Yes, sir. For a portion of those shares we entered
into an arrangement with the Guaranty Co. of New York to underwrite the sale of 500,000 shares of common stock.
Mr. PECORA. Did it make any other disposition or agreements
with respect to the distribution of any portion of this block of
1,250,000 shares prior to February 15, 1929?
Mr. WHITNEY. May I answer that question in two parts? Be
cause I can. We made arrangements for the disposition of another
STOCK EXCHANGE PRACTICES
137
574,900 shares, but this does not state the date. I think it was very
probably prior to the 15th of February, but I haven't got that date
before me and I would have to refresh my memory.
Mr. PECORA. Was that distribution made in one block, to any one
individual ?
Mr. WHITNEY. NO, sir.
Mr. PECORA. Or purchaser?
Mr. WHITNEY. N O ; it was
not. It was made to a list of individuals, of which you have a copy.
Mr. PECORA. Did your firm furnish me upon my request with a
list of such individuals ?
Mr. WHITNEY. We did.
Mr. PECORA. I show you
this typewritten document. Will you
kindly look at it and tell us if that is the list to which you have
just referred?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. I offer that list in evidence.
Mr. DAVIS. Just one moment, Mr. Pecora.
I do not think it has
yet appeared on the record that this is an exhibit of the committee.
Of course, we perfectly understand that the committee has decided.
I am not raising that question. I want the record to show, however, that it is offered by the direction of the committee.
Mr. PECORA. That was one of the lists that was discussed in the
executive session of the committee yesterday.
Mr. DAVIS. I perfectly understand; and the record does not yet
show that fact.
Mr. PECORA. Let us put it on the record now.
Mr. DAVIS. Precisely.
Mr. PECORA. Namely, that this list which is now offered in evidence and which I ask be spread upon the record of this hearing
is one of the lists which was considered by this committee in executive session yesterday, which session was attended by Mr. John W.
Davis, counsel for J. P. Morgan & Co., and at which session this
committee decided to receive this list and have it spread upon the
records of this hearing.
Senator COSTIGAN. The list was not voluntarily tendered by J. P .
Morgan ?
Mr. PECORA. NO, sir; it was tendered by J. P. Morgan & Co. upon
my request and upon my agreement with Mr. Davis that use of it
in these hearings would be subject to the decision of the committee.
Is that correct, Mr. Davis?
Mr. DAVIS. That is quite correct, and that is all I want the record
to show.
Mr. WHITNEY. Mr. Pecora, may I qualify my discussion of this
exhibit by calling to your attention that this list covers the whole
1,250,000 shares?
Mr. PECORA. Yes; all right.
Mr. WHITNEY. Which not only includes the sales to the Guaranty
Co. I just referred to, but also the list which includes certain individual partners and which covers the whole amount, rather than
the figure I gave you before.
Mr. PECORA. In other words, that list shows the distribution of
this entire block of 1,250,000 shares of common stock of the Alle-
138
STOCK EXCHANGE PRACTICES
;hany Corporation which was made by the same firm of J. P.
"organ & Co. ?
Mr. WHITNEY. At a price equivalent to our cost, namely, $20
a share.
Mr. PECORA. I offer it in evidence and ask that it be spread upon
the record.
The CHAIRMAN. Let it be received in evidence and placed on the
record.
(The list under discussion was marked by the official reporter
a
Committee Exhibit No. 10 ", and appears in the words and figures
following:)
Alleghany corporation common stock issued Fed. 15, 1929
Charles Francis Adams
W. H. Aldridge
G. G. Allen
A. M. Anderson
Montgomery B. Angell
J. Rowland Auchineloss
Chellis A. Austin
Geo. F. Baker
Newton D. Baker
D. S. Barrett, Jr
F. D. Bartow
F. D. Bartow, special
Sosthenes Behn
L. V. Belden
Mrs. Mary Case Bench
J. J. Bernet
Stephen Birch
C. N. Bliss
Bonbright & Co., Inc
Charles Bradley
Nicholas F. Brady
Matthew C. Brush
E. G. Buckland
M. N. Buckner
W. E. Burnet
William C. Cannon
Edward F. Carry
Bernard S. Carter
J. Ridgely Carter
Sir Thomas S. Catto
Hendon Chubb
Clark, Dodge & Co
Thomas Cochran
Do
Clinton H. Crane
Donald K. David
Arthur V. Davis
John W. Davis
H. P. Davison
E. B. Dibrell
Dominick & Dominick
Drexel & Co
Caleb C. Dula
F. H. Ecker
George B. Everitt
William Ewing
First Security Co
Lawrence P. Fisher
Shares
1, 000
1,000
500
11,500
100
300
500
10,000
2,000
2,000
11,500
3, 000
1,000
1, 000
500
5,000
1,200
1,000
10,000
7, 500
2,000
1,000
500
500
500
200
1,000
2,500
2,500
1, 000
1, 000
1,000'
15, 000
2, 000
500
200
1,000
400
2,500
500
2,000
50,000
500
1, 000
500
10,000
30,000
10,000
Herbert Fitzpatrick
Max C. Fleischmann
Mitchell D. Follansbee
H. A. Fortington
P. A. S. Franklin
W. C. Frew
Giovanni Fummi
Michael Gallagher
George H. Gardiner
Thomas Garrett
Harvey D. Gibson
Walter S. Gifford
Mrs. S. Parker
Philip G. Gossler
E. G. Grace
R. F. Grant
E. C. Grenfell
Guaranty Co. of New York_
Do
W. J. Hanahan
Horace Havemeyer
Charles Hayden
Michael G. Herbert
Charles D. Hilles
Hitt Farwell & Co
J. A. House
.
George H. Howard
R. G. Hutchins
Arthur Curtis James
Percy H. Johnston
Nelson D. Jay
Benjamin Joy
Cornelius F. Kelley
Kidder, Peabody & Co
Kuhn, Loeb & Co
Thomas S. Lamont
T. W. Lamont
Lapondos Corporation
Lee, Higginson & Co
R. C. Leffingwell
Augustin Legorreta
Charles A. Lindbergh
L__
A. L. Lindley
Henry E. Machold
C. H. Mackay
H. E. Manville
Henry A. Marting
Wm. Gibbs McAdoo
Shares
1, 000
1,000
1,000
500
1,000
500
1,000
1,000
500
200
500
1,000
500
1,000
1,000
500
1,800
1, 600
500, 000
1,000
1, 000
2, 000
1,200
1,000
500
1,000
1,000
1, 000
1,000
1, 000
2, 500
2, 500
1, 000
2, 000
5, 000
2, 500
18, 000
500
2,000
13,500
500
500
1,000
2,000
1,000
1,000
500
500
139
STOCK EXCHANGE PRACTICES
AUeghany corporation common stock issued Feb. 15, 1929—Continued
Lee McCandliss
H. C. McEldowney
Gates W. McGarrah
T. N. McCarter
D. R. McLennan
R. B. Mellon
T. F. Merseles
Albert G. Milbank
Edward G. Miner
Charles E. Mitchell
S. Z. Mitchell et al
Daniel J. Moran
Henry S. Morgan
Henry S. Morgan, special-J. P. Morgan
J. P. Morgan & Co. stock
A/C
J. S. Morgan, Jr
J. R. Morron
Frederick K. Morrow
John P. Murphy
National City Co
Newmont Mining Corporation
J. R. Nutt
Robert E. Olds
Carlo Orsi
Gen. John J. Pershing
Frank L. Polk
W. C. Potter
Seward Prosser, et al
Wm. S. Rainsford
John J. Raskob
Lansing P. Reed
Samuel W. Reyburn
W. L. Ross
John D. Ryan
Franz Schneider, Jr
Schoellkopf Hutton & Pomeroy, Inc
Shares
100
1,000
500
1,000
1,000
2, 000
2,000
500
500
10,000
2,500
500
2,500
4,100
40,000
175,000
8,000
500
1,000
500
10, 000
10,000
3,000
500
500
500
300
40,000
12,000
100
2,000
300
500
1,000
1, 000
500
Shares
5, 000
1,000
10,000
500
3,000
1,000
10,000
10,000
14,000
1,000
2, 000
500
500
1, 000
300
10,000
1,500
500
1,000
2,500
300
2,000
1,000
1,000
14,000
1,000
3,000
10,000
500
1,000
1,000
1,000
1,000
5, 000
500
200
John Sherwin, Sr
E. H. H. Simmons
Alfred P. Sloan, Jr
Matthew S. Sloan
Vivian H. Smith
F. S. Smithers & Co
Somerset Corporation
.Harold Stanley
Charles Steele
Charles Steele, special
G. D. Steere
John A. Stephens, Jr
Frederick Strauss
Silas H. Strawn
Edwin S. S. Sunderland
Myron C. Taylor
Walter C. Teagle
Jos. B. Tarbell
Wm. B. Thompson
O. P. Van Sweringen
Allan Wardwell
F. Edson White
Robert H. White
White & Case
George Whitney
Richard Whitney
C. F. Whigham
A. H. Wiggin
J r a E. Wight
Joseph Wilshire
Wood, Struthers & Co
William H. Woodin
Clarence M. Wooley
Owen D. Young
L. Edmund Zacher
William Zeigler
1,250, 000
1,000
MAY
4, 1933.
The Honorable JOHN W. DAVIS :
In the list of purchasers obtaining the Alleghany Corporation common stock
issued February 15, 1929, at $20 a share there is included 50,000 shares which
were sold to Drexel & Co.
Were these 50,000 shares for the account of the partners of Drexel & Co. or
were there others allotted certain portions of this? If others were allotted a
portion of these 50,000 shares, I would like to obtain the information covering
the names of such allotments, how many shares of each, and the amount paid
by the purchaser.
FERDINAND PECOEA,
By FRANK J. MEEHAN.
Alleghany Corporation common stock
Shares
500 William W. Bodine_
Thomas G. Ashton
500 Francis B. Bracken_
W. W. Atterbury
200 Henry G. Brengle—
Thomas J. Baldridge100 Arthur S. Burgess—
Charles W. Bayliss__
400 B. Dawson Coleman
Charles G. Berwind__
600 Jay Cooke
Harry A. Berwind
500 D Graham Craig
Samuel T. Bodine—
Shares
200
100
200
50
500
1,000
100
140
STOCK EXCHANGE PRACTICES
Alleghamy Corporation common
Samuel M. Curwen
Charles Day
Margretta B. Dice
Drexel & Co
Sophie H. Drinker
William N. Ely
Charles H. Ewing
Philip H. Gadsden
Estelle B. Gadsden
T. S. Gates
Clarence H. Geist
William P. Gest
Herbert W. Goodall
Alfred M. Gray
John H. Gross
Harry J. Haas
Edward Hopkinson, J r
George H. Houston
Albert A. Jackson
Livingston E. Jones
John W. Kephart
William T. Kirk
Louis J. Kolb
Conrad N. Lauer
William A. Law
Edward B. Leisenring
Charles P. Lineaweaver
H. G. Lloyd
H. G, Lloyd, Jr
Howard Loeb
Edward E. Loomis
Geo. H. McFadden & Bro
Andrew J. Maloney
Donald Markle
John C. Martin
John H. Mason
Mr. PECORA. The cost
Shares
500
500
500
900
100
200
100
250
250
4,000
600
500
100
100
200
200
4, 500
200
200
300
300
100
500
300
500
1,000
200
4,000
1,000
100
500
1,000
300
500
1, 000
200
stock—Continued
Marshall S. Morgan
Effiingham B. Morris, Jr
Arthur V. Morton
Jonathan C. Neff
A. E. Newbold
C. Stevenson Newhall
T. Newhall
Richard E. Norton
W. A. Obdyke
Charles S. W. Packard
George Wharton Pepper
O. H. Perry Pepper
Evan Randolph
E. Robert Riter
Owen J. Roberts
Benjamin Rush
Bernard Samuel
.
William J. Schaffer
Harold S. Schutt
Frank Seamans
Arthur W. Sewall
E. T. Stotesbury
George H. Stuart, 3d
Frank H. Taylor
Samuel M. Vauclain
Robert Yon Moschzisker
Carroll J. Waddell
Samuel D. Warriner
Joseph Wayne, J r
John H. Weaver
James M. Wilcox
Edward H. York, J r
John E. Zimmerman
Shares
200
200
200
200
2, 000
100
4, 000
200
2,000
200
200
100
200
100
„
100
500
50
500
200
100
300
4,000
200
50
500
150
100
1,000
300
300
500
100
500
50, 000
to J. P. Morgan & Co. of these shares was
$20 per share?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. And J. P.
Morgan & Co. distributed this stock to
the persons named in this list, which has been marked "Committee's Exhibit 10 " in evidence on this date, at the same price of $20
per share, which was cost to J. P. Morgan & Co.; is that right?
Mr. WHITNEY. That is the effective price of its distribution; yes.
Mr. PECORA. And this list also shows not only the persons who
participated in such distribution but the respective allotments of
shares to them at $20 per share ?
Senator COTJZENS. May I ask the counsel before he asks that question to have Mr. Whitney restate his answer to the previous question ? I am sorry I did not get it clear. Will the reporter
Mr. WHITNEY (interposing). May I amplify, Senator Couzens?
I think I can make it clear. There is 500,000 shares in here that
was sold under a contract where it was sold at the price less the
commission at which the net price to us was 20, and I wanted to
make the qualification that did not appear in the record, that it
was cost $20, so that would gibe with the other part. The actual
fact was that we received $20 a share cost to us. Does that clear
it up?
STOCK EXCHANGE PRACTICES
141
Senator COUZENS. YOU said that was the " effective cost" to you,
and I did not quite understand what you meant by that.
Mr. WHITNEY. There was, as I have already testified before you
came in, 500,000 shares of the stock sold to the Guaranty Co., of
New York, under an agreement dated January 31, 1929. The sale
was stated as being at $24 less 4 percent which came to 20 to us. It
was just to gibe with the record.
Now, may I have the other question ?
The committee reporter (Mr. Eandolph) read the question:
And this list also shows not only the persons who participated in such distribution but the respective allotments of shares to them at $20 per share?
Mr. WHITNEY. I don't quite understand the difference between
that, Mr. Pecora. If you will explain your question I will try to
answer it. What is the difference between " participation " and " allotment " in your mind ?
Mr. PECORA. I am using them perhaps clumsily as synonymous
terms.
Mr. WHITNEY. This is a list, to the best of my knowledge and
belief, of the people that got the stock at 20.
Mr. PECORA. NOW, were the persons whose names are shown on
that list invited by J. P. Morgan & Co. upon its own initiative to
subscribe to these shares at the price of $20 per share ?
Mr. WHITNEY. They were offered the opportunity, I think would
be a more correct way of stating it.
Mr. PECORA. They were offered the opportunitj^ and the offer was
made by J. P. Morgan & Co. upon its own initiative ?
Mr. WHITNEY. Yes, sir.
Senator BYRNES. Well,
how was it offered, through newspaper
publicity or personal solicitation?
Mr. WHITNEY. Oh, no; purely by personal conversations, and if I
may refer to it again, there was 500,000 shares sold to Guaranty Co.
That was a matter of negotiation, but they were all done by personal
conversations, but not by any kind of solicitation or letter. The firm
by letter in all cases, but no solicitation of any kind and no public
offer.
Mr. PECORA. This was a private offer, in other words?
Mr. WHITNEY. Absolutely.
Senator COSTIGAN. Who carried on the conversations ?
Mr. WHITNEY. DO you mean with these individuals?
Senator COSTIGAN. Yes.
Mr. WHITNEY. Why, various members of the firm.
Mr. PECORA. NOW, Mr. Whitney, the first name I see on the list,
and I observe the list apparently was prepared in alphabetical
order
Senator COSTIGAN (interposing). Were those carried on in social
intercourse as members 6f the firm met individuals or was there a
campaign ?
Mr. WHITNEY. Well, there was not a campaign, Senator, but it was
carried on by personal conversations. There was no campaign.
Mr. PECORA. The first name that I observe on the list is that of
Charles Francis Adams, to whom 1,000 shares were offered at $20
per share.
175541—33—PT 1
10
142
STOCK EXCHANGE PRACTICES
Mr. WHITNEY. Yes, sir.
Mr. PECORA. DO you know who he is?
Mr. WHITNEY. I do.
The COURT. Did he ever hold any public
Mr. WHITNEY. Secretary of the Navy, I
position ?
think. You also know,
don't you, that he is a father-in-law of one of the partners ?
Mr. PECORA. I have not studied the genealogy of the partners.
Mr. WHITNEY. Well, he is Mr. Henry S. Morgan's father-in-law.
Mr. PECORA. Well.
Senator BARKLEY. That is not to be regarded as an unfavorable
circumstance ?
Mr. WHITNEY. NO ; but it accounts for his opportunity to invest in
this stock.
Mr. PECORA. YOU have said that as a bit of interesting evidence.
Let me call your attention to the name which appears on this list of
William H. Woodin. Is he related to any member of the firm ?
Mr. WHITNEY. NO, sir.
Mr. PECORA. Did he hold or does he hold any public office ?
Mr. WHITNEY. He does now. He did not in January or February
1929.
Mr. PECORA. What is the office he now holds ?
Mr. WHITNEY. Secretary of the Treasury. I think that is right.
Mr. PECORA. NOW, do you know who suggested that Mr. Woodin
be offered a block of 1,000 shares of this stock at $20 per share?
Mr. WHITNEY. It would be very difficult without refreshing my
memory with the letters which you have already—the documents
which you have already seen—to remember that,, but Mr. Woodin
has been a very close personal friend of many of the partners,
dating particularly back to Mr. Stettinius, who was a partner until
1925. I would not
Mr. PECORA. What is that? Will you finish your answer? Oh.
Mr. WHITNEY. I would not know who had the conversations in
this particular thing. It might have been any one of several of us.
Mr. PECORA. I show you
Mr. WHITNEY (interposing). As a matter of fact, I am advised
here, to refresh my memory, that at the time of this particular
thing Mr. Woodin was away and communication was done through
a letter.
Mr. PECORA. Well, I show you what purports to be a photostat
copy of such a letter which was furnished to me by your firm on
my request. Will you look at that and tell us if you can identify
it as such photostatic copy?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. I offer that
in evidence and ask that it be spread
upon the record.
The CHAIRMAN. The letter will be spread upon the record.
(Letter dated Feb. 1, 1929, from J. P. Morgan & Co. to William
H. Woodin, was marked by the official reporter " Committee Exhibit 11 ", and the same appears in the words and figures following:)
STOCK EXCHANGE PEACTICES
143
J. P. MOEGAN & Co.,
February 1, 1929.
WILLIAM H. WOODIN,
Esq.,
Care of American Gar & Foundry Co., Neio York.
MY DEAE ME. WOODIN : You may have seen in the paper that we recently
made a public offering of $35,000,000 Allegtiany Corporation 15-year collateral
trust convertible 5 percent bonds, which went very well.
In this connection the Guaranty Co. offered today $25,000,000 Alleghany Corporation cumulative 5% percent preferred stock. There was also a strong demand for this stock.
The Guaranty Co. also sold, privately, some of the common stock at $24 a
share.
We have kept for our own investment some of the common stock at a cost of
$20 a share, and, although we are making no offering of this stock, as it is not
the class of security we wish to offer publicly, we are asking some of our close
friends if they would like some of this stock at the same price it is costing us,
namely, $20 a share.
I believe that the stock is selling in the market around $35 to $37 a share^
which means very little, except that people wish to speculate.
We are reserving for you 1,000 shares at $20 a share, if you would like
to have it.
There are no strings tied to this stock, so you can sell it whenever you wish.
For further information regarding this corporation, I am enclosing circular
covering the bond issue.
We just want you to know that we were thinking of you in this connection
and thought you might like to have a little of the stock at the same price we
are paying for it.
I am sending this to your office, as I understand that you are now on your
way through the Panama Canal, but this can wait until you return.
Hoping you are having a pleasant trip, and with best regards,
Sincerely yours,
WE-ERM
(Handwritten note:) From file designated: "Alleghany Corp.—Jan. 31, '29—
Sale of common stock."
Mr. PECORA. I am going to read it if you will let me.
Senator ADAMS. I would like to look at it a minute.
Senator BYRNES. I S the American Car Foundry Co. one of the
clients of Morgan &> Co. ?
Mr. WHITNEY. They have been depositaries of ours for many
years; yes, sir.
Senator BYRNES. That is a company of which Mr. Woodin ,1s
president?
Mr. WHITNEY. Eight.
Mr. PECORA. I S it one of the companies that maintain a balance of
$1,000,000 or more as depositor with your firm?
Mr. WHITNEY. I would have to look.
Mr. PECORA. Well, the record already shows what
Mr. WHITNEY. What is the answer ?
Mr. PECORA. The letter reads as follows: " February 1, 1929 "
Mr. Whitney, will you look at this exhibit no. 11 ? The stamp of
the photostat department of your firm is superimposed on an inscription. Is that inscription that of the firm name J. P. Morgan &
Co.?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. And the letter
&Co.?
is on the letterhead of J. P. Morgan
144
STOCK EXCHANGE PBACTICES
Mr. WHITNEY. Excuse me. That is not on the letterhead. The
original letter obviously is in Mr. Woodin's hands. That is the
hearing of our carbon copies.
Mr. PECORA. Oh, all right. [Reading:]
FEBRUARY 1,
1929.
WILLIAM H. WOODIN, Esq.,
Care of American Car & Foundry Co., New York.
MY DEAR MR. WOODIN : You may have seen in the paper that we recently
made a public offering of $35,000,000 Alleghany Corporation 15-year collateral
trust convertible 5 percent bonds, which went very well.
In this connection, the Guaranty Co. offered today $25,000,000 Alleghany
Corporation cumulative 5% percent preferred stock. There was also a strong
demand for this stock.
The Guaranty Co. also sold, privately, some of the common stock at $24 a
share.
We have kept for our own investment some of the common stock at a cost
of $20 a share, and, although we are making no offering of this stock, as it is
not the class of security we wish to offer publicly, we are asking some of our
close friends if they would like some of this stock at the same price it is costing us, namely, $20 a share.
I believe that the stock is selling in the market around $35 to $37 a share,
which means very little, except that people wish to speculate.
We are reserving for you 1,000 shares at $20 a share, if you would like to
have it.
There are no strings tied to this stock, so you can sell it whenever you wish.
For further information regarding this corporation, I am enclosing circular
covering the bond issue.
We just want you to know that we were thinking of you in this connection
and thought you might like to have a little of the stock at the same price we
are paying for it.
I am sending this to your office, as I understand that you are now on your
way through the Panama Canal, but this can wait until you return.
Hoping you are having a pleasant trip, and with best regards,
Sincerely yours,
There is no copy of any signature, but on the lower left-hand corner appear the initials " WE-EEM ". Do those initials " WE " relate
to Mr. William Ewing, on£ of the partners of J. P. Morgan & Co. ?
Mr. WHITNEY. I assume so.
Mr. PECORA. And would you also assume from that that Mr. Ewing
dictated and signed the original of this letter?
Mr. WHITNEY. I would.
Senator BYRNES. YOU say, Mr. Whitney, the stock was purchased
in response to that communication?
Mr. WHITNEY. I assume so, but there is a second letter there attached to that that shows that we received payment for it.
Senator BYRNES. When was that? How much later?
Mr. WHITNEY. February 15, the date of payment.
Senator ADAMS. Mr. Whitney, what has the market been on that
stock running since then?
Mr. WHITNEY. I think the high was somewhere in the fifties; selling about $1 now.
Senator BYRNES. In other words, what he paid $20 for is worth $1
at this time ?
Mr. WHITNEY. One to two dollars; right.
Mr. PECORA. What is that, sir?
Senator BYRNES. He said that sum which sold at 20 went as high
as 50 at one time but is now selling at about a dollar a share.
STOCK EXCHANGE PKACTIGES
145
Mr. WHITNEY. Nearer two.
Mr. BYRNES. Nearer two.
Mr. PECORA. Did you have any way by which you could foresee on
February 1, 1929, that this stock in the year 1933 would be selling
for a dollar per share or less ?
Mr. WHITNEY. NO, sir; any more than we had any way of foresee9
ing on February 15, 1929, it would sell at 50.
Mr. PECORA. But you know accurately and definitely and teyond
all peradventure of doubt that on the date that this letter was written
the stock was selling in the market on a when-issued basis at $35 to
$37 a share, didn't you?
Mr. WHITNEY. And we also knew
Mi*. PECORA (interposing). I say, didn't you? Will you answer
that?
Mr. WHITNEY. I just answered you. I was trying to.
Mr. PECORA. YOU said you also knew. You are going to tell me
something apparently
Mr. WHITNEY (interposing). Will you read what Mr. Ewing said
in that letter ? I will stand by that.
Mr. PECORA. With regard to that
Senator ADAMS (interposing). I think the witness is entitled to
make his own answer to the question.
Mr. PECORA. I would like to have him answer the question.
Senator BARKLEY. It is obvious from the letter that whoever wrote
it knew that.
Mr. WHITNEY. I am perfectly happy to stand on what was written in the letter, if you will read it all.
Mr. PECORA. YOU have no reason to doubt that Mr. Ewing wrote
this letter with a knowledge of the actual facts ?
Mr. WHITNEY. Well, no, Mr. Pecora; you asked me, didn't you?
I have no reason to doubt Mr. Ewing; but you asked me. I have
already testified I did not know, of my recollection, what it was
selling at. But I am perfectly happy to
Mr. PECORA. (interposing). Is Mr. Ewing here?
Mr. WHITNEY. I am perfectly happy to stand on that statement
there as the fact, that it was selling at those prices on that date.
(Letter referred to attached to committee exhibit A, dated February 25, 1929, from J. P. Morgan & Co. to William H. Woodin,
was designated " Committee Exhibit 11-A" and is in the words and
figures following:)
J. P. MORGAN & Co.,
February 25, 1929.
WILLIAM H. WOODIN, Esq.,
Care of American Gar & Foundry Co., New York, N.Y.
We acknowledge, with thanks, the receipt of your check to our
order for $20,033.33 in payment for 1,000 shares of Alleghany . Corporation
common stock (as par value) at $20 per share, plus interest from February 15
to date.
We have deposited in your account the above stock, in temporary form,
registered in our nominee's name.
Yours very truly,
Syn.-JJC-CMW
(Rubber stamp: Mailed Feb. 25, 1929, J. P. M. & Co.)
(Handwritten note: From file designated: "Alleghany Corp.—Jan. 31. '29—
Sale of Common Stock.")
BEAK SIR:
146
STOCK EXCHANGE PRACTICES
Mr. PECOKA. DO you know whether or not letters substantiallysimilar in form to this one addressed to Mr. Woodin were sent
to any other of the gentlemen whose names are included in this
list marked " Committee's Exhibit 10 " in evidence at or about the
time of the sending of this letter to Mr. Woodin ?
Mr. WHITNEY. NO, Mr. Pecora; my answer must be, because I
have already testified that the great majority of these sales were"
effected through personal conversations. I do not say by that that
there may not have been other letters written to people who might
also have been out of town, but generally speaking it was a matter
of personal discussion.
Mr. PECORA. DO you recall participating in any discussion among
the partners at which it was decided to offer a thousand shares of
this stock at $20 to Mr. Woodin?
Mr. WHITNEY. NO, sir.
Mr. PECORA. DO you know
upon whose suggestion or recommendation this offering was made to Mr. Woodin at that time?
Mr. WHITNEY. I have already testified that for many years Mr.
Woodin has been a personal friend of many of the partners.
Mr. PECORA. Were all of the persons whose names are included
or shown in this list marked " Committee's Exhibit 10 " of this date
persons who also could be characterized as among the close frionds
of J. P. Morgan & Co.?
Mr. WHITNEY. I should assume that the great majority; yes.
The CHAIRMAN. Why would you offer this stock at 20 when the
market was paying 25 and 27?
Mr. WHITNEY. Why, Senator, for I think two primary reasons..
One of them, even though there might have been a quoted market
at 35 or whatever it was, it did not amount to anything. We could
not have had any confidence in it. In the second place, we did not
desire to make any profit out of the sale. We arranged and discussed
this distribution before there was any market. I have been advised
by one of my partners here that trading did start some couple of
days before that letter was written Mr. Woodin, which I did not
know. The decision to dispose of this stock at 20 was arrived at
among ourselves long before there was any quoted market, and we
just as a matter of course in these things, in these private sales, dispose of them at cost to ourselves, because we did not desire to make
a distribution on a profitable basis. In other words, it was quite distinct from our normal security issues.
Mr. PECORA. Mr. Whitney, you said the decision
Mr. WHITNEY (interposing). Just a minute.
Mr. PECORA. I beg your pardon.
Senator COSTIGAN. May I ask why the profit motive was eliminated:
from this transaction as distinguished from other transactions?
Mr. WHITNEY. Because it is quite a different kind of a transaction.
This is not in any sense a security in the ordinary sense of our security business as a public issue. We made no public issue in February. Securities purchased with our own money. It did not come
under the security business in any way.
Senator COSTIGAN. Have you any objection to making a profit in
a private transaction as well as in one of a more general nature ?
Mr. WHITNEY. Not when certain friends and associates take the
same risk at the same time with us.
STOCK EXCHANGE PRACTICES
147
Senator BARKLEY. Did your firm or any members of it participate
in any purchase of that stock on the market after it was obtainable
on the market prior to the writing of this letter ?
Mr. WHITNEY. NO, sir.
Senator BARKLEY. SO as to
Mr. WHITNEY. AS far as I
boost the price ?
know, the firm of J. P. Morgan never
purchased a share of stock around that time. I do not think any
of the partners did. They had nothing whatever to do with the
market.
Senator BARKLEY. YOU had nothing to do with the boosting of
the price up to 35 in order that you might dispose of it at 20?
Mr. WHITNEY. Absolutely not.
Senator COUZENS. May I point out that it was not on the market
when you offered it at 20, was it ?
Mr. WHITNEY. Well, apparently it was. I answered earlier that
I did not think it was, but I answered wrong, because I found out
there was some market on it 2 days before we wrote this letter.
Senator BYRNES. At the time that you determined to sell at $20 a
share was it then quoted on the market?
Mr. WHITNEY. NO, sir.
Senator BYRNES. And you
say that you reached a determination
as to a price at which you would offer it at the time it was quoted on
the market at a much higher price, is that right?
Mr. WHITNEY. Previously. The determining factor in our
reaching the price was the fact that it was cost to us.
Mr. PECORA. I did not get that, Mr. Whitney.
Mr. WHITNEY. I said the determining factor in fixing the price
to these gentlemen in this list was the fact that it was cost to us, the
same price, in other words, at which we had purchased it.
Senator COUZENS. What date did you determine the price?
Mr. WHITNEY. The letters are written, as I testified earlier, Senator, January 28. We entered into a contract with the Van Sweringens to purchase various of three classes of securities, among them
these common shares, and that price was fixed then.
Senator COUZENS. In January?
Mr. WHITNEY. January 28.
Senator COUZENS. That was the time you decided to sell them at
20?
Mr. WHITNEY. Well, that fixes a definite date. That is the formal
contract.
Senator COUZENS. And then sometime between 2 and 3 weeks after
that you wrote these letters to your friends?
Mr. WHITNEY. TWO or three days afterwards.
Senator COUZENS. The letter was dated February 15, I think.
Mr. WHITNEY. N O ; the payment was February 15. I think they
read the date of that letter as February 11. February 1, wasn't it?
Senator COUZENS. What was the date of the letter to Mr. Woodin ?
Mr. PECORA. February 1, 1929.
Mr. WHITNEY. It was paid for on February 15.
Senator COUZENS. The strange thing to me is that there were letters sent out later than that, and yet on February 1, the date of the
letter to Mr. Woodin, it signifies that the market was then 35.
Mr. WHITNEY. Well, sir; I think I can explain that. I think the
Digitizedday
for FRASER
or 2 days before, the 30th or 31st—I will see if I can get it to
148
STOCK EXCHANGE PKACTICES
be sure I am right—another one of these three classes of securities
involved the sale, public sale by the Guaranty Co., of certain shares of
preferred stock, which really was at the same time as the announcement of this corporation, and they immediately started what they
called " a when-issued market" for the common shares, so there was a
spurt just practically between those 2 days when it first appeared at
all in the market.
Senator COUZENS. Have you had many transactions of like character where you sold your stocks at cost ?
Mr. WHITNEY. Well, he is going to show you, I think, 3 or 4 others,
and in all but 1 of these the sale was also tne cost. There is one that
has quite a different set-up, which I will explain at the time.
The CHAIRMAN. YOU made some commission or profit?
Mr. WHITNEY. Not a cent.
The CHAIRMAN. Or some return on it?
Mr. WHITNEY. Not a cent; no, sir.
Mr. PECORA. Didn't you personally acquire for your individual
account, though, at $20 per share a block of this stock ?
Mr. WHITNEY. Certainly, as set forth in this list.
Mr. PECORA. HOW many shares?
Mr. WHITNEY. May I do a little mathematics ?
Senator ADAMS. Fourteen thousand, it shows on that list.
Mr. PECORA. Fourteen thousand shares, according to this list.
You, individually?
Mr. WHITNEY. Yes.
Mr. PECORA. And you
sold some or all of those shares in the
market on your individual account?
Mr. WHITNEY. Yes.
Mr. PECORA. DO you recall when you first commenced to sell any
of them in the market?
Mr. WHITNEY. NO, sir; I do not.
Mr. PECORA. Was it shortly after the issue ?
Mr. WHITNEY. NO, sir.
Mr. PECORA. HOW long after, according to your best recollection?
Mr. WHITNEY. I could not tell you; I really do not know. I t was
not shortly after. It may have been 6 months later. I know when
I sold the most of them.
Mr. PECORA. When you sold them on your individual account in
the open market, any of the block of 14,000 shares that you received,
did you sell at a price in excess of $20 per share ?
Mr. WHITNEY. Some of them; yes.
Mr. PECORA. When you first sold?
Mr. WHITNEY. Oh, yes. But Senator Fletcher's question was that
J. P. Morgan & Co. must have made some brokerage profit of some
kind and I answered no. I think you started off on my own personal
venture.
Senator TOWNSEND. Would you care to state when you sold most
of your shares?
Mr. WHITNEY. I really do not know. I sold some, but I do not
remember how many.
Mr. PECORA. According to an analysis of records which were made
available to one of my examiners or auditors I am informed that
you sold during the year 1929 for your individual account, 8,145
STOCK EXCHANGE PRACTICES
149
of these shares at 32, resulting in a profit to yourself of $229,411.32.
Does that conflict with any recollection of yours?
Mr. WHITNEY. I do not remember anything about it.
Mr. PECORA. Does it conflict with any recollection you now have
that you sold a substantial number of these shares in 1929 at a
substantial profit to yourself?
Mr. WHITNEY. It does not conflict with something I have not got,
obviously, because I have no recollection. If you have anything
there that your examiners have found about my personal sales, it
would be very interesting to me to see it.
Mr. PECORA. Suppose I show you what purports to be a photostatic copy of a schedule attached to your income-tax return for the
calendar year 1929 and from which I read the following entry
Mr. WHITNEY. Are you introducing that?
Mr. PECORA. N O ; I am just reading it to see if it refreshes your
recollection.
Mr. WHITNEY. It will not refresh my recollection. But read it.
Mr. PECORA. Let me try. Let me read it to you. Perhaps it will.
Mr. WHITNEY. Please.
Mr. PECORA. Under the schedule showing sales of securities during
the calendar year 1929 I find the following entry:
Eight thousand one hundred and forty-five shares Alleghany Corporation,
common, proceeds of sale, $392,311.32. Date acquired, February 15, 1929. Cost
to you, $162,900. Profit to you, $229,411.32.
Will you look at the document from which I have just read and
see if it refreshes your recollection ?
Mr. WHITNEY. I have no knowledge of this.
Mr. PECOKA. Won't you please look at it ?
Mr. WHITNEY. Will you identify where it is checked?
Mr. PECORA. It is checked there.
Mr. WHITNEY. Mr. Pecora, you hand me a piece of paper which
you say is a phptostatic copy of an income-tax return of mine. I do
not deny it is true, but I do not know anything about it. I have no
knowledge that I did not sell it; and if you would like me to find my
own copy of my tax return or my own statement, I am perfectly
ready to do that. I do not remember, and I am not going to pretend
to remember, any transactions I had in the year 1929. If this is a
correct statement, I am perfectly ready to stand by it; but I have no
knowledge of it.
Mr. PECORA. Let me say that this purports to be, and to my best
knowledge and belief is, a photostatic copy
Mr. WHITNEY. Oh, I do not doubt that.
Mr. PECORA (continuing). Of schedule attached to your income
tax return for the calendar year 1929 as the same is on file in the
office of the Bureau of Internal Kevenue, and, further, that that
photostatic copy was furnished by that Bureau.
Senator BYRNES. What objection would you have to looking up
your return and putting it in the record ?
Mr. WHITNEY. I have not the slightest objection.
Mr. PECORA. Would you prefer to refer to your own copy of your
income tax return?
Mr. WHITNEY. I would be delighted to find it, which I can very
by referring to my own* records up there.
Digitizedeasily
for FRASER
Mr.
PECORA. Will you refer to them ?
150
STOCK EXCHANGE PRACTICES
Mr. WHITNEY. I will. You asked me a question predicated on
that sale.
Mr. PECORA. N O ; I am trying to get from you some acknowledgment as to whether or not such a sale was made by you.
Mr. WHITNEY. I will find out.
Mr. PECORA. Can you find out now? Are your records available
to you ?
Mr. WHITNEY. I have none available now.
(Exhibit 9, a portion of which was read by Mr. Pecora during the
examination of Mr. Whitney, is here printed in the record in full,
as follows:)
JANUAEY 28,
1929.
Messrs. J. P. MORGAN & Co.,
New York City.
DEAE SIES : We propose to form a new corporation (to be called the "Alleghany Corporation") for the purpose of purchasing and owning certain stock
interests in various companies, largely companies owning or controlling railway properties, which holdings are now owned either by the Vaness Co., General Securities Corporation, or by ourselves individually, with full power to
such corporation to sell and reinvest from time to time as the directors of the
new corporation may determine.
The stock interests to be acquired by the new corporation and the proposed
capitalization in such new corporation are to be substantially as set forth in
schedule A, attached hereto. The terms (not expressly provided for in said
schedule A) and validity of the charter of the new corporation, of the stocks,
the purchase warrants and the bonds to be authorized and of the indenture
under which the bonds are to be issued, and the form of any and all corporate
proceedings in connection with the transactions outlined in said schedule A
and herein, shall be subject to the approval of your counsel.
This is to confirm the agreement between ourselves and yourselves as
follows:
1. We will cause the new corporation to contract to sell and to deliver to you
upon the terms and conditions herein set forth, and you are to agree to
purchase, the $35,000,000 principal amount of 5 percent bonds described in
schedule A for an aggregate price of $32,575,000 (being approximately 93.02
percent of the principal amount), plus the amount of interest accrued to the
date of the payment of the subscriptions for ouch bonds made upon the public
offering which you are to make or cause to be made as below indicated.
It is understood by us that you purpose to form a syndicate which on or
before February 8, 1929, will make a public offering of the bonds subject to
due issue and the receipt thereof by you from the corporation, and that you
purpose to call for payment to yourselves of the subscriptions for such bonds
at the offering price on such date (not later than February 23, 1929) as you
shall determine, and to issue to the subscribers making such payments bonds
in temporary form (or your interim certificates evidencing interests in such
temporary bonds) or, in case temporary bonds shall not have been theretofore
delivered to you, you may deliver your interim receipts entitling the holders
thereof to the delivery of the bonds therein specified when issued and received
by you as aforesaid.
Upon delivery to you by the corporation on or before February 28, 1929
(but not earlier than the date of payment of subscriptions upon the offering)
of the bonds in temporary or definitive form, you forthwith shall pay to the
corporation the purchase price therefor plus, in case you shall have theretofore delivered your interim receipts, 2% percent per annum upon such purchase
price from the date of payment of subscriptions upon the offering.
It is understood further that in case you shall have delivered your interim
receipts as aforesaid, you are to retain, pending the receipt by you of the
bonds, the amount of the subscriptions received by you for the benefit of the
holders of your interim receipts, and in case for any reason the corporation
shall not be able to make delivery of the bonds as aforesaid on February 28,
1929, or any later date agreed upon by the corporation with you, then you shall
be relieved, at your option, from all obligation hereunder and the undersigned
(a) will pay to you such sums as when added to the subscription price received
STOCK EXCHANGE PRACTICES
.
151
hy you from subscribers for the bonds together with the interest thereon to be
allowed by you at the rate of 2% percent per annum from the said subscription-payment date, will enable you to repay to the holders of your interim
receipts the subscription price for the bonds, plus interest on the principal
-amount of the bonds at the coupon rate from the subscription-payment date
to the date when such moneys are so repaid to such holders, the intent being
to protect the subscribers for the bonds and their assigns from losing the
income from their investment because of the failure of the corporation to make
delivery of the bonds as provided herein; and also (&) will reimburse to you
the amount of any out-of-pocket expenses (including counsel fees) incurred
by yourselves or by any syndicate which you may form in connection with the
issue.
2. We will cause the new corporation to issue and to sell to you or to you*
assigns $25,000,000 par value of the cumulative 5y2 percent preferred stock
series A, more fully described in schedule A, at $100 per share plus the amount
of any accrued dividend, and in connection with such stock to sell and deliver
to you, for the further consideration of $375,000 in cash, common stock purchase warrants described in said schedule A collectively entitling the holders
to purchase at $30 per share in cash 375,000 shares of the common stock of
the corporation. It is understood that in the first instance such warrants
shall be attached to the certificates of^the series A preferred stock so that the
holders of such preferred stock respectively will have a warrant for the
purchase of one and one half shares of the common stock for each share of
such preferred stock held by him; such warrants to be nondetachable except
upon redemption of preferred stock, all as set forth in said schedule A.
3. Of the 3,500,000 shares of common stock to be initially issued, we will
cause the new corporation to sell to you 1,250,000 of such shares at $20 per
share, payable in cash. This stock is to be purchased by you for your own
account, but you are to be free to resell such stock in such manner and at such
price as may seem to you advisable.
4. Delivery of and payment for said series A preferred stock and said common stock, shall be made at your office in the city of New York, or at such
other place in the city of New York as you may designate, on February 15,
1929, or on such subsequent date, not later than March 1, 1929, as you may
determine. Delivery shall be made in the form of temporary printed certificates in such names and amounts as you may designate. Such temporary
certificates shall be exchangeable for definitive certificates without expense to
the holders.
5. In case for any reason the corporation shall not be able to make delivery
of such series A preferred stock or such common stock on the date on which
delivery is due, then you shall at your option be relieved from all obligation
liereunder and in such case the undersigned will pay to you the amount of anyout-of-pocket expenses (including counsel fees) incurred by yourselves and by
any others who may have underwritten the resale of such series A preferred
stock or common stock, in connection with the marketing thereof by them.
6. We will cause the corporation to make application to have listed on the
New York Stock Exchange the above-described bonds, series A preferred stock,
•common stock and stock-purchase warrants, and to bear the cost of such listing, and if the corporation is unable for any reason to obtain any such listing
it will make application to have the securities not so listed listed on the Boston
.Stock Exchange, and will bear the cost of such listing.
7. We will cause the corporation to furnish on request all such information
and to cooperate generally to the end that the bonds, series A preferred stock
and common stock, may be qualified for sale under the laws of any jurisdiction
in which you or any others who may have underwritten the resale of any of
such securities shall desire to offer the same for sale.
8. We agree that the corporation will deliver to you and to any others who
may have underwritten the resale of any of such securities, letters signed by
the president of the corporation, in form mutually satisfactory, containing
information concerning the corporation and its said securities, which letters
xaay be used by you or your associates or such underwriters in connection with
any offerings of such securities.
9. We are to deliver to you as part consideration for your obligation under
this contract out of the warrants for the purchase of 1,725,000 shares of
common stock, described in schedule A, deliverable to us in connection with
our purchase of 2,250,000 shares of common stock, warrants for the purchase
152
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STOCK EXCHANGE PKACTICES
of 375,000 shares, which warrants you are to be free to sell or to retain and
to exercise as and when you so desire.
The agreement herein set forth has been and is made for the benefit solely
of yourselves and the undersigned, and may be amended or altered at any
time as we shall agree; and no holder of any of the bonds or stock of the
corporation referred to in this agreement shall acquire any rights under or
by virtue of this agreement, or any rights other than those evidenced by such
bonds and stock as issued by the corporation.
Will you kindly confirm that the agreement between us is as above expressed?
Yours truly,
Confirmed January 28, 1929.
O. P. and M. J. VAN SWERINGEN.
J. P. MOEGAN & Co.
Senator GoLDSBOROUGHr I move we take a recess until 10 o'clock
tomorrow morning.
The CHAIRMAN. The committee will take a recess until 10 o'clock
tomorrow morning.
(Thereupon, at 3:10 p.m., an adjournment was taken until 10 a.m.
the next day, Thursday, May 25, 1933.)
STOCK EXCHANGE PEACTICES
THURSDAY, MAY 25, 1933
UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE
ON BANKING AND CURRENCY,
Washington, D.C.
The committee met, pursuant to adjournment on yesterday, at 10
o'clock a.m., in the caucus room of the Senate Office Building, Senator Duncan U. Fletcher presiding.
Present: Senators Fletcher (chairman), Glass, Barkley, Costigan,
Townsend, and Couzens.
Present also: Senators Bulkley, Gore, Byrnes, Bankhead, McAdoo,
Adams, Goldsborough, Kean, and Steiwer.
Present also: Ferdinand Pecora, counsel to the committee; Julius
Silver, David Saperstein, and James B. McDonough, Jr., associate
counsel to the committee; John W. Davis, counsel for J. P. Morgan
& Co.; Randall J. LeBoeuf, Jr., and Earle J. Machold, counsel for
the United Corporation and for George H. Howard, president of
the United Corporation.
The CHAIRMAN. Let us have quiet, please. The committee will
come to order. Mr. Whitney, resume the stand. You may proceed,
Mr. Pecora.
Mr. PECORA. Mr. Whitney
Senator MCADOO (interposing). Mr. Chairman, I want to put a
statement in the record.
The CHAIRMAN. All right, Senator McAdoo.
Senator MCADOO. When the United States entered the World
War in 1917, I selected Kussell C. Leffingwell, of New York, to be
counsel for the Liberty bond issues. He was a member of a prominent law firm in New York, versed in these particular matters. I
had known, him as a young man—his family and mine having lived
across the street from each other at Yonkers, N.Y.
Subsequently, because of Mr. Leffingwell's ability, I made him an
Assistant Secretary of the Treasury, a place he filled with great
ability and distinction. When I left the Treasury in 1918, Mr.
Leffingwell remained with my successor, Mr. Carter Glass, and also
I believe with Mr. Glass' successor, Mr. David F. Houston.
After leaving the Treasury, he became a partner of the firm of
J. P. Morgan & Co.
Ten years after I resigned as Secretary of the Treasury, and
4 years before I became a United States Senator from California,
Mr. Leffingwell offered me the opportunity of making three investments through his firm. J. P. Morgan & Co.
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STOCK EXCHANGE PEACTICES
(1) February 1929, 500 shares of the stock of the Alleghany Corporation, which I paid for in cash and which I sold at a net profit
of $4,900.
(2) January, 1929, 250 shares of common and 250 shares of preferred stock of the United Corporation, which was sold at a loss of
approximately $400.
(3) September 1929, 1,000 shares of Standard Brands, which was
sold at a loss of $7,065.
The net loss on these transactions was $2,565.
I have never been a " preferred client" of J. P. Morgan & Co.
The participations to which I have referred came to me solely
through my friendship with Mr. Leffingwell. Prior to this time I
had never had a transaction with the firm of J. P. Morgan & Co., nor
have I had any transaction with the firm since. I have never borrowed from J. P. Morgan &> Co. and, therefore, have never owed
them anything.
Mr. Chairman, I do not consider it necessary for me to make this
statement, but I make it solely because of the misleading articles
which have appeared in the press, and which are attempting, through
headlines and otherwise, to impart some sinister feature into perfectly proper business transactions conducted by the Morgans on
the one hand and myself on the other, within our rights and not
subject to the least criticism.
The CHAIRMAN. The statement will be spread on the record. The
persons who are here as our guests or spectators or otherwise will
remain quiet or get out. That is all there is to it. You must all keep
quiet and not move your chairs around, which moving of chairs
makes a noise like a moving railroad train. Some of you do not
seem to care anything about the noise you are making. You must be
quiet or we will be forced to clear the room in order that we may
go along with our proceedings.
Now you may proceed, Mr. Pecora.
TESTIMONY OF GEORGE WHITNEY, A PARTNER OF THE FIRM OF
MORGAN & CO., NEW YORK CITY—Resumed
Mr. PECORA. Mr. Whitney, is there a standing list or record in the
office of J. P. Morgan & Co., or in the possession of any of its partners, which gives or shows the names of the close friends of J. P.
Morgan & Co. who were invited from time to time to subscribe to
various issues that J. P. Morgan & Co. were identified with ?
Mr. WHITNEY. NO, sir; and I wish to say that
Mr. PECORA (interposing). Whenever there was
Mr. WHITNEY (interposing). Mr. Pecora, may I interrupt? There
were one or two things brought up on yesterday that I did not know
the answer to. May I tell you the answers to those now, in order
to clear up the record?
Mr. PECORA. What are they?
Mr. WHITNEY. Well, one of them is the question of my own personal sales. And there were 1 or 2 things that I found in checking up I had given wrong information about. For instance, stock
selling on February 1. It won't take but a minute.
Mr. PECORA. All right; go ahead.
STOCK EXCHANGE PRACTICES
155
Mr. WHITNEY. This particularly refers to a question that Senator
Couzens asked me on yesterday, as to when the market—well, you
will recall, Mr. Pecora, that you asked me, and that Senator Couzens
asked me afterward, when the open market began. I have had
that record searched overnight, and apparently it was on the 1st day
of February, which was the date that the Guaranty Co. made a
public offering of the 500 shares
Mr. PECORA (interposing). You mean 500,000 shares.
Mr. WHITNEY. Yes; I beg pardon, 500,000 shares of Alleghany
Corporation common stock at 24 was made. There was created on
the New York Stock Exchange what they call a " when issued "
market. February 1, that was. So that that was the first day, so
far as any record shows, when there were any quotations of any
kind. On that date the prices—well, they opened at 37, and- the
high was 37, and the low was 32%, and it closed at 33. So the figures
that were quoted in the letter introduced on yesterday were correct.
That was the first day when there was any trading whatever. And
they ranged along—well, 37 as a matter of fact, the opening sale, was
the highest price at which they sold for a long time—I mean through
the month of February.
Senator KEAN. Mr. Whitney, I should like to correct one statement that you made: It was not listed.
Mr. WHITNEY. NO. It was on a " when issued " basis. It was
not issued until February 15. It was on a " when issued " basis
as to date of payment.
Mr. PECORA. The trading on the exchange from February 1 to 15
was on a when-issued basis.
Mr. WHITNEY. Eight.
Mr. PECORA. When was application made on behalf of the issuing
corporation to sell its securities on the New York Stock Exchange!
Mr. WHITNEY. On a definite basis?
Mr. PECORA. Yes.
Mr. WHITNEY. I
assume it was as soon as the corporation was
formed.
Mr. PECORA. That was prior to February 1, 1929.
Mr. WHITNEY. Oh, undoubtedly. Of course we—well, it was
undoubtedly prior, although I do not know the definite answer to
that question.
Mr. PECORA. Were any restrictions of any kind placed or even
suggested by J. P. Morgan & Co. upon the right of any of the
individuals to whom an invitation was extended to subscribe to
the stock at $20 a share?
Mr. WHITNEY. NO, sir.
Mr. PECORA. SO that any
one of those individuals who availed
himself of that subscription right could have disposed of the stock
allocated to him in the open market and would have reaped a very
substantial profit. Isn't that so ?
Mr. WHITNEY. I will answer—of course, the answer to the first
part of your question is yes, there were no strings to it. The answer
to the question, Could they have done that? is yes. If they had
taken advantage of the market they would, undoubtedly, on the
prices, have made a very substantial profit. But this question on
yesterday, particularly from Senator Qouzens, had to do with when
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STOCK EXCHANGE PRACTICES
we had our discussions and wfyat the prices were. As I testified on
yesterday, those conversations in which the stock was offered were
prior to when there was any listed market. So, in a great majority
of the cases, when people were available and could be reached, we
offered it and they accepted it without any basis of any possible
future market profit there might have been. The mere fact that
there was a market created subsequently was not in their minds or
in ours.
Senator COUZENS. In the letter to Mr. Woodin, it specifically stated
that the market was 35 or 37.
Mr. WHITNEY. Yes, sir. Mr. Woodin was away. We tried to reach*
him but could not, and that letter was sent February 1 to reach him.
That was one of the few cases which was done in that way. I told
you on yesterday I did not know how many were done without personal conversation, but I would say relatively few. I have not
checked it.
Senator COUZENS. It would be much more tempting written in that
way.
Mr. WHITNEY. Well, it so happened that the one that Mr. Pecora
produced on yesterday was one of the cases after the fact—in other
words, that was merely by reason of the accident of his absence.
Mr. PECORA. Wasn't that same accident repeated in other instances
where you communicated with any of those gentlemen by mail? In
other words
Mr. WHITNEY (interposing). Obviously
Mr. PECORA (continuing). Didn't you say that your firm
Mr. WHITNEY (interposing). Excuse me, Mr. Pecora
Mr. PECORA (interposing). What was that?
Mr. WHITNEY. Mr. Davis told me simply not to interrupt your
question.
Mr. PECORA. In other words, didn't you or your firm in writing
to the various individuals at that time who could not be reached
by telephone or by personal contact, write a letter to such individuals
substantially in the same form if not in the identical form of the
letter to Mr. Woodin "that was read into the record on yesterday?
Mr. WHITNEY. I should think not.
Mr. PECORA. Will you kindly look at your own correspondence
files, Mr. Whitney, and examine them for the purpose of making
sure of that?
Mr. WHITNEY. Well, I will; yes, sir. But I think
Mr. PECORA (interposing). Will you do that?
Mr. WHITNEY. NOW?
Mr. PECORA. Certainly.
Let us clear up the matter now, so that
tomorrow you will not have occasion to have to clear up something.
Mr. WHITNEY. Haven't you the letters here, Mr. Pecora, to which
>ou refer. I do not say there are not other letters, because I understand there was another somewhat exactly similar letter written by
Mr. Ewing to a friend of his.
Mr. PECORA. Haven't you the correspondence file of the firm here
relating to this issue ?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. All right.
Mr. WHITNEY. DO you want
they are looking
for that ?
me to clear up the other matter while
STOCK EXCHANGE PRACTICES
157
Mr. PECORA. YOU may clear up anything you wish.
Mr. WHITNEY. Mr. Pecora, I am advised that we have here only
letters and correspondence files of which you asked and received
photostatic copies. I am also advised that there are three letters
of this general character. As to this letter I speak of, written by
Mr. Ewing, that is one of them; and another letter written by
another one of the partners, Mr. Anderson, to a friend of his.
These, however, and Mr. Anderson's letters are not identical with
this at all. I can produce those if you wish. We have not brought
the file of correspondence. We only brought, as I thought it was
understood, those that you took photostats of. These are the only
three, I am told, that are here. I do not speak of my personal
knowledge, but am told they are the only three along this line.
Mr. PECORA. Well, I thought the understanding was that you
would not have to produce the originals of any documents of which
we had photostatic copies, but that you were to produce, in response
to the subpena served upon you, the original documents or records
called for as to which we had no photostatic copies.
Mr. DAVIS. May I answer that, Mr. Pecora ?
Mr. PECORA. If you think it necessary.
Mr. DAVIS. YOU know, and so do I, that your investigators were
given all those correspondence files; that they went through them at
length, page by page, and letter by letter; that you requested us to
furnish you with photostatic copies of certain designated letters,
which we very willingly did. You have those photostats. Now,
certainly if you had wanted any other letters from those files you
should have told us about them, instead of having toi encumber this
hearing room with a truck load, or what you will, of correspondence
files, which as you know occupy in toto something like three large
filing cabinets.
Mr. PECORA. NOW, Mr. Davis, a subpena was served upon your
clients to produce certain specified documents and records and files.
I had a conversation with you over the telephone prior to the first
day of the hearing and toward the latter part of last week, in New
York City, in which I said, in substance—or I may have had it with
a member of your firm *•
Mr. DAVIS (interposing). You had it with me.
Mr. PECORA. All right, sir. In which I said, in substance, that in
responding to tHe subpena duces tecum it would be agreeable to us
if you did not produce the originals of any documentary evidence of
which we had photostatic copies. And in view of the fact that your
firm, or your client, took for itself as I understand it a copy of every
document with respect to which we requested a photostatic copy, I
naturally assumed there could be no disagreement or misunderstanding as to just what documents we had photostatic copies of.
Mr. DAVES. Very good. Then there is not the slightest misunderstanding.
Mr. PECORA. There is, because our subpena called for the production of the correspondence file
Mr. t)Avis (interposing). Well, I will say
Mr* PECORA (continuing). With regard to this issue; not only
those portions of which we had photostatic copies.
175541—33—PT 1
U
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STOCK EXCHANGE PRACTICES'
Mr. DAVIS. Very well. If you will kindly indicate to us any letter
in those files which you want produced, it will be produced. If
your examiners will tell us what letters there are that you want, they
will be readily produced. What you are now asking us to do is
simply to do what your examiners have been doing in our office for
the last 3 months—rereading these letters and to see if we can
find any letters which, apparently, they did not find, of the character which you are asking about. That is not a proper demand under
any subpena, and counsel for the committee must know it.
Mr. PECORA. Well, Mr. Davis, we won't go into a discussion at this
time of how long the examiners in the employ of the committee were
there going through your office, or your client's office, because considerable more could be said as to just what privileges were accorded
with regard to an examination of the documents and records that
they wished to examine.
Mr. DAVIS. YOU are welcome to say on that subject anything you
please.
Mr. PECORA. And I will do it at the proper time, but I do not
want to encumber this record with it now, or delay the hearing.
Senator BYRNES. Mr. Chairman, cannot we find out what letters
are desired, and if so, make it known to Mr. Davis in response to his
statement, and see to it that he produces the letters counsel for the
committee wishes?
Mr. PECORA. All letters that were written on behalf of the firm of
J. P. Morgan & Co., or Drexel & Co., or by any of their members, to
any individual or corporation inviting subscription to the shares of
the Alleghany Corporation, United Corporation, Standard Brands,
Inc., General Motors Corporation, and the Johns-Manville Corporation.
Senator GLASS. Mr. Pecora, why didn't your men get those letters
when they were over there going through thosefiles?
Mr. PECORA. Senator Glass, I will state that our examiners covered
all material it was physically possible for them to cover in the limited time at their disposal. I asked permission for our examiners
to remain in the office of J. P. Morgan & Co., during the 6 or 7
weeks we were in there, until 12 o'clock at night. But we were
limited to 6 p.m. That curtailed our work very considerably.
Senator BYRNES. Mr. Davis, why can't you comply with that request? Is it because the files are so bulky that they cannot be
brought here ?
Mr. DAVIS. Quite true.
Senator BYRNES. DO you mean letters written inviting subscriptions to Alleghany Corporation, General Motors Corporation, and
other stocks?
Mr. DAVIS. Relating solely to the question of those particular subscriptions, no. What I am suggesting, and what I state on my
personal responsibility, is that the investigators of Mr. Pecora had
all those files, and they turned them over letter by letter and page
by page. Now, if it is the desire of the committee that we respond,
in effect, to a general subpena, we are perfectly willing to do it. If
I am assured that the committee wants physically brought down
here and laid upon this table all the correspondence files relating
to this subject—which, as I tell you, have already been combed in
STOCK EXCHANGE PRACTICES
159
extenso—the files will be produced. But I do ask that that request
come from the chairman of the committee or the committee itself.
Senator GLASS. Well, I do not think that the implication ought
to remain on the record, Mr. Davis, that your concern concealed
from those examiners letters of an allegedly incriminating nature.
If Mr. Pecora has any letters in mind, if any of his examiners discovered any letters of which they failed to take copies, why, I
think J. P. Morgan & Co. ought to be required to furnish them.
Mr. DAVIS. And we will do so, Senator Glass, with great pleasure.
Senator COTJZENS. Mr. Chairman, I move that we defer action
on this matter until Mr. Pecora can present a list which this committee may present in the house of Morgan of such papers as he
wants.
Senator BYRNES. I second that motion.
Senator GLASS. We have already placed in the record, as I am
told, but I was not here on yesterday afternoon, being engaged in
the Senate, a list of the persons who were invited to participate
in the subscription to these various stocks.
Senator COUZENS. Just the Van Sweringen matter.
Mr. PECORA. Just the Alleghany Corporation.
Senator COSTIGAN. Mr. Pecora, are you prepared to furnish such
a list as Senator Couzens requests?
Mr. PECORA. May I say in answer to that: Because of limitations of time that were imposed by J. P. Morgan & Co. upon our
examiners and accountants, we were not able to make that kind of
examination of their records, and files, as we desired to make. The
firm of J. P. Morgan & Co. is the only firm of private bankers now
under investigation by the committee and the committee's counsel
which denied our employees the right to remain in their business
offices engaged in this investigation and examination of their records
after 6 o'clock p.m.
Other houses have consented to and have permitted us to remain
as late as 12 o'clock midnight, if that were desired, and we have
taken advantage of their courtesy. For that reason it was not physically possible for my examiners and auditors to make the notation
of the records that they desired to make.
When we asked for the photostatic copies of documents that we
placed our hands on there were occasions when several days elapsed
before those photostatic copies of documents were given to us, although the photostatic plant is right in the office of J. P. Morgan
& Co.
I say that, Senator Costigan, merely to indicate some of the reasons why it has not been possible for me, as counsel to the committee,
to prepare the detailed kind of request that Mr. Davis has suggested.
Mr. DAVIS. Mr. Chairman, that statement I think demands some
comment from me. I should be very sorry if the time of this committee were occupied by disputes of counsel, or any questions of
veracity between the counsel for the committee and myself. But I
cannot let a statement of the character that counsel has made go
unchallenged. Let me tell the committee exactly what transpired.
On the 23d day of March, as I think it was, we received from
Mr. Pecora a questionnaire of 23 questions of the most extensive
Digitizedand
for FRASER
varied character, calling for the survey of all our records to
http://fraser.stlouisfed.org/
make reply. We worked on that intensively day and night, and
Federal Reserve Bank of St. Louis
160
STOCK EXCHANGE PRACTICES
furnished him on the 17th day of April the complete answers to
all his questionnaires which has formed the basis so far of practically
all his examination on this hearing.
A week later he advised me that he would like his investigator to
be given access to the original documents, papers, ledgers, and books
of account of the firm. We provided him with a commodious and
comfortable room for that purpose. We sent down to them every
book, paper, document, account that they asked for. They were
permitted to enter there at 9 o'clock in the morning, or earlier if
they chose. After they had been working some time Mr. Pecora
asked that they might stay on until midnight. At the same time
every day we were receiving from him additional written requests
for additional statistical information up, I think, to the aggregate
number of something like 50 different statistical questionnaires.
And every night our staff was occupied in satisfying those requests.
I told Mr. Pecora, and I make no apology for it, that it was wholly
unfair and in my judgment wholly unnecessary to expect the men
"whom we had detailed to assist in this investigation to stay with
trim all day and stay with him until midnight, and remain up, if you
please, the rest of the night satisfying his additional demands.
So far as the photostatic assertion is concerned, Mr. Pecora communicated that complaint to me over the telephone. I communicated,
through my assistants, with his investigators, and they reported to
me that the complaint had no real foundation, and that they were
getting their photostats as promptly as they needed them. That is
the report I received. And I am not willing this committee or this
audience shall have the impression we did not through this investigation give Mr. Pecora the degree of assistance and cooperation which
in my humble judgment could not possibly have been exceeded.
Senator COUZENS. Mr. Chairman, I insist uj)6n my motion now.
The CHAIRMAN. I think we understand the situation. I see no
reason why Mr. Pecora cannot go on and ask Mr. Whitney in a
general way about this correspondence, if he wants to pursue that,
and take time to specify what he is requested to produce, if he needs
to produce anything more.
I do not believe we need every letter that has been written and every
reply that has been furnished to people. I do not think we want
to encumber the record with all that. You have got one letter here.
That was understood to be somewhat the kind of letter that had
been sent out. Now, if there is a different form of letter used somewhere else in some other instances, let us put in that kind of a
letter, and let it stand as a sort of a type, if you want. But we do
not want all of the letters that have passed between the Morgan
house and everybody else with whom they have had any dealings
with respect to these stocks, it seems to me.
The motion is to defer
Senator COUZENS. The motion is to defer action and permit Mr.
Pecora to furnish the committee the list, and then the committee will
pass on whether they want the list.
The CHAIRMAN. Yes. All in favor say "aye." Opposed "no."
The ayes have it.
We will go on without regard to that, and you can get that up
.later,
Mr. Pecora.
STOCK EXCHANGE PRACTICES
161
Senator COSTIGAN. If it is not possible for Mr. Pecora to provide
such a list I trust he will so inform the committee.
The CHAIRMAN. Yes.
Mr. PECORA. In proceeding with the examination of the witness
I do not want it to be understood on the record that the record is
complete with the statement of Mr. Davis as to just the circumstances
under which we were permitted to examine their records.
Senator COTJZENS. Well, the committee is not here to determine
the statements of the two counsel.
Mr. PECORA. May I suggest the stenographer read the last question and answer?
(The reporter taking notes at the moment stated that the reporter
who had taken the last question and answer had been relieved by
him and was not present.)
Mr. WHITNEY. I think, Mr. Pecora, the last thing that happened
was I said, " Well, I will go over this other question of my personal
sales while we are waiting."
Mr. PECORA. Have you reviewed your data ?
Mr. WHITNEY. I have; yes, sir. And I incidentally found thai
the statement you showed me yesterday was a photostat of some
of our own records, which shows the familiarity that I have with
our income-tax department. My records show, Mr. Pecora, that I
acquired through the exercise of rights and through this original
subscription a total of 14,260 shares.
Senator ADAMS. A little louder, please.
Senator MCADOO. Yes. It is very difficult to hear you.
Mr. DAVIS. If you will face the stenographer, Mr. Whitney, yon
will be facing the middle of the table, and the Senators at each end
can hear equally well.
Mr. WHITNEY. I acquired 14,260 shares of Alleghany common1
stock during the year 1929, which includes 12,400 shares of the
14,000 that were on that list. The total cost of those shares was
$285,508.82.
I sold in July 1929, 6,145 shares. I sold in September 1929, 2,00$
shares. Which makes the total amount that you inquired of yesterday, Mr. Pecora, 8,145 shares which I sold for a total of $392,311.32, which results in the profit that was shown, that you mentioned yesterday, of approximately $229,000. The average price of
that was not 32, as you stated yesterday, but approximately 48.
I then sold in 1930, 4,000 shares more for a total of $28,977.50;
in 1931, 2,000 shares at $10,345, and I still hold 115 shares.
So my gross profit on the whole transaction was $146,125, although
I declared a profit in 1929 of $229,000 profit in my income-tax return.
The CHAIRMAN. What was the peak of that stock?
Mr. WHITNEY. I think it sold at something like 57.
The CHAIRMAN. When?
Mr. WHITNEY. At some time.
Mr. PECORA. HOW long after these individuals were invited to
subscribe at 20 did it sell at a peak of about 57 ?
Mr. WHITNEY. I would not know. I think in the summer. I
am told it was about 5 or 6 months. The 37 price that it sold
at on February 1 was the high price up through—this is as far as
paper goes—through March 1929. I subscribed for rights to
Digitized this
for FRASER
the
stock
in June 1929.
162
STOCK EXCHANGE PRACTICES
Senator BARKLEY. Mr.
The CHAIRMAN. Yes.
Senator BARKLEY. HOW
Chairman, may I ask a question?
much was the total issue of the Alleghany
stock?
Mr. WHITNEY. Three million, five hundred thousand shares.
Senator BARKLEY. And your firm took what amount?
Mr. WHITNEY. One million two hundred and fifty thousand.
Senator BARKLEY. A million and a quarter. Leaving roughly
2,000,000 shares.
Mr. WHITNEY. TWO and a quarter million shares.
Senator BARKLEY. TWO and a quarter million shares.
Mr. WHITNEY. Were received by the organizers of the Alleghany
Corporation in exchange for certain changes that made the portfolio of Alleghany—I mean it was received in exchange for that.
Senator BARKLEY. HOW many shares were traded in on the stock
exchange ?
Mr. WHITNEY. I do not know, Senator, without looking it up.
I have not inquired. Do you mean during the year?
Senator BARKLEY. Well, during this period in which you and
your partners held the stock that you had originally bought.
Mr. WHITNEY. Well, I do not know about my partners. I am
just speaking, of course, of my own personal shares which I sold
in July, and I have not checked up how many shares were sold
between February 1 and July.
Senator BARKLEY. What I am trying to arrive at is the question
of whether your firm owned a sufficient number of shares so that
the outstanding shares that would be traded in on the market would
be comparatively so small as to make it easy to boost the price ?
Mr. WHITNEY. Well, I testified yesterday, Senator, that of the
1 million and a quarter shares which we purchased at 20 we immediately disposed of, to individuals of various kinds, including partners, all but 175,000 shares. So there were disposed of to individuals, with complete freedom of action, all but 175,000 of the
million and a quarter shares acquired by us.
Senator BARKLEY. YOU do not know how long any of the partners
kept those shares before they disposed of them ?
Mr. WHITNEY. I haven't any idea.
Senator GORE. Did you say that you disposed of 175,000 shares
to individuals, or disposed of all but 175,000 shares?
Mr. WHITNEY. Excuse me, Senator, I did not hear.
Senator GORE. Did you say that you disposed of 175,000 shares
to individuals, or disposed of all but 175,000 shares to< individuals?
Mr. WHITNEY. NO, we disposed of originally, immediately after
purchase, as is set forth in the list that was put into evidence yesterday, all but 175,000 shares, which the firm as a firm retained.
Senator GORE. I see.
Senator ADAMS. Mr. Whitney, was the Alleghany company an
old company or a new company ? I am quite ignorant of it.
Mr. WHITNEY. Well, Senator, that was the next thing I would
like to explain from yesterday, because I found that in my testimony in answer to various questions from Mr. Pecora and the Senators, there would seem to be a little bit of confusion, and I would
like to explain a little bit just as to the origin of this corporation.
STOCK EXCHANGE PRACTICES
163
In answer specifically to your question, the Alleghany was a new
corporation. As Mr. Pecora read yesterday in a contract letter
the Messers. Van Sweringen undertook in that contract letter to form
a corporation, and perhaps to make the story a little bit clearer
it might be of interest to the committee to explain a little bit what
the Alleghany Corporation was.
The Messrs. Van Sweringen for 8 or 10 years prior to the formation of the Alleghany Corporation had been working steadily
towards the goal of trying to work in conformity with the Interstate
Commerce Act of 1920 which permitted consolidations, and they
had gradually been acquiring securities in what has now been approved by the Interstate Commerce Commission as one of the four
eastern trunk lines. During this acquisition they had formed in
the first instance the Chesapeake Corporation, which held stock of
the C. & O. Railroad, which is today the main spring, the main stem
of this fourth consolidation, the fourth eastern trunk line.
We first became acquainted with them as far back as 1916, and
from 1920 on we had had a great faith in their aim of trying to
build this railroad system. We believed they were excellent operators of railroads, and their records with the roads they have got now
have certainly proven that. In other words, the Chesapeake & Ohio
Railroad, as you all know, is one of the few properties that has
continued to be able to earn and pay its dividends during these
3 very unhappy years we have just gone through.
We have had business relations with them for a great many years.
We have believed in them, as I said. We have believed it was in
the interest of the country, it was in accordance, with the law of
the Congress, this consolidation of railroads, and as you undoubtedly remember, there was a report made by the Interstate Commerce Commission, one in which they refused to approve a so-called
" Nickel Plate merger " of these roads, although they did say that the
general grouping of the roads they thought was in the public interest, but that they would not approve the detail of the plan as
set forth at that time.
Subsequently, in 1929, just after this particular transaction we
were discussing yesterday, they did approve the C. & O. purchasing
the Pere Marquette, and did approve the theory of that consolidation, but not also certain details of their acquisitions of certain of
the other properties.
Now, as I say, this has been a 10-year regular program on the
part of the Messrs. Van Sweringen, and it was believed that it was in
the public interest that these railroad consolidations should take
place. And we have gone along as bankers with them. We had no
interest in any of the stocks that were turned in to these holding
companies that they created, with one very minor exception. But
we owned none of the stocks that were turned in to form Alleghany
whatever. But we did believe it was a worthy thing to finance.
We did believe, and it was so stated in the Splawn report, which
was a report made to the House of Representatives—I think it is
the Interstate Commerce Committee there—that the holding company might serve as a proper medium to effect these consolidations,
although they raised various other questions as to whether they
should not be regulated and controlled. But the general theory
164
STOCK EXCHANGE PBACTICES
which was raised was that it might be a good thing in bringing
about these consolidations.
Now in 1929 we believed—and, as I say, in 1929 the Interstate
Commerce Commission approved the purchase by the Chesapeake &
Ohio of Pere Marquette Railroad common stock at 133. And while
I have not got it here before me, there was a statement made at that
time that they believed that the condition of the country was such as
to render that in their judgment, a profitable purchase.
Now as I said, there was first the Chesapeake corporation, which
had its holdings in Chesapeake & Ohio. We helped them, having
confidence in that corporation, by the sale to the public of $48,000,000
of convertible bonds of the Chesapeake corporation founded upon
the C. & O. Eailroad. That was in 1927.
In 1929 they had developed still further their idea of this eastern
consolidation, and acquired certain other property, Erie, Pere Marquette, and so forth. And it came to their belief that they needed to
consolidate those in one holding. And so the Alleghany corporation
was formed.
We, as I said, have been bankers of the Van Sweringens in their
railroad endeavors. We have never had any association with them
in any of their real-estate developments, which is another phase of
their activities in Cleveland, but we had been bankers for them in
connection with their railroad operations for many years. Therefore, when the idea of forming this Alleghany corporation was
created they came to us to see how we would set it up. In other
words, the financial structure that we believed was the soundest.
And I think it is almost common knowledge that one of the things
that has caused the present trouble with railroad securities is the
fact that the railroads have not been able to do any equity financing.
In other words, they have got an over amount of debt as against the
equity they have got. With very few exceptions they have not been
able to get stock equity. In other words, to build a base against their
funded debt.
Now in this case we deliberately, with our experience of a great
many years in the security business, set this financial structure of
the Alleghany corporation up as was very briefly outlined in that
contract letter between us and the Van Sweringens, namely the
$35,000,000 of bonds, which were to be secured by the specific pledge
of the collateral, and of course a first lien on all of the assets. I
might state that I think the market values of these assets at the
time that this public issue of $35,000,000 of bonds was made, was
something like $130,000,000. There was a debt of $35,000,000 on
that.
Then to provide a base for that, to provide the equity money,
there was $25,000,000 of preferred stock purchased by us, and
through a contract with the Guaranty Co. was sold to the public.
That had, as was shown yesterday, attached to it warrants. With
each share of that stock you had a right to buy one and one half
shares of common stock at $30 a share, which gave it obviously a
certain speculative run or a run in the future and the prosperity of
the country.
Then, further, we undertook to buy this $25,000,000 of common
stock, which was paid for as was testified in cash. At the time the
STOCK EXCHANGE PRACTICES
165
Van Sweringens, who owned the collateral, turned in all of their
holdings through their various companies, and received common
stock for it. In other words, they placed their position in that company under a total of $60,000,000 of prior charges.
Now the question comes as to this common stock. We sold, as we
all know—or Mr. Pecora knows—we sold the bonds publicly. We
believed in these properties. We did not believe at all that we were
going into what we have gone into since 1929, and we believed there
was a very substantial base of real values against the bonds.
The preferred stock was sold by the Guaranty Co. because it is not
our practice in our regular security business to sell preferred stocks
of that type. That and the common stock, which has been what has
been discussed here, go to the question of these so-called " special
letters."
And yesterday I was questioned as to why we took no profit.
Senator Costigan asked me if we had any objections to making
profits, and I tried there to draw the definition between this kind of
a thing and our regular security business.
Now we believed in the company. We believed in the future
of what it was aimed to do. We did not think it prudent banking,
and I hope we have shown you how we feel about that, to keep
$25,000,000 of stock in our own portfolios. That that is not consistent with the banking business of J. P. Morgan & Co. We
therefore, in this case, and in the other cases to which Mr. Pecora
has referred, invited people that we know intimately, that we believe
have enough knowledge of business and general conditions to know
exactly what they are buying, to come along with us at the same
price, in the hope not that they are going to make an immediate
speculative profit, but that over the course of time the proposition
is sound enough so that they will make a profit, as we hoped to.
There was no idea in our minds in any of these things of this
terrific speculative boom or bust that we were all going on in 1929.
Neither was there anything in our minds that we were going to
run into such a disastrous 3 years as have followed the collapse
of this superinflation that we had in 1929.
Now, these lists were formed, as I say, of people we knew, people
we knew knew enough to know what they were doing. We hoped
that they would all make money, obviously. It was not done in
any case with the idea that they were going to—as suggested by
Mr. Pecora—that they were going to go out the next day and
throw it in the market, which happened to be an excited market.
And the hope was that they would ultimately make a profit.
There is only one further word on that I would like to say, if I
may, and that is our general principle on selling common stock.
We have never done that. We have never done that for very many
reasons. The chief, perhaps, is that our reputation in connection
with the security business has been on sound investments. We do
not think common stock ought to be sold publicly, or by us, at
least, for the reason that we think they get into the hands of people
who do not know what they are buying. We think, secondly, that
if you have an oifering of common stock, or perhaps if we did, that
that might carry with it some implication of speculations which
we would not want to be a party to.
166
STOCK EXCHANGE PRACTICES
Now, I am afraid I have talked a little more than I meant to.
But there is one last thing I wondered if it would not be of interest
to the committee to show, and that is to show perhaps the differentiation we make in our own minds between this special list—equity
financing, and our conception of the way to handle the proper
set-up of a corporation financially, and the handling of the different
types of business. I have had prepared in our office a statement,
which is not long, which tells something about what you asked
yesterday, Senator Costigan, about our regular security business.
And if I may have the permission of the committee I would like
to read this.
Mr. PECORA. May I have a copy of it ?
Mr. WHITNEY. Yes.
Senator COSTIGAN. May we have a copy
Mr. WHITNEY. I t is not very long. It
for Mr. Pecora.
takes up the different
classifications of securities.
The CHAIRMAN. YOU can read it. Proceed.
Mr. WHITNEY. DO you want to wait for the copies %
The CHAIRMAN. NO. GO ahead. We have no time to wait. We
must hurry on with these hearings. We can not take up too much
time. We will get the copies later. Let us move on as fast as
we can.
Mr. WHITNEY. I will read just as fast as I can. [Reading statement :]
It may be of interest to the Committee to give a brief summary of the public
offerings of securities, foreign and domestic, that J. P. Morgan & Co. have made
since the World War.
For the period from January 1, 1919—
I would like to state, just so there will be no misunderstanding,
that this is J. P. Morgan & Co., and not Drexel. I t is our New York
office, with which we are particularly familiar.
Senator COTJZENS. YOU are not going to stop to list them all, are
you?
Mr. WHITNEY. NO, sir. There are 254 of them. [Continuing reading statement:]
For the period from January 1, 1919, to date, we have offered to the public,
in almost every instance in association with others who have joined us in
such financing, securities to the aggregate amount of $6,024,444,200, of which
$2,098,953,400 have been retired.
Manifestly, it would have been impossible for us alone to have handled such
a tremendous volume but in every instance the public offering was made over
our name and in most instances over the names of others as well. For convenience we have listed these public offerings under six groups.
GROUP I. OBLIGATIONS O'F FOREIGN GOVERNMENTS AND FOREIGN CORPORATIONS
These public offerings aggregate $2,232,757,000 in principal amount.
May I be excused from reading the thousands ?
The CHAIRMAN. Certainly. You may put the whole thing in the
record, if you want to.
Mr. WHITNEY (reading) :
Of these obligations, 40 percent, or $883,854,400, have been retired either by
payment at maturity, by redemption at prices ranging from 107% to 115
percent, or by purchase at various prices through sinking funds. There remain
outstanding bonds or obligations of foreign governments or foreign obligors to
the aggregate principal amount of $1,348,902,600. Of these, even in these
STOCK EXCHANGE PEACTICES
167
depressed times, $446,690,500, or 33 percent, were on May 11, 1933, selling above
the original public offering price. The average offering price to the public
of these obligations was 94.69 percent, and the average current market jjrice
on May 11, 1933, was 81.07 percent, a decline of less than 13% points.
(The figures which I am giving in this group and in subsequent
groups for public offering prices and for current market prices is a
weighted average based on the total amount of bonds remaining
outstanding.)
No investor, who in this period purchased any of these bonds which we
offered to the public, has failed to receive the regular payment of interest at
the full rate in United States currency or the regular payment of principal
when due. The only German bonds that we have offered were the German
Government 7 percent bonds and 5% bonds, both of which were issued in
pursuance of international plans for German reconstruction and under the
auspices of the Great Powers
Senator COUZENS. May I ask if that language, " Great Powers ",
has a definite meaning?
Mr. WHITNEY. They were issued under the Hague Conference—
the people that were parties to the Hague Conference.
Senator COUZENS. Does that indicate that they were under the
auspices of the United States?
Mr. WHITNEY. NO? sir; not in the slightest.
Senator COSTIGAN. What countries are included ?
Mr. WHITNEY. Those that participated under the Dawes and
Young plans.
Senator COSTIGAN. DO you recall, Mr. Davis, the countries by
name?
Mr. DAVIS. England, France, Italy—I could not list them all, sir.
Mr. WHITNEY. They were issued under this international plan.
[Continuing reading:]
GROUP I I . RAILROAD COMPANY BONDS
The total principal amount offered to the public aggregates $1,845,639,300.
Of these, about 29 percent, or $536,814,500, have been retired, substantially all
by payment at maturity, by redemption, or by conversion, as few railroad
issues have sinking-fund provisions.
Senator COUZENS. Did you find any?
Mr. WHITNEY. NO, sir; they are constantly growing, and you
would have to recapitalize if you did.
Senator COUZENS. SO the bonds exist long after the equipment is
worn out?
Mr. WHITNEY. These are not equipment bonds, Senator.
Senator COUZENS. But the bonds are issued on such equipment,
are they not ?
Mr. WHITNEY. The question of depreciation and maintenance is
covered under the Interstate Commerce rulings, and all equipment
bonds are issued under serial numbers, which would affect sinking
fund. It is supposed to be kept in A - l shape under general maintenance and depreciation.
Senator COUZENS. DO you consider a bond paid, according to this
statement, when it has been redeemed or converted ?
Mr. WHITNEY. When the bond we have offered has been sold; yes,
certainly; when he has received it and the obligation he bought has
been satisfied
168
STOCK EXCHANGE PRACTICES
Senator COUZENS. Even if it is by conversion ?
Mr. WHITNEY. That is his own election. There is no conversion
except by the election of the owner. The answer to your question
is " Yes "; we do consider the obligation we have with the party has
been satisfied if the holder exercises his option to convert.
Senator COUZENS. But the debt on the railroads still continues?
Mr. WHITNEY. NO ; if there is a conversion the debt is extinguished.
Senator COTJZENS. But what it is converted into is still in opposition to the railroads?
Mr. WHITNEY. But, generally speaking, conversion refers to conversion into stock, not into other bonds. I do not mean, exchange
at maturity. That is not what is meant by "conversion."
Senator COUZENS. By redemption or by conversion?
Mr. WHITNEY. Conversion into an equity, it would mean.
{Continuing reading:]
" Of the balance, namely, $1,308,824,800, only 7.2 percent were on May 11,
1933, selling above their original issue prices. The average price at which
these bonds were offered to the public was 96.58 percent; the average current
market price on May 11, 1933, was 63.94 percent, a decline of 32,64 points, or
atbont-one third. Of these issues, $125,079,000 are in default in payment of
interest or principal, namely, $45,000,000 Florida East Coast Railway first and
refunding mortgage 5 percent bonds; $18,879,000 Mobile & Ohio Railroad Co.,
•refunding and improvement 4% percent bonds and secured 5 percent notes,
and $61,200,000 Missouri Pacific Railroad, first and refunding mortgage 5 percent bonds, series I. This aggregate amount is 6.78 percent of all railroads
tbonds offered and is less than 2.1 percent of the total of all classes of securities
.offered by J. P. Morgan & Co., in this period.
«GROUP III. PUBLIC-UTILITY BONDS INCLUDING OBLIGATIONS OF PUBLIC-UTILITY
HOLDING COMPANIES
The aggregate principal amount offered to the public is $1,074,750,000. Of
these, $268,269,800, or 25 percent have been retired
Senator GLASS. If I may interrupt, I move that this document be
placed in the record. What is the use of wasting time reading it?
Mr. WHITNEY. That is satisfactory to me.
The CHAIRMAN. YOU have no objection to letting it go into the
record and not taking time to read it ?
Mr. WHITNEY. NO, sir.
Senator COSTIGAN. I S there
any portion on which you wish to
comment?
Mr. WHITNEY. May I read two short paragraphs on the next
page?
The CHAIRMAN. Certainly.
Mr. WHITNEY. Senator Glass, would you object to my reading
the four last paragraphs ?
Senator GLASS. I do not object, except that your voice is mingled
with the moving of chairs here. We might as well be in a railroad
shop as to try to carry on a hearing here. No; I have no objection.
Senator COSTIGAN. We trust the witness will proceed in his own
way.
Mr. WHITNEY (reading) :
J. P. Morgan & Co. employ no bond salesmen and have never adopted any
methods of high-pressure salesmanship. We have distributed these securities
through syndicates or selling groups consisting in cases of the largest issues
of as many as 1,100 or 1,200' retail and distributing houses, large and small,
scattered throughout the country and invited by us to join in the offering
STOCK EXCHANGE PRACTICES
169
of these securities because of their distributing ability and their standing
and reputation in their own communities. We have believed in this method
of distribution and have consistently adherred to it.
Of the issues now in default, namely, bonds of the Florida East Coast
Railway, and of the Mobile & Ohio Railroad, and of the Missouri Pacific Railroad, we ourselves purchased and still hold bonds of those issues or of issues
junior to them on which our aggregate losses, based upon the difference between
our purchase price and the present market value, are greatly in excess of the
profit that we made from these offerings.
In the case of securities of railroad operating companies and public utility
operating companies, the price paid to the obligor is a matter of public records
In the case of the foreign issues offered by us since January 1, 1920, the price
paid to the obligor was made public by us in the testimony submitted to the
Senate Finance Committee in December 1931. In the case of all issues during
the 5-year period from January 1, 1927 to January 1, 1932, the spread between^
the price paid to the obligor and the offering price to the public has been given
in the detailed record which we have furnished the committee. We are not
opposed to, but are heartily in favor of publicity and disclosure of the gross*
profit or commission paid in respect to all securities offered to the public as is*
proposed by the legislation which you are now considering.
As to the group of bonds which have shown the greatest declines, namely
railroad and railroad holding companies, it may be pertinent to point out that
in the case of the railroad issues every issue of bonds of a railroad operating
company issued after June 27, 1920, was authorized by the Interstate CommerceCommission as being in the interest of the public and a minimum price fixedP
at which these bonds could be sold; and in the case of the railroad holdingcompany issues, which were all collateral trust issues secured by stocks or
bonds or obligations of railroad operating companies, the collateral behinc!
the bonds at the time of the issue and the financial strength of the company
making the issue seemed to afford more than ample security.
(The document referred to, entitled " Statement to Senate Committee ", from which the witness read certain paragraphs, will be
found in full at the end of today's record.)
The CHAIRMAN. Are there any more corrections that you wish t o
make in yesterday's testimony?
Mr. WHITNEY. I do not think so. Are there, Mr. Davis?
Mr. DAVIS. I do not recall any.
Senator COSTIGAN. Mr. Whitney, do you know how your securities
are handled in the city of Washington—by what firm ?
Mr. WHITNEY. Well, I would be speaking purely from memory^
Senator Costigan.
Senator COSTIGAN. Does it happen to be Kidder, Peabody & Co. ?
Mr. WHITNEY. If Kidder, Peabody & Co have a branch here, it
might be, because they have been distributors of securities for many
years. I would not know them as of Washington, because their mai»
office is at Boston.
Senator COSTIGAN. I have been advised that J. P. Morgan & Co;
have a half interest in that firm. Do you know whether or not that
is true ?
Mr. WHITNEY. I t is not true; or in any other firm.
Mr. PECORA. Has it any interest in that firm?
Mr. WHITNEY. None whatever. That question was asked by Mr;.
Pecora in his questionnaire; and we have no interest of any kind iw
any other security house.
Senator COSTIGAN. Your statement about employing no bond salesmen therefore holds good with respect to the city of Washington?'
Mr. WHITNEY. Absolutely, everywhere.
Mr. PECORA. Who prepared this printed statement from* which*
you
have read into the record ?
170
STOCK EXCHANGE PRACTICES
Mr. WHITNEY. Several.
Mr. PECORA. Who are they?
Mr. WHITNEY. Well, the statistical information was got up by
certain half a dozen fellows in our security business where we keep
our records. All this factual stuff in here was prepared obviously
by the clerks who handle those records; and I think probably 5 or
6 departments have been over it. It was prepared as a sort of joint
effort.
Mr. PECORA. Who prepared it? Give the names, will you, of the
partners that this printed document represents the collaboration of.
Mr. WHITNEY. I think all of us down here have read it a great
many times.
Mr. PECORA. Suppose you give the names for the record.
Mr. WHITNEY. Mr. Morgan, have you read it?
Mr. MORGAN. I have read it, but I had no part in its preparation.
Mr. WHITNEY. Mr. Lamont, Mr. Anderson, Mr. Stanley, Mr.
Ewing—all of us have read it a great many times, I think. Counsel
have had a hand in it and have gone over it. We have had many
proofs. We prepared it just as carefully as we try to do everything.
Mr. PECORA. HOW long did it take you to prepare this printed
statement ?
Mr. WHITNEY. YOU mean, how long did it take to write it or
prepare it ? I think the idea first came into being last Friday, and
it was finished or practically finished on Monday.
Mr. PECORA. And it was printed when ?
Mr. WHITNEY. I do not know.
Senator GLASS. By whom?
Mr. WHITNEY. I do not know.
Senator GLASS. Was it written in red ink or black ink?
Mr. WHITNEY. I do not know, Senator.
Mr. PECORA. Whose phraseology is embodied in this printed statement, Mr. Whitney ?
Mr. WHITNEY. Mr. Pecora, I do not want to give the impression of
trying not to answer, but I honestly do not know. Everybody has
been over it. I t has been changed.
Senator GLASS. It is a statement for which the firm of J. P. Morgan & Co. is responsible?
Mr. WHITNEY. The firm presents the statement; yes, sir, through
me.
Senator BARKLEY. Getting back to the Alleghany Co., I would
like to inquire a little further about that. The Alleghany Co. was
a holding company?
Mr. WHITNEY. Yes, sir.
Senator BARKLEY. Through
which the Van Swerengens hoped to
bring about a consolidation that they could not bring about without
the consent of the Interstate Commerce Commission. Is that true?
Mr. WHITNEY. Quite.
Senator BARKLEY. A consolidation which either the law would not
permit or the Commission would not permit.
Mr. WHITNEY. Senator, I do not know whether I have answered
you quite accurately. I t was a holding company. It held the securities of railroads which they hoped to bring together into a consolidation, and that required, of course, the consent of the Interstate
http://fraser.stlouisfed.org/
Commerce Commission.
Federal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
171
Senator BARKLEY. And of course it did not require the consent of
the Interstate Commerce Commission in order that the Alleghany
Co. might buy up these stocks ?
Mr. WHITNEY. NO.
Senator BARKLEY. SO that without
Mr. WHITNEY. At the present time
any
there is no regulation on railroad holding companies, although it is very much discussed.
Senator BARKLEY. All of these holding companies—the Chesapeake Co., the Alleghany Co., the Pennroad Co., and probably some
others—were organized in order that there might become a common
ownership in the stock of different railroads which, in effect, was
a consolidation without the consent of the Interstate Commerce
Commission ?
Mr. WHITNEY. I do not think so, Senator. That, I know, is
often said, but I do not think that was the object, except to have a
common ownership, certainly; but I do not think it was that. I
think the record of these holding companies shows it was not the
intent to get around the law, because all through this period they
were trying, working, and adapting their plans to put it in shape
so that the Interstate Commerce Commission would approve it; and
as you know, the final plan of consolidation of the four eastern
trunk lines has been approved, which embraces one of the systems
which the Van Sweringens dreamed of back in the early twenties.
Senator BARKLEY. But, regardless of what might happen with
respect to the physical consolidation of the properties, there would
be a consolidation through the holding company ?
Mr. WHITNEY. Through equity ownership; yes, sir. The fact
that there was that interest, that community of interest, has always
been disclosed. I mean, the number of shares that the Alleghany
4ias held of the constituent parts has always been disclosed.
Senator BARKLEY. For the firm of J. P. Morgan & Co. to act as
financial agents for this set-up and to agree to take over a certain
number of shares at a given price, regardless of what might be the
future course of the stock under the excitement of the public, would
be one thing, but it would be quite another thing if the firm agreed
to take this million and a quarter of shares with the intention of
handling the shares through some artificial method in the hope
that the constituent members of the firm would later make an enormous profit out of it. You see what I have in mind ?
Mr. WHITNEY. That is absolutely true, Senator, and that is what
I tried to point out, that the function that we performed toward the
Alleghany Corporation was that the normal number of banks were
trying to finance an idea that we believed was sound and constructive. The other alternative or extreme you have mentioned would
be a mere promotion of the idea of washing securities out to the
public. That is what I wish to show, if I can, that this sale of the
common stock was a mere incident, one of the three steps or parts of
the whole factor in the promotion of this company, to make what
we considered a proper set-up from a financial point of view. As
I said earlier today, we approach people whom we know. We do
not solicit or try to sell them or give them an opportunity of investing in the hope that they will make profits for the prosperity of the
company, but we believe and know them to be people of sufficient
172
STOCK EXCHANGE PRACTICES
knowledge to know exactly what they are buying, and realize that
if they accept the suggestion we make to them they will also hope
to make a profit in the future.
Senator BARKLEY. In the letter which you sent out to your list
which was read here—I think, the letter to Mr. Woodin
Mr. WHITNEY. Yes, sir.
Senator BARKLEY (continuing).
That is not material so far as the
identity of the recipient of the letter is concerned—you referred to the
fact that the stock was selling some 15 or 17 dollars above the price
at which you were offering it to him
Mr. WHITNEY. Yes; but you will remember
Senator BARKLEY. Would it, or' not, be fair to assume that even
if the stock had not been on the stock exchange and would never
appear there, you would have gone to the same trouble to distribute
this stock to your friends which you did go to under the circumstances which have been related?
Mr. WHITNEY. Certainly, sir. You will further note, if you remember, in the letter that the price was referred to with the very
specific qualification that it did not mean anything except that people
wanted to speculate.
Senator BARKLEY. And not only wanted to, but did?
Mr. WHITNEY. Did;
yes.
Senator COTJZENS. YOU said
the only object was that these men
you distributed the stock to would make money ?
Mr. WHITNEY. I did not say our only object. I said we hoped they
would.
Senator COUZENS. That was not the only object you had?
Mr. WHITNEY. HO, sir.
Senator COUZENS. YOU hoped they would reciprocate?
Mr. WHITNEY. NO ; really.
Senator COTJZENS. YOU did not give them this price so
*
that they
would reciprocate and keep on good terms ?
Mr. WHITNEY. NO ; really. That is, of course, the suggestion that
has been carried in the testimony yesterday and in the papers, but
I can only tell you that that is not so.
Senator COUZENS. I never heard of anybody quite so altruistic
in my life before.
Mr. WHITNEY. It is not a question of altruism; it is a question of
doing a legitimate, straightforward security and banking business.
Senator COUZENS. I am not concerned about the illegitimacy of it,,
but I am concerned about the impression not going over that you
only wanted these men to make a profit out of it. You had had
business relations in the past with them and they were friends of
yours, and you hoped it would continue by giving them an opportunity to make a profit; is not that true ?
Mr. WHITNEY- When you put it that way, Senator Couzens, I
would hate to be put in the position of stating that this was going
to make them unfriendly, by giving it to them. Certainly not. I t
was a continuing of relations that were existent. But your first
question rather implied that we expected some direct consideration.
Senator COUZENS. YOU would naturally get direct consideration by
their making deposits with your concern, by giving you their underwritings, and the opportunity to sell their securities. That is per
fectly obvious.
STOCK EXCHANGE PEACT1CES
173
Mr. WHITNEY. I think if you will examine the list, Senator, you
will find that many of them are purely personal friends; I mean, not
people who would have anything to do with the influencing of business. You will find others with whom we have been associated
in a great many lines for many years. If you have close associations in business with a man you have mutual respect for each other,
and you become friendly. Those are the kind of people. Whether
it makes them feel more friendly or less friendly, I am not going
to deny that that is one of the things. Some of them made money.
I hope most of them did. I do not know anything about that. But
your first question, which I denied perhaps too vehemently, was that
we expected to get direct consideration.
Mr. PECORA. May I ask the witness a question or two right on this
line?
Senator COUZENS. Certainly.
Mr. PECORA. One of the gentlemen who was invited to subscribe
for the common stock of the Alleghany Corporation in February
1929, by your firm, was Mr. John J. Kaskob?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Which partner suggested that he be put on that
Mr. WHITNEY. I think I did.
Mr. PECORA. Did you personally
Mr. WHITNEY. May I——
Mr. PECORA. Pardon me. Let me ask you some questions.
list?
You
have had a lot of opportunity, I think, all you wanted, to testify
without being questioned.
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Let me ask
you some questions, and then you can
make all the statements you want to, so far as I am concerned.
Did you write to Mr. Raskob at the time you invited him to subscribe to 2,000 shares of Alleghany Corporation stock at $20 a share
in February 1929?
Mr. WHITNEY. My recollection is that I talked to him over the
telephone.
Mr. PECORA. Was he in town then—in New York City?
Mr. WHITNEY. Whether he was in New York or Wilmington, I do
not know.
Mr. PECORA. Did you receive an acceptance from Mr. Raskob ?
Mr. WHITNEY. I did.
.Mr. PECORA. TO that offer?
Mr. WHITNEY. Yes.
Mr. PECORA. Was that
acceptance conveyed to you in writing or
otherwise ?
Mr. WHITNEY. I think there is an acknowledgment of the letter in
the files you have, as I remember it. I cannot remember whether it
was this issue or one of the others.
Mr. PECORA. Let me read to you what has been furnished to me
by your office as a photostatic copy of a letter addressed to you by
Mr. Raskob. [Reading:]
WHITEHALL, PALM BEACH.
DEAR GEORGE : Many thanks for your trouble and for so kindly remembering
me. My check for $40,000 is enclosed herewith in payment for the Alleghany
stock, which kindly have issued when ready, in the name of John J. Raskob,
Wilmington,
Del. I appreciate deeply the many courtesies shown me by you
175541—33—PT 1
12
174
STOCK EXCHANGE PRACTICES
and your partners, and sincerely hope the future holds opportunities for me
to reciprocate. The weather is fine and I am thoroughly enjoying golf and
sunshine.
Best regards and good luck.
JOHN.
It is addressed to George Whitney, Esq., New York City.
Senator GORE. What is the date of that ?
Mr. PECORA. There is a date on it of February 4, 1929. Whether
that is a notation indicating the date of tHe receipt of the letter—no;
there is a notation on the photostatic copy reading as follows:
Received by J. P. Morgan & Co., February 8, 8.10 a.m., 1929.
Senaor GORE. That was after the election ?
Mr. PECORA. DO you recall receiving that letter, sir?
Mr. WHITNEY. Yes.
Mr. PECORA. IS this
photostatic copy a true and correct copy of
the original?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. I offer it in
evidence.
(The letter referred to was marked " Committee Exhibit No. 13.")
Mr. PECORA. At the time that Mr. Raskob was invited by you,
Mr. Whitney, in behalf of your firm to subscribe for 2,000 shares of
the common stock of the Allegheny Corporation at $20 a share the
market for the stock was between $35 and $37, was it not ?
Mr. WHITNEY. Didn't you read that letter?
Mr. PECORA. That is indicated by the letter to Mr. Woodin that
was put in evidence yesterday ?
Mr. WHITNEY. At the date of that letter the stock was selling—the
high was 33%, the low was 31%, and the last was 32%. So on the
date he wrote the letter we happen to have the facts here
The CHAIRMAN. What is it today ?
Mr. WHITNEY. I think it is just about 2.
I find, Senator Barkley, that I have the quotations here that I
was asked about.
Senator COSTIGAN. Since the witness has referred to a memorandum of the volume of shares, would it not be well to place it in the
record ?
Mr. WHITNEY. Senator Barkley asked me earlier how many shares
were traded in, and I just realized that it was on there.
Senator BARKLEY. I did not mean the day-by-day transactions of
the stock exchange; I meant the number of shares filed with the
stock exchange subject to be traded in.
Mr. WHITNEY. Oh; I misunderstood you, Senator.
Senator BARKLEY. That is what I had in mind; but this is interesting information.
Senator COSTIGAN. Shall we place it in the record, or any portion
of it, Mr. Chairman?
Mr. WHITNEY. I t is just quotations.
Senator GORE. I did not understand how many shares of common
stock were issued by the Alleghany Co.
Mr. WHITNEY. 3,500,000. One and a quarter millions bought by
us at $20, and two and a quarter millions issued in exchange for
the securities of the Van Sweringen group.
STOCK EXCHANGE PRACTICES
175
The CHAIRMAN. That statement of quotations may go into the
record.
(The statement of quotations referred to by the witness will be
found at the end of today's record.)
Mr. PECORA. When you received this letter from Mr. Easkob expressing his appreciation of the many courtesies shown him by you
and your partners, what did you understand him to mean by saying
in the letter, "And I sincerely hope the future holds opportunities
for me to reciprocate " ?
Mr. WHITNEY. I don't remember what I thought. I thought it
was just a nice, polite letter.
Mr. PECORA. What position did Mr. Easkob occupy at that time
that could have enabled him to reciprocate the many courtesies shown
him by you and your firm, of which the invitation to subscribe to
these shares was one?
Mr. WHITNEY. My recollection is that Mr. Easkob was no longer
an officer of General Motors where I had known him for 10 years.
I am not sure of this, but did he not have something to do with the
Democratic National Committee?
Mr. PECORA. I don't know. Don't you know whether he had or
not?
Mr. WHITNEY. I don't follow those things.
Mr. PECORA. He was one of your close friends.
Mr. WHITNEY. Certainly; but I cannot remember whether he was
at that time. He had been prior to that, but I don't remember
whether he was then.
Senator BYRNES. Did you think as chairman of the Democratic
committee he would give you an opportunity to vote for the Democratic Party?
Mr. WHITNEY. I have never known him in any political relationship, I have known him very intimately for many years in the
General Motors Corporation of which I happened to be a director.
Senator KEAN. Mr. Whitney, you are a Democrat, are you not?
Mr. WHITNEY. NO, sir.
Senator KEAN. Your brother is.
Mr. WHITNEY. We don't have to be the same.
Senator GORE. I think a Bepublican has a right
to claim his constitutional immunit}^ from answering. This was about 3 months
after the election, was it not?
Mr. WHITNEY. February; yes, sir.
Senator GORE. HOW many States did the Democrats carry in that
election? I have forgotten.
Mr. WHITNEY. I am sorry, Senator, but I don't know those
things.
Senator BYRNES. They carried a few more than the Eepublicans
carried this last time, didn't they ?
Mr. WHITNEY. That is my recollection.
Senator KEAN. The Eepublicans concede the election.
Mr. PECORA. DO you recall, Mr. Whitney, on how many other
occasions prior to February 1929 courtesies similar to the one referred to in this letter last read in evidence had been extended to
Digitized forMr.
FRASER
Easkob by your firm?
176
STOCK EXCHANGE PRACTICES
Mr. WHITNEY. Well, I can think of one, Mr. Pecora, but I would
not trust my memory, because I—as I say, we have had very—I
have had personally very intimate relations with Mr. Baskob in a
business way extending over a 10-year period. You may know
that—well, you are not—you know that I am a director of General
Motors, have been for a good many years, and we have been connected with that company on the board. At the request of the
Dupont people, of whom Mr. Easkob was a direct representative
at that time, we joined the board back in 1920, and during those
years we have had very intimate relations. I happened to be on
the board personally with Mr. Easkob, and he is a great friend of all
of us.
But that was the relationship, and the fact that he decided to
enter politics when he did, that was subsequent to our relationship
for many years. He had been before on—as a matter of fact, the
only one that I can remember—I think you will find that he was
on every one of our special lists. But you have a great deal of it.
You got it and you know the answer.
Mr. PECORA. But he was your friend and you are the one that,
suggested that he be invited to subscribe ?
Mr. WHITNEY. I should imagine
Mr. PECORA (interposing). Can't you tell whether or not he was
invited to subscribe to all of these issues ?
Mr. WHITNEY. I should assume that he was.
Mr. PECORA. When he wrote you that he " sincerely hope the future holds opportunities for him to reciprocate ", was that language
meaningless to you?
Mr. WHITNEY. Yes.
Mr. PECORA. Did you
ask him to explain what he meant, in view
of the meaningless character of his words?
Mr. WHITNEY. I did not; no. He was in Palm Beach.
Mr. PECORA. That so appears from his letter and references to*
" golf and sunshine ". Did you call him up while he was at Palm
Beach that time to invite him to subscribe to the Alleghany commoni
shares ?
Mr. WHITNEY. I should think probably, or else I called up his
secretary and he relayed it. I don't remember.
Mr. PEGORA. NOW, Mr. Whitney, at about the same time was a
similar invitation extended to Mr. Joseph Nutt to subscribe for
shares of Alleghany common stock at $20 per share ?
Mr. WHITNEY. Let me look at the list.
Senator TOWNSEND. He is on the list.
Mr. WHITNEY. Yes, I am sure he is, Mr. Pecora, because you all8
know Mr. Nutt has been associated with the Van Sweringens in this
thing for a great many years, and probably was put on there at their
suggestion. There were various other names on there that were put
on at the Van Sweringens' suggestion, various friends who were
interested with them.
Mr. PECORA. Mr. Nutt at that time was treasurer of the Republican National Committee, wasn't he ?
Mr. WHITNEY. I don't know.
Mr. PECORA. YOU don't know about that?
Mr. WHITNEY. I don't deny it, but I don't know it.
STOCK EXCHANGE PRACTICES
177
Senator BYRNES. Mr. Whitney, you did offer Mr. Nutt 3,000 shares
as against the 2,000 you offered to Raskob ?
Mr. WHITNEY. That is right, Senator. [Laughter in the room.]
Senator GORE. YOU say you are a Eepublican ?
Mr. WHITNEY. Yes, sir. But I didn't suggest Mr. Nutt.
The CHAIRMAN. Didn't Mr. Nutt take the shares ?
Mr. WHITNEY. Oh, I assume so, if he is on this list, because I
don't think this list represents any of those who were the final
subscribers.
The CHAIRMAN. Are you an officer of Johns-Manville, Mr. Whitney?
Mr. WHITNEY. I am a director; yes, sir.
The CHAIRMAN. HOW long have you been?
Mr. WHITNEY. I think it is '27; since 1927.
Senator COUZENS. Why would Mr. Nutt have to buy through your
company when he was so close to the Van Sweringens?
Mr. WHITNEY. I don't know, sir. I just don't know.
Mr. PECORA. One of the gentlemen invited to subscribe was Mr.
C. N. Bliss. Do you know upon whose suggestion he was invited to
subscribe ?
Mr. WHITNEY. I should think it would probably have been
unanimous.
Mr. PECORA. Unanimous. He also had been a treasurer of the
Republican National Campaign Committee, had he not?
Mr. WHITNEY. SO I heard.
Mr. PECORA. And another gentleman invited to subscribe was Mr.
Charles D. Hilles, isn't that so?
Mr. WHITNEY. Yes. I haven't got the list here, but I assume it is
if you are reading from it.
Mr. PECORA. Yes.
Mr. WHITNEY. Yes, sir; 1,000 shares.
Mr. PECORA. He also had been a chairman
of the Republican National Committee, had he not, some time in the past ?
Mr. WHITNEY. YOU asked me to speak of my personal knowledge
or my general belief ?
Mr. PECORA. Whose friend is Mr. Hilles ? All the partners ?
Mr. WHITNEY. All the older partners', certainly. Dwight Morrow's particularly, I suppose.
Mr. PECORA. Who is Mr. Giovanni Fummi, whose name appears
on the list of those invited to subscribe?
Mr. WHITNEY. He is our representative in Italy.
Senator COSTIGAN. The representative of J. P. Morgan?
Mr. WHITNEY. J. P. Morgan & Co. in Italy.
Mr. PECORA. Has J. P. Morgan & Co. an office for the transaction
of business anywhere in Italy ?
Mr. WHITNEY. NO, sir.
Mr. PECORA. HOW long have you had
Mr. WHITNEY. I am advised 1921.
a representative there?
I don't know of my own
knowledge.
Mr. PECORA. Does he hold any office of public trust in the Italian
Government; do you know ?
Mr. WHITNEY. He does not.
Mr. PECORA. Does he?
178
STOCK EXCHANGE PRACTICES
Mr. WHITNEY. He does not.
Mr. PECOKA. NOW, Mr. Charles Francis Adams was one of the
gentlemen invited to subscribe to the shares of Alleghany common
at $20, wasn't he?
Mr. WHITNEY. Yes, sir. And in February 1929.
Mr. PECORA. Yes, sir; February 1929.
Mr. WHITNEY. That is quite right.
Mr. PECORA. Have you a letter received by your firm from him
under date of February 13, 1929, in which he accepted the invitation to subscribe ?
Mr. WHITNEY. Let me see. [After examining document:] Apparently not, Mr. Pecora, with these photostats that we gave you.
Mr. PECORA. Well, we did not receive a photostat of that. There
is a typewritten copy which I will submit to you.
Mr. DAVIS. This is from thefiles?
Mr. PECORA. Yes, sir.
Senator COUZENS. What does it
Mr. WHITNEY. I t says—do you
Mr. PECORA. YOU do not dispute
say ?
want to read it?
the authenticity at all of the letter
of which that is a copy ?
Mr. WHITNEY. No; not at all. Of course, it is not addressed to
the firm.
Mr. PECORA. It is addressed to a member of the firm.
Mr. WHITNEY. I t is addressed to his son-in-law, Mr. Henry S*
Morgan.
Mr. PECORA. I offer the letter in evidence, reading as follows :
BOSTON, February IS, 1929.
H.
S. MORGAN,
Esq.,
New York, N.Y.
My DEAR HENRY: AS you probably know, I have duly signed on. I see no
reason why this should interfere with this bit of investment. I accordingly
send a check with many thanks to you. Please have the certificate put in my
name.
Always affectionately yours,
C. F. ADAMS.
Now, Mr. Whitney, do you know to what Mr. Adams referred in
this letter when he said: " I see no reason why this should interfere
with this bit of investment" ?
Mr. WHITNEY. Mr. Pecora, no; I don't know; but I think by a
slight use of imagination I could guess.
Mr. PECORA. Give us your guess.
Mr. WHITNEY. I assume it means that he had accepted the invitation to be Secretary of the Navy.
Mr. PECORA. NOW, on whose suggestion was Mr. Newton D. Baker
invited to subscribe for 2,000 shares of this stock?
Mr. WHITNEY. I should also assume that was suggested by the
Van Sweringens, as it is common knowledge that Mr. Baker was
acting as their counsel in many instances.
Mr. PECORA. On whose suggestion was Mr. Matthew C. Brush invited to subscribe?
Mr. WHITNEY. I haven't any idea.
Mr. PECORA. On whose suggestion was Mr. E. G. Buckland invited
to subscribe?
Mr. WHITNEY. Oh, might have been any one of a lot of us.
STOCK EXCHANGE PRACTICES
179
Mr. PECORA. Well, you know Mr. Buckland well, don't you ?
Mr. WHITNEY. Very well. We have done business with him. He
is general counsel of the New Haven Eoad since before I came in the
office, long before.
Mr. PECORA. Did Mr. Buckland accept the offer to subscribe for
these shares?
Mr. WHITNEY. I don't know. I assume he did, because he is down
there for 500 shares.
Senator BYRNES. Mr. Whitney, I notice the name of Lindbergh.
Was Mr. Morrow then a member of thefirm?
Mr. WHITNEY. In 1929? Oh, no, sir; he retired in September
1927.
Senator BYRNES. That is when he went to Mexico.
Mr. WHITNEY. Linbergh was introduced to us, was brought into
the office when he came back from Paris by Mr. Dwight Morrow, who
happened to be staying here in Washington when he landed, and we
have sort of helped him, advised with him on his affairs ever since.
Mr. PECORA. Who is the gentleman named Michael J. Herbert?
Mr. WHITNEY. He is one of our—or was one of our London partners, a partner in Morgan-Grenf ell & Co., who died here about a year
Mr. PECORA. Was he ever connected, to your knowledge, with the
Diplomatic Service of England?
Mr. WHITNEY. IS he ?
Mr. PECORA. Was he at any time ?
Mr. WHITNEY. His father was over
here in two capacities, once as
consul to the embassy and once as ambassador.
Mr. PECORA. This Michael G. Herbert was not the ambassador
himself but his son?
Mr. WHITNEY. Yes.
Mr. PECORA. Who is
the gentleman named Henry E. Machold?
Is that the same as H. Edmund Machold?
Mr. WHITNEY. That is the same.
Mr. PECORA. And he was for years Speaker of the Assembly of the
State of New York, Legislature of the State of New York ?
Mr. WHITNEY. Years ago.
Mr. PECORA. And State chairman of the Republican Party in New
York State for a number of years, wasn't he?
Mr. WHITNEY. Why, I don't know, Mr. Pecora. You seem to be
suggesting that we have these listed with their political offices. Was
he? Well, I don't know.
Senator GOLDSBOROUGH. Mr. Chairman, I suggest that we are not
engaged in political vaudeville. I am quite sure that this is a dignified committee, and we would like to pursue that line.
Senator COUZENS. What objection has the Senator from Maryland
to finding out whether Morgan & Co. are tied up with political parties or not?
Senator GOLDSBOROUGH. Well, I don't believe that they are.
Senator COUZENS. That is something for the committee to find
out, not for the
Senator GOLDSBOROUGH (interposing). The Senator may have that
opinion. I do not share it with him.
Senator COUZENS. I did not say I have the opinion. I said I
would
like to find out.
180
STOCK EXCHANGE PRACTICES
Senator GOLDSBOROUGH. Your suggestion would indicate it.
Senator COSTIGAN. I hope that counsel may be permitted to
continue.
The CHAIRMAN. Let us continue with the examination.
Mr. PECORA. Who is Mr. Silas H. Strawn, whose name appears on
the list of those invited to subscribe ?
Mr. WHITNEY. He is a very prominent lawyer .in Chicago.
Mr. PECORA. Was he within very recent years or is he now the
president of the United States Chamber of Commerce ?
Mr. WHITNEY. I really don't know. I think he was president of
the Bar Association once, but I don't know about the other. I don't
know about the United States Chamber of Commerce.
Mr. PECORA. DO you know that the United States Chamber of
Commerce has within the last few days appeared before legislative
committees of the Congress in opposition to certain bills having to
do with the sale of securities ?
Mr. WHITNEY. Did I know it?
Mr. PECORA. Yes.
Mr. WHITNEY. NO, sir.
Senator GORE. What was the
question, Mr. Pecora ? I did not get
that.
Mr. PECORA. That the United States Chamber of Commerce or its
executive officers has recently been appearing before committees of
Congress in opposition to the securities bill that is now awaiting
action.
Senator GORE. Yes.
Mr. PECORA. NOW, who recommended the inclusion in this list of
subscribers of Mr. A. H. Wiggin for an allotment of 10,000 shares?
Mr. WHITNEY. I really don't know, Mr. Pecora. It might have
been any one of us. I don't know. I just don't know.
Mr. PECORA. Mr. Wiggin at that time was chairman of the board
of the Chase National Bank, wasn't he?
Mr. WHITNEY. Well, I don't know what his title was in 1929. He
was the head of it.
Mr. PECORA. He was the executive head of the bank. And the bank
at that time had a securities affiliate known as the Chase Securities
Co., did it not?
Mr. WHITNEY. Well, 1929, they had a good many security affiliates. I don't remember if that was the title or not. I should not
-doubt it. I just don't remember what the title of it was.
Mr. PECORA. DO you know any reason why
Mr. WHITNEY (interposing). I assume that you want me to—I
assume they had an affiliate in 1929, if that is what you want to
know.
Mr. PECORA. DO you know why Mr. Wiggin should have been invited to subscribe for as many as 10,000 shares at this figure of $20 a
share ?
Mr. WHITNEY. Why he should have been ?
Mr. PECORA. Yes; why was it?
Mr. WHITNEY. That is an investment of $200,000?
Mr. PECORA. Yes.
Mr. WHITNEY. Why, I suppose the reason is that Mr. Wiggin
a man that certainly
was
would come into the—within the classification
STOCK EXCHANGE PRACTICES
181
of those that are mentioned before. He had ample means, large
means. He had a very active knowledge of financial matters, and
he knew exactly what he was doing. I don't quite understand your
question. That is why I hesitated—why he should have been invited
to subscribe the 10,000 shares? Those are the only reasons that I
can imagine.
Mr. PECORA. That is, he had a financial capacity that would have
enabled him to take care of 10,000 shares ?
Mr. WHITNEY. Very easily.
Mr. PECORA. Who, by the way, among the partners determined
the number of shares that these various gentlemen would be respectively invited to subscribe for?
Mr. WHITNEY. Why, the way that we doi all our business; by conversations among us, gradually coming together, meeting of minds
on a list that would be prepared and worked over and finally set.
Mr. PECORA. Well, for instance, in the case of Mr. Woodin, it was
Mr. Ewing of your firm who suggested that he be allotted 1,000
shares? Is that correct? I merely assume so from the fact that
the letter to Mr. Woodin apparently was dictated by Mr. Ewing.
Mr. WHITNEY. Oh, that would not carry that inference at all.
It would mean that Mr. Ewing was the man who was designated, or
apparently, to speak to Mr. Woodin. But these lists are made up
lilfe everything else is done in our office, by mutual agreement between
us all.
Mr. PECORA. Then there must have been a discussion at which it
was agreed to allot to Mr. Woodin 1,000 shares and to Mr. Wiggin
10,000 shares; is that correct?
Mr. WHITNEY. Does every agreement necessitate discussion?
Mr. PECORA. I don't know.
Mr. WHITNEY. I don't think so.
Mr. PECORA. I am simply following up your answer that the partners met frequently and discussed and decided these things.
Mr. WHITNEY. Excuse me, Mr. Pecora; I didn't say they met frequently. I said this list was arrived at by mutual agreement among
the partners. I didn't mean to infer any discussion or lengthy
meetings. I thought it was a perfectly simple answer. You have
asked me who determines this. I don't know. Perhaps that would
be—I didn't think that was a complete enough answer.
Mr. PECORA. Well, somebody must have determined the allotments
of these shares. Is that a violent assumption—that somebody did
make such a determination?
Mr. WHITNEY. Well, no; it is not a violent assumption. I am.
perfectly willing to let that go.
Mr. PECORA. IS it the fact that somebody did make such a decision?
Mr. WHITNEY. Of course, the decision was made, and I don't mean
to be evasive in this. I don't know any individual that came down
and said that list is done and approved, if that is what you mean.
That is what you are trying to get me to say yes or no to, isn't it?
Mr. PECORA. I am not trying to get you to say yes or no; I am.
trying to get you to answer the question.
Mr. WHITNEY. That is what I am really trying to do. The list
was approved, Mr. Pecora, in its final form, obviously, but who actually affirmatively individually did that I just don't know.
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STOCK EXCHANGE PRACTICES
Mr. PECORA. YOU know how many gentlemen
Mr. WHITNEY (interposing). Would you like me to inquire of my
partners if any of them remember who of the firm finally
Mr. PECORA (interposing). Well, how many shares all told were
offered to these various gentlemen at $20 a share ?
Mr. WHITNEY. Well, there was a million and a quarter shares of
the total. There were 500,000 shares sold to the Guaranty Co. under
the agreement that I mentioned yesterday. There were retained by
the firm of J. P. Morgan & Co. i75,100. So that leaves—let me see
(calculating on pad)—I should figure, Mr. Pecora, that there were
allotted 574,900 shares to the individuals on that list, including the
individual partners. I think my mathematics are right.
The CHAIRMAN. HOW many shares to each partner ?
Mr. WHITNEY. I don't know, Senator. I could very easily have
a computation made, but I don't remember of these—the list that
we handed in yesterday, that was produced yesterday, gives them
all in one list, and I don't remember out of the 574,900 that were
allotted to some individuals how many were the partners. We
might be able to get that. I haven't got it here. It is on the list.
Mr. PECORA. NOW, Mr. Whitney, I am assuming that when your
partner, Mr. Ewing, wrote under date of February the 1st that the
market value of these shares was between 35 and 37 dollars he
wrote according to the fact. On that basis, on a basis of a market
value of $35 a share for the stock at the time these invitations were
extended, your firm in deciding to allot 574,900 shares of the common stock of Alleghany Corporation, was virtually divesting itself
of something potentially worth $8,623,500 over and above the price
at which you were selling it. Is that a violent assumption, Mr.
Whitney?
Mr. WHITNEY. I don't say it is a violent assumption, Mr. Pecora,
but it is not an accurate one, because I have testified a good many
times in the last 2 days that these lists were prepared, and what you
call we " divested ourselves " before there was any quoted market
of any kind. We had made the arrangements. Whether in each
individual instance I don't know. Clearly not in the case of Mr.
Woodin, as the letter was not written until February 1. But
the arrangement or the contract on our part had been made prior
to the opening of any public market, as I testified this morning.
As far as we can find out from searching the records in New York, the
opening sale on a when-issued basis of Alleghany common was on the
1st day of February, and we had decided to do what you call divest
ourselves prior to that time.
Now, the facts are, as you say, the day we took payment the
stock was selling at a higher price than the price at which we had
already undertaken to sell it to this list.
Mr. PECORA. Can you find among your files a single letter dated
prior to February 1, 1929, which was written by your firm to anyone inviting him to subscribe to these shares at $20 a share ?
Mr. WHITNEY. I have no recollection of one.
Senator GORE. Mr. Whitney, do you mean that those allotments of
stock were made to these various individuals prior to February 1,
1929?
Mr. WHITNEY. Not the allotments; no, sir; but I think you will
http://fraser.stlouisfed.org/
find, or my recollection is fairly clear, that you would find that we
Federal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
183
discussed it with many—the great majority of this list—verbally,
and a great many of this list were suggested
by the Messrs. Van
Sweringen, and the understanding there wTas in the general creation
of this business and the agreement to purchase there was a general
understanding that we would give the opportunity to certain people
they suggested. So the price to those people— to a certain number—
was fixed, and obviously, if we determined on the policy of selling
at $20 for any of this list prior to February 1, they would obviously
have to go with the full list, even though we did not get through
the physical work of approaching each individual in the two or
three days in there which were very crowded.
Mr. PECORA. Well now, let us get the chronology of events. According to the evidence of yesterday, the contract to do the financing
for the Alleghany Corporation was formally entered into by the
J. P. Morgan Co. by the Van Sweringens on January 28, 1929 ?
Mr. WHITNEY. That is right.
Mr. PECORA. And according to the provisions of that contract J. P.
Morgan & Co. obligated themselves to purchase 1,250,000 shares of
the common stock of the corporation at $20 a share and pay cash
for it?
Mr. WHITNEY. Among other things; yes.
Mr. PECORA. That required $25,000,000.
Mr. WHITNEY. Yes, $25,000,000.
Senator GORE. Was that no par stock?
Mr. WHITNEY. NO par stock; yes, sir.
Mr. PECORA. NOW, Mr. Whitney, what interest did the Van Sweringen brothers have in the stock which J. P. Morgan & Co. agreed
to buy at that time for $25,000,000 or at the rate of $20 per share?
Mr. WHITNEY. What interest did they have?
Mr. PECORA. Yes, sir.
Mr. WHITNEY. DO you mean financial interest?
Mr. PECORA. Financial interest; yes.
Mr. WHITNEY. None whatever.
Mr. PECORA. None whatever?
Mr. WHITNEY. NO. Then, if you will remember,
we were cosigners of the agreement, they were cosigners of the agreement with
J . P. Morgan & Co.
Mr. PECORA. Exactly.
The CHAIRMAN. When did you get the stock?
Mr. WHITNEY. We paid for it February 15.
The CHAIRMAN. February 15, 1929?
Mr. WHITNEY. Yes, sir.
The CHAIRMAN. The $25,000,000?
Mr. WHITNEY. Yes, sir.
The CHAIRMAN. So that the letters
written prior to that time were
an contemplation of receiving stock which had not yet been delivered?
Mr. WHITNEY. DO you mean these letters to these individuals?
The
CHAIRMAN.
Yes.
Mr. WHITNEY. Oh, quite so, sir. We had contracted to buy it,
and our arrangement with the persons or individuals was that they
would make payment on February 15.
Senator GORE. DO you know at what price the stock closed the
day it was listed?
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STOCK EXCHANGE PEACTICES
Mr. WHITNEY. I think so.
Senator GORE. It went on the market February 1, or something
like that.
Mr. WHITNEY. Yes; but I have not that day. But my recollection
of it is that it was around 37 and closed at 33.
Senator GORE. That is near enough for my purposes.
Mr. WHITNEY. Yes, sir. The opening sale was 37. That was the
high. And the low was 32%, and it closed at 33.
Mr. PECORA. NOW, Mr. Whitney, when was the decision arrived
at by the members of your firm to take blocks aggregating 574,900
shares of this stock and to sell it to selected individuals at $20 a
share?
Mr. WHITNEY. Why, Mr. Pecora, of course there were several
steps in that mental process to make that decision. The first one,,
as you know, was that there was an arrangement made with the
Guaranty Co. for the purchase of 500,000 shares. So that reduced
the amount to 750 of the total. As I attempted to explain earlier this
morning, that would not be, in our conception, a proper permanent
investment for a banking firm such as ours to continue to hold that
amount of common shares.
So that practically since the idea of the formation and the financing of the Alleghany Corporation started, it was our intention to
include with us, in our purchase, in effect, individuals such as ultimately came out in this list. If you ask me what day that idea
suddenly sprang into our heads, I could not tell you, because that
is the customary thing when we take this kind of investment, that
is the customary thing that we do as you know. It is always the
definite policy of J. P. Morgan & Co., as such, not to consider holding a $25,000,000 investment, or even three fifths of that.
Senator GORE, DO you mean to say that that is the general practice with the Morgan concern?
Mr. WHITNEY. Well, we have done it very seldom, you understand.
I tried to explain earlier, Senator Gore, I think before you came
into the room, that there were only four or five cases in which we
have done equity financing of this kind.
Senator GORE. That is, where you permitted people to buy stock?
Mr. WHITNEY. NO ; where we have bought common stocks in this
kind of general arrangement.
Senator GORE. But you have on other occasions invited people to
subscribe ?
Mr. WHITNEY. Yes, sir. And Mr. Pecora has requested a list,
and has the details I think, of three or four others.
Senator GORE. All right.
Mr. PECORA. Mr. Whitney, I notice that one of the individuals
who was invited to subscribe for Alleghany Corporation common
shares at $20 a share, was M^s. S. Parker Gilbert.
Mr. WHITNEY. Yes.
PECORA. Her husband
Mr.
not?
is now a partner of your firm, is he
Mr. WHITNEY. He is; yes, sir.
Mr. PECORA. Was he in February
Mr. WHITNEY. NO, sir.
Mr. PECORA. Was he connected in
http://fraser.stlouisfed.org/
Morgan & Co. ?
Federal Reserve Bank of St. Louis
of 1929 a partner of the firm?
any way at that time with J. P .
STOCK EXCHANGE PRACTICES
185
Mr. WHITNEY. None whatever; except as a very close personal
friend of one of the partners who had been very intimate with him
for a long time.
Mr. PECORA. Was he in February of 1929, when his wife was invited to subscribe for these shares at $20 a share, serving as agent
general with the Reparations Commission?
Mr. WHITNEY. He
Mr. PECORA. And
was.
J. P. Morgan & Co. had financial interests
that were very substantially affected by the operations of the
Reparations Commission, had it not ?
Mr .WHITNEY. We had no interest of any kind within Germany.
As you know, Mr. Pecora,
and as we have stated, we have sold the
German loan 1924 7?s and in that way, of course, we had a general
interest in the world economy of reparations. But we had no interest
in Germany as a firm of any kind.
Mr. PECORA. But you did have interests that were affected and
that could be affected by the operations of the Reparations Commission ?
Mr. WHITNEY. NO personal interests. Only interests as a result
of the effect of reparations on the general world economic effect on
business in general. But no personal or direct interest of any
kind.
Mr. PECORA. Mr. Whitney, do I understand that there was never
a meeting of the partners of J. P. Morgan & Co. at which a decision
was definitely reached to allot over 500,000 shares of the common
stock of the Alleghany Corporation to selected individuals at $20
a share?
Mr. WHITNEY. Mr. Pecora, I should think it was most likely that
at a meeting of the partners, whoever were then present, that the
matter of the disposition of those shares was discussed as a matter
of policy. So the answer to your question as I understand it, made
directly, is yes. But that is quite a different question than the questions you have been asking previously, as to whether there was a
meeting of the, firm, that might mean sitting down and conning
over each one of this long list of names of persons and allocating
to them. Of course, the policy was discussed at a meeting of the
firm. You will remember that Mr. Morgan testified the other day
that there was a firm meeting every week day except Saturday.
Mr. PECORA. I recall that very well.
Mr. WHITNEY. Undoubtedly at one of those meetings the question of the policy of disposing of such a large block of common stock
would be discussed. I do not remember that it was, but undoubtedly it would be.
Mr. PECORA. I think Mr. Morgan also testified that no minutes or
other written memoranda are kept of those firm meetings and discussions and decisions. That is true, isn't it ?
Mr. WHITNEY. Why, of course, he testified that way.
Senator COSTIGAN. Was it not also stated by Mr. Morgan that in
lieu of minutes the members of the firm relied upon their memory?
Mr. WHITNEY. We do.
Mr. PECORA. And your
memory at the present time is just a little
bit deficient concerning that matter?
Mr. WHITNEY. Not a particle.
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STOCK EXCHANGE PBACTICES
Mr. PECOEA. Let us see, now. Was it at the meeting of the firm
at which it was determined to allot something like 574,000 shares
of Alleghany Corporation common at $20 a share to selected individuals, that the decision also was made with respect to the allotment of stock that would be offered to the various individuals who
were to be invited to subscribe?
Mr. WHITNEY. Mr. Pecora, if I may be permitted to answer that
question, in order to get at the result you want, I am afraid I will
have to divide it into two parts. I have already stated that during
the discussion of the policy connected with this Alleghany Corporation financing, undoubtedly that matter was discussed at a firm
meeting, and the policy of disposing of the shares of Alleghany
Corporation common was decided upon. But when you come to the
question of any meeting of the firm at which the detailed allotments
of the shares to individuals might have been decided upon, I have
already testified that to the best of my recollection and belief there
would have been no such meeting.
Mr. PECORA. Well, then, how could the partners individually have
known how many shares each was to offer to individuals recommended by each partner ?
Mr. WHITNEY. Why, there is a list ultimately made up. I have
never denied it, because you have a list there in front of you. And
again I must state that I am not trying to be evasive in my answers,
but frankly I do not know what you are trying to find out.
Mr. PECORA. I am trying to find out how the apportionment or
allotment of those shares was made by the partners.
Mr. WHITNEY. Well, you asked me, and I am not answering this
question indirectly at all, but you asked me earlier, and I think your
opening question this morning was, whether there was any standard
form of people put on this list, and my answer to that question is,
there was not.
Mr. PECOHA. I am asking you a specific question. Will you answer
that question now?
Mr. WHITNEY. Yes, I will be very glad to do so.
The CHAIRMAN. Mr. Whitney, you agreed that you would offer
some 500,000 shares at $20 a share ?
Mr. WHITNEY. Yes, sir.
The CHAIRMAN. And did
the partners of the firm then go out and
each one of them undertake to dispose of any amount of shares ?
Mr. WHITNEY. NO, sir.
The CHAIRMAN. Then there
must have been some time when you
allotted those shares, because otherwise all of your partners being
busy in the disposition of those shares, you might have disposed of
a million shares. At some time you certainly had to come down
to a decision of what you could and would do in the matter.
Mr. WHITNEY. Certainly. And I hope I have not given the impression at all that this list was not in existence at the time, or that
this list has been prepared for the purpose of this investigation.
This list was determined upon, of course. But the thing I am afraid
I am not quite clear on is just exactly how I could answer truthfully
when it was definitely done and who determined that. I assume if"
that is what you want, Mr. Pecora
Mr. PECORA (interposing). I want the best answer you can givehttp://fraser.stlouisfed.org/
based upon your knowledge and recollection.
Federal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
187
Mr. WHITNEY. Then will you ask me the question over again so
that it may be perfectly definite.
Mr. PECORA. Was there ever a meeting of the partners of J. P.
Morgan & Co. at which it was decided what number of shares was
to be allotted to every or each individual who was invited to subscribe to those shares at $20 a share ?
Mr. WHITNEY. TO the best of my knowledge and belief there was
not.
The CHAIRMAN. HOW was this allotment arrived at, then?
Mr. WHITNEY. Well, Senator Fletcher, it is, perhaps, a little bit
difficult for one to understand all these things without knowing the
geography of our office. We all sit in one room, on the floor of our
office, and we all move around, talking to each other
The CHAIRMAN (interposing). Oh, well. But your partners would
not go out and throw dice in order to determine the number of shares
to allot to each individual.
Mr. WHITNEY. Oh, no. And if you would like to get the general
procedure of one of those things, I can tell you that. That is what
I tried to do.
Mr. PECORA. Give us the general procedure in the case of the
Alleghany Corporation common stock.
Mr. WHITNEY. Well, we want to be as discreet as we can. Say, we
decide to sell as a matter of policy a block of shares, but down to
the exact number of shares, down to within 100 shares, probably is
not determined. Then the partners generally converge upon a list,
making suggestions of who they would personally like to suggest,
like the Van Sweringen matter, who would be included in that list.
And that is gradually brought together, and probably we would start
out with a number of memoranda of the various partners making
suggestions. Those memoranda are thrown into the list. That list
is gone over by whoever made suggestions, and gradually—and there
are some limits within which you work, but you gradually come to
the list. That would be the general procedure. It may sound
awfully vague and awfully sort of casual, but that is really the way
it is done.
Mr. PECORA. Does it sound vague and casual to you?
Mr. WHITNEY. Not a bit.
Mr. PECORA. And was it the
firm's policy to do it in a manner that
might sound vague or casual to anyone else?
Mr. WHITNEY. NO. But you appear so unsatisfied with my answer
that I want to give a clear one, and I am afraid it must sound vague
to you.
Mr. PECORA. N O ; I am not unsatisfied at all, but am simply perplexed.
Senator GORE. Mr. Whitney, was there any pool or concert or
arrangement at that time by which this stock that was listed on the
market and selling on the stock exchange should be handled?
Mr. WHITNEY. NO. Certainly none in which we had the slightest
interest. And to the best of my knowledge and belief there was
none.
Senator GORE. If the stock had opened, say, at 15, instead of, say,
at 35, would those men have been expected and obligated to take
their allotments?
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STOCK EXCHANGE PRACTICES
Mr. WHITNEY. Well, those who had accepted certainly would.
Those who had heard about it afterward, I do not think we could
have expected them to take it if it sold at 15. But if they had
agreed to it, obviously, yes.
Senator GORE. There was some allotted after it was listed and was
selling at thirty-odd.
Mr. WHITNEY. Well, Senator Gore, there has already been introduced in testimony a letter that was dated February 1, and your
question was, I think, after February 1, if instead of selling at 35
it was selling at 15 would we have expected them to take it? I do
not think it would be fair to anybody to expect a man who had not
heard of it, to do so in that case. And obviously there were a certain
number who heard of it after February 1, at least one that we
know of.
Senator GORE. Certainly no one who had not agreed to take it
would be obligated or expected to take it in that case.
Mr. WHITNEY. NO.
Senator GORE. My point was, if it had opened at 15, those who had
accepted it of course you would have expected to carry out their
contract.
Mr. WHITNEY. Why, yes, sir; if they had a contract, I think so.
And they were the type of people who would have expected to carry
it out without any urging from us. It is a hard think to imagine
what might happen in a case like that, when it did not, but the people
who had accepted these things were the type of people who would
have wanted to fulfill their obligations.
Senator GORE. And some did receive allotments after it had gone
on the market and was selling at 30-odd ?
Mr. WHITNEY. Yes, sir; but how many I do not know.
Senator GORE. My point was, whether it was a business transaction.
Mr. WHITNEY. Oh, quite so.
Senator GORE. Or a sort of conversation in which it was understood to be one thing if it eventuated one way, and another thing
if it eventuated another way.
Mr. WHITNEY. NO, sir. I t was a business transaction.
Mr. PECORA. ISTow, Mr. Whitney, your office was asked to furnish
us with the details as to the disposition of 430,000 shares of common
stock of the Fleishmann Co., and the disposition of 18,365 shares
of the preferred stock of the Fleishmann Co., which were bought
for your firm through Max C. Fleischmann and the Fleischmann
Co., respectively, under the terms of agreements dated June 11, 1929,
and July 2, 1929.
Mr. WHITNEY. Yes,
sir.
Mr. PECORA. DO you recall that?
Mr. WHITNEY. Quite.
Mr. PECORA. And in connection therewith you were also asked to
include in such information: First, the selected list showing to whom
Standard Brands, Inc., preferred stock was allotted, with the number of shares and prices. Second: How the balance was disposed of
after the above allotments, and through whom, and at what prices.
Third: The dates and number of shares of Fleischmann Co. common
and preferred deposited by J. P. Morgan & Co. under the plan in
STOCK EXCHANGE PRACTICES
189
exchange for Standard Brands, Inc., stock, and the number of shares
received in exchange. Is that right?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. NOW, I show
Mr. DAVIS [interposing].
you this document, and I ask you if
•
Mr. Pecora, what is the number of the
question ?
Mr. PECORA. The answer to question 52.
Mr. DAVIS. All right. I thank you.
Mr. PECORA. And, Mr. Whitney^ I ask you if that constitutes the
information supplied to us in response to our request ?
Mr. WHITNEY. Yes,
Mr. PECORA. I offer
sir.
that in evidence and ask that it be spread on
the record of the hearing.
The CHAIRMAN. It may be received.
(The answer supplied by J. P. Morgan & Co. to question 52 submitted by committee counsel, was received as a part of the record
and marked "Committee Exhibit No. 14, May 25, 1933", and wil]
be found at the end of the day's record.)
Senator GORE. Mr. Chairman, is there some way by which we could
keep these people in the room quiet, and prevent them from moving
around and making so much noise?
The CHAIRMAN. Well, Senator Gore, we have tried several times
to do it.
Senator GORE. There is just a perpetual noise in the room.
The CHAIRMAN. When those in the room have to move will they
try to avoid the noise made by moving chairs. Just do not move
your chair. That is where the noise comes from. If you have to
leave your chair, or to reoccupy it, try to let the chair remain silent
if you can.
Senator KEAN. Let me see that exhibit, Mr. Pecora.
Mr. PECORA. Certainly.
Senator KEAN. I thank you. You may have it now.
Mr. PECORA. Mr. Whitney, how was the decision arrived at by your
firm concerning the identity of the individuals who were to be
invited and who were invited to subscribe for the shares of Standard
Brands, Inc.?
Mr. WHITNEY. I should assume it was very much in the same
way, Mr. Pecora.
Mr. PECORA. Well, there are various names on this list, which is
the list offered in evidence and marked " Committee Exhibit No.
14 ", that do not appear
Mr. WHITNEY (interposing). Which list are you now talking
about ?
Mr. PECORA. The Standard Brands list.
Mr. WHITNEY. All right.
Mr. PECORA. Which do not appear on the list of the gentlemen invited to subscribe to Alleghany Corporation common shares. Do
you notice that?
Mr. WHITNEY. Oh, I would assume that would be true. They are
entirely different types of companies. And as I have mentioned two
or three times, there were various people shown on the Van Sweringen and other lists that were interested in railroads.
175541—33—PT 1
13
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STOCK EXCHANGE PRACTICES
Senator COSTIGAN. Mr. Whitney, do you happen to know why
the name of Mr. Claude Boettcher of Denver is on that list. My
attention has just been drawn to the fact that his name is on it.
Mr. WHITNEY. He is; yes, sir.
Senator COSTIGAN. Was there
any special reason known to you
why he should be included ?
Mr. WHITNEY. Frankly, up to this minute I did not know that he
was on the list. No, I do not know; didn't even know him.
Senator COSTIGAN. All right.
Mr. PECORA. Mr. Whitney, upon whose suggestion or recommendation was Calvin Coolidge's name included on this list?
Mr. WHITNEY. I should assume—is it on the list?
Mr. PECORA. Yes.
Mr. WHITNEY. I should assume it was Mr. Thomas
Senator GORE. Why?
Mr. WHITNEY. He was always a very close personal
Cochran.
friend of his,
and was advising him on investments after he left the White House.
Senator GORE. What was the date of this, Mr. Pecora?
Mr. PECORA. In July of 1929.
Senator COSTIGAN. Who is Mr. Cochran ?
Mr. WHITNEY. He is one of our partners. Unfortunately, he is
very ill at the present time.
The CHAIRMAN. Mr. Whitney, did you purchase this stock, or did
your firm purchase this stock?
Mr. WHITNEY. We made an agreement to purchase it; yes, sir. It
is quite a complicated matter, and
Mr. PECORA (interposing). At what price?
Mr. WHITNEY. Well, we have the agreement here. You know, Mr.
Pecora, this involved the purchase—and you spoke of the purchase
of Fleischmann stock. It involved the purchase of Fleischmann
stock pending the merger or creation of a company called Standard
Brands, Inc. The agreement was that we would purchase the stock
and turn it through to get Standard Brands stock. So that the price
of Standard Brands, alter the completion of all those arrangements,
was $32 a share for Standard Brands.
Mr. PECORA. That was the price to J. P. Morgan & Co.?
Mr. WHITNEY. That is the price in my mind. I do not remember
just what the price was.
Mr. PECORA. It was also at that price of $32 a share that these
persons whose names are shown on the list offered in evidence
Mr. WHITNEY (interposing). Yes, sir.
Mr. PECORA (continuing). Were invited to subscribe to it?
Mr. WHITNEY. Yes, sir.
Senator GORE. Was that Standard
Mr. WHITNEY. Well, Fleischmann
Brands or Fleischmann?
was merged with various other
companies into Standards Brands, Inc. It is the same thing.
Standard Brands is a successor company to Fleischmann.
Senator GORE. That and some other concerns ?
Mr. WHITNEY. Yes, sir. That and Royal Baking Powder, Chase
& Sanborn, and various others.
Senator GORE. This relates to Standard Brands?
Mr. WHITNEY. Yes, sir; but that is the contract. We were not
called upon to buy stock in these various ramifications and legal
STOCK EXCHANGE PRACTICES
191
steps, except if Standard Brands went through. We made this contract/in June and it did not become effective until September. There
was a period of about 60 days that elapsed.
The CHAIRMAN. September of 1929?
Mr. WHITNEY. We made the contract in June.
The CHAIRMAN. And to take effect in September 1929 ?
Mr. WHITNEY. We had to pay for the stock September 5, I think
it was.
Senator GORE, 1929?
Mr. WHITNEY. Yes, sir.
The CHAIRMAN. Was it listed on the
Mr. WHITNEY. I think that—well,
stock exchange in September f
Fleischmann, of course, had
been listed. And I think after that, when Standard Brands was
actually formed that that succeeding stock became listed, and I
should think that by September it was listed.
Mr. PECORA. The opening trades, as I understand, according to
committee exhibit 14, prepared by jour office, were on September
6, 1929.
Mr. WHITNEY. Yes, sir. I think that question also said that it
was sold on the stock exchange, or made no mention of it. Or was
that another question ? I am pretty sure it was listed.
The CHAIRMAN. HOW was it quoted then?
Mr. PECORA. According to committee exhibit no. 14, it was 40%.
Mr. WHITNEY. Our commitment was to purchase, as I remember
it, Senator Fletcher, on September 5 at 32, and we had entered into
that commitment back some time in the latter part of June—or I
mean July; no; it was June 11.
Mr. PECORA. Mr. Whitney, it is true, isn't it, according to committee exhibit 14 which has been introduced in evidence, and which
was prepared by your firm, the sales in the market of the common
stock of Standard Brands, Inc., were at 40% ?
Mr. WHITNEY. The opening sales?
Mr. PECORA. Yes.
Mr. WHITNEY. If
that is what it says here, I guess it is right;
40% is right.
Mr. PECORA. And that within 4 days thereafter, or on September
10, 1929, the market price reached 43% ?
Mr. WHITNEY. Well, we sold 200 shares at that price, so it mast
have.
Mr. PECORA. Mr. Whitney, who recommended that an invitation
to subscribe for these shares of Standard Brands, Inc., be extended
to Mr. Bernard M. Baruch?
Mr. WHITNEY. I do not really know.
Senator GOLDSBOROTJGH. Mr. Whitney, what is the present quotation on Standard Brands?
Mr. WHITNEY. About 19. Standard Brands has continued to pay
dividends right through, and I think it is now about 19. But what
has happened in the last couple of days I do not know.
The CHAIRMAN. It has been lower than that.
Mr. WHITNEY. Oh, yes, sir. It went down, I think, to 12, or
perhaps 11.
Senator GOLDSBOROTTGH. It has always paid dividends?
Mr. WHTTNEY. Yes,
sir.
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STOCK EXCHANGE PRACTICES
Senator GOLDSBOROUGH. It has not skipped a dividend?
Mr. WHITNEY. NO, sir. It is paying at the rate of $1 a share now.
Senator GORE. IS it earning the dividend ?
Mr. WHITNEY. Yes, sir; a little bit more than its dividend, I
understand.
Mr. PECORA. Mr. Whitney, who recommended that Mr. Norman
H. Davis be invited to subscribe for 500 shares of Standard Brands
common stock at that time?
Mr. WHITNEY. I do not know, Mr. Pecora.
Mr. PECORA. NOW, who is F. H. Ecker, whose name is included
on the list of persons invited to subscribe for Standard Brands, Inc.,
at 32?
Mr. WHITNEY. He is the president of the Metropolitan Life Insurance Co., and I think he was at that time. He may have been vice
president then.
Mr. PECORA. And his company is a very heavy buyer of securities
at all times, isn't it?
Mr. WHITNEY. When things are going that way; yes. Not today,
of course. They have not been for a good many years. But they
are, of course, currently large holders of securities.
Mr. PECORA. Have you any notion as to whether or not that circumstance might have influenced the recommendation that he be
invited to subscribe for those shares at 32 ?
Mr. WHITNEY. I know that it would not.
Mr. PECORA. YOU know it would not ?
Mr. WHITNEY. It would not influence the suggestion.
Mr. PECORA. YOU do not think it would awaken any desire in his
mind to reciprocate such courtesy, do you?
Mr. WHITNEY. NO.
Mr. PECORA. By an
investment of the funds of his company in
issues that your firm is interested in?
Mr. WHITNEY. NO, sir; I really do not. I have done a great deal
of business with Mr. Ecker over the last 18 years, and I am sure
you would agree with me if you knew him that it would not influence him at all.
Mr. PECORA. It would not offend him with your firm, would it ?
Mr. WHITNEY. It would not make any difference to him.
Senator GORE. Mr. Pecora, I should like to ask a question or two
so that I may go.
Mr. PECORA. All right.
Senator GORE. YOU may have covered some of these questions
when I was absent.
The CHAIRMAN. Proceed, Senator Gore.
Senator GORE. Mr. Whitney, does your firm lend money on call like
others ?
Mr. WHITNEY. I S it doing it, or does it ever do it ?
Senator GORE. Did it?
Mr. WHITNEY. Oh, yes, sir.
Senator GORE. Could you submit,
Mr. Whitney, in connection with
your testimony a statement showing the amount, the highest and
lowest amounts, you had outstanding on call each month during
1929?
STOCK EXCHANGE PRACTICES
193
Mr. WHITNEY. Yes, sir. Of course, Senator Gore, in our general
statement that was submitted here day before yesterday we
showed
Senator GORE (interposing). Was it included in that statement?
Mr. WHITNEY. That was only as of December 31 of each year.
But we can certainly procure that information.
Senator GORE. On the 1st of each month during 1929.
Mr. WHITNEY. What do you mean by call loans? Straight call
loans ?
Senator GORE. Yes.
Mr. WHITNEY. Ordinary call loans?
Senator GORE. I should like to have the highest and lowest amounts
each month unless that would be too much trouble to you.
Mr. WHITNEY. First, let us understand. You mean what is known
as ordinary straight brokers' loans ?
Senator GORE. Yes.
Mr. WHITNEY. All right. We have other demand loans. You are
interested in the call market?
Senator GORE. Yes, sir. And state the rate of interest prevailing
on each of those dates for which you furnish certificates.
Mr. WHITNEY. The high and the low for each month, or the
amount on the 1st of each month, and the rate of interest prevailing ?
Senator GORE. The call rate.
Mr. WHITNEY. Yes,
Senator GORE. And
sir.
the amount of other loans on that date, loans
other than call loans.
Mr. WHITNEY. DO you mean to brokers, time loans ?
Senator GORE. Yes; any loan that you carry in your ordinary banking business.
Mr. WHITNEY. All loans?
Senator GORE. Yes.
Mr. WHITNEY. DO you mean customers' loans and commercial loans
and any evidence of indebtedness ?
Senator GORE. Well, under two categories. Call loans in one, and
the other one could be submitted in categories or groups of loans
other than call loans.
Mr. WHITNEY. We can get that, Senator Gore. The second part
of your question will take longer because it is carried in the office
in an entirely different way. But we can get it for you if you wish
it. We can get the first one very promptly, and the second one
will take some time. But we will get it for you very quickly.
Senator GORE. If you can group the loans, other than call loans,
in one catagory that would serve my purpose.
Mr. WHITNEY. On the first of each month in 1929 ?
Senator GORE. Yes, sir.
Mr. WHITNEY. All right, sir.
Senator GORE. NOW, then, do you remember the rate of profit that
was developed in the hearing about a year ago on your foreign
loans?
Mr. WHITNEY. Yes, sir.
Senator GORE. What was
that?
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STOCK EXCHANGE PRACTICES
Mr. WHITNEY. Well, our average profit on our foreign loans—
and it is slightly less on our domestic loans—is just under one half
of 1 percent. That is, before charging ourselves with any overhead, rent, interest on the moiney. I mean, that is our gross profit
actually flowing from those transactions, from that department of
the business.
Senator GORE. Did you make a substantial loan to Italy during
that period of the last 10 years ?
Mr. WHITNEY.
Senator GORE.
Mr. WHITNEY.
Senator GORE.
Yes.
What was that amount?
$100,000,000.
And what was the date, approximately, do you
remember ?
Mr. WHITNEY. We have got it right here, Senator Gore, and in
just a second I will answer you. That is prior to the scope of this
question of Mr.'Pecora's, and I am advised it was in 1925.
Senator GORE. Yes. Of course, I would not want to ask you to
submit any information not called for in this resolution, if you
have any objection, of course.
Mr. WHITNEY. Not the slightest.
Senator GORE. I want to stay within that.
Mr. WHITNEY. All that information, Senator Gore, was furnished when Mr. Lamont appeared before the Senate committee in
connection with foreign loans. I will be very glad to send you a
report of that testimony which covers this point.
Senator GORE. Here was the additional point I wanted to develop. Could you show first the date on which that loan was
made?
Mr. WHITNEY.
Senator GORE.
Yes.
Mr. WHITNEY.
Senator GORE.
Yes.
The amount that was advanced in cash to the
Italian Government at the time?
Then the date at which further advances were made
from time to time ?
Mr. WHITNEY. Further
Senator GORE. On this Italian loan?
Mr. WHITNEY. Well, to be sure I understand. We would have
bought the bonds all in one lot. In other words, we would have made
payment for the full amount at one date.
Senator GORE. But did you turn the entire purchase price over to
the Italian Government at that time ?
Mr. WHITNEY. Yes, sir; certainly.
Senator GORE. The reason I was asking, Mr. Whitney, was this:
I had beenT advised to the contrary. That the transaction was made,
the sale w as made, and that this was the agreement—and I use this
by way of illustration—that, say, $25,000,000 was advanced at the
time to the Italian Government. The balance was carried by your
firm and was loaned on call at a high rate of interest during the time.
Mr. WHITNEY.^ Senator Gore, I am speaking—I haven't got the
records before me, but I am very confident that they will support
this statement of mine, that we contracted to purchase $100,000,000
worth of bonds of the Italian Government at a certain price. We
agreed to pay for those bonds on a certain date, and on that date we
http://fraser.stlouisfed.org/
paid for those bonds in accordance with the terms of that contract.
Federal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
195
Senator GORE. Yes. In accordance with the terms of the contract.
Mr. WHITNEY. And at one time, on one specific date, the full total
payment was made in accordance with the terms of the contract
on a specific date. We did not make, in other words, partial payment.
Senator GORE. Well, maybe this is the point then I had better
bring out. You made the total payment to Italy, that is, you credited
Italy with the entire amount. Did Italy carry a balance comprising
a very substantial proportion of that for sometime in your bank ?
Mr. WHITNEY. DO you mean on deposit with us ?
Senator GORE. Yes.
Mr. WHITNEY. I do not know for a fact, but I should think very
likely.
Senator GORE. Here is what I am trying to get at, Mr. Whitney.
I have heard this criticism made, that your house as an investment
banking house was represented on a number of industrial boards
of directors and railroads and other concerns, for that matter. And
that pressure was exerted by your house to get them to make loans
with your company.
Mr. WHITNEY. DO you mean deposits ?
Senator GORE. NO, sir.
Mr. WHITNEY. Deposit or loan?
Senator GORE. NO, sir; to borrow money from your house. Allow
the money to stay on deposit. They would pay interest on the bonds
of the amount that were issued, for instance, and the money was
allowed to remain with your concern. Meantime, being loaned on
call at high rates of interest. And that there was a virtual antagonism between your company as an investment banking house and
the industrial concerns on which your members served as directors.
Mr. WHITNEY. Well, sir, of course the question of what we were
loaning as a firm on call will be answered in your first question.
Senator GORE. Yes, sir.
Mr. WHITNEY. If it is true, as I think very likely, that we paid
for these by paying the Italian Government money which they
deposited with us, on which we paid them interest, the two things
have no relation. If you mean that we loaned money for the account
of the Italian Government in the call market, I can assure you that
is not so, because
Senator GORE. N O ; I did not mean that at all. But that the
money was held by your bank.
Mr. WHITNEY. It was on deposit.
Senator GORE. On deposit.
Mr. WHITNEY. That is, yes; very probable.
Senator GORE. And loaned on call in the meantime. I have this
concrete case which has been mentioned to me, and it might be illustrative, if true. The transaction of the Marland Oil Co., which I
believe in 1927 borrowed some $30,000,000 from your concern, or
you handled bonds or gold notes for that company amounting to
$30,000,000 in 1927, is that not true?
Mr. WHITNEY. Yes, sir; we purchased $30,000,000 Marland notes
in 1927. I am not sure of the date, but I know we purchased $30,000,000 Marland Oil Co. obligations; yes, sir.
Senator GORE. Yes. Now, I have been informed that the company
never did get the money, but paid interest on the money.
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STOCK EXCHANGE PRACTICES
Mr. WHITNEY. Well, I can assure you, Senator Gore, that your
informant has informed you incorrectly.
Senator GORE. Well, that is what I am trying to get at—what the
facts are.
Mr. WHITNEY. There is no question of doubt about it.
Senator GORE. When the Marland Co. was taken over, or when
Mr. Marland was removed from the presidency of it, I have been
informed that $22,000,000 of that loan was still on deposit with your
firm. I am speaking from memory.
Mr. WHITNEY. If you would care to, I would be very glad, if the
committee would like to have a statement of the account of the
Marland Oil Co., to furnish it. Mr. Marland finally retired or was
not reelected to the board in the annual meeting of 1929. And I
would be very glad to show you what the statement of the Marland
Oil Co.'s account was at that time with us. They did have, and have
had for many years, deposit relations with us, as has the Continental
Oil Co., which is their successor company.
Senator GORE. Here is the point I want to bring out
Mr. WHITNEY. But they got the money, Senator Gore; they got the
money. That is the point. I do not have in my mind what they
had on the date Mr. Marland finally severed his connections.
Senator GORE. Here is what I have in mind. The $30,000,000 were
borrowed.
Mr. WHITNEY. Were sold. They sold notes.
Senator GORE. Yes. When he retired as president $22,000,000 of
that were still on deposit in your bank, and, we will assume, being
loaned on call ?
Mr. WHITNEY. Well, we would not
Senator GORE. And the company had not drawn the money out
of the bank?
Mr. WHITNEY. We would not be able to identify any particular
deposit in money we were loaning on call.
Senator GORE. Oh, certainly not.
Mr. WHITNEY. But, as I said, we would be very glad to give you
the amount of money we did have loaned on call. While I hate to
guess or try to remember anything like that, I think I am pretty safe
in guessing that at the time Mr. Marland left the company they did
not have anything like $22,000,000 on deposit with us, but they had
drawn out whatever deposits they had had which had been credited
by the purchase of those notes a long, long time before that.
Senator GORE. Yes. Well, I spoke from memory.
Mr. WHITNEY. I am not denying either, Senator Gore, that Mr.
E. W. Marland and some of his directors had a dispute. That has
been a matter of almost public record.
^ Senator GORE. Yes. You know it has been discussed as to what
limits ought to be placed on investment bankers, and how far they
should be divorced from commercial banks. What I am trying to
get at is this—and this is the criticism on which these questions are
based. The house of Morgan has members of its firm serving as
members of boards of directors of different concerns.
Mr. WHITNEY. Yes, sir.
Senator GORE. That pressure
industrial concerns
has been exerted by the bank on these
and railroads to borrow money from the bank,
STOCK EXCHANGE PRACTICES
197
your bank; that the money has remained on deposit with the bank,
and been used by the bank to lend on call at high rates of interest.
The point being that there was an antagonism of relationship, and
that really the men who were serving in these two capacities were
serving two masters. Now that is the point I am getting at.
Mr. WHITNEY. Well, Senator Gore, I think I can safely say in
complete reliance that the record would support it, that never has
J. P. Morgan & Co. tried to influence any company to borrow a dollar
that that company did not very definitely need in the conduct of its
regular business.
Senator GORE. Well, I wanted to get what the facts were in the
record.
Mr. PECORA. Mr. Whitney, referring to the list last offered in evidence, namely, exhibit 14, that is the Standard Brands subscribers.
Who is John Marshall, whose name appears on that list ?
Mr. WHITNEY. He is a partner in the law firm of Messrs. Covington, Burling & Eublee here in Washington.
Mr. PECORA. IS that the law firm with which Dean Acheson was
connected ?
Mr. WHITNEY. I am told so; yes.
Mr. PECORA. It
is?
Mr. WHITNEY. I am told so; yes, sir.
Mr. PECORA. NOW will you describe briefly for the benefit of the
committee the transaction or transactions whereby the merger of
Standard Brands, Inc., was effected? That is, the merger of the
constituent companies into Standard Brands, Inc. ?
Mr. WHITNEY. DO you mean with reference to this particular
transaction ?
Mr. PECORA. With reference to these stock transactions that you
have been examined about.
Mr. WHITNEY. Well, of course, there were two collateral transactions going on here. The actual transaction that this question covers
was, as you stated in your introduction of the subject, a personal
transaction between the firm of J. P. Morgan & Co. and Max C.
Fleischmann and certain of his relatives who were very large owners
of Fleischmann stock. And he had been desirous for a long time of
diversifying his investments and disposing of his shares. That is
one transaction.
Parallel to that there had been these negotiations going on for
the formation of Standard Brands, which involved the Fleischmann
Co., the Royal Baking Powder, Chase & Sanborn, and a Canadian
company whose name I do not remember. The theory of the consolidation being that the Fleischmann
Mr. PECORA. Was that E. W. Gillette Co., the Canadian company?
Mr. WHITNEY. Yes, sir. I could not remember at the moment.
It was a Canadian company. The theory of this combination
or merger being that the Fleischmann organization had developed a very unique and very effective method of distribution,
particularly for more or less perishable foodstuffs, and these other
companies, coffee and baking powder—not so much baking powder,
but coffee, were thought to fit in, we thought, very economically
with the general set-up of Fleischmann's. So when the two transactions came together it was that we made this agreement with
Max
C. Fleischmann to buy—I think he said 430,000 shares of
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STOCK EXCHANGE PRACTICES
Fleischmann stock from him when, as, and if this merger had gone
through. We entered into that contract in the early part of
Mr. PECORA. At what price, do you remember?
Mr. WHITNEY. I only remember what it was going to be when
it came out of the hopper. But I can look that up', 80. The contract was made June 11, I think. It had to be ratified by all these
various stockholders, and we made our commitment to buy the stock
in the form of Standard Brands stock on September 5, and the net
effective price to us on the proposed merger, under the terms of the
merger, was $32. That is where it went down to.
Now, the other part of your question about the preferred stock,
may I bring that in now ?
Mr. PECORA. All right.
Mr. WHITNEY. The Fleischmann Co. owned certain preferred
shares of its own company—its own preferred shares. They did not
want to continue to have that in the merged company. Soi we agreed
to buy the preferred shares and after the merger to sell those shares,
accounting to them for any profit beyond expenses that might be
from the purchase price of the preferred stock of Fleischmann
through the sale ultimately of the common shares of Standard
Brands. So that that is what actually happened to that. That is
quite a distinct trade from anything to do with Max Fleischmann.
That was made with the Fleischmann Co. for the account of the
Fleischmann Co., and we accounted to them for the profits, which I
think were something around $900,000.
Mr. PECORA. $919,360. Shall we recess now?
Mr. DAVIS. Mr. Chairman, before we recess may Mr. Morgan have
just 2 minutes to make a statement?
The CHAIRMAN. Mr. Morgan desires to make a statement in regard to some tax matters. You may do so, Mr. Morgan. We will
have quiet in the room.
TESTIMONY OF J. P. MORGAN—Resumed
Mr. MORGAN. There was a question raised about my having paid
income tax to the British Government yesterday. I was asked yesterday whether I had paid any income taxes to any foreign government and replied that I had paid income tax to the British Government. My memory was not entirely clear about it, so that I thought
I would like to explain it a little.
My income tax to the British Government is paid upon the basis of
the English income tax law, and it is fixed by the Inland Kevenue
Authorities, as they call them there. I paid an assessment during
1932 of 7,000 pounds, and approximately similar amounts for 1931
and 1932.
The English income tax includes a tax on the rental value of
property owned which the owner uses and which would have increased his income had he rented it. And does not include any
capital gains and losses.
The CHAIRMAN. YOU are referring now to your personal tax?
Mr. MORGAN. My personal income tax.
The CHAIRMAN. Not the firm's?
Mr. MORGAN. NO. My personal income tax.
STOCK EXCHANGE PRACTICES
199
Mr. PECORA. The individual tax?
Mr. MORGAN. The individual tax. I want to make clear about it
that I take great pains, and I have all my life, to pay the income
taxes and other taxes I am called upon to pay by the various governments. And I get the best advice I can to find out that I do not
underpay or overpay.
Senator KEAN. Mr. Morgan, I would like to ask you the difference
between the tax there and in the United States. Ours is not an
income tax. Ours is really a profit tax, is it not?
Mr. MORGAN. Well, it would seem that capital gains and losses
could hardly be a part of an income.
Senator KEAN. SO that as our tax is fixed on capital gains and
losses, if there are no capital gains, why you do not have to pay any
tax?
Mr. MORGAN. Well, except on what you have in the way of interest
and income of that sort.
Mr. PECORA. Income?
Mr. MORGAN. Except on income.
Mr. PECORA. Yes.
Mr. MORGAN. I consider
income to be what a man earns by his
work; his salary or pay, or whatever it is; the income received from
securities or from occupation.
The CHAIRMAN. IS the tax which you paid to the British Government deducted from your income tax in the United States?
Mr. MORGAN. That I do not know, sir. I think so, probably, but
if the law allows it it is.
Senator KEAN. NO.
Mr. MORGAN. It is no longer so ?
Senator KEAN. NO.
The CHAIRMAN. Does the partnership pay a tax in England ?
Mr. MORGAN. Oh, yes; before you get the money over here, on
which you pay tax again.
The CHAIRMAN. Yes.
Senator BARKLEY. Was
the reason for your failure to pay taxes in
1931 and 1932
Mr. PECORA. And 1930, Senator.
Senator BARKLEY (continuing). 1930, 1931, and 1932 due to the
fact that your losses were greater than your gains ?
Mr. MORGAN. Losses were greater than my income.
Senator BARKLEY. That is, charging off your losses against your
income there was no tax due ?
Mr. MORGAN. There was no tax to be paid. I am not responsible
for these figures. I viewed them with great regret when they
appeared.
I am very much obliged to you, Mr. Chairman.
The CHAIRMAN. Yes. That is all right, Mr. Morgan. If you have
nothing further to say, we will take a recess until—2 o'clock or 2: 30!
Mr. PECORA. May I ask Mr. Morgan just one question?
The CHAIRMAN. Yes.
Mr. PECORA. If the English
system of income tax would have
been adopted here and had been in effect here, you would have been
required to pay income taxes for the past 3 years, would you not?
Mr. MORGAN. On quite considerable amounts, I expect.
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STOCK EXCHANGE PEACTICES
Mr.
Mr.
PECORA. On considerable amounts?
MORGAN. On quite considerable amounts; yes,
Mr. PECORA. Yes.
Mr. MORGAN. We would have paid a lot less in 1928 and 1929.
Mr. PECORA. SO that to the extent that capital losses may
be
deducted from taxable income our income tax is not an income tax,
is it?
Mr. MORGAN. NO. And also to the extent that capital gains could
be added to income it ceases to be an income tax.
Senator BARKLEY. This English tax was based solely on the profits
or the income derived by you or your concern in England?
Mr. MORGAN. Yes,
Senator BARKLEY.
Mr. MORGAN. The
sir.
It had no relation
English taxing authorities say that a man who
owns a house has made an investment of that amount which, if you
had not put it into the house and left in it, you would have to invest
and receive an income on.
Senator BARKLEY. AS though he had received it.
Mr. MORGAN. And they tax him on the amount that he would
have got in rent for his house, as they estimate, and they change the
value every 5 years. So that he cannot put a lot of money by
earning no income.
Senator BARKLEY. Well, the tax that you paid over there had no
relationship to your business or your income in the United States ?
Mr. MORGAN. NO ; nothing at all. Thank you.
Senator KEAN. Mr. Morgan, the income tax over there is based on
any income you receive from either your partnership over there
or from
Mr. MORGAN. Or from any investment that I have.
Senator KEAN. Or from any investment that you have over there ?
Mr. MORGAN. Yes.
Senator KEAN. And
the difference is merely that the English law
says that if you have a house the rental value of that house would
be so much, and therefore your income on that if you rented it would
be so much; that is correct, is it not ?
Mr. MORGAN. That is it. They do not say a house is worth so
much. They say it would earn such an income. They do not place
a capital valuation on real estate there.
Senator KEAN. They state it would earn so much.
Mr. MORGAN. Yes.
The CHAIRMAN. We
will take a recess until 2:30. The witnesses
who have been summoned will return at that time.
(Thereupon, at 12: 55 p.m., a recess was taken until 2: 30 p m. the
same day, Thursday, May 25, 1933.)
AFTERNOON SESSION
The hearing was resumed at the expiration of the recess.
The CHAIRMAN. The committee will come to order. Let there be
quiet in the room.
Mr. Whitney, will you resume the stand?
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TESTIMONY OF GEOEGE WHITNEY, A PAETNEE IN THE FIEM
OF J. P. M0EG0N & CO., NEW Y0EK, NX—Resumed
Mr. PECORA. Mr. Whitney, I observe in reading over the printed
copy of the statement you read into the record this morning the
following sentence:
We are not opposed to, but are heartily in favor of publicity and disclosure
of the gross profit or commission paid in respect to all securities ottered to the
public as is proposed by the legislation which you are now considering,
To which legislation does that statement refer ?
Mr. WHITNEY. I said this morning, Mr. Pecora, that I understood
that the legislation had already been passed—the securities bill.
Mr. PECORA. Did anyone in behalf of J. P. Morgan & Co. make
any public announcement that your firm, before the enactment of
that legislation, while it was under advisement by the Congress,
were in favor of publicity and disclosure of the gross profit or
commission ?
Mr. WHITNEY. NO, Mr. Pecora. We did not make any statement
in that connection. I t has always been known that we have always
practiced the fullest kind of disclosure in all our public issues.
Mr. PECORA. Did you ever issue a circular or prospectus offering
an issue to the public in which you set forth the spread to your firm ?
Mr. WHITNEY. NO, sir.
Mr. PECORA. And the first
public statement of any kind of which
you have knowledge that has been made in behalf of your firm with
respect to its attitude of favoring such legislation is this one contained in this printed pamphlet which you read into the record this
morning. Is that correct?
Mr. WHITNEY. A S far as I know, we are not in the habit of making public statements, and I rather think this is the first one. Our
opinion on the subject has never been asked before.
Mr. PECORA. YOU knew that committees of Congress were holding
public hearings upon the securities bill that was very recently enacted, did you not?
Mr. WHITNEY. We did.
Mr. PECORA. And you knew
that those hearings were open to representatives of your firm for an expression of their views or opin*
ions with regard to the wisdom of such legislation, did you not?
Mr. WHITNEY. The question is, Did I know they were open for us
to appear?
Mr. PECORA. Yes.
Mr. WHITNEY. I understood
they were open hearings. I wish to
correct the statement I made a minute ago, and that is that at the
time of the Senate inquiry into foreign loans we did make a full
disclosure of our spread.
Mr. PECORA. But that was back in December of 1931 ?
Mr. WHITNEY. Yes; that is correct.
Mr. PECORA. And you made that in response to questions put to
representatives of your firm by the committee who examined the
members of your firm as witnesses; is not that so ?
Mr. WHITNEY. My recollection is, Mr. Pecora, that we volunteered
the information at the time of the hearing; yes.
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Mr. PECORA. But prior to that time, or, as a matter of fact, at any
time up to. the present time, your firm has never stated in any prospectus that you issued to the investing public with regard to any
security that it had issued what your firm's spread was so that the
investor or the prospective investor might have that information to
help guide his judgment as to whether or not he would buy?
Mr. WHITNEY. The answer, Mr. Pecora, to your question is no; but
as I pointed out in the statement which I read this morning, a great
many of the securities which we have issued—as a matter of public
knowledge the question of the disclosure of spread has never become
a matter of public interest or even suggested, so far as I remember.
The legislation just passed raised it. You asked me whether we
have ever made a public statement, and the answer is no. We have
always, on the other hand, been prepared to and have in practice
given all information considered pertinent. This particular information, which we think is a good thing if it is deemed so? has never
been a question of discussion until very recently.
Mr. PECORA. What do you mean when you say that it is a good
thing if it is deemed so? That is a statement that I do not quite
understand.
Mr. WHITNEY. I said, Mr. Pecora, that the question of the disclosure in propectuses of spread has never been raised until very
recently. The question having been raised, as I state there, we are
heartily in favor of any and all disclosure which is deemed to be
in the interest of the investor or purchaser of securities.
Mr. PECORA. This statement here merely relates to full publicity
and disclosure of the gross profit or commission as is proposed by
the legislation which you apparently thought was now under consideration but which you now know was enacted a few days ago ?
The WITNESS. Since we have been in Washington; yes.
Mr. PECORA. While that legislation was pending in Congress there
was not a word from the firm or any representatives which would
have enlightened the committees of Congress considering the legislation, as to the firm's attitude?
Mr. WHITNEY. I do not know that I can speak absolutely accurately, but there was no case, to my recollection, where a member of
the firm of J. P. Morgan & Co. has appeared before legislative committees for or against legislation, unless they have been requested
so to do.
Mr. PECORA. SO this statement simply means that you now are in
favor of the law which has already been enacted, does it not?
Mr. WHITNEY. TO that, Mr. Pecora, the answer is " Yes." As you
so clearly brought out this morning, this statement was prepared
last Friday. You took a little pains to bring out when it was written. It was written last Friday, and that clause was in it then.
Mr. PECORA. When I questioned you about this statement very
briefly, immediately after you completed reading it into the record
this morning, you did not know whose phraseology was embodied
in this printed statement. Do you now know?
Mr. WHITNEY. I do not think that is quite what I said, Mr. Pecora,
You asked who had prepared it. I said it was the collective effori
of many of us; and that is still true.
Mr. PECORA. But I asked you specifically, as I rather distinctly
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recall, the question as to whose phraseology was employed or emFederal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
203
bodied in this statement, and you said you did not know. Do you
know, as a matter of fact?
Mr. WHITNEY. Have you the record of what was said this morning?
Mr. PECORA. I have it in my memory for the time being.
Mr. WHITNEY. My recollection is, Mr. Pecora—I don't think it
is very important, but my recollection is that I did not know whose
phraseology it was but that I amplified the answer by saying that
it was the collective effort of many of us. That answer is just as
true now as it was this morning. But you also then rather pursued
the point and asked me when it was first thought of, and I said my
recollection was that it was first begun to be worked on about last
Friday or Saturday. My only point is that that clause has been in
that statement since its inception, which was prior to the passage of
this legislation which was pending last Friday.
Mr. PECORA. Was it about last Friday or Saturday—or perhaps a
day or two prior to last Friday—that certain members of your firm
had a conversation with a New York attorney at which the suggestion was made that your firm or its members come here prepared to
present some sort of program for the consideration of this committee
in recommending legislation to the Congress ?
Mr. WHITNEY. I cannot tell you the conversation that members of
my firm have had with respect to the many suggestions made by
many people in regard to the purpose of this investigation that we
should attempt to have some definite ideas as to things of this kind;
but that has been a matter of the most—well, the greatest concern
and consideration by us since we first understood we were to have
the privilege of appearing before this committee.
Mr. PECORA. Did you have such conversations as I have indicated
toward the latter part of last week with an attorney in New York?
Mr. WHITNEY. Whom do you refer to?
Mr. PECORA. Did you have with any attorney in New York?
Mr. WHITNEY. I do not know. I have seen so many attorneys in
the last several weeks that I would hate to say that I did not.
Mr. PECORA. Perhaps Mr. Leffingwell can answer that.
Mr. LEFFINGWELL. Yes, indeed, Mr. Pecora. I have had conversations with attorneys. The man you have in mind is Mr. Ernst ?
Mr. PECORA. Yes. He suggested that you come here prepared with
some kind of a program, did he not?
Mr. LEFFINGWELL. I think he did. I .think, Mr. Pecora that we
have done quite a little thinking about these questions ourselves. I
think that rather exaggerates the importance of that conversation
if we assume that
Mr. PECORA. I was just wondering, in view of Mr. Whitney's testimony, if this printed statement that was read into the record this
morning represented the product of conferences that were had beginning on last Friday.
Mr. LEFFINGWELL. Not at all.
Mr. WHITNEY. It had nothing to do with that.
Mr. LEFFINGWELL. Not that conversation, at all.
Mr. PECORA. I do not know just why you brought
in the date of
last Friday in connection with this statement.
Mr. WHITNEY. I do not know why you think it has any connection
with Ernst.
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Mr. PECORA. I was simply wondering if this was the product or
the result of the suggestions made by Mr. Ernst to Mr. Leffingwell
that members of your firm should be prepared to present some sort
xof program to this committee for its consideration in the way of recommendation of legislation.
Mr. WHITNEY. The answer to that is, no. The answer is completely no.
Mr. LEFFINGWELL. May I confirm that, Mr. Pecora?
Mr. PECORA. All right.
n
The CHAIRMAN. In order to clear the record—I think we are
spending too much time on this—as a matter of fact, the conference
report on the securities bill was agreed to in the House on Monday.
Mr. PECORA. Of this week.
The CHAIRMAN. Of this week; and on Tuesday of this week it
was agreed to in the Senate. So probably on Wednesday it went to
the President. That is the situation with reference to that legislation.
Mr. PECORA. In the course of your testimony yesterday you referred to the loan made by J. P. Morgan & Co. to Mr. Norman H.
Davis as a very small loan to enable him to buy some stock to qualify
him as a director of a bank. Is that so ? Do you recall giving any
such testimony?
Mr. WHITNEY. Certainly; but* not quite like that.
Mr. PECORA. Did you not refer to the loan as a very small loan?
Mr. WHITNEY. I did not say " was"; I said " is." And you
asked me about the dates, you remember, and I said you could identify the date by the time he became a director of this bank.
Mr. PECORA. AS a matter of fact, what was the amount of that
loan ?
Mr. WHITNEY. $50,000 it was; it is now $10,000.
Mr. PECORA., Did $50,000 represent the amount of the loan
initially?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Was it increased in amount subsequently?
Mr. WHITNEY. My recollection is, without having the records
before me, that it was increased in a very short time to $75,000. I
think that was stated by Mr. Davis this morning.
Mr. PECORA. NO; I just heard somebody state it now; I just overheard the statement made by somebody sitting back of me.
Mr. WHITNEY. My hesitancy was as to whether it started at
$75,000 or at $50,000.
Mr. PECORA. At the session of this committee which was held the
day before yesterday, Mr. Morgan, among other things, testified to
the directorships that were held in various corporations by different
members of your firm, and he identified, as I recall it, this document
as having been prepared by your firm and furnished to me in answer
to my request for information showing the names of corporations
in which any partner or representative of said firm is a director or
officer. Will you please look at that document, Mr. Whitney, and
tell me if the page thereof entitled and captioned " George Whitney "
correctly and fully sets forth all the directorships held by you in
the 5-year period 1927 to 1931, both inclusive? You may look at
your own copy, if you wish.
STOCK EXCHANGE PRACTICES
205
Mr. WHITNEY. I think I remember them. With, of course, the
qualification that we put in the preamble to all of this—except for
various eleemosynary, educational, and other nonbusiness corporations—it does.
Mr. PECORA. Thank you. As I have totaled them, these corporations are 23 in number. That includes, of course, subsidiaries?
Mr. WHITNEY. Yes. For instance, the second one on the list
Mr. PECORA. Has five subsidiaries ?
Mr. WHITNEY. Yes; and the next to it has one. The Royal Exchange has three others. I have not counted them. Twenty-three
is your figure ?
Mr. PECORA. Yes.
Mr. WHITNEY. Right.
Mr. PECORA. These 23 corporations
include railroad companies, insurance companies, financial corporations, public utilities companies,,
oil companies, metal-producing companies, and industrial and manufacturing companies, for instance, like the Johns-Manville Corporation, do they not?
Mr. WHITNEY. Yes, sir. I think it is proper to point out what
you call finance companies. You have already been advised in
response to the questionnaire the Foreign Finance Corporation,.
Willow Corporation, merely shows with whom they are doing their
business.
Mr. PECORA. HOW about the American Securities Corporation?
Is that a shell?
Mr. WHITNEY. N O ; not a bit. That was a company that was
formed last June in an effort to assist in the bond market. That
was a corporation formed of 35 banks, of which I am a director,,
which raised $116,000,000, subscribed $116,000,000, to buy bonds that
we believed to be sound at a time when there was very little demand
for those bonds.
Mr. PECORA. And with the exception of those two corporations,,
namely, the Foreign Finance Corporation and the Willow Corporation, all these corporations are active concerns, aren't they?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Very actively
Mr. WHITNEY. Of course,
engaged in their various pursuits?
the same qualification applies to certain subsidiaries of the Kennecott Copper Corporation, but generally
speaking that statement is correct.
Mr. PECORA. Are you a regular attendant at various meetings of
the boards of directors of these companies ?
Mr. WHITNEY. I think I might; yes. I have not been very regular recently, but I generally am.
Mr. PECORA. And do you impart on occasion, whenever you deem
it necessary, to your copartners information acquired by you concerning these corporations ?
Mr. WHITNEY. The answer certainly is yes, with the qualification
that obviously if there is anything confidential in the corporation, I
do not.
The CHAIRMAN. HOW often do these boards meet ?
Mr. WHITNEY. Well, they vary, Senator, very much. Probably
the average would be about once a month, the boards. Some of them
I notice meet only 3 or 4 times a year.
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Senator COUZENS. The offices are located in New York ?
Mr. WHITNEY. Well, United Corporation's office is not. Pullman
Co. is not. Pullman, Inc., is not either. As a matter of fact, that
company generally meets in New York. I think those are the only
ones that do not except the Braden, a Kennecott subsidiary. Of
course, General Motors, as you know, Senator, its head office is at
Detroit.
Senator COUZENS. DO you go out there to the meetings?
Mr. WHITNEY. NO. The meetings are held in New York. Their
executives are in Detroit one week and the other in New York, and
the}^ meet in New York.
Mr. PECORA. By the way, Mr. Whitney, in the course of your testimony yesterday, or rather in your examination, I asked you if any
of the members of your firm were indebted to the firm at the present
time, and after some hesitation you said, " Yes; that you were either
unable or unwilling, until you had further checked up on the fact,
to state how many of your partners were so indebted to the firm."
Mr. WHITNEY. That was right.
Mr. PECORA. Have you checked up on that since yesterday?
Mr. WHITNEY. NO. I didn't know you wanted me to. If you
remember, that discussion followed through in which you asked
questions to show that we carried such indebtedness as an asset of the
firm; and I did not understand that that was something I was
going to check up at all, but I thought you rather dropped the
question when I stated that that was deducted from the net worth
of the firm and that the question of the arrangement between the
partners really was an entirely immaterial one. I have not checked
up. I have had a great many other things to check up and have not
checked that up.
Mr. PECORA. HOW long would it take to check up by conference
with such of your officials as are seated behind you ?
Mr. WHITNEY. Well, I don't know; but I think anything of that
kind you would rather check accurately than by recollection.
Mr. PECORA. Can you check up as to the number of partners who
were so indebted without reference to any records?
Mr. WHITNEY. Mr. Pecora, if you ask can I, of course the answer
is yes.
Mr. PECORA. Will you please do so?
Mr. WHITNEY. IS that
Mr. DAVIS. I should like, Mr. Chairman, the committee to rule
whether it thinks that is pertinent or material information.
Senator COUZENS. I submit, Mr. Chairman, that there is not a
quorum present. We will have to take it under consideration at some
other time.
Mr. PECORA. Then I will pass the question at this time, Senator,
but I suggest the witness check up anyway, so that he will have the
information available when the committee decides whether or not it
shall require him to present it here.
Mr. WHITNEY. IS that the pleasure of the committee, that I leave
it in abeyance or that I get it ready? As I understand, it is my
instruction that I get the data ready.
Mr. PECORA. That is my suggestion.
The CHAIRMAN. I am inclined to think you had better get it ready.
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There is not much trouble to do that.
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STOCK EXCHANGE PEACTICES
207
Mr. WHITNEY. We will have to check up in the office, Senator.
The CHAIRMAN. Yes; I understand.
Mr. PECORA. AS a director of these various corporations—I withdraw that question. Let me put this question first: Are the securities of these corporations in which you are a director or trustee listed
on any public stock exchange?
Mr. WHITNEY. Well, will you run down the list with me and I can
answer that?
Mr. PECORA. All right.
Mr. WHITNEY. General Motors is. Kennecott Copper is. I think
Utah Copper still is. Kennecott Copper owns something like 98^2
percent of it, and I don't know; it was, it used to be, and I think it
still is. I don't know. Consolidated Gas Co. of New York, United
Corporation, Texas Gulf Sulphur, Pullman, Inc., Johns-Manville,
Continental Oil, and that is all that are listed.
Senator BARKLEY. I S Continental Oil a successor of the Marland
Co.?
Mr. WHITNEY. Yes, sir. It is a merger of the Marland Oil and
the Continental Oil of Maine.
Mr. PECORA. NOW, you have told us that you attend the meetings
of the boards of these companies with regularity, or with a fair
degree of regularity ?
Mr. WHITNEY. Yes; that is more accurate.
Mr. PECORA. That is a better way to put it. Don't you acquire,
thereby, knowledge and information concerning the financial condition of these various corporations which is not acquired by stockholders of the corporation until long after you have acquired it as
a director, which is not acquired by the investing public until long
after you have acquired it?
Mr. WHITNEY. Well, Mr. Pecora, I never thought of the question
from a point of view of chronology before. It obviously is my job
to know as much about financial matters of these companies as I can.
I think it is fair to say that in the case of all these publicly owned
companies, for instance, those that I have mentioned, that they all
pursue a policy of the greatest and the promptest disclosure of any
facts that have to do with the companies.
Mr. PECORA. What do you mean by that? That is, dp they issue
financial statements to their stockholders or to the public at very
frequent or regular intervals?
Mr. WHITNEY. I think I am prepared to say that each one of these
companies now makes a quarterly statement to the New York Stock
Exchange, which is what is known as the new listed companies.
A lot of these are old listed and didn't used to do it except annually.
I know in the last year and a half both the Kennecott Copper and
Consolidated Gas changed their practice in order to make full
disclosure.
Mr. PECORA. Did any of these corporations prior to the }^ear 1930
make quarterly reports of financial condition to the New York Stock
Exchange ?
Mr. WHITNEY. I would not dare answer that question without
checking it.
Mr. PECORA. Such of them as do now make quarterly reports of
financiar condition to the exchange do so in pursuance of a rule or
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STOCK EXCHANGE PRACTICES
regulation that was adopted by the exchange within recent monthsf
do they not?
Mr. WHITNEY. And welcomed by the corporation.
Mr. PECORA. They did not volunteer to do it before the adoption
of this rule, which required them to do it, did they ?
Mr. WHITNEY. I just told you I could not answer that question
without checking. If you are implying that they had any objection
to disclosure of the fact, my first statement, Mr. Pecora, still stands,
that every one of these companies has made a practice of the fullest
disclosure. Whether or not they made quarterly statements to the
New York Stock Exchange before such statements were required,
I do not know, but I don't quite see that that has anything to do
with their general policy of full disclosure. One of my partners
refreshes my memory to state that this policy of full disclosure was
established 30 years ago in the case of the United States Steel Corporation, when Mr. J. P. Morgan, Sr., was instrumental in its
organization, and our firm has consistently since then stood for full
disclosure.
Mr. PECORA. I am very thankful for the information, Mr. Whitney, but it so happens that the United States Steel Corporation is
not a company of which you are a director, and I am asking you
about the companies of which you are a director.
Mr. WHITNEY. The same is true, sir.
Mr. PECORA. During the year 1929 did you trade very actively in
the securities of the corporations of which you were a director, at
least of those of them that were listed on the stock exchange ?
Mr. WHITNEY. Will you define the word " trade ", because it is
very much used in many senses. If you mean by that purchases
Mr. PECORA (interposing). What do you regard as the common
acceptation of the term?
Mr. WHITNEY. My understanding of the term would be buying
and selling and all that, in and out of the market. That would be
my definition as it is used generally colloquially. Is that what you
mean?
Mr. PECORA. Yes, sir.
Mr. WHITNEY. I did not.
Mr. PECORA. Did you make
any extensive sales of securities during
the year 1929 to those corporations of which you were a director?
Mr. WHITNEY. Well, when I was required to refresh my memory
as to a question that you asked me late yesterday afternoon I find
I did dispose of quite a good many shares of stock during 1929 and
reported in my income tax.
Mr. PECORA. May I say to you that is the source of my information ?
Mr. WHITNEY. I assumed it was.
Mr. PECORA. Have you a copy of your income-tax return for the
year 1929 with you?
Mr. WHITNEY. NO, sir; but you have as to the sales of securities.
Mr. PECORA. NOW, one of the corporations of which you were a
director in 1929 was the Alleghany Corporation, was it not ?
Mr. WHITNEY. NO, sir.
Mr. PECORA. Were you
actively interested in the negotiations and
Alleghany Corpora-
transactions that led to the incorporation of the
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tion and the financing thereof by your firm?
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STOCK EXCHANGE PRACTICES
209
Mr. WHITNEY. Well, I suppose a fair answer is that I was fairly
active in a good deal of those financing operations; yes.
Mr. PECORA. I am confining my question just to the Alleghany
Corporation. I assume that you are active in all the matters affecting your firm, but I am only confining myself for the time being to
the Alleghany Corporation.
Mr. WHITNEY. Yes, sir.
Mr. PECORA. IS it the fact
that during the calendar year 1929 you
disposed of 8,145 shares of the common stock of the Alleghany
^Corporation
Mr. WHITNEY (interposing). It is
Mr. PECORA (continuing). At a resulting profit to you of $229,411.32?
Mr. DAVIS. NOW I submit, Mr. Chairman, that you got all the data
in detail this morning.
Mr. PECORA. It was the only question I was going to ask on that,
and then I was going to pass on to other securities.
Mr. DAVIS. Why ask it twice if it was all asked and answered this
morning ?
Mr. PECORA. Because I want to make this line of examination complete, Mr. Davis.
Mr. DAVIS. DO you make it more complete by repetition?
The CHAIRMAN. He can answer. We will save time by answering
"the questions.
Mr. WHITNEY. I already testified this morning that I had and did.
Mr. PECORA. Were you during the year 1929 a director of the
.Johns-Manville Co.?
Mr. WHITNEY. I was.
Mr. PECORA. Did you have
many transactions in the common stock
of that company during the calendar year 1929?
Mr. WHITNEY. I don't remember how many, but it is on that list
what I sold.
Mr. PECORA. What list are you referring to ?
Mr. WHITNEY. The one you showed me yesterday, which is a
iphotostat.
Mr. PECORA. That is the list showing the sale of securities during
the year 1929 attached to your income-tax return for that year?
Mr. WHITNEY. That is how you identified it yesterday; yes, sir;
showing the profit that I made on sales of securities in 1929. My
recollection is I sold 5,000 shares of Johns-Manville and I had 5
left.
Senator BARKLEY. Five what?
Mr. WHITNEY. Thousand.
Mr. PECORA. Those 5,000 shares of Johns-Manville Co. common
stock were acquired by you, according to the schedule of sales of
securities attached to your income-tax return for 1929, at a cost of
$237,500 and were sold by you for an aggregate of $1,136,525, resulting in a profit to you of $899,025. Have you any reason for challenging the authenticity or correctness of those figures ?
Mr. WHITNEY. NO, sir; now that I have checked them. That is
^quite correct. And I call attention to the fact that I had 5,000 shares
left, which I still have.
Senator BYRNES. What is it selling at today?
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Mr. WHITNEY. In the twenties—thirties.
Senator BYRNES. And what did you pay for it ?
Mr. WHITNEY. Forty-seven and a half. It went up to two hundred and something.
Senator BYRNES. It went up to two hundred and something and
is now down to 20 ?
Mr. WHITNEY. Yes. It went down to 14.
Senator COUZENS. And you sold those 5,000 shares up at the price
then?
Mr. WHITNEY. I think somewhere around 230, Senator. That is
a guess.
Mr. PECORA. Were these 5,000 shares sold at various times throughout the calendar year 1929 ?
Mr. WHITNEY. I haven't my records here, Mr. Pecora, but I rather
assume they were sold in July 1929.
Mr. PECORA. All sold during that month ?
Mr. WHITNEY. I don't remember. I haven't checked it. I haven't
my books down here in Washington.
The CHAIRMAN. Did it pay dividends ?
Mr. WHITNEY. It did then. It doesn't now.
The CHAIRMAN. They have been lower than they are now?
Mr. WHITNEY. Oh, yes, sir.
The CHAIRMAN. AS a matter
of fact, haven't most stocks gone up*
recently ?
Mr. WHITNEY. They have gone up pretty steadily since the 31st
of March. The low was during the winter.
Mr. PECORA. DO you recall a particular reason why you sold those
5,000 shares at that particular time?
Mr. WHITNEY. Because they were selling at two hundred thirty
something.
Mr. PECORA. IS that the high for the year ?
Mr. WHITNEY. I don't know, sir.
Mr. PECORA. What I am trying to get at, Mr. Whitney, is if you
made a sale at that time because of any knowledge that you required concerning the financial condition of the company as a director of it which was not shared by other shareholders or by the
public generally.
Mr. WHITNEY. I did not, Mr. Pecora. The company was doing
exceedingly well.
Senator BARKLEY. Did you sell on the way up or on the way
down?
Mr. WHITNEY. The sales were still on the way up. And it continued, if it is of any interest to the committee. Johns-Manville, like
so many other companies that are primarily connected with the
building trade, continued to do business long after other industries
had started to go down. There is always that lag.
Mr. PECORA. Who has charge of the trading activities of J. P..
Morgan & Co. ?
Mr. WHITNEY. We do not do any, Mr. Pecora?
Mr. PECORA. Does not the firm buy and sell shares, either for its
own account or for customers?
Mr. WHITNEY. Those are two quite different questions, aren't they ?
Mr. PECORA. Well, does it? Let us separate them. Does it buy
itself for its own account?
STOCK EXCHANGE PRACTICES
211
Mr. WHITNEY. With trade in the sense to buy and sell that we defined a few minutes ago; no.
Mr. PECORA. I didn't ask trade this time; I asked bought and sold
for its own account.
Mr. WHITNEY. It buys at times and it sells at times, but it does
not buy and sell in the sense of trading. You asked who manages
the trading activities of the firm, didn't you ?
Senator BYRNES. When you sell and when you buy, who does it?
That will answer it.
Mr. WHITNEY. By mutual consent or advice. It is again a matter
of policy, Senator. We don't ever trade in the sense the word is
used. When we decide it is time to sell we sell through brokers, of
course, through a stock department in our office, and through whatever brokers—we have already testified yesterday that we use some
thirty-odd brokers for various reasons.
Mr. PECORA. Did you indicate which of the partners has charge
of the buying and selling of securities for the account of thefirm?
Mr. WHITNEY. I was not able to, Mr. Pecora, because there is no
such partner charged with that responsibility.
Mr. PECORA. Who makes the decision
Mr. WHITNEY (interposing). The firm.
Mr. PECORA (continuing). With regard to what securities it will
buy and sell for its own account?
Mr. WHITNEY. The
partners.
Mr. PECORA. All1 of them?
Mr. WHITNEY. Yes.
Mr. PECORA. Through what brokers are these transactions effected ?
Mr. WHITNEY. Well, it depends what particular security you are
talking about. It would depend upon the security, depend upon the—
I don't know; there are some 30 brokers. I think Mr. Morgan testified yesterday—bonds is one set of brokers.
Mr. PECORA. Which broker in your opinion or according to your
best recollection handles more of that business than any other
broker ?
Mr. WHITNEY. There is no such one in my recollection.
Mr. PECORA. DO you mean to say that that business is distributed
equally among 30 or more brokers?
Mr. WHITNEY. NO. N O ; but there is no favored broker.
Mr. PECORA. Well, whether it is intended that he should be a favorite broker, is there any one brokerage firm or office that handles
more than any other brokerage firm?
Mr. WHITNEY. NO, sir. You might—if I understand just what
you want me—the answer you want, Mr. Pecora, it might be in
1 year one given stock we might be selling, and there might be some
broker that would handle that transaction; so in any given month
or year one broker might handle very much the largest proportion
of the business, but if it is a different situation, different stock, it
might well be another one.
The CHAIRMAN. Does the firm buy stocks or bonds as an investment, purely investment, not buy for the purpose of selling again ?
Mr. WHITNEY. Well, when the firm buys securities for its own account, we buy them for the purpose of investing our funds and with
the idea of disposing of them when it seems wise to do it. We do
not
practice trading in the sense as it is colloquially known.
212
STOCK EXCHANGE PRACTICES
Mr. PECORA. YOU mean you buy for investment as distinguished
from trading?
Mr. WHITNEY. We buy, as I said, for the employment of funds,
for the interest account.
Mr. PECORA. Mr. Whitney, reference has heretofore been made to
the so-called " questionnaire " which I submitted to your firm, on
March 23 last, which contained 23 different requests for information.
Now, in answer to the request known as " question 9 "
Mr. WHITNEY ((interposing).
Yes,, sir.
p g )
M PECORA
P
( t ci i g) .) Did
y your fi
Mr.
(continuing).
firm
Senator COUZENS
(interposing).
The committee would like to
S
C
( i i ) Th
know what question 9 is.
Mr. PECORA. I am going to read it. Did your firm compile and
render to me this document which I now show you ?
Mr. WHITNEY. Yes, sir. I haven't time to go through all of that.
Mr. PECORA. I S this complete? Does this constitute a complete
answer to that question?
Mr. WHITNEY. I guess I had better look at it again.
Mr. PECORA. Yes.
Mr. WHITNEY (after examining document). I t was complete. As
far as I can tell from a rather brief glance, it is all there.
Mr. PECORA. If it will be any comfort to you I will say that it is
in the same shape
Mr. WHITNEY (interposing). I am sure it is.
Mr. PECORA (continuing). In which I received it.
Mr. WHITNEY. I am sure it is.
Mr. PECORA. Wear and tear excepted.
Mr. WHITNEY. And a few notations. •
Mr. PECORA. Well, the lead-pencil notations, of course, are ours.
I will now read the question into the record. But first I offer that
in evidence, Mr. Chairman.
The CHAIRMAN. All right, it will be received and made a part of
the hearings.
(The paper furnished by J. P . Morgan & Co. in response to question 9 submitted by committee counsel, was received and ordered
made a part of the record, and marked " Committee Exhibit No. 15,
May 25, 1933 ", and will be found at the end of the day's proceedings.)
Mr. DAVIS. DO you want to instruct the committee reporter to
omit the lead-pencil notations ?
Mr. PECORA. Oh, yes. None of the lead-pencil notations are any
part of the exhibits, and the committee reporters are instructed not
to include them.
Mr. DAVIS. All right. I thank you.
The CHAIRMAN. While you are waiting, Mr. Pecora, and although
it is not very material, I take it, yet I notice on this return 1,700
shares of Columbia Gas & Electric Co. common stock cost $210,S37.50 and were sold for $105,325, with a loss of $100,000 in round
figures, on September 24,1929. That was before the crash, wasn't it?
Mr. WHITNEY. It sounds as if I bought it before the crash.
The CHAIRMAN. Yes; but it seems to have been sold before the
orash, on September 24.
Mr. WHITNEY. I saw that transaction last night, Senator Fletcher.
The CHAIRMAN. Well, let me see
STOCK EXCHANGE PRACTICES
2IS
Senator BARKLEY (interposing). That might have been what precipitated the crash.
Mr. WHITNEY. Well, hardly.
The CHAIRMAN. I thought you sold it on September 24, and I
wondered why you came to do that and to lose money, because the
market was going up, was going forward, until the latter part of
October.
Mr. WHITNEY. I wish I could explain it.
The CHAIRMAN. Well, you bought it in September but did not
sell it until later, I take it ?
Mr. WHITNEY. Yes.
Mr. PECORA. The exhibit
which is offered as no. 15 of this committee as of this date, consists of a statement in answer to a request
for a list of all stock and bond issues in which either of said firms—
that is, J. P. Morgan & Co. or Drexel & Co.—has participated during the 5-year period embraced in the calendar years 1927 to 1931,
both inclusive, showing the following details:
(a) Whether such participation was in the original terms group, bankers,,
wholesale distributors, or any other group.
(&) All other detailed information similar to the classifications embodied
in the report of the Morgan firm submitted to the Senate Finance Committee
investigating foreign bond issues in 1931.
I won't attempt to read all that, Mr. Chairman, because of itsvery voluminous character.
Mr. DAVIS. IS that the schedule?
Mr. PECORA. Yes.
Mr. WHITNEY. May we explain how we answered it ?
Mr. PECORA. YOU may make any explanation you want.
Mr. WHITNEY. YOU will see that that is a fairly comprehensive
inquiry, and for purposes of clarity we put our answer under eight
general headings, which were as follows:
Group 1 is a summary of all issues of stocks and bonds by the
firm of J. P. Morgan & Co.
Group 2 is a summary of all issues of stocks and bonds by the
firm of Drexel & Co.
Group 3 is a summary of all underwritings of stocks and bonds
by the firm of J. P. Morgan & Co.
Group 4 is a summary of all underwritings of stocks and bonds
by the firm of Drexel & Co.
Group 5 is a summary of transactions on the part of the firm of
J. P. Morgan & Co. in which there was no public offering.
Group 6 is a summary of transactions on the part of the firm of
Drexel & Co. in which there was no public offering.
Group 7 is a summary of all issues and underwritings of stocks and
bonds by others, in which the firm of J. P. Morgan & Co. took a
financial participation or commitment.
Group 8 is a summary of all issues and underwritings of stocks and
bonds by others, in which the firm of Drexel & Co. took a financial
participation or commitment.
Mr. PECORA. NOW, Mr. Whitney——
The CHAIRMAN (interposing). That can be entered on our record.
Mr. PECORA. The statement just made by Mr. Whitney is part of
the statement submitted and now made a part of the record as com-
214
STOCK EXCHANGE PRACTICES
mittee exhibit no. 15. May 25, 1933, and therefore will become a part
of the record.
The CHAIRMAN. All right.
Mr. WHITNEY. Very well.
Mr. PECORA. Mr. Whitney, request no. 10 in that so-called questionnaire received by your firm from me on March 23, last, called
for a list of all pools, joint accounts, and/or syndicates in which
either of said firms—that is to say, J. P. Morgan & Co. or Drexel
& Co., or representatives—participated, giving the name of security
involved, names of all participants, and all details with respect to
the amount of the participation and profits and losses therein. Now,
I show you this document, Mr. Whitney, and I ask you if you
recognize it to be the data compiled by your firm and submitted to
me in answer to that request.
Mr. WHITNEY. DO you want me to check each one of these things ?
Mr. PECORA. Satisfy yourself in any way that you may desire,
Mr. Whitney.
Mr. WHITNEY. Yes,
Mr. PECORA. DO the
sir.
contents of this document represent a complete
•and correct answer to that request ?
Mr. WHITNEY. TO the best of my knowledge and belief it is.
Mr. PECORA. I now offer it in evidence.
The CHAIRMAN. It will be received and made a part of the record.
(The paper submitted by J. P. Morgan & Co. in response to question 10 submitted by counsel to the committee, was received in evidence and made a part of the record, being marked " Committee
Exhibit No. 16, May 25, 1933," and will be found at the end of the
day's proceedings.)
Senator BYRNES. Mr. Whitney, while the last exhibit is being
looked over, let me ask you a question about Committee Exhibit No.
15 which contains the eight answers to which you referred. Among
the other statements contained in it is a reference to some Alleghany
Corporation stock, which we have been discussing at some length,
and I notice this statement:
February 15, 1929, J. P. Morgan & Co. sold to the Guaranty Co. 500,000
shares at $24 a share. J. P. Morgan & Co. paid to Guaranty Co. of New York
a commission of $4 per share on this stock.
J. P. Morgan & Co. sold to others 573,000 shares at $20 a share.
According to a letter which has been introduced in evidence, addressed to Mr. Woodin, and the date of that letter as I recall was
about February 1, and it stated that there was a market on the stock
and that the stock was selling on the market at something like $35
a share. I am curious to know why on February 15 you were selling
to the Guaranty Co. 500,000 shares at $24 a share.
Mr. WHITNEY. Well, Senator,
Senator BYRNES (interposing). Just look at this.
Mr. WHITNEY. I remember it. We contracted with or arranged
with the Guaranty Co., I think either on the '28th or the 29th of
January, to make the sale, and February 15 was the date when the
sale was contemplated.
Senator BYRNES. Fifteenth of February was the date of delivery.
Mr. WHITNEY. The date of delivery and of payment. If you will
remember, the letter which Mr. Pecora read on yesterday. The conhttp://fraser.stlouisfed.org/
tracts with the Van Sweringens were for bonds and preferred stock.
Federal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
215
Senator BYRNES. I can understand it if there was an agreement
arrived at before that market price.
Mr. WHITNEY. Yes.
Senator BYRNES. But
that statement as it stands in that list does
not give such an explanation, and- as it stands it shows on February
15 you were selling 500,000 shares at $24 a share.
Mr. WHITNEY. Yes, sir. And this statement is right. We sold
to the Guaranty Co. 500,000 shares on February 15. That is the date
this was consummated. The actual contract was signed, however, on
January 31.
Senator BYRNES. All right.
Mr. PECORA. NOW, Mr. Whitney, in connection with the questions
that have just been asked of you by Senator Byrnes, let me call your
attention to what purports to be a photostatic copy of a letter addressed by your firm, or by someone in behalf of it, under date of
February 1, 1921, to Mr. A. G. Milbank, at Pau, France, which is a
photostat that was furnished to me by your firm, was it not ?
Mr. WHITNEY. Yes, sir.
Senator COSTIGAN. While
counsel is conferring for a minute, let
me ask: Who is Mr. Milbank?
Mr. WHITNEY. Albert G. Milbank is the senior partner of the
firm of Milbank, Tweed, Hope & Webb, lawyers in New York City.
Senator COSTIGAN. All right.
Mr. PECORA. Mr. Whitney, do you recognize this photostatic copy
as the photostatic copy of such a letter furnished to me by your
firm, do you?
Mr. WHITNEY. Of a carbon copy of such a letter.
Mr. PECORA. A photostatic copy of a carbon copy of the letter.
Mr. WHITNEY. Yes, sir.
Mr. PECORA. NOW let me
letter:
read to you the following from that
Since that time we have put you down for 500 shares of common stock of
the company formed by the Van Sweringens to take over their railroad holdings.
Does "that company " refer to the Alleghany Corporation?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Let me read
further from that letter, from that
point on:
We are placing a certain amount of this with close friends at cost to us
of $20 per share and we shall handle this $10,000 debit in the same way as
the United Corporation stock unless I hear from you to the contrary by cable.
And then it goes on:
It probably is unnecessary for me to add that I hope you will not make any
mention of this operation. The Guaranty Co. are making the public offering
of the Van Sweringen Co. stock at $24 per share, and there are very few people
who are getting it at any lower price.
That still relates to the Alleghany Corporation common stock,
does it not ?
Mr. WHITNEY. I assume it does; yes, sir.
Mr. PECORA. NOW, Mr. Whitney, " Very few people who were getting it"—that is, Alleghany Corporation common stock, at $20 per
share, were the persons whose names were set forth on the list that
was offered in evidence before this committee, I take it?
Mr. WHITNEY. Undoubtedly.
216
STOCK EXCHANGE PRACTICES
Mr. PECORA. And those were the " very few people" who got
574,000 shares; is that right ?
Mr. WHITNEY. Well, there were not very many people. He didi
not say very few shares.
Mr. PECORA. I say, those were the " very few people " who got the
total of 574,000 shares from your firm ?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. I now offer that letter
The CHAIRMAN. It will be received
in evidence.
and made a part of the record.
(The photostatic copy of carbon copy of letter furnished to committee counsel by J. P. Morgan & Co. was received in evidence and
marked " Committee Exhibit No. 17, May 25, 1933", and is a&
follows:)
J. P. MORGAN & Co.,
February 1, 1929.
DEAR BERT : Following receipt of your cable, I talked with Walter Hope and
told Mm it was quite agreeable for us to carry the United Corporation stock,
until your return.
Since that time we have put you down for 500 shares of common stock of
the company formed by the Van Sweringen's to take over their railroad holdings. We are placing a certain amount of this with close friends at cost to*
us of $20 per share and we shall handle this $10,000 debit in the same way as
the United Corporation stock unless I hear from you to the contrary by cable..
It probably is unnecessary for me to add that I hope you will not make any
mention of this operation. The Guaranty Co. are making the public offering
of the Van Sweringen Co. stock at $24 per share, and there are very fewpeople who are getting it at any lower price.
For your information I am enclosing copy of the bond circular which we
issued in connection with the bond financing which will give you a general idea,
as to what it is* all about.
With kindest personal regards.
Yours sincerely,
A. G. MILBANK,
Esq.,
Gassion Hotel, Pau, France.
Mr. PECORA. NOW, Mr. Whitney, why was it desired that Mr. Milbank make no mention of what is referred to in this letter which
has just been offered in evidence as " this operation " and which
relates to the Alleghany Corporation?
Mr. WHITNEY. I do not know, sir.
Senator COUZENS. Who signed the letter?
Mr. PECORA. This is a photostat of a carbon copy of a letter. Theoriginal is probably in the possession of Mr. Milbank, as it is addressed to him.
Senator BYRNES. What are the initials shown on that letter?
Mr. PECORA. There are no initials shown on here. Perhaps Mr.
Whitney could tell us which member of his firm signed the original of that letter.
Mr. WHITNEY. Well, I rather think, as relating to other correspondence at that same time with Mr. Milbank, that Mr. Anderson
signed it.
Mr. PECORA. He is one of your partners?
Mr. WHITNEY. Yes, sir.
Senator BARKLEY. Mr. Whitney,
the phraseology used in that letter coming from an ordinary stock salesman or market booster would
convey the impression that he was being let in on something a little*
unusual, would it not?
Mr. WHITNEY. Yes. sir. But as a matter of fact
STOCK EXCHANGE PKACTICES
217
Senator BARKLEY (interposing). Was that the intention there?
Mr. WHITNEY. Not a bit. Mr. Milbank is a very close friend of
Mr. Anderson's and many others of us. This is probably somewhat
similar to the letter which Mr. Pecora has addressed to Mr. Milbank
in connection with the United Corporation, and which came, roughly
speaking, a month before this, and this letter ties in with the rest
of the correspondence. Mr. Milbank, as you will notice in this letter,
was abroad. In the case of the United Corporation, of which units
were sold by us, it is my recollection that Mr. Anderson talked to
Mr. Hope, one of Mr. Milbank's partners, and probably he communicated with Mr. Milbank by cable, and he may have made the
request that if anything else like that came along to let him know.
Mr. PECORA. And was he subsequently communicated with in reply
to that question of his?
Mr. WHITNEY. That is the next communication.
Mr. PECORA. Were there others after this one?
Mr. WHITNEY. I do not know. You have the list, and I do not
remember. I do not try to carry them in my mind.
Senator BARKLEY. YOU thought this met the specifications, then,
of his telegram?
Mr. WHITNEY. Perhaps Mr. Anderson did.
Senator BARKLEY. Well, that is what I meant.
Mr. PECORA. Mr. Whitney, request no. 11, which I addressed to
your firm in behalf of the committee on March 23, called for the
names of all governments, States, municipalities, and corporations
for which J. P. Morgan & Co. or Drexel & Co. has acted as fiscal
agent during the 5-year period for the calendar years 1927 to 1931,
both inclusive, together with a statement of the services rendered for
each of such governments, States, municipalities, and corporations.
Do you recognize this document which I now hand you as the reply
that was given to me in behalf of your firm in answer to that request ?
Mr. WHITNEY. Yes, sir.
Mr. PECORA. And to the
best of your knowledge and belief is that
a complete and correct answer to that question ?
Mr. WHITNEY. Yes, sir; and the only worry we had about that
was that we gave you more than you asked for.
Mr. PECORA. And if I have not expressed my gratitude heretofore
for that excess information, I do it now.
x Mr. WHITNEY. All right.
Mr. PECORA. I now offer that in evidence.
The CHAIRMAN. It may be received and incorporated in the record
of our hearings.
(The document furnished by J. P. Morgan & Co. in response to
request no. 11, made by the counsel to the committee, was received in
evidence and marked "committee exhibit no. 18, May 25, 1933",
and will be found at the end of the day's proceedings.)
Mr. PECORA. Mr. Whitney, request no. 12 on that so-called " questionnaire " called for a list of all bond or debenture issues, foreign
or domestic, of which either of your firms was the syndicate manager
and which issues have been or now are in default; and any issue
floated prior to 1927 which were in default at any time during the
period 1927 to 1931, both inclusive. I show yon this document and
ask you if it constitutes an answer to that request prepared by your
firm
and submitted to me?
218
STOCK EXCHANGE PRACTICES
Mr. WHITNEY. Yes, sir.
Mr. PECORA. And to your
knowledge and belief is it a complete
and accurate statement in answer to that request ?
Mr. WHITNEY. Yes,
Mr. PECORA. I offer
The CHAIRMAN. It
sir.
it in evidence.
will be received in evidence and spread on
the record of our proceedings.
(The paper submitted by J. P. Morgan & Co. in response to question 12 submitted by
counsel to the committee, was received in evidence and marked Ci Committee Exhibit No. 19, May 25, 1933 ", and
will be found at the end of the day's proceedings.)
Mr. PECORA. I do not think there are any notations of any kind
in that list, that last exhibit, but if there are let it be understood
that they do not form a part of the record.
Mr. DAVIS. I thank you, Mr. Pecora.
Mr. PECORA. Mr. Whitne}^ request No. 17 of that so-called " questionnaire ", called for the names of all issues in which either J. P.
Morgan & Co. or Drexel & Co. had any participation, which are
now or have been at any time during the period 1927 to 1931, both
inclusive, in default; such information to include date of default,,
present market value of securities, and names and addresses of the
secretaries of committees formed to protect the interests of investors
or for reorganization purposes. In connection therewith I now
show you this document, and ask you if you recognize it to be the
answer to that request prepared by your firm or in its behalf.
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Does that
document constitute to your best knowledge and belief a complete and accurate answer to that request?
Mr. WHITNEY. Yes,
Mr. PECORA. I offer
The CHAIRMAN. It
sir.
it in evidence.
will be received in evidence and made a part
of the record of our proceedings.
(The document furnished by J. P. Morgan & Co. in response to
question 17 submitted by counsel to the committee was received in
evidence and ordered made a part of the proceedings, being marked
•' Committee exhibit no. 20, May 25, 1933 ", and will be found at the
end of the day's proceedings.)
The CHAIRMAN. Mr. Whitney, on this list of bonds in default as
to interest or principal, I mean committee exhibit no. 19, I find
Imperial Eussian Government credit of 1916 issued June 1916, without any notation as to whether the default was in interest or in
principal.
Mr. WHITNEY. TO answer the second half of your question first,
Senator Fletcher, it is both interest and principal. My recollection
is that they defaulted back in 1917. There was an issue during the
war and before the revolution in Kussia and they defaulted immediately after the last revolution.
The CHAIRMAN. What was the amount ?
Mr. WHITNEY. Isn't it on the paper ?
The CHAIRMAN. I think not.
Mr, WHITNEY. I am trying to identify it. There were two issues.
The amount is $50,000,000.
STOCK EXCHANGE PEACTICES
219
The CHAIRMAN. And the Eepublic of Mexico 4's, 5's, and 6's of
1899, issued prior to July of 1913. Was that default interest or
principal or both?
Mr. WHITNEY. We had a good deal of discussion as to whether
we should include that issue, because we offered those bonds, my
recollection is, long before the war, as agents in connection with certain arrangements made abroad. But we put them in as we stated
further on in answer to question 17. There was a protective committee on the Mexican obligations, and we did have a connection
with this issue, so we put it in. There were several issues. They defaulted somewhere in 1913, and they were still in default during
this period. In the second part of Mr. Pecora's question it included
issues prior to that. They were still in default.
The CHAIRMAN. Both as to interest and principal?
Mr. WHITNEY. Oh, yes. The occasion of the default was the revolution in Mexico. There had been certain payments made on account
of certain bonds as a result of the protective committee's work. But
they have been in default ever since, way back.
Mr. PECORA. NOW, Mr. Whitney, request no. 13 in that questionnaire called for the names of all issues in which a member or representative of either of your two firms acted as a member of a protective or reorganization committee.
Mr. WHITNEY. Yes, sir.
Mr. PECORA. Mr. Whitney,
I show you this document, and I ask
you if you recognize it as the document that was furnished to me by
your firm in answer to that request.
Mr. WHITNEY. Yes, sir.
Mr. PECORA. And does
that document constitute, so far as you
know, a complete and correct answer to that request ?
Mr. WHITNEY. Yes,
Mr. PECORA. I offer
The CHAIRMAN. It
sir.
it in evidence.
will be received in evidence and made a part
of the record of our proceedings.
(The document furnished by J. P. Morgan & Co. in response to
question 13 by committee counsel, is received in evidence and made a
part of the record, being marked " Committee Exhibit No. 21, May
25, 1933 ", and will be found at the end of the day's proceedings.)
(Committee exhibit no. 14 and statement submitted by Mr. Whitney, are presented in the record in full at this point, as follows:)
UNITED STATES SENATE,
COMMITTEE ON BANKING AND CURRENCY,
New York, N.YJMay
Mr.
L.
P.
10, 1933.
REED,
Neio York, N.Y.
DEAR SIR: May I have your client, Messrs. J. P. Morgan & Co., furnish my
staff with details as to the disposition of the 430,000 shares, common stock of
the Fleisehmann Co., and the disposition of the 18,365 shares of preferred stock
of the Fleisehmann Co., bought from Max C. Fleisehmann and the Fleischmann,
Co., respectively, under terms of the agreements dated June 11, 1921, and July
2, 1929, such information to include the following:
1. The selected list showing to whom Standard Brands, Inc., stock was
allotted, with number of shares and price.
2. How balance was disposed of after the above allotments, and througb
whom, and at what prices.
220
STOCK EXCHANGE PRACTICES
3. The dates and number of shares of Fleishchmann & Co. common and
preferred deposited by J. P. Morgan & Co., under the plan in exchange for
Standard Brands, Inc., stock, and the number of shares received in the exchange.
Yours very truly,
FERDINAND PECOEA,
By FEANK J. MEEHAN.
1. List attached.
2. List attached.
3. J. P. Morgan & Co. purchased from the Fleischmann Co. 18,365 shares
of the preferred stock of that company pursuant to an agreement entered into
July 22, 1929, a copy of which has been furnished you. J. P. Morgan & Co.
deposited these shares on July 26, 1929, and received on September 7, 1929,
73,460 shares of Standard Brands Inc. common stock in exchange therefor. On
September 10, 1929, the 73,460 shares were sold in the market at prices ranging
from 36y2 to 39.
Under the terms of said agreement of July 22, 1929, J. P. Morgan & Co. agreed
to pay over to Standard Brands Inc. the net profits resulting from the transaction, and on September 10, 1929, this amount,, namely, $919,360.64, was paid
to Standard Brands Inc.
Standard Brands, Inc.
Alamance Club
W. H. Aldridge
Alta Corporation
A. M. Anderson
Argonaut Securities Corporation
Asiel & Co
Ohellis A. Austin
Bankers Co. of New York
Charles D. Barney & Co
D. S. Barrett, Jr
F. D. Bartow
Bernard M. Baruch
Hernand Behn
Sosthenes Behn
Julius Bergen
J. J. Bernet
Stephen Birch
€ . N. Bliss
Claude K. Boettcher
Bonbright & Co., Inc
Charles Bradley
Nicholas F. Brady
Brown Bros. & Co
Matthew Brush
.
E. G. Buchland
W. E. Burnett
Callaway, Fish & Co
F. L. Carlisle—a
Chicago Corporation
Hendon Chubb
Climax Corporation
Clark, Dodge & Co
Leon R. Clausen
Thomas Cochran
Calvin Ccolidge
C. C. Cooper
C. A. Corliss
Corn Exchange Bank Trust
Co
Walter Craig
Clinton H. Crane
P. E. Crowley
Shares
1,000
1, 000
2, 000
10, 000
1,000
2,000
1, 000
10, 000
2, 000
500
11,000
4, 000
1,000
1, 000
300
500
4, 000
2, 000
1, 000
20,000
500
5, 000
5, 000
2, 000
500
1,000
1,000
2,000
3, 000
2,000
2, 500
10, 000
500
25, 000
3, 000
1,000
1,000
1, 000
100
1,000
500
Shares
John W. Davis
Arthur V. Davis
Norman H. Davis
H. P. Davison
Edward Dibrell
Dominick & Dominick
Wallace B. Donham
Drexel & Co
F. H. Ecker
Cornelius Cousins Egan
Martin Egan
Evans, Stillman & Co
Geo. B. Everitt
William Ewing
Marshall Field
First Chicago Corporation
First Security Co
H. A. Fortington
P. A. S. Franklin
W. E. Frew
Giovanni Fummi
W. Tracy Gaffey
A. L. Gates
Walter S. Gifford
Mrs. S. Parker Gilbert
Philip G. Gossler
Guaranty Co. of New York
Guggenheim Bros
Perry E. Hall
Reginald Halladay
W. J. Harahan
Albert H. Harris
The N. W. Harris Co
The Harris Forbes Corporation
Horace Havemeyer
Haystone Securities Corporation
R. C. Hill
Charles D. Hilles
Hirt, Farwell & Co
J. J. B. Hilliard & Sons
George V. Holton
5,000
1,000
500
2,500
500
10,000
1,000
42,000
2, 000
500
500
3,000
1,000
10, 000
2, 000
3, 000
25, 000
500
1,000
1, 000
500
1,000
5,000
1, 000
500
2, 500
10, 000
5, 000
1, 000
2, 000
500
500
2, 000
5,000
1, 000
5,000
500
2, 000
1, 000
1, 000
100
STOCK EXCHANGE PRACTICES
Standard Brands,
Shares
Hornblower & Weeks
2,000
George H. Houston
1,000
George H. Howard
2,000
Arthur Curtiss James
2,000
Jesup & Lamont
1,000
P. H. Johnston
1, 000
F. B. Keoch & Co
1,000
Cornelius F. Kelley
2,000
L. A. Keyes
4, 600
Kidder, Peabody & Co
5,000
T. S. Lamont
2,000
T. W. Lamont
20,000
Thomas W. Lamont, Vernon
Munroe, and William B.
Thompson, as trustees for
the benefit of Phillips Exeter Academy
5,000
Lee, Higginson & Co
5,000
J. S. Leech
200
R. C. Leffingwell
10,000
Augustine Legorreta
500
Charles A. Lindbergh
500
A. L. Lindley
2,000
Robert O. Lord
500
Luke, Banks & Weeks
— 2, 000
Henry E. Machold
2, 000
C. H. Mackey
2,000
John Marshall
500
Miss Mary Marshall
100
William Gibbs McAdoo
1,000
T. N. McCarter
1,000
Usal H. McCarter
1,000
H. C. McEldowney
5,000
R. B. Mellon
5,000
Stephen Mersolis
500
Albert G. Milbank
500
Edward G. Miner
500
Minsch, Monell & Co., Inc
1, 000
C. E. Mitchell
10,000
S. Z. Mitchell
3,000
Daniel J. Moran
500
H. S. Morgan
1,000
J. P. Morgan
28,750
Morgan & Cie
20,000
Morgan Grenfell & Co
20,000
M. Morize
^
. 100
J. R. Morron
1,000
Frederick K. Morrow
1,000
F. S. Moseley & Co
2,000
Vernon Munroe
300
John P. Murphy
500
The National City Co
20,000
Newmont Mining Corporation
10,000
Old Colony Corporation
2,000
John E. Oldham
500
Robert E. Olds
500
Miss Anne O'Rourke
100
Carlo Orsi
500
J. J. Pelley
500
T. Nelson Perkins—
500
175541—33—PT 1- -15
221
Ino.—Continued
Gen. John J. Pershing
Bernard E. Pollak
Mrs. Bernard E. Pollak
W. C. Potter
John W. Prentiss
Seward Prosser
John J. Raskob
Stanley Resor
S. W. Reyburn
Arthur Reynolds
John D. Ryan
Salomon Bros. & Hutzler
J. A, M. de Sanchez
Franz Schneider, Jr
Mrs. Florence S. Schuette
A. P. Sloan
Matthew Sloan
Edward B. Smith & Co
F. S. Smithers & CoSomerset Corporation
Harold Stenley
Charles Steele
John N. Steele
John A. Stephens, Jr_
Frederick Strauss
Charles I. Sturgis
Cornelius J. Sullivan
Myron C. Taylor
Walter C. Teagle
Wni. Boyce Thompson
A. A. TilneySpencer Trask & Co
O. P. Van Sweringen
F. T. Ward
Mrs. Marie M. Watkins
Kenneth W. Watters
N. A. Weathers
White, Case & Co
White, Weld & Co
George Whitney
Richard Whitney & Co
A. H. Wiggin
Ira Wight
A. H. Wigren, G. Jordan &
L. A. Keyes as trustees for
the benefit of Andover Academy
Joseph Wilshire
Daniel G. Wing
Winslow, Lanier & Co
.
Garrard Winston
^_
Wood, Struthers & Co
William H. Woodin
Arthur Woods
Clarence M. Woolley
Mrs. Noramae Wylie
John M. Young
L. Edmund Zacher
Total
Shares
500
2,000
2,000
10,000
1,000
10, 000
2,000
1,000
1,000
3,000
2, 000
1,000
100
1, 000
2, 000
7,500
1,000
2, 000
3,000
5,000
9, 970
5,000
500
500
1,000
300
500
10, 000
2, 000
2, ,000
2, 000
2, 000
5,000
1, 000
30
1,000
1,000
2, 000
5,000
20,000
5,750
8,500
1,000
5, POO
50,000
2,000
1,000
500
2,000
1,000
500
2,000
200
100
500
722, 600
222
STOCK EXCHANGE PRACTICES
Standard Brands, Inc., common stock
Shares purchased
Shares purchased
Shares sold
Date
Amount Price Amount
352,400
Price
$32
•
1,600
2,200
400
1,500
1,000
3,500
1,300
1,200
200
1,800
1,500
4,900
1,700
2,000
3,000
9,000
3,000
1,300
1,700
9,700
8,000
3,300
2,200
2,200
8,900
13,200
9,400
2,500
3,000
2,500
5,000
100
1,400
1,300
2,000
200
900
900
2,700
400
1,000
600
2,100
1 000
500
200
3,500
5,700
17,600
20,000
11 100
3,700
1,300
6 200
2,400
500
11,000
1,300
7,600
1,000
4,100
900
5,000
12,000
1,500
6,300
100
500
2,700
2,700
2,000
4,200
1,900
4,400
200
4,000
1,000
$40%
40V£
40%
40%
40
40V
40V
40^*?
ngi/
38%
38%
39
39%
39%
QQ5/
39%
39%
40
40%
40$/
AQZ/
40%
41
41%
41%
41V
415/
41%
42
42%
42%
42%
42%
42%
43
43%
43%
43U
43 l l
37
37%
37 H
3734
3714
37%
38
38%
38%
44%
44%
42^
42%
42%
427%
£WOO s
\a\
0
Sept. 5,1929
gent 6 1929
Do
Do
Do
Do
Sept. 9,1929
Do
Do
Do .
Do
Sept. 10,1929 _
Do
Do
Do
Do
Do
Do
Do.
Do
Do
Do
Do
Do.
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do. Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
SeDt 11.1929
Do
Do
Do
Do
Sept. 12,1929
Do
Do
Do
Do
Do . . _
Do
Do
Do . .
Do
Do
Do...
Do
Do
Do .
Do
Shares sold
Date
43%
43%
43%
44%
44%
Amount Price Amount Price
Sept. 20,1929
Do
Do
Oct. 29,1929
Do
Do
Oct. 31,1929
Do
Do
Do
Do...
Do
Nov. 4, 1929
Nov. 7, 1929
Do
Do
Nov. 15, 1929
Dec. 18,1929
May 21, 1930
May 23,1930
Do.
June 10, 1930
Do!
June 11,1930
Do
June 13,1930^
Do.
June 17,1930
Do
Do
June 18, 1930
Do
Do
June 19, 1930
Do
Do
Oct.
Oct.
Oct.
Feb.
21, 1930
23, 1930
31, 1930. _
11, 1931
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do.
Do
Do
Feb. 16, 1931—
Do
Do
Feb. 17, 1931Feb. 19 1931
Feb. 24, 1931
Mar. 18, 1931
Mar. 20, 1931. . .
Do
Do
Do
Jan. 18, 1932
Jan. 29, 1932
Feb. 2, 1932
Feb. 15, 1932
Feb 18 1932
Feb 23 1932 •
Mar. 1, 1932
Mar 31 1932
Sept 6 1932
Do
Do
Do
Sept. 7, 1932
Sept. 8, 1932
1,000
200
1,900
1,000
1,000
1,000
6,000
1,000
2,000
2,000
3,000
3,000
29
27
28
26
25
24
23
22
21
1,000
1,000
1,000
100
100
2,000
1,000
700
1,300
1,000
1,000
3,000
2,000
100
2,900
2,000
1,000
2,000
2,000
3,000
2,000
2,000
400
700
4,300
29
28
27
34
34
22
21%
600
42%
33
21/4
21%
21
20%
20%
20
19%
19%
19
17%
17
16%
16%
2 500
5,200
2 300
300
600
2,400
1 000
300
700
1,300
100
1,800
400
1,400
1,000
1,300
1,800
1,000
1,700
1,000
3,200
100
3,700
200
2,100
3,900
1,000
1,000
500
3,500
500
600
2,900
200
4,100
400
600
300
600
500
16V
18
18%
18%
18%
18V
18%
18 i/o
17%
175/
V70
177/
1Q
191/
1Q1/
1Q
19%
igi2
20
20
20%.
20%
20%
133^
13
13
13
13%
13%
12%
g*
17%
16%
17%
16%
223
STOCK EXCHANGE PRACTICES
Standard Brands, Inc., oommon stock—Continued
Shares purchased
Shares purchased
Shares sold
Date
Shares sold
Bate
Amount Price Amount
Sept. 9, 1932..
Sept. 22, 1932.
Sept. 23, 1932.
Do
Sept. 26, 1932.
Oct. 4, 1932...
Do
Oct. 21, 1932. _
Nov. 7, 1932..
Nov. 9, .1932..
Do
Nov. 10, 1932..
Do
Nov. 11, 1932 .
Nov. 14, 1932..
Do
Do
Do
500
800
200
300
700
200
4,800
500
500
800
500
1,000
200
800
500
200
300
500
Amount Price Amount Price
Price
16M
Nov. 14, 1932Nov. 16,1932...
Nov. 17,1932. _,
Do
Do
Nov. 25,1932. _.
Do
Do
Do
Dec. 13,1932
Jan. 10,1933_._
Mar. 16,1933. _.
Do
Do..
Do.
B©___
Mar. 17,1933...
Do
...
2,000
500
100
100
300
3,500
1,500
1,700
500
400
400
3,600
1,200
1,700
2,800
700
1,300
400
On Mar. 23, 1933, J. P. Morgan & Co, held the balance of 37,500 shares,
(A portion of this statement was read! hj Mr. Whitney during his
testimony and is here printed in full as follows:)
STATEMENT TO SENATE! COMMITTEE
It may be of interest to the committee to- give a brief summary of the public
offerings of securities, foreign and domestic, that J. P. Morgan & Co. have
made since the World War.
For the period from January 1, 1919, to date, we have offered to the public,
in almost every instance in association with others who have joined us in such
financing, securities to the aggregate amount of $6,024,444,200, of which $2,098,953,400 have been retired. Manifestly, it would have been impossible for us
alone to have handled such a tremendous volume but in every instance the
public offering was made over our name and in most instances over the names
of others as well. For convenience we have Ms-ted these public offerings under
six groups:
GROUP I. OBLIGATIONS OF FOREIGN GOVERNMENTS AND FOREIGN CORPORATIONS
These public offerings aggregate $2,232,757^000 in principal amount. Of these
obligations 40 percent or $883,854,400 ha.ve bees retired either by payment at
maturity, by redemption at prices ranging from 107% percent to 115 percent,
or by purchase at various prices through sinking funds-. There remain outstanding bonds or obligations of foreign governments or foreign obligors to the
aggregate principal amount of $1,348,9€2y60«X
Of these, even in these depressed times, $446,690,500, or 33 percent, were on
May 11, 1933, selling above the original public-offering price. The average
offering price to the public of these obligations was 94.69 percent, and the average current market price on May 11, 1933, was 81.07 percent, a decline of less
than 13% points. (The figures which I ana giving in this group and in subsequent groups for public-offering prices and for current market prices is a
weighted average based on the total amount of bonds remaining outstanding.)
No investor, who in this period purchased any of these bonds which we offered
to the public, has failed to receive the regular payment of interest at the full
rate in United States currency or the regular payment of principal when due.
The only German bonds that we have offered were the German Government 7
percent bonds and 5% percent bonds, both of which were issued in pursuance
of international plans for German reconstruction and under the auspices of the
Great Powers.
224
STOCK EXCHANGE PRACTICES
GROUP I I . RAILROAD CO. BONDS
The total principal amount offered to the public aggregates $1,845,639,300.
Of these about 29* percent or $536,814,500 have been retired, substantially all by
payment at maturity, by redemption, or by conversion, as few railroad issues
have sinking-fund provisions. Of the balance, namely $1,308,824,800, only 7.2
percent were on May 11, 1933, selling above their original issue prices. The
average price at which these bonds were offered to the public was 96.58 percent;
the average current market price on May 11, 1933, was 63.94 percent, a decline
of 32.64 points, or about one third.
Of these issues, $125,079,000 are in default in payment of interest or principal, namely, $45,000,000 Florida East Coast Railway first and refunding
mortgage 5-percent bonds; $18,879,000 Mobile & Ohio Railroad Co. refunding
and improvement 4%-percent bonds and secured 5-percent notes and $61,200,000
Missouri Pacific Railroad first and refunding mortgage 5-percent bonds, series
1. This aggregate amount is 6.78 percent of all railroad bonds offered and is
less than 2.1 percent of the total of all classes of securities offered by J. P.
Morgan & Co. in this period.
GEOUP I I I . PUBLIC UTILITY BONDS, INCLUDING OBLIGATIONS OF PUBLIC UTILITY
HOLDING COMPANIES
The aggregate principal amount offered to the public is $1,074,750,000. Of
these $268,269,800, or 25 percent, have been retired in the main, by conversion,
by redemption at prices ranging from 105 percent to 110 percent or by payment
at maturity. There remain outstanding of the bonds so publicly offered $806,480,200 in principal amount. Of these bonds $693,480,200 in principal amount
or 86 percent, on May 11, 1933, were selling above the public offering price.
The average price at which these bonds were offered to the public was 97.08
percent; the average current market price on May 11, 1933, was 95.68 percent,
a decline of 1.4 points. None of these bonds is in default in the payment of
principal or interest.
GROUP IV. INDUSTRIAL CO. BONDS AND INDUSTRIAL CO. PREFERRED STOCK
The aggregate public offerings in this group amount to $578,297,900. Of these
securities, $397,046,700 or 69 percent have been retired, again, mainly by redemption at prices ranging from 100% percent to 125 percent. There remain outstanding bonds and preferred stock to an aggregate amount of $181,251,200.
Of these $123,208,000 or 68 percent on May 11, 1933, were selling above the
public offering price and $42,187,000 or 23 percent were selling within 10 points
of the public offering price. Industrial company bonds and preferred stock
now outstanding, which were offered to the public, were offered at the average
price of 99.28 percent. The average current market price on May 11, 1933,
was 99.07 percent, a decline of about two-tenths of a point. There has been
no default in the payment of principal or interest on these bonds or in the
regular payment of dividends on the preferred stock.
GROUP V. MUNICIPAL BONDS
The amount of public offerings in this group aggregates $160,000,000. Of
these, $1,000,000 have been retired and the balance remains outstanding. The
average public offering price was 101.64 percent. The average current market
price on May 11, 1933, was 82.83 percent, a decline of about 18.8 points. None
of these bonds is in default in the payment of principal or interest.
GROUP VI. RAILROAD HOLDING CO. BONDS
These aggregate $133,000,000 or 2.21 percent of the total public offerings of
securities made by my firm since January 1, 1919. Of these $11,968,000 have
been retired. The balance, namely $121,032,000 are selling substantially below
the public offering price. The average public offering price of these bonds
was 97.25 percent and the average current market price on May 11, 1933, was
50.94 percent, a decline of about 46% points. None of these bonds as yet is
in default in the payment of principal or interest.
J. P. Morgan & Co. employ no bond salesmen and have never adopted any
http://fraser.stlouisfed.org/
methods of high-pressure salesmanship. We have distributed these securities
Federal Reserve Bank of St. Louis
225
STOCK EXCHANGE PRACTICES
through syndicates or selling groups consisting in cases of the largest issues of
as many as 1,100 or 1,200 retail and distributing houses, large and small,
scattered throughout the country and invited by us to join in the offering of
these securities because of their distributing ability and their standing and
reputation in their own communities. We have believed in this method of distribution and have consistently adhered to it.
Of the issues now in default, namely bonds of the Florida East Coast Railway,
and of the Mobile & Ohio Railroad, and of the Missouri Pacific Railroad, we
ourselves purchased and still hold bonds of those issues or of issues junior to
them on which our aggregate losses, based upon the difference between our
purchase price and the present market value, are greatly in excess of the
profit that we made from these offerings.
In the case of securities of railroad operating companies and public utility
operating companies, the price paid to the obligor is a matter of public record.
In the case of the foreign issues offered by us since January 1, 1920, the price
paid to the obligor was made public by us in the testimony submitted to the
Senate Finance Committee on December 1931. In the case of all issues during
the 5-year period from January 1, 1927, to January 1, 1932, the spread between
the price paid to the obligor and the offering price to the public has been given
in the detailed record which we have furnished the committee. We are not
opposed to but are heartily in favor of publicity and disclosure of the gross
profit or commission paid in respect to all securities offered to the public as is
proposed by the legislation which you are now considering.
As to the group of bonds which have shown the greatest declines, namely,
railroad and railroad holding companies, it may be pertinent to point out that
in the case of the railroad issues every issue of bonds of a railroad operating
company issued after June 27, 1920, was authorized by the Interstate Commerce Commission as being in the interest of the public and a minimum price
fixed at which these bonds could be sold; and in the case of the railroad holding
company issues, which were all collateral trust issues secured by stocks or
bonds or obligations of railroad operating companies, the collateral behind the
bonds at the time of the issue and the financial strength of the company
making the issue seemed to afford more than ample security.
MEMORANDUM
AUeghany Corporation common stock was publicly offered by a group headed
by the Guaranty Co. of New York on February 1, 1929.
Common shares of the AUeghany Corporation were admitted to trading on
the New York Stock Exchange on February 1 on a when-issued basis. On
February 19 transactions in AUeghany Corporation common shares were placed
on a regular basis on the New York Stock Exchange.
Attached herewith find schedule showing high, low, and last sales, as taken
from the New York Times, of the Alleghany Corporation common shares. The
volume of transactions for each day is also indicated. The period covered in
this schedule is from February 1 to March 30, 1929, inclusive.
Alleghany Corporation common stock
Date
Feb. 1,1929, W.I....
Feb. 2, 1929, W.I___
Feb. 4,1929, W.I...
Feb. 5, 1929, W.I...
Feb. 6 1929, W.I...
Feb. 7,1929, W . I —
Feb. 8,1929, W.I...
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
9,19291
11,1929, W.I..
13,1929, W.I..
14,1929, W.I..
15, 1929, W . I . .
16,1929, W . I 18,1929, W.I.,
19,1929
20,1929
21,1929
23,19291
25,1929
26,1929
Digitized fori FRASER
E x c h a n g e closed.
High
Low
Last
33
33^
32M
37
34^
33V
32
31
31
31
30
30
31
30
14,900
10,700
13,800
19,400
17,800
5,300
6,500
8,400
19,800
11,100
7,700
7,000
7,900
10,300
30,600
8,700
31
30^
29>
29
31
31
Volume
6,800
5,600
226
STOCK EXCHANGE PRACTICES
Alleghany Corporation common stoclo—Continued
Bate
Feb. 27,1929..
Feb. 28,1929..
Mar. 1, 1929—
Mar. 2, 1929-.
Mar. 4, 1929-.
Mar. 5, 1929Mar. 6, 1929Mar. 7, 1929Mar. 8, 1929Mar. 9, 1929-.
Mar. 11, 1929..
Mar. 12, 1929..
Mar. 13, 1929Mar. 14, 1929Mar. 15, 1929-.
Mar. 16, 1929..
Mar. 18, 1929Mar. 19, 1929Mar. 20, 1929..
Mar. 21, 1929..
Mar. 22, 1929Mar. 23, 1929Mar. 25, 1929Mar. 26, 1929Mar. 27, 1929Mar. 28, 1929Mar.
Mar. 30, 19291.
1
High
33^
373/
36
36
34<
3435
34M
34"
34;
34
343^
33K
33
J
Low
Last
Volume
5,900
5,200
51,400
37,800
58,600
56,200
58,000
28,600
20,300
6,400
13,200
12,500
6,600
13,800
11,800
5,000
11,000
10,000
5,800
9,900
6,500
2,500
17,600
21,000
9,800
7,100
Exchange closed.
Mr. PECORA. Mr. Chairman, it is now about 4 p.m., and also in
view of the fact that I have been informed a list of individual depositors who have maintained demand deposit accounts having
average balances of $10,000 or more with the firm of J. P . Morgan
& Co., and Drexel <& Co., is available and to be presented to the
committee by representatives of the firm, may I respectfully suggest
that the committee now recess until tomorrow morning, so that the
committee may go into executive session to consider that list ?
That also applies to the articles of copartnership of the firm of
J. P. Morgan & Co.
Senator COIJZENS. YOU do not mean to recess now, but to go into
executive session now?
Mr. PECORA. Yes, Senator Couzens, to go into executive session
now.
Senator BARKLEY. I move that the committee at the present time
go into executive session.
Senator BYRNES. Mr. Chairman, if we are to pass upon it, there
ought to be a quorum of the committee present.
The CHAIRMAN. We will call for a quorum.
Mr. PECORA. And I suggest that following the executive session
the committee adjourn until 10 o'clock tomorrow morning.
The CHAIRMAN. The committee will now go into executive session
and the hearing will be adjourned until 10 o'clock tomorrow morning.
All witnesses under subpena will appear at that time.
(Thereupon, at 4 p.m., Thursday, May 25,1933, the committee went
into executive session, and the open hearings were adjourned until
10 o'clock the following morning.)
APPENDIX
MAY
25, 1933
The following exhibits, a part of this day's proceedings of the Subcommittee
on Banking and Currency, United States Senate, are to be printed as a part of
the hearing:
Exhibit 15, answer to question 9.
Exhibit 16, answer to question 10.
Exhibit 18, answer to question 11.
Exhibit 19, answer to question 12.
Exhibit 20, answer to question 17.
Exhibit 21, answer to question 13.
COMMITTEE EXHIBIT NO. 15 OF MAY 25,
1933
QUESTION 9
List of all stock and bond issues in which either of said firms has participated,
together with the folio wing details:
(a) Whether such participation was in the original terms group, bankers,
wholesale distributors, or any other group.
(b) All other detailed information similar to the classifications embodied in
the report of the Morgan firm submitted to the (Johnson) Senate Committee
investigating the foreign bond issues.
Group 1. Is a summary of all issues of stocks and bonds by the firm of J. Pi M.
&Co.
Group 2. Is a summary of all issues of stocks and bonds by the firm of Drexel
&Co.
Group 3. Is a summary of all underwritings of stocks and bonds by the firm of
J. P. M. & Co.
Group 4. Is a summary of all underwritings of stocks and bonds by the firm of
Drexel & Co.
Group 5. Is a summary of transactions on the part of the firm of J. P. M. & Co.
in which there was no public offering.
Group 6. Is a summary of transactions on the part of the firm of Drexel &
Co. in which there was no public offering.
Group 7. Is a summary of all issues and underwritings of stocks and bonds
by others, in which the firm of J. P. M. & Co. took a financial participation or
commitment.
Group 8. Is a summary of all issues and underwritings of stocks and bonds
by others, in which the firm of Drexel & Co. took a financial participation or
commitment.
227
/
GROUP 1.—SUMMARY OF ALL ISSUES OF STOCKS AND BONDS BY THE FIRM OF J. P. MORGAN & CO.
fcO
Managing commission
Date of issue
Feb.
1,1928
Jan. 31,1929
May
Mar.
Jan.
Jan.
Apr.
Nov.
Apr.
Aug.
May
July
June
Jan.
Jan. 15,1930
Mar. 24,1927
Nov. 19,1931
Sept. 25,1930
Jan. 18,1928
8,1931
June 18,1930
Amount outstanding
Mar. 24,1933
Price to
obligor
52,500,00
.15
.15
.15
37,500.00
37,500.00
168,750.00
97
.10
2,800.00
90
91
91
93
101
.10
.125
.125
.20
.10
.125
8,809.00
25,000. 00
31,250.00
50,000.00
5,700,00
25,000.00
94
.20
48,000.00
Alleghany C orp
15-year coll. trust conv. 5% due Feb. 1,1944.
35,000,000
31,500,000
20-year coll. trust conv. 5% due June 1,1949. _
_
20-year coll. trust conv. 5% due Apr. 1,1950.._
35-year 5% debentures due Feb. 1,1965...
_
External S.F. 6% due Feb. 1, 1961
Loan of 1927 external S.F. 6% due May 1,1961
Gen'l unified 50-year ±y2% " A " due June 1,1964...
25,000,000
25,000,000
150,000,000
27,000,000
21,200,000
2,800,000
21,900,000
24,500,000
150,000,000
25, 500,000
20,000,000
2,800,000
.doExternal loan of 1927 30-year 5% due Sept. 1, 1957...
External loan of 1928 4J/£% due May 1, 1956Intern'l loan of 1930 S.F. 7% due July 1, 1957
Improvement bonds of 1928 4 ^ % due Aug. 1, 1978..
Gen'l & ref. mtge. 4 ^ % due Feb. 1, 1981
8,809,000
40,000,000
50,000,000
25,000,000
5,700,000
20,000,000
8,809,000
38,300,000
49,700,000
24, 300,000
5,700,000
20,000,000
Conv. coll. Tr. 20-year 5% due May 15,1947-
48,000,000
43, 300,000 t r a c t 90 ef-
Ref. & imp. mtge. 4H% due Oct. 1,1993
24,784,000
24,084,000
Ref. & imp. mtge. 43^% due Jan. 1,1995
35,088,000
30,000,000
35,088,000
30,000,000
12,000,000
12,000,000
95
12,000,000
15,000,000
12,000,000
15,000,000
100
1st & ref. mtge. 4H% due Feb. 1,1977
1st mtge. 4 ^ % due July 1, 2020..
Ref. & imp. 4 ^ % due July 1, 1977.
Ref. & imp. 4 ^ % " E " due July 1,1977
do
__.
97
93.07 contract.
100
97 effective.
100
95.79
97
95
[ 0^
Con-
[ fective.
5,000,000
5,000,000
24,000,000
24,000,000
00
.15
$5,206,000
1st mtge. 5% due July 1, 2020.
Total
Number
of participants in
such
Our share
managing
commission
$3,253.75
$5,206,000
Chesapeake Corporation.
Chesapeake & Ohio
R.R.
.do..
Chi., Burlington &
Quincy R.R.
Cincinnati Union Terminal Co.
.do
Ciev., Cinn., Chicago
& St. L. Ry.
Clev., Cinn., Chicago
& St. L. Ry.
do
Issue
price
Percent
0.0625
1st cons. mtge. 4% " B " due Dec. 1,1943-
do
do
Amer. Tel. & T e l Argentine
.do_
Atlantic Coast Line
R.R.
6,1927
do24,1927 Australia
8,1928
do
15,1930 Austrian
27,1930 Boston & Albany R.R_.
22,1931 Buffalo Gen'l Electric
Co.
Jan. 28,1929
Amount of
Title of issue
Alabama Great Southern R.R.
13,1929
10,1930
13,1930
14,1927
28,1927
7,1928
May 11,1927
Jan.
Name of Government,
municipality, or corporation
94
97
96
.125
30,980.00
125
.125
43,860.00
18,750.00
.125
7,500.00
102H
100
.1125
.10
6,750.00
15,000.00
100
.10
5,000.00
.10
24,000.00
o
W
X
a
W
>
i
Mar. 25,1930
Feb. 2,1928
June 26,1930
July 1,1927
May 9,1927
Apr. 8,1930
Feb. 16,1927
Sept. 24,1930
Jan. 31,1927
June
Oct.
May
Apr.
12,1930
24,1927
15,1930
1,1927
Jan. 31,1930
June 15,1927
Mar. 1,1927
Do
May 12, 1930.
Feb. 7, 1930_
Sept. 15, 1931.
Feb. 7, 1930
June 10,1927
July 2,1930
Feb. 11,1931
July 1,1930
Jan. 27,1931
Nov. 6,1930
Sept. 19,1927
Feb. 10,1930
Do
Oct. 21,1927
Feb. 20,1928
Mar. 10,1931
Dec. 22,1927
Cleveland tTnion Terminals Co.
.do.
Colorado & Southern
Ry.
Republic of Cuba
Erie R.R
do
_
General Motors Corporation.
18,000,000
18,000,000
1st mtge. S.F. 4 ^ % " O " due Oct. 1, 1977..
Gen'l mtge: 4 ^ % " A " due May 1,1980—
5,000,000
20,000,000
5,000,000
20,000,000
100
93
Serial 5%% due July 1,1928/1937.
Ref. & imp. mtge. 5% series of 1927 due May 1,1967.
Ref. & imp. mtge, 5% due Apr. 1,1973
7% preferred stock
9,000,000
50,000,000
50,000,000
25,000,000
4,500,000
50,000,000
50,000,000
Redeemed
100
15,856,200
50,000,000
15,856,200 \f 92.5926
effective.
Reedemed.
97
$5 preferred stock
*
General Motors Accep- 10-year S.F. 6% gold debentures due Feb. 1,1937
tance Corp.
German
International 5H% loan of 1930 due June 1,1965
Great Northern Ry
Gen'l mtge. 4J4% " E " due July 1,1977
.do.
_do_.
Humble Oil & Refining 10-year 5% debentures due Apr. 1,1937
Co.
International Tel. & 25-year 5% debentures due Feb. 1,1955
Tel. Corp.
do
25-year 4 ^ % debentures due July 1,1952
Italian credit consorti- External sinking fund 7% due Mar. 1,1937
_
um for public works,
.do.
External sinking fund 7% due Mar. 1,1947
External
loan
of
1930,35-year
S.F.
5J^%
due
Mayl,1965_
Japanese
._.
Louisville & Nashville Unified 4% due July 1,1940
R.R.
do
10-year secured 5% due Oct. 1,1941
..—do
1st ref. mtge. 4 ^ % " C " due Apr. 1, 2003
Marland Oil Co
Serial 5% notes due serially to June 15,1932
Merchants Despatch,
5% Equipment Trust ctfs. due Oct. 1,1930/43:.
Inc.
Michigan Central R . R .
Ref._do..
& Imp. 4 ^ % " C " due Jan. 1,1979
do.
Missouri Pacific R.R. 1st & ref. mtge. 5% " I " due Feb. 1,1981.
Co.
Mobile & Ohio R. R. 5% Secured gold notes due Sept. 1,1938..
Co.
do.
Ref. & imp. 4 ^ % due Sept. 1,1977
Morris & Essex R. R. Construction mtge. due Nov. 1, 1955 5% " A "
Co.
do
_
Construction mtge. due Nov. 1,1955,
"B"
.do.
1st ref. m due Dec. 1, 2000
Nashville, Chattanooga 1st mtge. 4% due Feb. 1,1978
& St. Louis Ry. Co.
New York Central R.R, Ref. & imp. ±H due Oct. 1, 2013
Co.
N.Y., New Haven & 40-year 1st & ref. m% due Dec. 1,1967.
Hartford R.R. Co.
95%
1st mtge. S.F. 4H% due Oct. 1,1977
98,250,000
20,000,000
20,000,000
25,000,000
95,500,000
20,000,000
20,000,000
20,200,000
117
102
flOl. 123
\average.
94M
120
.1125
20,250.00
1
.10
.1125
5,000.00
11, 250.00
1
2
} .0541
5,049.00
75,000.00
30,000.00
37,500. 00
1
1
1
1
.15
.10
.13
100
.15
75,000.00
1
86
97
95
90
99
97
100
.20
.10
.10
.125
196,500.00
10,000.00
10,000.00
31,250,00
1
2
2
1
.15
75,000.00
.15
.20
52,500.00
24,000.00
1
1
142,000.00
5,000.00
1
1
.1125
11, 250,00
.125
95
18,750.00
f 98. 6875
30,000.00
\ average
f 101.3255
1,389.34
\ average } .0409
102.50
. .10
4,000.00
98^
.10
7,634.00
95
.125
76,500.00
1
1
1
1
1
1
.0875
4,375.00
1
' .125
17,348.75
•j
> . 1125 28,125.00
1
50,000,000
50,000,000
35,000,000
4,500,000
35,000,000
2,200,000
89
92
7,500,000
71,000,000
5,000,000
6,300,000
71,000,000
5,000,000
86
90
10,000,000
15,000,000
10,000,000
15,000,000
30,000,000
Redeemed.
3,392,000
2,776,000
100.50
4,000,000
7,634,000
61,200,000
5,000,000
13,879,000
10,000,000
4,000,000
7,634,000
61,200,000
100.50
96H
92^
15,000,000
9,871,000
16,800,000
15,000,000
9,871,000
16,800,000
75,000,000
75,000,000
31,000,000
31,000,000
96.6875
}.!0
5,000,000
13,879,000
10,000,000
95
Q7U
.20
.10
1
1
85
97
.075
12,600.00
1
100
.1125
84,375.00
1
.10
31,000.00
1
91J4
GROUP 1.—Summary of all issues of stocks and bonds by the firm of J. P. Morgan & Co.—Continued
Managing commission
Date of issue
Feb.
Mar.
Apr.
Jan.
26,1931
18,1930
28,1927
29,1929
Feb. 23,1928
Mar.
Tuly
June
Oct.
29,1927
7,1931
6,1930
18,1929
June 26,1931
Feb.
1,1929
Aug. 1,1930
Name of Government,
municipality, or corporation
Pere Marquette Ry. Co.
do
Pirelli Co. of Italy
Railway Express Agency Inc.
Rochester Gas & Electric Corp.
City of Rome
St. Joseph Lead Co
Southern Ry. Co
Southern Bell Tel. &
Tel. Co.
Taiwan Electric Power
Co., Ltd.
Terminal R.R. Ass'n
of St. Louis.
Terminal R.R. Ass'n
of St. Louis.
Texas & Pacific Ry. Co_
City of Tokyo
State of Vermont
Amount of
issue
Title of issue
$8,000,000
14,000,000
4,000,000
32,000,000
1st mtge.
due Mar. 1, ]
do
Covertible S.F. 7% due May 1,1952__.
Serial 5% due serially to Mar. 1,1949.
Gen'l mtge. 4 ^ % due Sept. 1,1977. ._
Ext. loan of 1927 S.F. 6H% due Apr. 1,1952.
10-year conv. deb. b\i% due May 1, 1941
1st cons. mtge. 5% due July 1,1994,.
1st mtge. S.F. 5% due Jan. 1, 1941
—
40-year S.F. 5H% due July 1,1971
Gen'l & ref. 4% due Jan. 1, 1953
Gen'l & ref. 4% due Jan. 1, 1953
Gen'l & ref. 5% " D " due Dec. 1, 1980
External loan of 1927 S.F. hW/Q due Oct. 1,1961
Loan of 1927, Z3A% gold bonds due serially to Dec. 1,
1938.
Mar. 28.1927 Hocking Valley Ry. Co_ 6-months 4 ^ % notes dated Mar. 1, 1927, due Sept.
1, 1927.
Mar. 22.1928 Canadea Power Cor- 1st mtge. 5% dated Apr. 1,1928, due Apr. 1,1958
poration.
Mar. 16,1931 Southern Ry. Co
1st cons. mtge. 5% dated Oct. 2,1894, due July 1,1994.
Mar. 10,1927
1st cons. mtg. 5% dated Oct. 2,1894, due July 1,1994.
do
Jan. 9,1931
Mar. 21.1927
Jan. 16.1928
Amount outstanding
Mar. 24,1933
Price to
obligor
$8,000,000
14,000,000
1,102,000
28,000,000
94
6,000,000
6,000,000
97
30,000,000
7,187,000
3,106,000
32,000,000
26,298,400
7,187,000
3,106,000
2,000,000
Issue
price
97
98
100
87
91
97.3872
effective.
109^
108
100
97J4
Total
Percent
0.10
.1125
.20
.1125
Number
of participants in
Our share
such
managing
commission
$8,000.00
15,750.00
8,000.00
18,000.00
.125
7,500.00
.20
30,000.00
o
W
.075
.1375
2,329.50
33,000.00
Q
2,800,000
90
.175
39,900.00
8,000,000_
8,000,000
87
.10
8,000.00
3, 500,000
3,500,000
13,000,000
20, 640,000
5, 000, 000
13,000,000
19,400,000
4,000,000
5,000,000
Redeemed.
2,000,000
1,310,000
3,368,000
22,800,000
91
.10
3,500.00
98H
.125
.175
16,250.00
36,120.00
100
100
.006
312.50
2,000,000
102^
105
.125
2,500.00
1,310,000
3,368,000
107
105
109
107
.10
.10
1,310.00
3,368.00
99J£
O
W
Original group
Name of Government, municiDate of issue
pality, or corporation
Feb.
1st cons. mtge. 4%
" B " due Dec.
1,1943.
15-year coll. trust
Alleghany Corp.._
conv. 5% due
Feb. 1,1944.
20-year coll. trust
do_.
conv. 5% due
June 1,1949.
20-year coll. trust
do
conv. 5% due
Apr. 1, 1950.
Amer. Tel. & Tel. 35-year 5% debentures due Feb.
1,1965.
Argentine
_._ External S.F. 6%
due Feb. 1,1961.
Loan of 1927 external S.F. 6%
due May 1,1961.
Gen'l unified 50Atlantic Coast
year 4H% " A "
Line R.R.
due June 1,1964.
—do
..—do..—External
loan of
Australia
1927 30-year 5%
dueSept.1,1937.
External loan of
do
1928 Qb% due
due May 1,1956.
Intern'1
loan of
Austrian..
1930 S.F. 7% due
July 1, 1957.
Boston & Albany I m p r o v e m e n t
bonds of 1928
R.R.
4H% due Aug.
1, 1978.
BufEalo Gen'l Elec- Gen'l & ref. mtge.
4H%dueFeb.l,
tric Co.
1981.
1,1928 Alabama Great
Southern R.R.
Jan. 31,1929
May 13,1929
Mar. 10,1930
Jan. 13,1930
Jan. 14,1927
Apr, 28,1927
Nov. 7,1928
Apr. 6,1927
Aug. 24,1927
May 8,1928
July 15,1930
June 27,1930
Jan. 22,1931
Title of issue
Intermediate group
Number of Gross
par- spread
ticipants
Amount
of our
interest
Gross Amount of Our gross Our share
spread our interest
of expenses
profit
Our net
profit
Percent
0.1875 $2,603,000
$4,880.63
$4,880.63
3
.85
13,125,000
111, 562.50
111, 562.50
4
.50
9,187,500
2.06
15,000,000
261,187.50
258,187. 50
4
.50
.85
9,375,000
79,687.50
79,687. 50
4
.50
.85
30,000,000
255,000.00
255,000.00
9
$3,000.00
Percent
0.375 $1,735,333
Our gross Our share Our net
of expenses profit
profit
$3,900.00
4
45,937.50
45,937.50
9
GO
6,562,500
32,812.50
32,812.50
9
Q
6,562,500
32,812.50
32,812.50
9
$6,508.00
33,750,00
135,000.00
2
1.50
10,600,000
159,000.00
26,500.00
132,500,00
2
.90
1,400,000
12,600.00
650.00
11,950.00
3
.90
.375
4,404,500
15,000,000
39,640.50
56,250.00
2,660.50
15,000.00
36,980.00
41,250.00
3
3
.50
.375
18,750,000
70,312. 50
30,468.75
39,843.75
3
.50
15,375,000
76,875.00
.80
7,375,000
59,000.00
59,000.00
11
1.00
3,175,000
.90
4,275,000
26,006.25
26,006.25
2
52,500.00
5
.50
6,000,000
52,500.00
§
3
13,500,1)00 168,750.00
6,000,000
$2,608.00
oteJ
1.25
.875
Number of
participants
33,125.00
124
9,609.37
67,266.63
14
31,750.00
6,667.50
25,082.50
134
30,000.00
11,700.00
18,300.00
10
6,625,000 33,125.00
CO
to
to
GROUP 1.—Summary of all issues of stocks and bonds by the firm of J. P. Morgan & Co.—Continued
Original group
Name of Government, municiDate of issue
pality, or corporation
May 11,1927
Jan. 28,1929
Jan. 15,1930
Mar. 24,1927
Nov. 19,1931
Sept. 25,1930
Jan. 18,1928
Jan.
8,1931
June 18,1930
Mar. 25,1930
Feb.
2,1928
Title of issue
Percent
Conv. coll. Tr. 20- 0.80
year 5% due
May 15, 1947.
Chesapeake & Ohio Ref. & imp. mtge.
375
R.R.
*H% due Oct.
1,1993.
do
Ref. & imp. Mtge. .375
4H% due Jan.
1, 1995.
Chi., Burlington 1st & Ref. Mtge. .875
&QuincyR.R.
4H%dueFeb.l.
1977.
Cincinnati Union 1st mtge. 5% due .875
July
1, 2020.
Terminal Co.
1st mtge. 4 ^ % due .8875
do
July 1, 2020.
Clev., Cinn., Chi- Ref. & imp. 4&% .90
cago & St. L. Ry.
due July 1, 1977.
Clev., Cinn., Chi- Ref. & imp. m% .90
cago & St. L. Ry.
" E " d u e July 1,
1977.
.90
.do
Cleveland Union 1st mtge. S.F.
.3875
Terminals Co.
4 ^ % due Oct. 1,
1977.
.do.
1st mtge. S.F.. .40
% "O"
Chesapeake Corporation.
m%
June 26,1930
July
1,1927
May 9,1927
Gross Amount of Our gross
spread our interest
profit
$14,880,000 $119,040.00
Our net
profit
.8875
.316
.85
Number of Gross
par- spread
ticipants
Amount
of our
interest
Our gross Our share Our net
profit
of expenses profit
Number of
participants
$119,040.00
Percent
1.00 $13,440,00 $124,325.00
$124,325.00
31
6,443,840
24,164.40
24,164.40
.50 5,477,264 27,386.32
27,386.32
7
9,122,880
34,210.80
34,210.80
.50 7,754,448 38,772.24
38,772.24
7
11,250,000
98,437.50
98,437.50
4,000,000
35,000.00
35,000.00
4,000,000
35,500.00
35,500.00
11,250,000
68,437.50
3,750,000
22,812.50
$225.00
68,212.50
22,812.50
18,000,000 109,500.00 3,350.00 106,150.00
13,275,000 51,440.62 27,843.75 23,596.87
3,687,500
7,015.63
7,015.63
7,500,000
66,562.50
66,562.50
1,800,000
5,688.00
O" due
Oct. 1, 1977.
Gen'l mtge. 4H%
"A" due M a y l ,
1980.
Republic of Cuba. Serial
5 ^ % due
July
1,1928/1937.
Erie R . R
Ref. & imp. mtge.
5% series of i927
due May, 1,1967.
Colorado & Southern Ry.
Our share
Intermediate group
37,500,000 209,375.00
2,748.00
2,940.00
209,375.00
Apr.
8,1930
Feb. 16,1927
Sept. 24,1930
Jan. 31,1927
General Motors
Corporation.
do
General Motors
Acceptance
Corp.
June 12,1930 German
Great Northern
By.
do.
May 15,1930
Oct. 24,1927
Ref. & imp. mtge. .90
5% due Apr. 1,
37,500,000
228,125.00
.85
10,000,000
85,000.00
1973.
7% preferred stock
$5 preferred stock— 5.4074 6,342,480 342,173.78
25,000,000 159,375.00
10-year S.F. 6%
.85
gold-debentures
due Feb. 1,1937.
28,983,750 231,870.00
International 5H% .80
loan of 1930 due
June 1, 1965.
7,500,000 67,500.00
Gen'l mtge. 4 ^ % .90
" E " due July 1,
XV ( 1 .
1Q77
.90
.—do
Humble Oil & Re- 10-year 5% debenfining Co.
tures due Apr. 1,
1937.
Jan. 31,1930 International Tel. 25-year 5% deben& Tel. Corp.
tures due Feb. 1,
1955.
June 15,1927
do
25-year 4 ^ % deApr.
1,1927
Mar. 1,1927
Do
May 12,1930
Feb. 7, 1930
Sept. 15,1931
Feb. 7,1930
bentures due
July 1,1952.
Italian credit con- External sinking
sortium for pubfund 7% due
lic works.
Mar. 1,1937.
do
External sinking
fund 7% due
Mar. 1, 1947.
External loan of
1930,35-year S.F.
f>W7o due May
1
IQfiK
i, moo.
Louisville & Nash- Unified
4% due
ville R.R.
JTni-v
uiy 1J , 1Q40
law.
do
10-year secured 5%
due Oct. 1,1941.
do
1st ref. mtge. 4J^%
lif*\)9
KJ
r\i-tr\
Art?
67,500.00
197,125.00
2
85,000.00
4
4,577.78
357,596.00
159,375.00
6
3
231,870.00
11
67,500.00
3
2,062.50
18,300,000 91,500.00
91,500.00
145
.50 15,000,000
75,000.00
75,000.00
7
.50 10,500,000
52,500.00
52,500.00
7
.50
6,725,000
33,625.00
33, 625.00
92
.50
2,000,000
10,000.00
10,000.00
3
.50
65,437.50
.875
12,500,000 109,375.00
.35
18,750,000
65,625.00
65,625.00
.35
13,125,000
45,937.50
45,937.50
1.30
4,500,000
58,500.00
14,565.00
43,935.00
8
.80
22,666,667
265,136.14
2,394.36
262,741.78
5
.90
2,500,000
22,500.00
2,900.00
19,600.00
3
.8875
5,000,000
44,375.00
800.00
43,575. 00
3
.875
7,500,000
65,625.00
65,625.00
3
.90
17,000,000
76,500.00
9,112.00
67,388.00
5
.2846
2,544,000
5,431.36
745.00
4,686.36
2
.40
3,000,000
8,250.00
8,250.00
2
.90
5,725,500
34,825.75
34,825. 75
2
109,375.00
3
1
Qu6 ivpr. i9
2003.
June 10,1927 Marland Oil Co. Serial
5% notes
due serially to
June 15, 1932.
July 2,1930 Merchants Des- 5% Equipment
patch Inc.
Trust ctfs. due
Oct. 1, 1930/43.
Feb. 11,1931 Michigan Central Ref. & Imp. 4y2%
R.R.
" C " due Jan. 1,
1979.
July 1,1930
do
—_do
7,500,000
31,000.00
GEOTJP 1.—Summary of all issues of stocks and bonds by the firm of J. P . Morgan & Co.'—Continued
Original group
Name of Government, municiDate of issue
pality, or corporation
Jan. 27,1931
Missouri Pacific
R.R. Co.
Nov. 6,1930
Mobile & Ohio
R.R. Co
Sept. 19,1927
Feb. 10,1930
Do
Oct. 21,1927
do
Morris & Essex
R.R. Co.
do
-do-
Nashville, Chattanooga & St.
Louis Ry. Co.
Mar. 10,1931 New York Central
R.R. Co.
Dec. 22,1927 N.Y., New Haven
& Hartford R.R.
Co.
Feb. 26,1931 Pere Marquette
Ry. Co.
Mar. 18,1930
do_
Apr. 28,1927 Pirelli Co. of ItalyFeb. 20,1928
Jan. 29,1929
Feb. 23,1928
Title of issue
Gross Amount of Our gross Our share
spread our interest
profit
of expenses
Percent
1st & ref. mtge. 0.375 27,540,000
5% " I " due
Feb. 1,1981.
5% Secured gold .1625 2,500,000
notes due Sept.
1,1938.
Ref. & imp. 4H% .875
6,939,500
due Sept. 1,1977.
Construction
mtge. due Nov.
1,1955,5% "A".
.8875 $25,000,000
Construction
mtge. due Nov.
1,1955,4H%"B".
1st ref. 3H% due .125
9,871,000
Dec. 1, 2000.
1st mtge. 4% due .675 13,400,000
Feb. 1,1978,
Our net
profit
57,375.00
57,375.00
3,750.00
3,750.00
23,420.63
23,420. 63
$85,156.25
$85,156.25
12,338.75
12,338.75
56,700.00
56,700.00
Ref. & imp. 4 ^ % .3875 56,250,000 147,656.25
due Oct. 1, 2013.
40-year 1st & ref. .40
10,332,000 41,328.00
4 # % due Dec.
1,1967.
1st mtge. &A% .40
2, 400,000
9,600.00
due Mar. 1,1980.
.3875 4,200,000
do.
16,275.00
Convertible S.F., 1.80
2,000,000
32,250.00 $12,071.40
7% due May 1,
1952.
Railway Express Serial 6% due seri- .8875 12,000,000 106,500.00 2,940.00
Agency, Inc.
ally to Mar. 1,
1949.
Rochester Gas & Gen'l mtge. 4 ^ % .375
3,000,000 11,250,00
due
Sept. 1,1977.
Electric Corp.
Intermediate group
Number of Gross
participants
Amount
of our
interest
Our gross Our share Our net
profit of expenses profit
Percent
0.50 $15,300,000 $76,500.00
Number of
participants
$76,500.00
10
25,500.000 127,500.00
127,500.00
9
41,328.00
9,300,000
46,500.00
6
9,600.00
2,040,000
10,200.00
16,275.00
20,178.60
3,570,000
17,850.00
2,000,000
20,000,00
147,656.25
46,500.00
$1,275.00
8,925.00
10
17,850.00
10
103,560.00
11,250.00
1.00
2,820.00
17,180.00
Mar. 29,1927
July
7,1931
June 6,1930
Oct. 18,1929
June 26,1931
Feb.
1,1929
Aug. 1,1930
Jan.
9,1931
Mar. 21,1927
Jan. 16,1928
Mar. 28,1927
Mar. 22,1928
Mar. 16,1931
Mar. 10,1927
Ext. loan of 1927
S.F. 6H% due
Apr. 1,1952.
St. Joseph Lead 10-year conv. deb.
Co.
5H% due May
1, 1941.
Southern Ry. Co__ 1st cons. mtge. 5%
due July 1,1994.
Southern Bell Tel. 1st mtge. S.F. 5%.
& Tel. Co.
due Jan. 1,1941.
Taiwan Electric 40-year S.F. W7o
Power Co., Ltd.
due Jule 1,1971.
Terminal
R.R. Gen'l & ref. 4%
Ass'n of St.
due Jan. 1,1953.
Louis.
TerminalR.R.Assn Gen'l & ref. 4% due
Jan. 11953.
of St. Louis.
Texas & Pacific Gen'l & ref. 5%
" D " due Dec.
Ry. Co.
1,1980.
External loan of
City of Tokyo
1927 S.F. 5H%
due Oct. 1,1961.
State of Vermont- Loan of 1927,3U%
gold bonds due
serially to Dec. 1,
Hocking Valley
1938.
6 - m o n t h s 4H
notes dated Mar.
Ry. Co.
1,1927, due Sept.
1,1927.
Canadea Power 1st mtge. 5% dated
Corporation.
Apr. 1,1928, due
Apr. 1, 1958.
1st cons. mtge. 5%
Southern Ry. C o . .
dated Oct. 2,1894,
due July 1,1994.
1st cons. mtge. 5%
do
dated Oct. 2,
1894, due July 1,
1994.
City of Borne
90,000.00
11,250,000
90,000.00
.6128
3,593,500
22,013.15
2,773.15
.425
2,329,500
6,988.51
650.00
.8625
6,400,000
55,200.00
.825
6,933,000
57,200.00
.40
4,000,000
16,000.00
3,050.00
12,950.00
.90
1,750,000
15,750.00
900.00
14,830.00
.375
3,250,000
12,187.50
6,547,000
54,012.75
.80
3
1.00
8,575.000 85,750.00
85,750.00
29
19,250.00
6,338.51
55,200.00
57,200.00
2,014.50
.50
5,100,000
25,500.00
12,187.50
.75
3,250,000
24,375.00
24,375.00
10
54,012.75
.50
5,340,000
26,700.00
26,700.00
10
23,485.50
o
W
M
O
W
.119
1,300,000
1,543.75
195.00
1,348.75
.875
1,000,000
8,750.00
900.00
7,850.00
.40
982,500
5,975.00
387. 21
5,587.79
.90
2,526,000
4,841.50
j
Q
4,841.50
to
CO
fcO
GROUP 1.—Summary of all issues 0/ stocks and bonds by the firm of J. P. Morgan & Co.—Continued
CO
Our total profit before overhead expenses, salaries,
and taxes
Selling syndicate or group
Date of issue
Feb.
1,1928
Jan. 31,1929
May 13,1929
Mar. 10,1930
Jan. 13,1930
Jan. 14,1927
Apr. 28,1927
Nov. 7,1928
Apr. 6,1927
Aug. 24,1927
May 8,1928
July 15,1930
June 27,1930
Jan. 22,1931
May 11,1927
Jan. 28,1929
Jan. 15,1930
Mar. 24,1927
Nov. 19,1931
gept. 25,1930
Name of Government, municipality, or corporation
Title of issue
A l a b a m a Great 1st cons. mtge. 4% " B " due Dec. 1, 1943..
Southern R.R.
Alleghany Corp.,. 15-year coll. trust conv. 5% due Feb. 1,
1944.
do
20-year coll. trust conv. 5% due June 1,
1949.
__do
20-year coll. trust conv. 5% due Apr. 1,
1950.
Amer. Tel. & Tel. 35-year 5% debentures due Feb. 1,1965
External S.F. 6% due Feb. 1, 1961—
Argentine
Loan of 1927 external S.F. 6% due May 1,
do.
1961.
Atlantic
Coast Gen'l unified 50-year 4J^% " A " due June
Line R. R.
1, 1964.
do.
do
External loan of 1927 30-year 5% due Sept.
Australia
1, 1957.
do
External loan of 1928 4H% due May 1,1956.
Austrian
Intem'l loan of 1930 S.F. 7% due July 1,1957
Boston & Albany Improvement bonds of 1928 4J^% due Aug.
R.R.
1, 1978.
Buffalo Gen'l Elec- Gen'l & ref. mtge. 4 ^ % due Feb. 1,1981. .
tric Co.
Chesapeake Corpo- Conv. coll. Tr. 20-year 5% due May 15,1947
ration.
Chesapeake & Ohio Ref. & imp. mtge. 4J^% due Oct. 1,1993
R.R.
do
Ref. & imp. mtge. 4 ^ % due Jan. 1,1995
Chi., Burlington & 1st & ref. mtge. 4>£% due Feb. 1,1977
Quincy R.R.
Cincinnati Union 1st mtge. 5%, due July 1, 2020—.
Terminal Co.
do
1st mtge. m%, due July 1, 2020..
Gross Amount of Our gross
spread our interest
profit
Percent
0.625
Portion of
comOur share our
mission
allowed
dealers, etc.
Our net
profit
Number of
participants
In percent of
principal
In dollars
amount
of the
issue
8
$5,000
$31.25
1.50
3,809,000
60,930.00
$6,475.30
1.50
875,000
10,087.50
2,537.50
Percent
Q
0.231
w
$6.25
$25.00
3,062. 50
51,392.20
661 261,392.20
.746
7,550.00
336,050.00
1.344
32
1.50
1,410,000
17,737.50
2,820.00
14,917.50
164,917.50
.659
2.00
2.00
2.00
10,271,000
1,750,000
1,010,000
219,180.00
20,430.00
18,060.00
6,778.86
2,992.50
2,646.20
17,605. 00 194,796.14
16,782. 50
655.00
2,015. 00
960 618,546.14
645 151,782.50
623 145,898.80
.412
.562
.688
1.00
1,800,000
18,000.00
6,125. 00
11,875.00
10
26,625.00
.950
1.00
1.50
7,059,000
2,115,000
70,590.00
17,692.50
4,314. 60
24, 545.00
512. 50
46,045.00
12,865.40
18
820
91,834.00
112,240.40
1.042
.280
1.50
2.00
1.00
2,655,000
202,200
24,525.00
4,044.00
15,000.00
398. 25
108. 75
505. 50
675.00 ~~I,~875.~66"
24,018. 00
3,538. 50
12,450.00
901
726
24
162,377. 38
137,621.00
44,156.25
.324
.550
26,860.00
294
122, 660.00
1.00
2.00
1.50
1.50
1.50
1.50
1.25
GO
1, 500,000
2,686,000
26,860.00
.774
.613
59,593.63
3,521,83
2,365.00
53,706.80
786 345,071.80
128,422.50
13,083.00
20,862.50
94,477.00
295
177,007.72
3,733,000
3,283,000
40,935.00
72,240.00
5,226. 20
3,053.19
5,375.00
16,105.00
53,081.81
474
358
147,176.84
170,269.31
1,530,000
22,950.00
3,519.00
2,137.50
17,293.50
159
59,793.50
.498
31?250.00
4,500.00
5,000.00
64,000.00
• 503
3,610,000
8,722,000
2,5,00,000
.718
.714
.419
.567
M
o
W
>
i
s
Jan. 18,1928
Jan.
8,1931
*-t June 18,1930
o< M a r . 25,1930
©i
M
|
w
I
Feb. 2,1928
June 26,1930
July 1,1927
May 9,1927
Ref. & imp. 4^%, due July 1,1977
Ref. & imp. m% " E " due July 1,1977...
do
,do
Cleveland Union 1st mtge. S.F. 4^% due Oct. 1,1977
Terminals Co.
.do.
1st mtge. S.F. 4^% " O " due Oct. 1, 1977.
Colorado & South- Gen'l mtge. 4^% "A" due May 1,1980—
Clev., Oinn., Chicago & St. L. By.
do___
ern Ry.
Republic of Cuba. Serial 5H% due July 1, 1928/1937
ErieR. R
Ref. & imp. mtge. 5% series of 1927 due
May 1, 1967.
£ Apr. 8,1930 . . . . d o .
_. Ref. & imp. mtge. 5% due Apr. 1, 1973....
Feb. 16,1927 General
Motors 7% preferred stock.
Corporation.
Sept. 24,1930
$5 preferred stock..
do
Jan. 31,1927 General
Motors 10-year S.F. 6% gold debentures due Feb. 1,
Acceptance
1937.
June 12,1930
Oct. 24,1927
May 15,1930
Apr.
1,1927
Jan. 31,1930
June 15,1927
Mar. 1,1927
Do
May 12,1930
Feb. 7,1930
Sept.
Feb.
June
July
15,1931
7,1930
10,1927
2,1930
Feb.
11,1931
July 1,1930
Jan. 17,1931
Nov. 6,1930
Sept. 19,1927,
Corp.
German
Great Northern
Ry.
do
Humble Oil & Refining Co.
International Tel.
& Tel. Corp.
do
Italian credit consortium for public works.
do
Japanese
Louisville & Nashville R.R.
-.—do..
do.
Marland Oil Co..
Merchants Despatch, Inc.
Michigan Central
R.R.
do.
Missouri Pacific
R.R. Co.
Mobile & Ohio
R.R. Co.
do
International 5J4% loan of 1930 due June 1,
1965.
Gen'l mtge. 4 ^ % " E " due July 1, 1977-_.
do
19,212.50
200
102,425.00
1,554.20
40
29,366.70
.587
5,000.00
3,575.00
12,893.75
48,275.00
293
184
143,043.75
92,121.87
.596
.511
1,440.00
6,958.65
2,500.00
6,500.00
24,185.00
24,360.10
16
262
36,200.63
102,172.60
.724
.510
38,126.62
4,472.17
1,088.75
32,565.70
110
791
7,989.00
316,940.70
.088
.633
1,330,500
4,100,000
13,305.00
43,102.00
1,655.00
5,412.00
11,650.00
37,690.00
791
427
258,775.00
160,190.00
.517
.640
1,225,000
5,140,000
12,250.00
57,050.00
"5,~705.~46"
370.00
12,250.00
50,974. 60
264
743
349,846.00
285, 349.60
2.206
.570
2
7,295,000
159,030.00
20, 790. 75
21,413.75
116,825. 50
1,011
636,695.50
.648
1
4,525,000
45,250.00
3,801.00
5,968.75
35,480. 25
310
112,980. 25
.564
1
2,595,000
25,950.00
3,243.75
5,762.50
16.943.75
243
92,381.25
.461
1.00
2,500,000
25,000.00
3,125.00
1.00
190f 000
1,900.00
345.80
1.00
1.75
2,045,000
5,850,000
20,450.00
54,250.00
2,556.25
2,400.00
1.50
1.25
1,625,000
3,025,500
28,125.00
37,818.75
.75
2.00
3,435,000
1.00
2.00
1.00
2
2,662.50
.682
10-year 5 % debentures due Apr. 1,1937
1.50
970,000
15,982.50
1,678.10
2,707.50
11,596.90
453
152,221.90
.608
25-year 5% debentures due Feb. 1,1955—
2.00
2,585,000
33,050.00
4,136.00
1,532.50
27,381.50
804 243,006.50
.486
25-year 4M% debentures due July 1,1952..
External sinking fund 7% due Mar. 1,1937.
2.00
2.50
2,790,000
605,000
47,007.50
12,835.00
4,063.10
1,905.75
512.50
995.00
42,431.90
9,934. 25
681
296
.553
.648
External sinking fund 7% due Mar. 1,1947.
External loan of 1930, 35-year S.F. 5H%
due May 1,1965.
Unified 4% due July 1,1940
2.50
2,262,000
39,405.00
6,220.50
2,572. 50
30,612.00
1.00
110,000
1,100.00
275. 00
825.00
1.25
1.25
1.00
.50
6,106,000
2,610.000
76,325.00
36,350.00
2,266,000
11,330. 00
1.00
_do1st & ref. mtge. 5 % " I " due Feb. 1,1981- 1.50
3,507,000
4,180,000
35,070.00
77,420.00
4,383.75
9,614.00
5 % Secured gold notes due Sept. 1, 1938.. 1.50
2,250,000
8,750.00
3,125.00
Ref. & imp. 4 ^ % due Sept. 1,1977
6,245,550
84,762.75
6,602.65
10-year secured 5% due Oct. 1,1941
1st ref. mfge. 4J^% " C " due Apr. 1, 2003...
Serial 5% notes due serially to June 15,1932.
5% Equipment Trust ctfs. due Oct. 1,
1930/43.
Ref. & Imp. 4H% " C " due Jan. 1,1979...
7,632.50
3,132. 00
14,625. 00 54,067. 50
4, 232. 50 28,985. 50
468,978.78
.660
25,425.00
.508
85 108,892. 50
165 113,360. 50
325 97,388. 00
10,275.70
1.088
.755
.324
.302
22,250. 00
.556
73,146. 00
257,763.50
.958
.421
26
7,130. 00
4, 200. 00
20,417.50
30,686. 25
47,388. 50
5,625.00
13,750.00
.275
8,505.00
69,655.10
104 110,424.48
.795
1.00
..! 1.10
193,369.40
77,869. 25
GROUP 1.—Summary of all issues of stocks and bonds by the firm of J, P. Morgan & Co.—Continued
8
Our total profit before overhead expenses, salaries,
and taxes
Selling syndicate or group
Date of issue
Name of Government, municipality, or corporation
Feb. 10,1930 Morris & Essex
R.R. Co.
do
....Do
:
Oct. 21,1927
Feb. 20,1928.
Mar. 10,1931
Dec. 22,1927
Feb. 26,1931
Mar. 18,1930
Apr. 28,1927
Jan. 29,1929
Feb. 23,1928
Mar. 29,1927
July 7,1931
June 6,1930
Oct. 18,1929
June 26,1931
Title of issue
Gross ; Amount of Our gross Our share
spread our interest profit
of expenses
Construction mtge. due Nov. 1,1955, 5%
Our net
profit
In percent of
Number of In dollars principal
particiamount
pants
of the
issue
Percent
Construction mtge. due Nov. 1,1955,4^% \ 1.25
"B".
1st ref. 3H% due Dec. 1, 2000
do
1.575
.75
Nashville, Chat- 1st mtge. 4% due Feb. 1,1978
tanooga & St.
Louis Ry. Co.
New York Central Ref. & imp. 4^% due Oct. 1, 2013
1.25
R.R. Co.
N.Y., New Haven 40-year 1st & ref. 4J4% due Dec. 1,1967
1.00
& Hartford R.R.
Co.
Pere Marquette 1st mtge. 4^% due Mar. 1,1980
1.00
Ry. Co.
do
do
1.25
Pirelli Co. of Italy. Covertible S.F. 7% due May 1,1952.
2.00
Railway Express Serial 5% due serially to Mar. 1,1949.
1.25
Agency Inc.
Rochester Gas & Gen'l mtge. 4^% due Sept. 1,1977
1.00
Electric Corp.
City of Rome
Ext. loan of 1927 S.F. 6H% due Apr. 1, 2.00
1952.
St. Joseph Lead Co. 10-year conv. deb. 5H% due May 1,1941.. 1.00
Southern Ry. Co__ 1st cons. mtge. 5% due July 1,1994
1.00
Southern Bell Tel. 1st mtge. S.F. 5% due Jan. 1,1941..
1.75
& Tel. Co.
Taiwan Electric 40-year S.F. 5J4% due July 1,1971_.„„._.. 2.00
Power Co., Ltd.
Portion of
our commission
allowed
dealers, etc.
Percent
$2,550,000
$31,875.00
$3,315.00
$6,250.00
$22,310.00
3,701,000
3,100,000
34,007.50
23,250.00
4,226.54
3,844.00
1,250.00
4,475.00
28,530.96
14,931.00
54
133
40,869.71
84,231.00
.414
.301
4,582,000
57,275.00
6,873.00
9,530.00
40,872.00
823 400,403.25
.533
2,935,000
29,350.00
2,846.95
3,437.50
23,065.55
603
141,893.55
.437
5,062. 50
102
31,587.50
.394
3,875.00
38,370.00
21,537. 50
16,104. 00
21,997. 50
149
9
274
71,412.50
44,282.60
143,557.50
.510
1.107
.448
3,531.25
25,818.75
20
675,000
5,062.50
2,375,000
1,100,000
5,366,000
29,687. 50
22,000,00
60,367.50
2,935,000
29,350.00
2,005,000
45,078.00
425,000
1,235,000
4,040,000
4,250.00
12,350.00
82,544.00
1,607,000
18, 220.00
4,275.00
5,896.00
243 $135,591.25
0.542
61,748.75
1.029
.814
2,515.25
38,552.75
742 244,302.75
7,433.40
2,500.00
2,437.50
4, 250.00
9,850.00
72,672.90
159
12
433
23,500.00
18,310.01
160,872.90
.326
.596
.502
4,017. 50
467. 50
13,735.00
396
134,320.50
.589
4,010.00
OO
g
Q
w
M
o
g
i
Terminal
R.R.
Ass'n of St.
Louis.
Aug. 1,1930 Terminal
R.R.
Ass'n of St.
Louis.
Jan. 9,1931 Texas & Pacific
Ry. Co.
Mar. 21,1927 City of Tokyo
Feb. 1,1929
Gen'l & ref. 4% due Jan. 1,1953...
1.00
4,599,000
68,985.00
Gen'l & ref. 4% due Jan. 1,1953-
1.00
3,500,000
38,000.00
1.25
1,447,000
18,087.50
3,038.70
2,562.50
12,486.30
2.00
811,000
10,420.00
1,589.56
560.00
8,270.44
Gen'l & ref. 5% " D " due Dec. 1,1980
External loan of 1927 S.F. 5H% due Oct. 1,
1961.
Jan. 16,1928 State of Vermont __ Loan of 1927, Z%% gold bonds due serially
to Dec. 1, 1938.
Mar. 28,1927 Hocking Valley Ry. 6-months 4 ^ % notes dated Mar. 1, 1927,
due Sept. 1,1927.
Co.
1st mtge. 5% dated Apr. 1,1928, due Apr.
Mar. 22,1928 Canadea Power
1,1958.
Corporation.
Mar. 16,1931 Southern Ry. Co._ 1st cons. mtge. 5% dated Oct. 2,1894, due
July 1,1994.
1st cons. mtge. 5% dated Oct. 2,1894, due
do
Mar. 10,1927
July 1,1994.
22,557.50
3,376.62
46,427.50
10
35,000.00
1
f 3,376.62
\
loss
.842
53,350.00
1,524
212
65,298.80
.502
649
125,103.19
.606
/ 3,376.62
loss
I
1,661.25
.067
loss
.033
2,017
}
1.50
2,000,000
30,000.00
30,000.00
1
40,350.00
1.50
500,000
5,000.00
1,250.00
3,750.00
6
10,647.79
.818
1.00
1,684,000
37,805.00
6,820.00
30,985.00
3
39,194.50
1.163
Q
W
8
o
SI
03
ro
CO
•ZO
GROUP 2.—SUMMARY OF ALL ISSUES OF STOCKS AND BONDS BY THE FIRM OF DREXEL & CO.
Managing commission
Date of
issue
Name of government, municipality, or corporation
1927
Jan. 17
Central Hudson Gas & Electric
Corporation.
Public
Service Electric and Gas
Mar. 1
Co.
9 Georgia Power Co
May 6 Philadelphia Suburban-Counties
Gas & Electric Co.
18 Lehigh & New England Railroad
Co.
26 City of Philadelphia, Pa
Title of issue
7
Maturity
Amount of
issue
Total
Issue price
Our
share
Number
of participants in
such
managing
commission
00
First and refunding mortgage.
do- ,
5%
1937
$8,000,000
All
5
1965
19,800,000
None
5
1967
1957..
45,000,000
10,000,000
All
$19,032,000
General mortgage series B
5
1954
750,000
All
School district serial..
4
Annually 1937
to 1956.
Semi-annually
1930 to 1942.
1957
3,000,000
3,000,000
6,422,000
4,693,000
do
do - - .
Erie Railroad Equipment Trust-- Series N N equipment trust
certificates.
First Hen and refunding
27 Atlantic City Gas C o . - .
mortgage.
Oct. 10 Philadelphia Suburban Water Co. First mortgage
First lien and refunding
13 The Philadelphia Electric Co
Mortgage,
do
.
Georgia
Power
Co
20
do
Nov. 3 Philadelphia Suburban-Counties
Gas & Electric Co.
do
23 Public Service Electric & Gas Co.
Dec. 5 Electric Railway Equipment Se- Equipment trust certificates
curities Corporation.
trust of Dec. 1,1927.
28 Lehigh Valley Railroad Co
General consolidated mortgage.
1928
.
.
ran. 4 Indianapolis Water Works Secur- Secured
ities Co.
May 22 Debardelesen Coal Corporation... Firt mortgage
First and refunding mortSept. 10 Georgia Power Co
gage.
Twenty-fifty
year
Dec. 18 City of Philadelphia
Debenture
Delaware
Electric
Power
Co
18
First
mortgage
19 Delaware Power & Light Co
July
Rate
Amount outstanding
Mar. 24,1933,
or Dec. 31,
1932
AH
5
None
8
99.
None
97
None
None
o
W
101^
_
95
103
100.9004 (average)
99.306 (average) .
800,000
All
2,437,000
33,211,500
98
97—
98^-
5
1967
1957
18,000,000
10,000,000
All
19,032,000
AH
1967
Quarterly 1928
to 1937.
2003
45,000,000
1, 325, 000
45,000,000
353,000
12, 686,000
All
3,800,000
3,694,500
3,250,000
15,000,000
2,836,000
All
98
None
None
8,000,000
8,000,000
3,100f 000
All
8,000,000
3,100,000
101..
96H
None
None
Netae
5
1953......
1967
5H
1978/48
1959...
1980
~—
W
>
o
None
2,500,000
35,000,000
1958
o
None
1967
1967
A
X
None
None
None
$52,500
$52,500
1
98
98
None
15,000
15, 000
1
98.
-—
99.31 (average). .
92%.
None
None
None
None
O
Apr. 10
June 21
Oct. 4
1930
Jan. 22
29
Feb. 20
Mar. 11
Apr. 27
Indianapolis Water Co
First lien and refunding
mortgage.
General Steel Castings Corporation First mortgage series A with
warrants.
Philadelphia Suburban Water Co. First morgtage
Public Service Electric & Gas
Co.
Philadelphia Electric Co
The United Gas Improvement Co_
The Baldwin Locomotive Works _
General Steel Castings Corporation
First and refunding mortPreferred stock
Preferred stock
3-year gold notes
Cumulative convertible preferred stock.
First mortgage
First lien and refunding
mortgage.
Cumulative preferred stock.
May 8 Harrisburg Gas Co
21 Indianapolis Water Co..
27 Public Service Corporation of
New Jersey.
July 1 Erie R.R. equipment trust of 1930— Equipment trust certificatesConsolidated mortgage sinkOct. 3 Lehigh Coal & Navigation Co
ing fund series C.
Philadelphia Suburban Water First mortgage
Co.
Nov. 25 Electric Railway Equipment Se- Equipment trust certificates,
curities Corporation.
trust of Dec. 1,1930.
1931
Jan. 14 The United Gas Improvement Co.. Preferred stock.._
First and refunding mortPhiladelphia Electric Co
gage.
Mar. 17 Alabama Power Co
do
26 Public Service Electric & Gas Co__
do.
May 21
Cumulative preferred stock.do.
26 Public Service Corporation of
do
New Jersey.
July 28 Delaware Power & Light Co
First mortgage..
i960..
542,600
542,000
1949..
20,000,000
17,150,000
1969-.
2,500,000
2,464,500
None
1070..
20,000,000
20,000,000
None
All 97.50
All 97.50
12,000,000
i 20,000
None
None
12,000
None
99f£ percent
None
98_
$97.50
99.4153 percent
(average).
None
None
$5
5%
i 86,658
i 94,360
$12,000,000
i 20,000
$6
5%
1970..
$2,200,000
$2,200,000
1970..
852,000
1 150,000
All
All
$6,690,000
5,575,000
6,000,000
3,919,000
1,800,000
2,177,000
Semiannually,
1930 to 1945.
1954
1970
-
Annually 1931/
40.
$5
4%
4%
$5
5%
1971.
1967..
1971,.
1971-.
ivone
100
„
40,000
40,000
1
12,000
1
8
None
Q
None
W
1,782,000 99
None
X
1,608,000 97.8423 (average)
None
1250,000
$40,000,000
All
$40,000,000
8,000,000
26,000,000
i 300,000
9ZH"-"""---•
1150,000
8,000,000
26,000,000
All
All
$103.50 per share.
$99.50 per share,
None
None
None
None
$6,000,000
6,000,000
100 percent
None
$98 per share
93H per cent
None
60,000
>
60,000
1
3
a
H
M
a
i Shares.
GROUP 2.—Summary of all issues of stocks and bonds by the firm of Drexel & Co.—Continued
to
Original group
Date of
issue
Name of government, municipality, or corporation
1927
Jan. 17 Central Hudson
Gas & Electric
Corporation.
Mar. 1 Public
Service
Electric and Gas
Co.
9 Georgia Power
Co.
May 6 Philadelphia Suburban-Counties
Gas & Electric
Co.
18 Lehigh & New
England Railroad Co.
26 City of Philadelphia, Pa.
July 7 Erie Railroad
Equipment
Trust.
27 Atlantic City Gas
Co.
Oct. 10
13
20
Nov. 3
23
Title of issue
Gross spread
Amount
of our
interest
Intermediate groups
Numshare Our net ber of
Our gross Our
parof
exprofit
profit
ticipenses
pants
First and refund- 1H per cent. $4,800,000 $72,000.00 $6,907.53 $65,092.47
ing mortgage.
1
do
$9,900,000 99,000.00
None. 99,000.00
Gross
spread
Amount
of our
interest
Numshare Our net ber of
Our gross Our
parof
exprofit
profit
ticipenses
pants
2 None
2
1 percent— $9,137,500 $91,375.00
None. $91,375.00
13
. do
1
$18,000,000 180,000.00
None. 180,000.00
3
1
$15,520,000 155,200.00
None. 155,200.00
16
do
1
$6,500,000 65,000.00
None.
3
1
$5,947,500 59,475.00
None.
59,475.00
13
None 141,550.00
15
General mortgage No profit
series B.
do
School d i s t r i c t
serial.
Series NN equip- 0.125.
ment trust certificates.
First lien and re- No profit
funding mortgage.
1
Philadelphia sub- First mortgage
urban Water Co.
The Philadelphia First lien and reElectric Co.
funding mortgage.
Georgia Power Co_
do
Philadelphia Subdo_
Hurban-Counties
Gas & Electric
Co.
Public Service --.- do- . . . . „ _ _ _
Electric & Gas
Co.
65,000.00
1 None— _-
550,000
4 None
750,000
$6,422,000
8,091.72 7,823.19
268.53
1 None
2 None
None
25,000.00
1 None
$15,555,000 38,887.50 23,331.95
15,555.55
3
1
54,000.00
6,500.00
3
3
H—
None 225,000.00
2
$2,500,000 25,000.00
$7,200,000
- $6,500,000
54,000.00
16,250.00
$22,500,000 225,000.00
None
9,750
$14,155,000 141,550.00
$5,680,000 28,400.00
$5,947,500 59,475.00
None
None
28,400.00
59,475.00
16
13
$19,000,000 95,000.00
None
95,000.00
13
Dec. 5 Electric Railway Equipment trust 0.12 on
$331,000 [$1,325,000 1, 224.70
Equipment Secertificates trust
curities Corpoor Dec. 1,1927. 0.25 on
ration.
$331,000
$6,343,000 31,713.00
Lehigh
Valley General consoli- H
Railroad Co.
dated mortgage.
1928
Jan. 4 Indianapolis Wa- Secured
ter Works Secur$3,300,000 [$3,350,000 19,000.00
ities Co.
.1 on $500,000
May 22
Sept. 10
H on $1,600,000.
2 on $1,- [$1,300,000 16,400.00
[ 650,000.
$6,000,000 60,000.00
Georgia Power Co_ First and refund- 1
Debardelesen Coal f First mortgage
Corporation.
City of Philadelphia.
Delaware Electric
Power Co.
19 Delaware Power
& Light Co.
Indianapolis WaApr. 10
ter Co.
General Steel Cast
June 21 ings Corporation.
Dec. 18
Oct. 4
1930
Jan. 22
29
Feb. 20
Mar. 11
Apr. 27
May 8
21
27
ing mortgage.
Twenty-fifty year- 0.4711.
Debenture
2
1,224.70
1 Noil©
2
H
$3,893,000
19,465.00
None.
19,465.00
33
None. 19,000.00
2
1
$1,650,000
16,500.00
None.
16,500.00
2
None
$4,720,000
23,600.00
None
23,600.00
15
None
20,850.00
40
100.00 41,650.00
12
32
16,368.00
3
None.
60,000.00
3
$1,950,000
9,186.43
1,314,66
7,871.79
5
$2, 687,000
53,340.00
6,975.44
46,364.56
No profit
First mortgage
First lien and re- No profit
271,000
funding mortgage.
First mortgage se$8, 000,000
ries A with warrants.
$2, 500,000
Philadelphia Sub- First mortgage
urban Water Co.
$10,000,000
Public
Service First and refund- 1 percent
Electric
Gas
ing mortgage.
Company.
$1 per share . i 43,329
Philadelphia Elec- Preferred stock
tric Co.
$1 per share- i 47,180
The United Gas .....do
Improvement Co.
The Baldwin Loco- 3-year gold notes. _ s' percent... $9,000,000
motive Works.
General Steel Cast- Cumulative con- $2 per share. 120,000
ings Corporation. vertible preferred
stock.
Harrisburg Gas Co. First mortgage
1H percent- $1,100,000
Indianapolis Water First lien and re- No profit—.
funding
mortCo.
gage.
Public S e r v i c e Cumulative pre- $1 per share. 175,000
ferred stock.
Corporation of
New Jersey.
i Shares
None.
None. 31,715.00
80,000
16,000
25,000
None
100,000.00
43,329.00
64,000.00
25,000.00
-.
HNone
3 None
3 None
2
None
5
H~
$4,170,000
20,850.00
1 None _
200.00 99,800.00
2
y>None
None
43,329.00
2
47,180.00 11,794.63
35,385.37
2 None
45,000.00
9,000.00
36,000.00
2
40,000.00
7,941.25
32,058.75
1 None
16,500.00
None
16,500.00
2 None
2 None
75,000.00
None.
75,000.00
2 50 cents
per share.
H
$8,350,000
$3,850,000
163,000
41,750.00
19,250.00 4,518.64
31,500.00
None.
1
14,731.36
39
31,500.00
12
GROUP 2.—Summary of all issues of stocks and bonds by the firm of DrexeF& Co.—Continued
Intermediate groups
Original group
Name of Government, municiq,lity, or corporation
Erie E.R. equipment trust of
1930.
Lehigh Coal &
Navigation Co.
I
Title of issue
Equipment trust
certificates.
6,000,000 45,000.00
1,855.00
None.
1,855.00
None.
None. 125,000.00
50 cents
per share.
8,078.60
5,000.00
250.00
4,750.00
U12,500 56,250.00
250.00
56,000.00
10
M percent. $16,250,000 81,250.00
None.
81,250.00
14
32,000.00
3,000,000
15,000.00
None
15,000.00
12
13,000,000 130,000.00
None 130,000.00
10,550,000
52,750.00
None
52,750.00
13
$1 per share.
i 150,000 150,000.00
None 150,000.00
50 cents
per share.
i 123,750
61,875.00
None
61,875.00
15
$1 per share.
1 75,000 75,000.00
None
75,000.00
50 cents
per share.
i 62,625
31,312.50
None
31,312.50
15
2,460.43
37,539.57
None
1
.....do
1,000,000
K on $742,000 2,177,000
U25,000 125,000.00
Numshare Our net ber of
Our gross Our
parof
exprofit
profit
ticipenses
pants
$2,700,000 $13,500.00 $5,421.40
24,000.00
1 percent
i Shares.
45,000.00
3,000.00
First and refunding mortgage.
do
First mortgage .
None.
Amount
of our
interest
None..
27,000.00
$1 per share.
do
$8,131.99
Gross
spread
1,800,000
Preferred stock
Cumulative preferred stock.
Numshare Our net ber of
Our gross Our
of
expar
profit
profit
penses
ticipants
0.2002 per- $6,690,000 $13,393.38 $5,261.39
cent.
Consolidated
mortgage sinking fund series
C.
First mortgage
Philadelphia Subu r b a n Water
Co.
Electric Railway Equipment trust
Equipment Se- certificates trust
curities Corpoof Dec. 1,1930.
ration.
The United Gas
Improvement
Co.
Philadelphia Electric Co.
Alabama Power
Co.
Public
Service
Electric & Gas
Co.
Public Service
Electric & Gas
Co.
Public Service
Corporation of
New Jersey.
Delaware Power
& Light Co.
Amount
Gross spread of our
interest
2%
$20,000,000 200,000.00 30,000.00 170,000.00
3,200,000 32,000.00
2,000,000
40,000.00
None
Our total profit before overhead exp e n s e s , salaries,
and taxes
Selling syndicate or groups
Name of government, municipality, or corporation
Title of issue
Gross spread
Central Hudson Gas & Electric
Corporation.
Public Service Electric and Gas
Co.
Georgia Power Co
Philadelphia Suburban-Counties
Gas & Electric Co.
Lehigh & New England Railroad
Co.
City of Philadelphia, Pa
Erie Railroad Equipment Trust..
Amount of Our gross Our share
our interest
profit
of expenses
$535,000
First and refunding mortgage...
$9,789.67
Our net
profit
Number of
participants
In percent of
principal
In dollars amount
of the
issue
$9,789.67
97 $74,882.14
0. 9360
.—.do
2,332,000
47,390.00 $15,777.91
31, 612.09
439 221,987.09
1.1211
..do.do.
3,992,000
$865,000
79,940.00
24,855.00
15,857.12
9,487.41
64,082.88
15,367. 59
652
180 139,842.59
.8872
1.3984
550,000
5,500.00
1,076.09
4,423.91
4,423.91
750,000
$2,150,000
3,711.00
10,750.00
2,566.63
6,994.25
1,144.37
3,755.75
1,144.37
4,024.28
$400,000
8,000.00
1,864.55
6,135.45
6,135.45
9,796.02
$590,000 12,400.00
Philadelphia Suburban Water Co. First mortgage
2—.
First lien and refunding mort- 1%.
$5,457,000 106,925.00 26,806.73 80,118.27
The Philadelphia Electric Co
gage.
1,811.90 18.613.10
$1,010,000
20,425.00
Georgia Power Co__
..do_
1,864.31 13,605.69
15,470.00
Philadelphia Suburban-Counties
..do..
Gas & Electric Co.
$10,470,000 157,050.00 19,284.47 137,765.53
Public Service Electric & Gas Co. .—.do1H
Electric Railway Equipment Se- Equipment trust certificates (1% on $633,000—
4,885.86
curities Corporation.
6, 630.00 1,744.14
trust of Dec. 1,1927.
<L88 on $335,000—
1.75 on $335,000—
4,177.02
3,642.98
7,820.00
$761,000
Lehigh Valley Railroad Co
General consolidated mortgage.. 1
39 34, 796.02
326 289,723.82
Atlantic City Gas Co
Indianapolis Water Works Securities Co.
Debardelesen Coal Corporation..
Georgia Power Co
City of Philadelphia
Delaware Electric Power Co_
Delaware Power & Light Co
i Shares
General mortgage series B_.
School district serial
Series NN equipment trust
certificates.
First lien and refunding mort-
Secured.
First mortgage
First and refunding mortgage...
Twenty-fifty year
Debenture. __
First mortgage
0.494_.
1
W
H
M
>
.0381
.0626
O
406 101,013.10
184 94,580.69
1.3910
.8277
.5612
.9458
o
440
457,765.53
1.0172
6,110. 56
.4611
167
54,822.98
.4321
$1, 300,000
26,000.00
8,366.60
17,633.40
53,133. 40
1.3982
$487,200
14,616.00
23,595.83
11,420. 00
11, 500.00
31,000.00
8,649.55
4,273.72
4,389.12
947.73
6,409.17
5,966.45
19.322.11
7,030.88
10,552.27
24.590.83
46 22,334.45
397 102,922.11
5 14,902. 67
247 56,916.83
3 24,590. 83
.6872
.6861
.1862
.7114
.7932
$2,284,000
$575,000
1.034,000
CO
H
O
Q
GROUP 2.—Summary of all issues of stocks and bonds by the firm of Drexel & Co.—Continued
Our total profit before overhead exp e n s e s , salaries,
and taxes
Selling syndicate or groups
Date of
issue
Name of Government, municipality, or corporation
Title of issue
Gross spread
Amount of Our gross
our interest profit
Our share
Our net
profit
Number of
participants
In percent of
principal
In dollars amount
~ of the
issue
H
d
1928
Apr. 10
June 21
Oct.
4
1930
Jan. 22
Feb. 20
Mar. 11
Apr. 27
Q
First lien and refunding mortgage.
General Steel Castings Corpora- First mortgage series A with
tion.
warrants.
Philadelphia Suburban Water Co_ First mortgage
_
Indianapolis Water Co
Public Service Electric & Gas
Co.
Philadelphia Electric Co
The United Gas Improvement Co.
The Baldwin Locomotive Works _
General Steel Castings Corporation.
First and refunding mortgage...
Preferred stock
Preferred stock
3-year gold notes
Cumulative convertible preferred stock.
First mortgage
First lien and refunding mortgage
Cumulative preferred stock
2 percent
$2 per share._
$2 per share..
1%
$1 per share. .
1H percent
Harrisburg Gas Co_—
Indianapolis Water Co
Public Service Corporation of
$2 per share
New Jersey.
Erie R.R. equipment trust of 1930. Equipment trust certificates
July
0.375 percent
Lehigh Coal & Navigation Co
Oct.
Consolidated mortgage sinking 1
fund series C.
Philadelphia Surburban Water First mortgage
Co.
Nov. 25 Electric Railway Equipment Se- Equipment trust certificates, 1.6723 on $1,435,000
curities Corporation.
trust of Dec. 1, 1930.
May
8
21
27
1.4223 on $742,000
$271,000
$8,130.00
$2,959.69
$5,170. 31
2
$5,170.31
0.9540
$1,066,000
25, 660.00
5,269.29
20,390. 71
317
145, 240.71
.7262
$1,200,000
28,065.00
8,216.86
19,848.14
27
44,848.14
1.7980
$1,682, 500
27,618.75
6,641.27
20,977. 48
416
162,427.48
.8121
i 18,979
i 15, 680
$1,359,000
i 4,900
37,958.00
32,110
13,590
4,900
5,976.81
5,557.26
220.00
221.25
31, 981.19
26,552. 74
13,370. 00
4,678. 75
87
135
152
73
75,310.19
61,938.11
76,101.36
36,737. 50
.8690
.6564
.6341
1.8369
$510, 000
$426,000
i 9,700
7,650. 00
12,780.00
17,720.00
2,162. 72
4,180. 52
5,817.14
5,487. 28
8,599. 48
11,902.86
2
375
21,987. 28
8, 599. 48
118,402.86
.9994
1.0093
.7893
M
$2,495,000
$1, 776, 000
9,356.25
17,450.00
1,781.65
7,574.60
10,188. 75
15, 706. 59
63, 267. 35
.2348
1. 0544
GO
$640,000
6,400.00
$1, 435,000
23,997.51
7, 261. 25
4, 606. 22
12,141. 72
1, 793. 78
11,855.79
29
30, 543. 78
13, 710. 79
w
c
W
Q
tel
H
o
rr
1931
Jan. 14
29
Mar. 17
26
May 21
26
July 28
*
The United Gas Improvement Co. Preferred stock
Phialdelphia Electric Co
First and refunding mortgage..
Alabama Power Co
_do_.
Public Service Electric & Gas Co. .—.do
do.
Cumulative preferred stock...
do
_
__
Public Service Corporation of
New Jersey.
Delaware Power & Light Co
First mortgage.
$2 per share
1H percent
2%..
IX
$1.50 per share$2 per share
1 percent
247,351.28
369,932.96
*41,341
$5,082,000
$1,220,000
$3,932,000
» 72,200
19,900
81,941.00
75,260.00
24,400.00
62,960.00
108,300.00
19,800.00
15,589.72
16,577.04
5, 540. 72
17, 757. 34
23,330.34
5,121. 63
66,351.28
58,682.96
18,859. 28
45, 202. 66
84,969.66
14,678.37
308
341
124
351
270
331
227,952. 66
$296,844.66
120,990.87
.9248
.8232
.8767
.9895
.8066
$1,774,000
17,740.00
3,450.00
14, 290.00
28
51,829.57
.8638
i Shares
Q
W
B
248
STOCK EXCHANGE PRACTICES
GROUP 3.—SUMMARY OF ALL UNDERWRITINGS OF STOCKS AND
BONDS BY THE FIRM OF J. P. M. & CO.
Feb. 24,1927:
International Telephone & Telegraph Exchange
of All America Cables stock:
Amount of issue
shares. _
360, 407
Underwriting the exchange of International
Telephone & Telegraph stock, J. P. M. &
Co.'s profit
$283, 137, 77
June 14,1927:
International Telephone & Telegraph Corporation convertible 5% percent bonds:
Amount of issue
$25, 000, 000
Underwriting the redemption of bonds,
J. P. M. & Co.'s profit
211,312.00
Sept. 15, 1927:
New York, New Haven & Hartford R.R,. 7 percent
preferred stock:
Amount of issue to be underwritten _ shares _ _
100, 000
Subscribed by stockholders
do
89,501
Taken by underwriters
do
10, 499
Group took up stock at cost.
Mar. 19, 1928:
E. E. du Pont de Nemours & Co. preferred stock:
Amount of issue
shares. _
101, 575
Subscribed by stockholders
do
95, 476
Taken by underwriters
do
6, 099
J. P. M. & Co.'sprofit
297, 701. 98
Dec. 21, 1928:
International Telephone & Telegraph Corporation convertible 4}£ percent Jan. 1, 1939:
Amount of issue
$56, 911,400
Subscribed by stockholders
56, 590, 560
Taken by underwriters
320, 840
J. P. M. & Co.'s profit
589,663.74
Mar. 13, 1930:
International Telephone & Telegraph:
Amount of issue
shares.733, 967
Subscribed by stockholders
do
730, 967
Taken by underwriters
do
3, 000
J. P. M. & Co.'s profit
332, 147. 81
May 23, 1930:
General Motors Corporation $5 preferred stock:
Amount of issue
shares. _ 1, 875, 366
Subscribed by stockholders
do
1, 716, 804
Taken by underwriters
do
158, 562
J. P. Si, & Co.'s profit_.__
840, 914. 70
June 2, 1930:
Hudson Bay Mining & Smelting Co., Ltd., 5 year
6 per cent convertible debenture July 15,1935:
Amount of issue
$5, 000, 000
Subscribed by stockholders
3, 221, 200
Taken by underwriters
1, 778, 800
J. P. Si. & Co.'s profit
16, 750. 00
Apr. 9, 1931:
St. Joseph Lead Company 10-year convertible 5%
per cent debenture, May 1,1941:
Amount of issue
$9, 752, 300
Subscribed by stockholders
1, 161, 500
Taken by underwriters
8, 590, 800
J. P. Si. & Co.'s profit
74, 816. 46
STOCK EXCHANGE PRACTICES
249
ALLEGHANY CORPORATION COMMON STOCK UNDERWRITING
May 11, 1929, J. P. Morgan & Co. agreed to purchase at $30 per share, up to
525,000 shares Alleghany Corporation common stock, or any part thereof which
should not be subscribed to by the common-stock holders of the corporation to
whom these shares were to be offered.
The Guaranty Co. had a 40 percent interest in this underwriting on original
terms.
Stockholders of the corporation subscribed to 524-626 shares of the total of
526,123 shares offered. One thousand four hundred and ninety seven shares
were taken up by the underwriters.
Mar. 15, 1927:
American Cellulose & Chemical Mfg. Co., Ltd., stock.
Par value of offering, $5,500,000.
Our one half interest in underwriting of $2,750,000.
Profits received by J.P.M. & Co., 1,375 shares preferred.
Underwritten by Robert Fleming & Co. and J. P. Morgan & Co.
AMERICAN RADIATOR & STANDARD SANITARY CORPORATION COMMON STOCK
UNDERWRITING (1929)
The American Radiator & Standard Sanitary Corporation offered to its common
stockholders of record May 2, 1929, the right to subscribe to additional common
stock to the extent of 10 per cent of their holdings. (The corporation had outstanding approximately 7,600,000 shares of common stock without par value.)
On April 5, 1929, J. P. Morgan & Co. and the First Security Company jointly
agreed with the corporation to take up at $25 per share all common stock not
subscribed for by stockholders.
As a consideration for this undertaking, the corporation sold to us jointly
118,000 shares of common stock at $30 per share. One thousand six hundred and
forty-eight shares of common stock not subscribed by stockholders purchased at
$25 per share.
J. P. Morgan & Co.'s participation:
59,000 shares at $30 per share
__.. $1,770, 000
824 shares (unsubscribed for) at $25 per share
20, 600
59, 824 shares
1, 790, 600
June 25, 1927:
Celanese Corp. of America new common stock:
Par value of offering, $6,000,000. Our one half interest in underwriting
$3,000,000, of which we ceded to Morgan, Grenfell & Co. a 20 per cent
share.
Profits received by J. P. M. & Co., $120,000.00.
Underwritten by Robert Fleming & Co. and ourselves.
CELANESE CORPORATION OF AMERICA 7 PERCENT CUMULATIVE SERIES PRIOB
PREFFERED STOCK UNDERWRITING
February 4, 1928, J. P. Morgan & Co. and Robert Fleming & Co., London,
underwrote subscription by stockholders of 114,818 shares prior preferred stock
at $100 per share.
April 5, 1928, account purchased the unsubscribed 361 shares at $100 per share.
Account closed May 5, 1928. J. P. Morgan & Co.'s profit $106,747.36.
GROUP 4.—SUMMARY OF ALL UNDERWR1TINGS OF STOCKS AND
BONDS BY THE FIRM OF DREXEL & CO.
UNDERWRITING OF THE PHILADELPHIA & READING COAL & IRON COMPANY
TWENTY YEAR CONVERTIBLE 6% GOLD DEBENTURE BONDS DUE MARCH 1,1949
On March 1, 1929, Drexel & Co. agreed to underwrite at par for a commission
of 5% the subscription by stockholders of The Philadelphia & Reading Coal &
Iron Corporation to $30,800,000 of the above debentures.
On March 5, 1929, an Underwriting Syndicate of 58 participants was formed in
which Drexel & Co. participated to underwrite the bonds at 96.
The subscription rights terminated April 8th and on April 11th a distributing
syndicate with 291 participants in which Drexel & Co. participated was formed
250
STOCK EXCHANGE PRACTICES
to purchse at 96}4 the bonds not taken by the stockholders, amounting to $13,981,
950.
The amount of $2,676,000 was withdrawn by members of the underwriting
syndicate, leaving a balance of $11,305,950 to be disposed of by the distributing
syndicate. In addition the Distributing Syndicate purchased $1,784,000 of
debentures at 96.50%.
Drexel & Co.'s profit, $415,541.44.
Jan. 26, 1928:
Public Service Corp. of NJ. 20-year 4^% conv.
debentures due 1948:
Amount of issue
$43,689,000
Subscribed by stockholders
39, 913, 000
Taken by underwriters
3, 676, 000
Drexel & Co.'s profit
$383,592.65
Feb. 20, 1929:
Connecticut Electric Service Co. common stock:
Amount of issue
shares. _
143, 000
Subscribed by stockholders
do
143, 000
Drexel & Co.'s profit
28, 125. 00
July 25, 1929:
Connecticut Electric Service Co., common stock:
Amount of issue
shares.187, 200
Subscribed by stockholders
do
187, 200
Drexel & Co's profit
36, 796. 54
Aug. 28, 1929:
General Asphalt Company, conversion of 5%
conv. preferred stock into common stock and
subscription by stockholders to additional
shares of common stock:
Amount of issue
shares. 200, 941
Subscribed by stockholders
do
176, 652
Taken by underwriters
do
24, 289
Drexel & Co.'s profit
172, 768. 59
GROUP 5.—SUMMARY OF TRANSACTIONS ON THE PART OF THE
FIRM OF J. P. M. & CO. IN WHICH THERE WAS NO PUBLIC OFFERING
$200,000,000.
BRITISH GOVERNMENT ONE-YEAR REVOLVING CREDIT DUE AUGUST 28,
1932
August 28, 1931, opened a revolving credit for $200,000,000 for one year.
We agreed to purchase British Government Treasury bills in amounts of
$10,000,000 or multiples thereof up to an agrgegate of $200,000,000 at any one
time outstanding. Bills to be issued for 30, 60, or 90 days and discounted at the
rate of 1% above the Federal Reserve Bank of New York official discount rate
for 90-day commercial paper at date of discount, such discount to be not less than
4J/2% nor more than 6%, unless Federal Reserve bank's discount rate exceeded
6%, in which event bills to be discounted at same rate as Federal Reserve bank's
rate.
All the Treasury bills issued were discounted at the agreed minimum rate of
4H%e formed a group of 108 banks and banking institutions to participate in
this credit, the compensation being $2,000,000, i.e., 1% on the $200,000,000 credit.
We received this compensation and paid it to all participants "on August 31, 1931.
We also received and retained for our services an additional commission of
$500,000.
At the time of the reduction of this credit from $200,000,000 to $50,000,000 on
March 4, 1932, we requested and received from the participants a refund of their
proportionate shares of the commission as follows:
1% commission, calculated from March 21st to August 28, 1932, on $120,000,
000.
1% commission, calculated from April 5th to August 28, 1932, on $30,000,000,000.
This refund, amounting to $654,166.66, was credited to British Treasury
special account on March 4, 1932.
STOCK EXCHANGE PEACTICES
251
SUMMARY
Our share of the 1% commission
$111, 940. 39
In addition to this, we received an additional %% commission
500, 000. 00
Total commissions received by J. P. Morgan & Co
Against the }i% commission referred to above, we incurred
expenses (including $15,000 legal fee) amounting to
Net commissions to J. P. Morgan & Co
611, 940. 39
33, 560. 81
578, 379. 58
$25,000,000
(DOLLAR PORTION) ONE-YEAR REVOLVING CREDIT GRANTED TO
THE BANCA D'ITALIA ROME, DATED DECEMBER 22, 1927
On December 22, 1927, Morgan Grenfell & Co., Baring Bros. & Co., Limited,
Hambros Bank, Limited, and N. M. Rothschild & Sons, all of London, and
J. P. Morgan & Co., New York, granted a revolving credit for one year to the
Banca d'ltalia, Rome, of $25,000,000 and £5,000,000 sterling.
In conjunction with this credit, the Banca d'ltalia also obtained a further
credit for the approximate equivalent of $75,000,000 from Federal Reserve banks,
the Bank of England and several European central banks.
Advances under the dollar portion of the credit in amounts of $500,000, or
multiples thereof, to be made for afixedperiod of thirty days; the Banca d'ltalia
to repay each advance at end of 30-day period and to have right to reborrow
repaid advances.
Dollar and sterling lenders to provide equal amounts of each advance.
Interest on the dollar advances at 1% above the official rate of discount of
Federal Reserve Bank of New York for 90-day commercial paper, discounted by
member banks but with minimum of 5% per annum. Interest to be paid on
each advance upon repayment.
As collateral for advances, Banca d'ltalia to hypothecate and hold, subject to
the order of Messrs. Morgan Grenfell & Co., London, for account of the lenders
negotiable Treasury bills of the Italian Government.
1% percent commission to be paid on the dollar portion of credit ($25,000,000),
viz, $312,500. J. P. Morgan & Co. to receive a separate commission of }{ percent
from the Banca d'ltalia for services in arranging and managing the dollar credit.
On December 24, 1927, J. P. Morgan & Co. charged the National Institute of
Exchange, Rome, $325,000, and the Banca d'ltalia Direzione Generale, Rome,
Italy, $50,000, and credited these amounts to an account designated as "Banca
d'ltalia Special Account," and in turn charged this latter account $375,000,.
representing total commission of 1% percent due in connection with the dollar
portion of the credit.
On December 29, 1927, paid the participants their proportionate share of the
1% percent commission ($312,500) on their participation in the dollar portion
of the credit. J. P. Morgan & Co. also received }i percent commission ($62,500)
for services in arranging and managing the credit.
The credit expired by limitation on December 22, 1928, no drawings or advances
having been made against the credit.
89 participants.
$25,000,000
JAPANESE CURRENCY STABILIZATION CREDIT, DATED NOVEMBER 21,
1929
November 19, 1929: J. P. Morgan & Co., Kuhn, Loeb & Co., the National
City Bank, First National Bank, New York, at the request of the Imperial
Japanese Government and the Bank of Japan, entered into an agreement with
the Yokohama Specie Bank, Ltd., to grant them a revolving credit for $25,000,000
for one year from the date of promulgation, i.e., November 21, 1929.
The Yokohama Specie Bank, Ltd., had the right to call for advances of $500,000
or multiples thereof for a period of 30 days, with the privilege of renewals in
whole or in part, provided that the total advances outstanding at any one time
did not exceed $25,000,000. No advance was to be made later than 30 days
prior to the expiration of the credit, i.e., November 21, 1930.
Interest payable on each original or renewal advance to be 1 % above the Federal Reserve Bank of New York official discount rate for 90-day commercial
paper rediscounted by member banks. The interest rate in no case was to be
than 5% per annum.
Digitized less
for FRASER
252
STOCK EXCHANGE PRACTICES
As security for the repayment Thereof, the Yokohama Specie Bank, Ltd.,
agreed to deliver to J. P. Morgan & Co., Imperial Japanese Government external
loan of 1924 thirty-year sinking fund §%% gold bonds (issued in U.S.A.), dated
January 1, 1924, and due February 1, 1954, and Imperial Japanese Government
4% sterling loan bonds of 1905, due January 1, 1931, in amounts with a market
value equal to at least 120% of such advance or renewal.
On November 22, 1929, we received from the Yokohama Specie Bank, Ltd.,
$250,000, being 1% commission for the participants and $62,500, being }i of 1%
managing commission for the group.
Number of participants, 85.
Original group
Interest
K% managing commission of
expenses
of $3,662.27
paid Dec.
6,1929
J . P . M. &Oo., ,„,„
Kuhn, Loeb & Co., 25%-.
The Natl. City Bk., 25%.
First Natl. Bk. N . Y.,""
100%
$20,000,000
1% commission
ParticiTotal
pation in of $250,000 commisbanking >aid group sions
on Nov.
group
paid
22,1929
$19,612.58 $3,000,000
14,709.43 2,250,000
14,709.43 2,250, 000
9,806.29
1,500,000
58,837.73
Banking group
9,000,000
22,500
22,500
15,000
$49,612. 58
37,209. 43
37,209.43
24,806.29
90,000 148,837.73
ONE-YEAR REVOLVING CREDIT GRANTED TO THE BANK OE SPAIN
August 5, 1928, J. P. Morgan & Co. and a group granted a 1-year revolving
credit for $20,000,000 to the Bank of Spain. The rate of interest charged was 1%
above the rediscount rate for 90-day commercial paper prevailing in New York
at the time of making each advance, but in no case to be less than 5 %.
We received 1% commission, $200,000, which was paid to participants. We
received, in addition to our part of the above a managing commission of $50,000,
being 1}4%. According to the contract, all payments of principal and interest
were to be made at our office.
Upon the expiration of the above credit, a new credit was formed under the
same conditions, to run until August 5, 1930. At the request of the Bank of
Spain, this credit was terminated April 5, 1930. We refunded to the Bank of
Spain $83,333.33, being one third of the $200,000 and one third of our managing
fee.of $50,000.
$38,000,000
BANK OP SPAIN REVOLVING CREDIT, DATED MARCH
DUE SEPTEMBER 27, 1932
27, 1931.
On March 26, 1931, a revolving credit was granted to the Bank of Spain,
Madrid, for $38,000,000.
We received on March 28, 1931 as compensation, a commission of $570,000,
being 1 per cent per annum for 18 months, viz, 1]4 percent on the full amount of
the credit of $38,000,000; but if the Bank of Spain should surrender the credit on
March 27, 1932, $95,000, being one half of the commission paid for 6 months
beginning March 27, 1932, and ending September 27, 1932, shall be repaid to the
Bank of Spain.
We also received on March 28, 1931, a managing commission of $142,500,
being one fourth of 1 percent per annum on the full amount of the credit, subject
to a reduction of $23,750 in event that the credit should be surrendered on
March 27, 1932.
Commissions were paid to participants on March 30, 1931.
On April 23, 1931, we wrote to the participants in this credit requesting them
to refund us the full amount of the commissions paid them, and, between April
17 and May 2, 1931, we received the refunded commissions from them and reimbursed the commission account.
The amount refunded by us was $187,500, of which $142,500 represented managing commission of one fourth of 1 percent and $45,000 represented V/i percent
on our participation of $3,000,000.
253
STOCK EXCHANGE PRACTICES
AEGENTINE GOVERNMENT TREASURY BILLS
1927-28 (three issues redeemed at maturity).
Total issues $44,000,000.
Number of participants 68.
J. P. Morgan & Co. profit, $35,668.01.
Share of
Par value Par value Gross
profit to
outstand- profit Expenses J.
of
P. M .
offering ing Mar. 24
&Co.
$5,000,000
$6,250
2,000,000
2,000,000
50,000
1,800
40,350.00
1,310,000
1,310,000
26,200
3,447.21
11,897.70
3,368,000
3,368,000
67,360
35,785
18,734.50
$5,000,000
Hocking Valley Ry. Co
6 months 4J4 per cent notes dated Mar. 1,1927,
due Sept. 1,1927; offering date Mar. 28,1927;
price paid obligor 99M; issue price 99%.
ComNo. mission
Group
Percent
1 0.006
5 .1187
Managers
Original
Intermediate
Syndicate--
Canada Power Corp
First mortgage 5 percent: Dated Apr. 1, 1928;
due Apr. 1,1958; offering date Mar. 22, 1928;
price paid obligor 102>£; issue price 105.
ComNo. mission
Group
Managers
Original
Interm ediate
Syndicate
_ _
1
3
Percent
0.125
.875
1
1.5
Southern Ry. Co.
First cons. mtge. 5 percent, dated Oct. 2,1894,
due July 1, 1994; offering date Mar. 16, 1931;
price paid obligor 107; issue price, 109.
Group
Managers
Original
Intermediate
Syndicate. _
no.
1
2
3
6
_
-
Commission
Percent
0.10
.40
.50
1.00
Southern Ry Co
First cons. mtge. 5 percent, due July 1,1994; offering date Mar. 10, 1927; price paid obligor
105; issue price, 107.
Group
Managers
Original
Intermediate
Syndicate
$750 $1,661.25
http://fraser.stlouisfed.org/
175541—33—PT 1
17
Federal Reserve Bank of St. Louis
no.
-
Commission
1
2
Percent
0.10
.90
3
1.00
254
STOCK EXCHANGE PRACTICES
JOHNS-MANVILLE CORPORATION COMMON
In June 1927 J. P. Morgan & Co. acquired 400,000 shares of Johns-Manville
Corporation common at 47%.
Three hundred and forty-three thousand seven hundred and fifty shares were
disposed of to a selected list at 47%.
Fifty-six thousand two hundred and fifty shares were disposed of to a selected
list at 57y2.
UNITED CORPORATION UNITS
January 21, 1929, J. P. Morgan & Co. sold 600,000 units consisting of 1 share
United Corporation preference stock and 1 share United Corporation common
stock at $75 per unit, as follows:
Through Bonbright & Co
Through Drexel & Co
Through 291 others
Units
202, 930
82, 000
315, 070
ALLEGHANY CORPORATION COMMON STOCK
February 15, 1929, J. P. Morgan & Co. sold to the Guaranty Company 500,000
shares at $24 a share. J. P. Morgan & Co. paid the Guaranty Co., of New York,
a commission of $4 per share on this stock.
J. P. Morgan & Co. sold to others 573,900 shares at $20 a share.
NIAGARA HUDSON POWER CORPORATION COMMON STOCK ACCOUNT
August 19, 1929, the Niagara Hudson Power Corporation sold 2,000,000
shares of Common Stock (carrying one class A and one 5-year class C warrant,
dated Dec. 2, 1929, with each share of stock) at $25 per unit.
Units:
J. P. Morgan & Co. and Bonbright & Co. agreed to purchase
Of this amount J. P. Morgan & Co. sold to selected list
Leaving a balance of
. ..
Divided equally:
J. P. Morgan & Co
.
Bonbright & Co
.
„
200, 000
56, 500
143, 500
71, 750
71, 750
STANDARD BRANDS INCORPORATED COMMON STOCK
On or about September 5, 1929, 722,600 shares were disposed of at 32 to a
selected list.
255
STOCK EXCHANGE PRACTICES
GROUP 6—SUMMARY OF TRANSACTIONS ON THE PART OF THE
FIRM OF DREXEL & CO. IN WHICH THERE WAS NO PUBLIC OFFERING
PARTICIPATIONS IN REVOLVING CREDITS
(Arranged by J. P. Morgan & Co.)
BRITISH GOVERNMENT i
Date, Aug. 28,1931. Maturity, Aug. 28, 1932
Date
Sept. 1,1931
To
_
- Apr. 5,1932
Total credit
Our participation
_ $200,000,000
$3,000,000
Our commission!
Percent
1
$30,000*
BANK OF SPAIN
Date, Aug. 5,1928. Maturity, Aug. 5,1929
Oct. 29,1928
^_ July 24,1929
' . _ . $20,000,000
$250,000
1
$2,500*
$250,000
1
$2,500
Date, Aug. 5,1929. Maturity, Aug. 5,1930
Aug. 12, 1929
Feb. 13,1930
$20,000,000
Date, Mar. 27,1931. Maturity, Sept. 27,19322
$38,000,000
$250,000
$3,750
BANCA D'lTALIA, ROME
Date, Dec. 22,1927. Maturity, Dec. 22,1928
$25,000,000
$500,000
Per cent
$6,250
No calls for advances were received.
JAPANESE C U R R E N C Y STABILIZATION C R E D I T G R A N T E D TO YOKOHAMA SPECIE
BANK, L I M I T E D
Date, Nov. 19,1929. Maturity, Nov. 19,1930
$25,000,000
$250,000
Per cent
$2,500
No calls for advances were received.
Par value
Par value outof offering standing
Mar. 24
Savanah Gas Co. 1st mtge. 5% " B " , due 1956;
offering date, Aug. 19,1927; price paid obligor,
98J4; issue price, 100
$200,000 $200,000
Midland Valley R.R. 1st mtge. 5%, due 1943; offering date, Oct. 26,1928; price paid obligor, 95; issue
price, 97
400,000 400,000
Share of.
profit to
J. P. M .
& Co,
Gross
profit
$3,000
None
$3,000
8,000
$4,474.71
3,525.2$
1 On Mar. 4,1932, the British Government reduced its original commitment of $200,000,000 to $50,000,000.
Drexel & Co.'s participation was reduced accordingly from $3,000,000 to $750,000, and they refunded $9,812:5©
of the $30,000 originally received as commission.
2 Credit canceled by Bank of Spain Apr. 23,1931. Drexel & Co. refunded entire commission of $3,750.
256
STOCK EXCHANGE PEACTICES
GROUP 7.—SUMMARY OF ALL ISSUES AND UNDERWRITINGS OF
STOCKS AND BONDS BY OTHERS IN WHICH THE FIRM OF J. P.
MORGAN & CO. TOOK A FINANCIAL PARTICIPATION OR COMMITMENT
Jan. 3,1927: Porto Rican American Tobacco Co. 15-yr. secured
6% conv. bonds due June 1,1942; National City Co
Jan. 8, 1927: Dominican Republic 14-yr. customs admin. 5H%
of 1926, first series, due 1940; National City Co., Dillon Read
& Co., Brown Bros. & Co., Alex. Brown & Sons, Bait
Jan. 10,1927: Gulf Oil Corp. of Penn. 20-yr. S.F. 5% debentures
due Feb. 1,1947; National City Co
Jan. 13, 1927: Southern California Edison Co. ref. mtge. 5%
bonds series due 1951; Harris Forbes & Co., E. H. Rollins &
Sons, Coffin & Burr, National City Co
Jan. 19, 1927: Consolidated Gas Co. of N.Y. $5 cumulative
preferred stock; National City Co
Jan. 31, 1927: Missouri Pacific 1st & ref. mtge. 5's series F due
March 1,1977; Kuhn, Loeb & Co
_
_._*___
_...
Feb. 11,1927: Chicago & North Western Ry. 1st & ref. 4J^'s due
May 1, 2037; Kuhn, Loeb & Co., National City Co_._
Feb. 15, 1927: Chicago, North Shore & Milwaukee Co. 3-yr.
bty% notes due Feb. 1,1930; National City Co., Halsey, Stuart
& Co., Inc.
Mar. 1,1927: Public Service Electric & Gas Co. 1st & ref. 5%
series due 1965; Drexel & Co., Bonbright & Co
Mar. 9, 1927: The Pennsylvania, Ohio & Detroit R. R. 1st ref.
4 ^ % series A due 1977; Kuhn, Loeb & Co., National City Co.
Mar. 9, 1927: Georgia Power Co. 1st & ref. mtge. 5% series, due
1967; Drexel & Co., Bonbright & Co., Harris, Forbes & Co
Mar. 11, 1927: City of Brisbane 3-yr. S.F. 5% gold bonds, due
Mar. 1, 1957; National City Co
Mar. 11, 1927: The Northern Central Railway Co. Gen. & ref.
mtge. 4H% series A, due Mar. 1, 1974; Kuhn Loeb & Co.,
National City Co
Mar. 16,1927: Republic of Peru secured 7% S.F. gold bonds, due
Sept. 1, 1959; J. W. Seligman & Co., National City Co
Mar. 28, 1927: Lawrence Portland Cement Co. 15-yr. b)4%
debentures, due Apr. 1,1942; National City Co., Kean, Taylor
& Co-—
Feb. 5, 1927, and Apr. 5, 1927: New York Steam Corporation
1st & ref. mtge. 5% series due 1951; National City Co., Cassatt
& CoApr. 5,1927: The Tennessee Electric Power Co. 1st & ref. mtge.
bonds 5% series due 1956; National City Co~
—Apr. 25, 1927: Illinois Central R.R. & New Orleans R.R. Co.
joint 1st ref. mtge. 4H% bonds series C due Dec. 1,1963; Kuhn,
Loeb & Co
-_Apr. 26, 1927: Duquesne Light Co. 1st mtge. 4 ^ % gold bonds
due Apr. 1,1967
In original group—
_
In purchase group
_
_
First National Bank.
Apr, 26, 1927: American- Radiator Co. 20-year 4 ^ % deb. due
May 1,1947; First.National Bank._._
May 5,1927: Remington Rand, Inc., 20 year 5M% debs, series A
due May 1,1947; National City Co
May 16, 1927: Chicago RapM Transit Co. 1st &•• ref. mtge. 6%
bonds series A due 1953; National City Co., Halsey, Stuart &
Co..
May 19,1927: Union Pacific R.R. Co. 40-year 4H% gold bonds
due July 1,1967; Kuhn, Loeb & Co
June 2, 1927: Cuba Northern Rys. 1st mtge. gold bonds 5%
series of 1942; National City Co., Lee, Higginson & Co., Cassatt & Co
June 2,1927: Southern Pacific Co.-Oregon Lines 1st mtge. 4H%
series A bonds due 1977
In underwriting group
_
In original group
-._
Kuhn, Loeb & Co.
June 7, 1927: The Hudson Coal Co. 1st mtge S.F. 5% series A.
bonds due 1962_
In original group
In syndicate group
First National Bank.
June 25, 1927: New York Steam Corp. 1st mtge. gold bonds 5%
series due 1951; National City Co
_
June 28,1927: Northern Ohio Power & Light Co. gen. & ref. mtge.
5K% series A due 1951; National City Co
1
Shares.
Par value of
offering
J. P . M. &
Co.'s commitment
$8,000,000
$900,000
5,000,000
312,500
1,917.04
35,000,000
500,000
4,250.00
15,000,000
1
1,200,000
Profit to
J. P. M. &
Co.
$6, 525. 00
375,000
6,215.24
i 150,000
75,000.00
95,000,000
1,000,000
6,598.60
20,572,000
1,028,600
12, 510.87
2,500,000
312,500
2,093. 51
19,800,000
400,000
8,407. 91
22,000,000
437,000
3,828.12
45,000,000
150,000
2,781.30
7,500,000
'3,750, 000
18,750 00
5,231,000
100,000
809. 08
15,000,000
1,000,000
2,856. 25
2,000,000
250,000
3,125.00
4,000,000
1,000,000
9,812.50
2,000,000
2,000,000
1,600.00
17,350,000
575,000
5,031.25
1,980,000
1,237, 500
19,192.26
19,800.00
55,000,000
10,000,000
2,500,000
39,867.47
25,000,000
3,324,000
41,042.97
1,795,000
310,750
1,786.81
26,835,000
250,000
10,500.00
20,000,000
3,000,000
10,500.00
250,000
437,500
1,542.17
3,828.12
1,435,000
575,000
12,197.50
3,727. 62
1,500,000
375,000
2,812.50
1,434,000
358,500
2,062. 74
20,000,000
35,000,000
257
STOCK EXCHANGE PEACTICES
GROUP 7.—Summary of all issues and underwritings of stocks and bonds by others,
in which the firm of J. P. Morgan & Co. took a financial participation or commitment—Continued
Par value of
offering
June 29,1927: Western Maryland Ry. Co. 1st & ref. mtge. 5H%
series A bonds due July 1,1977; Kufcm, Leob & Co., Speyer &
Co., National City Co
$12,000,000
Aug. 8,1927: Consolidated Water Power and Paper Co. 1st mtge.
series A 5K% due 1947; National City Co
7,500,000
Aug. 26, 1927: Chicago, Rock Island & Pacific Ry. Co. 4H>%
series A due Sept. 1, 1952; Speyer & Co., National" City Co.,
J. & W. Seligman & Co
40,000,000
Aug. 29,1927: Boston & Maine R. R. 1st mtge. 5% bonds series
" A C "due Sept. 1,1967
30,942,000
Original
_
_
Selling syndicate
__
J. P. M. & Co.'s allotment:
Selling syndicate
Commission
J. P. M. & Co.'s profit on sale of allotment in selling syndicate
Kidder Peabody & Co.
Harris Forbes & Co.
Lee Higginson & Co.
Sept. 12,1927: Firestone Tire & Rubber Co. of California 15
year S.F. 5% bonds due Sept. 1,1942; The Cleveland Tr. Co.,
Otis & Co., National City Co
10,000,000
Sept. 16, 1927: Southern California Ediscn Co. ref. mtge. gold
bonds series of 5% due 1952; Harris Forbes & Co., E. H. Rollins
& Sons., Coffin & Burr, Inc., National City Co
30,000,000
Sept. 21,1927: Pacific Gas & Electric Co. list & ref. mtge series E
4H% due 1957; National City Co., American National Co.,
Blythe Witter & Co..
_.
15,000,000
Oct. 13. 1927: The Philadelphia Electric Co. 1st & ref. mtge.
4H% series due 1967; Drexel & Co., Brown Bros. & Co., Harris
Forbes & Co
_
35,000,000
Oct. 14, 1927: U.S. of Brazil bonds, due Oct. 15, 1957; Dillon,
Read & Co., National City Go
_
41,500,000
Oct. 19, 1927: The Edison Electric Illuminating Co. of Boston
3-yr. 43^% notes, due Nov. 1,1930...
30,000,000
In original group.
_
_
In selling group
_
__
Lee, Higginson & Co.
National City Co.
Oct. 25, 1927: Hershey Chocolate Corp. (of Delaware) 6% cum.
prior pfd. stock; National City Co., Graham Parsons & Co.,
Cassatt & Co., Union Trust Co., Pittsburgh..
15, 000,000
Oct. 25, 1927: Continental Oil Co. 10-yr. 5H% gold debentures
due Nov. 1,1937; National City Co., Carl H. Pforzheimer & Co. 12,000,000
Nov. 5, 1927: International Match Corp., 20 y r . S . F . deb. due
Nov. 1, 1947
_
50, 000, 000
In banking group
_
._
In selling group
_
In original group..
_
Lee, Higginson & Co.—
_
_
Guaranty Co
National City Co
_
Nov. 17, 1927: Norwegian Hydro Electric Nitrogen Corp. ref.
& imp. mtge. gold bonds series A 5H% due Nov. 1, 1957;
National City Co
20, 000,000
Nov. 18,1927: Williamsport Wire Rope Co. 1st mtge. S.F. 6%
bonds due Nov. 1,1947; National City Co
1,600,000
Nov. 23,1927: Public Service Electric & Gas Co. 1st & ref. mtge.
4K% series due Nov. 1, 1967; Drexel & Co., Bonbright & Co.
Inc.
45,000,000
Dec. 2, 1927: City of Vienna external loan S.F. 6% bonds due
Nov. 1, 1952; National City Co., Dillon Read & Co
30,000,000
Dec. 3, 1927: Missouri, Kansas & Texas R.R. prior lien series
D ^A% due Jan. 1, 1978; Kuhn, Loeb & Co., National City
Co., Ladenburg, Thalman & Co., J. & W. Seligmann & Co.,
Hallgarten & Co
13,600,000
Dec. 6, 1927: Central Railroad Co. of New Jersey general mortgage 4% bonds due July 1,1987; First National Bank
5,000,000
Dec. 16,1927: Duquesne Light Co. 5% cumulative 1st preferred
stock:
Original Group
Purchase Group
__
Ladenburg, Thalman & Co.
H. M. Byllesby & Co. Inc.
Chase Securities Co.
Lee, Higginson & Co.
J. P. M. &
Co.'s commitment
Profit to
J. P. M. &
Co.
$600,000
$5,100.00
1,071, 500
8,304.12
2,500,000
21,977.08
3,440,000
1, 500,000
34,400.00
13,479.15
1,500,000
11,250.00
14,843.75
833,333.33
4,000.00
750,000
12,965, 56
250,000
3,845.08
2,593, 750
42,936.39
515, 625
500,000
4, 368. 39
2, 500. 00
2,625,000
45, 937. 50
750, 000
7,875.00
1, 000, 000
1, 000, 000
3,125, 000
4,431.35
5, 000.00
24,989.14
4,375,000
33,906.25
400,000
3,000.00
1,000,000
14,103.50
4,200,000
12,600.00
510,000
6,178.06
1, 250,000
11,905.91
755,000
520,000
7,550.00
6,922.33
258
STOCK EXCHANGE PRACTICES
(xROUP 7.—Summary of all issues and underwritings of stocks and bonds by others,
in which the firm of J. P. Morgan & Co. took a financial participation or commitment—Continued
Dec. 16, 1927: Philadelphia Co. 5% secured gold bonds due
Dec. 1, 1967
_
Original group
Purchase group
Additional profit, purchase group
___
_
H. M. Byllesby & Co.
Ladenburg, Thalman & Co.
First National Bank.
Dec. 22,1927: Republic of Peru, Peruvian National Loan 6% ext.
S.F. gold bonds 1st series due Dec. 1,1960; J. & W. Seligman &
Co., National City Co
Dec. 22, 1927: Sinclair Crude Oil Purchasing Co. 10-yr. 5 ^ %
gold bonds, series A, due Jan. 1, 1938; National City Co.,
Chase Securities Corp., Blair & Co., Inc
Jan. 25,1928: Republic of Chile Railway refunding 6% S.F. ext.
bonds, due Jan. 1, 1961, National City Co
Feb. 1,1928: Southern Pacific Co. 40-year 4K% gold bonds, due
Mar. 1,
& \JKj.f
Co., ±y
National
xvj.tu..
x, 1968;
±V\JO, Kuhn,
xvuiiJU, Loeb
u u o u ix.
Oinvueu City
\sivy Co
v^u
Feb. 3, 1928: Savoy-Plaza Corp. 10-year hxA% S.F. gold debentures, due Feb. 1, 1938; Blair & Co., Inc., National City Co._
Feb. 3, 1928: Savoy-Plaza Corp. realty extension 1st mortgage
53^% S.F. loan certificates, due Feb. 1,1945; Blair & Co., Inc.,
National City Co
_„.
Feb. 7,1928: Pacific Gas & Electric 1st & ref. mtge. gold bonds,
series E, 4 ^ % , due 1957; National City Co., American Nat.
Co., H. M. Byllesby & Co
Feb. 16, 1928: Republic of Finland 5 ^ % est. loan S. F. gold
bonds, due Feb. 1, 1958; National City Co., Guaranty Trust
Co., Brown Bros. & Co., New York Trust Co., Continental
National Co
Feb. 28, 1928: Scranton Gas & Water Co. 1st mtge. 4 ^ % bonds,
due Mar. 1, 1958_._
Original group
In purchase group
G. L. Ohrstrom & Co., Inc., First National Bank
Feb. 28,1928: The Firestone Cotton Mills 20-year 5% S. F. gold
bonds, due Mar. 1,1948; National City Co., Otis & Co., Cleve.,
Cleveland Trust Co
Mar. 12, 1928: Dominican Republic customs administration
5K% gold bonds, due Oct. 1, 1940; National City Co
Mar. 17, 1928: State of Minas Geraes (U.S. of Brazil) &A% secured ext. S.F. gold bonds, due Mar. 1,1958; National City Co_
Apr. 6,1928: Wheeling Steel Corpn. 1st & ref. mtge. 4^'s, series
B, due Apr. 1,1953; Lee Higginson & Co., National City Co.,
Dillon Read &.Co., Redmond &,Co
Apr. 9,1928: Cincinnati Gas & Electric Co. 1st mtge. 4's, series
A, due Apr. 1, 1968; Guaranty Company
Apr. 24, 1928: Cities Service Co. 5% debs., due Apr. 1, 1958;
Harris Forbes & Co., Halsey Stuart & Co., National City Co.,
Bonbright & Co. Inc., E. H. Rollins & SonsApr. 26, 1928: American Commercial Alcohol Corp. 15-yr.
mtge. S.F. 6's, Series A, due Apr. 1, 1943; National City Co..
Apr. 27,1928: Chicago, Milwaukee & St. Paul genl. 4^'s, series E,
due Mayy 1,, 1989;; Kuhn,, Loeb & Co.,, National City
y Co
Y k Steam
St
C
t 5%
i due
Apr. 281928
28,1928: N
New York
Corpn. 1
1sttmtge.
5% series,
May 1, 1951; National City Co., Cassatt & Co., Thayer,
Baker & Co
May 2, 1928: Mortgage Bank of Chile, guaranteed S.F. 696 gold
bonds, due Apr. 30, 1961; Kuhn, Loeb & Co., National City
Co., Guaranty Company of New York
May 24,1928: Susquehanna Silk Mills 10-yr. 5% S.F. debentures
due June 1,1938; Lee, Higginson & Co., National City Co
June 4,1928: Tokyo Electric Light Co., Ltd., 1st mtge. 6% dollar
series, due 1953, Guaranty Co
June 7, 1928: Container Corpn. of America 15-yr. 5% deb., due
June 1,1943; National City Co., E. H. Rollins, Spencer Trask
& Co
June 28,1928: Abitibi Power & Paper Cp., Ltd., 1st mtge. series
A ,5% gold bonds, due 1953; National City Co
July 3,1928: Republic of Panama 35-yr. 5% ext. sec. S. F. bonds,
series A due May 15, 1963; National City Co., Kissel, Kinnicutt & Co., Illinois Merchants Trust Co., Continental National Co
July 11,1928: State of Rio Grande de Sul 6% ext. S. F. gold bonds
due July 1, 1968
Original group
Purchase group
White
Weld & Co., National City Co., Equitable Trust Co.,
http://fraser.stlouisfed.org/
Illinois Merchants Trust Co., Cassatt & Co., Anglo London Paris
Federal Reserve Bank
of St.Co.
Louis
Par value of
offering
$60,000,000
50,000,000
J. P. M. &
Co.'s commitment
Profit to
J. P. M. &
Co.
$2,160,000
1,350,000
$21,600.00
20,250.00
1,957.00
2,333,334
10, 783.14
42,000,000
3,075,000
18,450.00
49,912,000
11,478,000
91,824.00
29,400,000
650,000
5,687.50
7,000,000
875,000
9,796.41
4,000,000
500,000
10,538.28
20,000,000
1,625,000
9,750.00
15,000,000
1,437,500
10,693.43
1, 375,000
687, 500
6,875.00
8,593.75
12,000,000
1,000,000
4,979.04
5,000,000
312, 500
1, 567.08
8,500, 000
1,338,750
10,859.34
21,000,000
1,050,000
3,937. 50
35,000,000
1,000,000
3,622.44
50, 000, 000
1,250,000
21,875.00
4,000,000
1,000,000
' 4,500.00
24,000,000
3,000,000
26,250.00
4,000,000
1,000,000
8,000.00
20,000,000
1,500,000
18,950.68
8,000,000
700,000.
5,036.16
7,000,000
89,731.42
11,000,000
70,000,000
6,000,000
937,500
7,500.00
50,000,000
5,375,000
14,781.25
12,000,000
1,912,500
1,855.00
2,875,000
2,312, 500
1,236.25
5, 781.25
23,000,000
259
STOCK EXCHANGE PRACTICES
GROUP 7.—Summary of all issues and underwritings of stocks and bonds by others,
in which the firm of J. P. Morgan & Co. took a financial participation or commitment—Continued
Par value of
offering
J. P. M. &
Profit to
Co.'s com- J. P. M. &
Co.
mitment
Aug. 1,1928: Southern Pacific Co. 4H% equip, tr., series K, due
annually 1929 to 1933, incl.; Kuhn, Loeb & Co., National City
Co.
$112,500
$4,815,000
Aug. 10, 1928: Chicago Rapid Transit Co. 1st & ref. mtg. gold
bonds, 6%, series A, due 1953; National City C o . .
540,340.15
3,122,000
Sept. 5, 1928: Republic of Chile ext. loan S.F. 6% gold bonds,
due Sept. 1,1691; National City Co.—
16,000,000 3,200,000.00
Sept. 11, 1928: The Kendall Company 20-yr. bW7o deb., series
A, due Sept. 1,1948; National City Co., First National Corp.
of Boston
_
6,500,000 1,218,750.00
Sept. 17, 1928: Gold Dust Corporation common stock V/T ctfs;
Underwriting Syndicate; First Security Co
11,611 shs.
193,855 shs.
Sept. 20, 1928: Kreuger & Toll Co., participating 5% deb.
(American ctfs.) or Kroner 10,000,000)
_
_. 500,000 shs.
In original group
_
_
_______
31,250 shs.
In banking group
_
Lee Higginson & Co., Guaranty Co., National City Co.
Oct. 1, 1928: Finland Residential Mortgage Bank 1st mtge.
coll. S.F.^s, xtue Sept. If _M; National City Co.,, Lee Higginson & Co., Guaranty Co. of New York,
__
978,750
10,000,000
Oct. 19, 1928: Cities Service Co. 5% gold deb., due 1933; Harris
Forbes & Co., Halsey Stuart & Co., National City Co., Bonbright & Co., Inc., E. H. Rollins Sons
750,000
30,000,000
Oct. 25, 1928: Republic of Peru Peruvian natl. loan 6% ext.
1,166,667
25,000,000
S.F., second series, due Oct. 1,1961; J. & W. Seligman & Co.,
and
and
National City Co., Continental National Co., J. N. Schroeder
£93,333
£2,000,000
&Co.
Oct. 30, 1928: The Oriental Development Co., Ltd., ext. loan
30-yr. 5H% gold deb., due Nov. 1, 1958, National City Co
3,980,000
19,900,000
Oct. 31,1928: American Thread Co. 1st closed mtge. 5M% 10-yr.
gold bonds, due Nov. 1, 1938, National City C o . 1,000,000
4,000,000
Nov. 10,1928: Pennsylvania Co. 35-yr. 4%% sec. gold bonds, due
Nov. 1, 1963; Kuhn, Loeb & Co., National City Co
1,125,000
50,000,000
Nov. 15, 1928: Canadian Pacific Railway Co. 4% coupon cons,
perpetual debenture stock; National City Co., Guaranty Co.
of N.Y., Bank of Montreal
5,000,000
675,000
Dec. 1, 1928: Portland Electric Power Co. 1st lien & ref. mtge.
1,611,500
gold bonds, series C, 5%,%, due 1951; National City Co
261,868.75
Dec. 7,1928: The New York, Chicago & St. Louis R.R. Co. ref.
11,275,000
mtge. iH%, series C, due Sept. 1, 1978
2, 255,000.00
In original group
2,255,000.00
In buying group
417,000.00
In banking group___
___
250,00. 000
In wholesale group
Guaranty Co. of N.Y., Lee, Higginson & Co.
Dec. 8, 1928: Consumers Power Co. 1st lien & unifying mtge.
4*^'s, series of 1928, due 1958; Bonbright & Co., Inc., National
11,415,100
713,443. 75
City Co., (Backers Tijust Co..
7,500,000
Dec. 8,1928: Duquesne Light Co. 5 % cum. pfd.stock
283,125.00
In original group
—
195,000.00
In syndicate
Ladenburg, Thalman & Co., H. M. Byllesby & Co., Chase
Sees. Corpn., Lee, Higginson & Co., Union Trust Co.,
Pittsburgh.
Dec. 11, 1928: City of Antwerp ext. loan S.F. 5% gold bonds,
10,000,000 2, 500,000.00
due Dec. 1,1958; National City Co
Dec. 15, 1928: Hahn Department Stores, common stock; Leh454,000
shs.
500 shs.
man Bros., Prince & Whitely
Jan. 4, 1929: Rossville Commercial Alcohol Corp. 20-year S.F.
6% conv. deb. & V/T ctfs. representing common stock; National City Co., Bauer, Pogue Pond & Vivian, William Schall
3,250,000
402,187.50
& Co
16,250 shs.
units.
Jan. 11, 1929: Chicago & North Western Railway Co. general
3,577,000
178,850.00
mtge. gold 4>_'s due 1987; Kuhn Loeb & Co., National City Co.
Jan. 14,1929: Fuller Building (G.A.F. Realty Corp.) 1st (closed)
mtge. S.F. 5M% loan, due Jan. 1,1949; National City Co., Blair
& Co. Inc
Jan. 14,1929: Fuller Building (G.A.F. Realty Corp.) 15-year S.F,
6% gold deb., due Jan. 1,1944; National City Co., Blair & Co.,
Inc
Jan. 28,1929: The Procter & Gamble Company 5% cumulative
preferred stock ($100 par value), First Security Co
5,000,000
937,500
$243.82
4,592.89
21,600.00
5,132.81
19,299.88
7,825.78
3,753.00
2,263.36
13,125.00
4,074.62
22,387. 50
3,625.00
9,632.81
2,531.25
1,871.97
2,818.75
22,793. 75
1,198.84
2,812. 50
8,713.80
2,831.35
1,300.00
12, 503.05
750.00^
5,874.60
1,699.98
7,500.00
3,000,000
562,500
4,359.37
12,500,000
11,250 shs.
24,614.91
260
STOCK EXCHANGE PRACTICES
GKOTJP 7.—Summary of all issues and underwritings of stocks and bonds by others^
in which the firm of J. P. Morgan & Co. took a financial participation or commitment—Continued
Par value of
offering
Jan. 31,1929: Alleghany Corporation cumulative 5^%pfd. stock,
series A (with stock purchase warrants)
Underwriting group
___
Special group
__
Banking group
___
Guaranty
Mar. 7, 1929, Mar. 8, 1929: Kreuger & Toll Co. 5% S.F. secured
gold debentures, due Mar. 1,1959 (part of issue of $50,000,000) ___
Original group.
.
Banking group
Syndicate group
Lee, Higginson & Co., National City Co., Guaranty Co. of
$25,000,000
26,500,000
Mar. 11,' 1929: Republic of Chile, ext. loan S.F. 6% gold bonds,
due Mar. 1,1962; National City Co
10,000,000
Mar. 14, 1929: Cities Service Co. 5% gold debentures, due 1959,
with warrants for common stock; Harris, Forbes & Co., Halsey
Stuart & Co., National City Co
50,000,000
Mar. 21, 1929: New York Steam Corp. 1st mtge. 5% series, due
1951; National City Co
2,000,000
Mar. 21,1929: Southern Pacific Co. 40-yr. 4H% gold bonds, due
May 1, 1969; Kuhn, Loeb & Co., National City Co
65,166,000
Apr. 24,1929: Portland Electric Power Co. 1st lien & refunding
600,000
mtge. 5J4% bonds, due 1951, National City Co
Apr. 26, 1929: Bethlehem Steel Corp., common stock.
600,000 shs.
Original group
Syndicate
Bankers Trust Co.; Guaranty Co. of N.Y., National City
Co., Chase Securities Corp. J. & W. Seligman & Co.
May 3, 1929: Central of Georgia Railway Co., ref. & genl.
mtge. 5% bonds, series C, due Apr. 1, 1959; Kuhn, Loeb &
10,000,000
Co., National City Co
May 14, 1929: Alleghany Corporation cumulative 5H% pfd.
25,000,000
stock, series A
Underwriting group
Special group
___
Banking group
Selling group
Guaranty Co. of New York.
June 10,1929: Porto Rican American Tobacco Co. 15-yr. secured
1,360,000
6% conv. gold bonds, due Jan. 1, 1942; National City Co
June 18, 1929: The Lautaro Nitrate Co., Ltd., 1st mtge. 6%
32,000,000
conv. gold bonds, due July 1, 1954, with warrants
Original group
Selling group
National City Co., Bankers Co. of N.Y., Brown Bros. &
Co.
June 21, 1929: General Steel Castings Corp. 1st mtge. bonds
20,000,000
5W/o, series A, due July 1,1949, with warrants.-.
Banking group
rr_
Syndicate
Drexel & Co.
June 27,1929: Mortgage Bank of Chile guaranteed S.F. 6% bonds
of 1929, due May 1,1962; Kuhn, Loeb & Co., Guaranty Co. of
20,000,000
N.Y., National City Co
July 1, 1929: Canadian Pacific Railway 5% equip, trust ctfs.
due July 1, 1944; National City Co., Guaranty Co. of N.Y.,
30,000,000
Bank of Montreal
Aug. 19, 1929: Solvay American Investment Corp. V/i% cumulative preferred stock (with warrants for purchase of Allied
25, 000,000
Chemical & Dye Corp. stock)
Original group
_
_
Intermediate group
Banking group
_._T
Selling group
L
Lee Higginson & Co., White, Weld & Co., Brown Bros. &
Co., Union Trust Co., Pittsburgh.
Aug. 21, 1929: The National Hotel of Cuba 30-year 6% income
6, 250,000
debenture, due Sept. 1, 1959, and common stock; National
62, 500 shs.
City Co
Aug. 21, 1929: Pennsylvania Dock & Warehouse Co., leasehold
mtge. 6% S.F. gold bonds with warrants, due Aug. 1, 1949;
5,750,000
National City Co
.
Aug. 31, 1929: Southern California Edison Co. ref. mtge. 5%
15,000, 000
bonds, due 1954; National City Co
_
_
J. P. M. &
Co.'s commitment
Profit to
J. P. M. &
Co.
$6,250,000
5,125,000
1,497,500
i, 200,000
$50,000.00
35,126.03
9,585. 52
17,250. oo
1,656,250,
1,406, 250
50,000
15,492.19
7,031.25
941.00
2,000,000
13,500.00
1,250,000
18,750.00
500,000
1,750.00
1,250,000
10,937.50
97,500
755.20
1, 530,000
1,012, 350
17.095.23
15,168.97
357,000
3,399.97
6,250,000
5,125,000
310,000
100,000
45,450.07
25,625.00
1,550.00
1,375.00
153,000
1,224.00
7, 200,000
600,000
53,100.00
11,755.94
2,200, 000
2,200,000
11,000.00
50,690.18
1,500,000
3,690,000
14,760.00
6, 250, 000
4,843, 750
3,887,500
2, 000, 000
31, 250. 00
36, 328.12
26,779.41
30, 000. 00
1, 562, 500
15,625 shs.
10,156. 25
575,000
4,168.75
375, 000
6,325.58
261
STOCK EXCHANGE PRACTICES
GEOUP 7.—Summary of all issues and underwritings of stocks and bonds by others,
in which the firm of J. P. Morgan & Co. took a financial participation or commitment—Continued
Par value of
offering
Sept. 12,1929: Bethlehem Steel Corp. common stock.
Original group
795,000 shs.
_
Underwriting syndicate.
Guaranty Co., Bankers Co., National City Co., Chase
Securities Co., J. & W. Seligman Co.
fJept. 12, 1929: Chicago & Northwestern Co. 20-yr. 4%% conv.
gold bonds, series A, due Nov. 1, 1949; Kuhn, Loeb & Co.,
National City Co
_
Sept. 13, 1929: Shell Union Oil Corp. 5% S.F. gold debentures
due 1949 with warrants:
Banking group
_-.
Selling group
Lee, Higginson & Co., Guaranty Co., National City Co.,
Hayden, Stone & Co., Dominick & Dominick,: Clark,
Dodge & Co
_
_._.
Sept. 16, 1929: State of Minas Geraes secured ext. loan of 1929
series A 6 ^ % bonds, due 1959 (United States of Brazil);
National City Co., Kissel, Kinnicutt & Co., J. Henry Sehroeder, Banking Corp
Sept. 23,1929: Frank C. Shattuck Co. common stock; Dominick
& Dominick, Hitt, Farwell & Co
Nov. 9, 1929: The New York, Chicago & St. Louis R.R. Co.
3-yr. 6% gold notes due Oct. 1,1932:
Original group
Buying group._
_
_
B anking group
Guaranty Co. of N.Y., Lee Higginson & Co
Dec. 10,1929: Minneapolis, St. Paul & Sault Ste. Marie Railway
Co. 1st mtge. b%% bonds, series B, due July 1, 1978; Dillon
Reed & Co., Inc., National City Co
Dec. 23, 1929: Canadian Pacific Railway 5% collateral trust
gold bonds, due Dec. 1,1954; National City Co., Lee Higginson & Co., Guaranty Co. of New York
Jan. 10, 1930: The Edison Electric Illuminating Co. of Boston
3-yr. 5% coupon gold notes, dated Jan. 15,1930, due Jan. 15,
In original group
_
In selling group
Lee Higginson & Co., National City Co.
Jan. 23, 1930: Public Service Electric & Gas Co. 1st & ref. gold
bonds 4K% series, due 1970
In syndicate
Drexel & Co., Bonbright & Co., Inc.
Jan. 29, 1930: Philadelphia Electric Co. $5 dividend pfd. stock_
$72,335,000
' $2,623,500
(23,850 shs.
at 110 per sh.).
l' 1,694,330
(15,403 shs.
[ at 110).
Profit to
J. P. M. &
Co.
$22,418. 56
24, 240.15
3,616,750
31,646.56
1,500,000
1,100,000
14,533.75
18,975.00
8,000,000
1,300,000
9,678.09
135,000 shs.
500,000
(10,000 s h s .
a t 50)
4,000,000
4,000,000
229,000
9,846.15
5,000.00
12, 258.94
858.75
8,000,000
444,440
4,044.72
30,000,000
875,000
7,109.07
515, 625
500,000
4,825.40
3,750.00
300,000
6,146.79
700 shs.
1,308.94
$3,151,550
27, 576.06
~~I,~252,~506~
~12~579.~50
1, 267,500
48,000.00
3,000 shs.
3,000 shs.
2,500.00
5,625.00
1,500 shs.
2,013. 20
500,000
11,819.63
2,014, 250
17,624.29
50,000,000
$20,000,000
30,000,000
20,000,000
8,665,800
;or 86,658 shs.)
In syndicate
Drexel & Co., Bonbright & Co., Inc.
Feb. 7,1930: The Baltimore & Ohio R.R. Co. 4H% oonv. bonds
63,031,000
due 1960; Kuhn, Loeb & Co., Speyer & Co., National City Co.
Feb. 8, 1930: General Italian Edison Corp. (American shares
140,000 shs.
representing ordinary shares of capital stock)
Participation in distributing group
We were allotted in selling group, 30,000 which we took up
and paid for
National City Co., Aldred Co., Dominick & Dominick.
540,000 s h s .
Peb. 17, 1930: Marshall Field & Co., Inc., common stock
Banking group
Selling group
Field, Glore & Co., Inc., Lee, Higginson & Co.
Feb. 19,1930: The United Gas Improvement Co. $5 dividend. _ 94,360 shs.
Pfd. stock syndicate
Drexel & Co., Bonbright & Co., Inc.
Feb. 19, 1930: The European Electric Corp. Ltd. (of Canada),
35-yr. 6 ^ % gold debentures, due 1965, with warrants; Bon12,900,000
bright & Co., Inc., Field, Glore & Co., Inc
Feb.
25, 1930
1930: Chi
Chicago,
o, R
Rock
Pacific
Railway
Co. 30b 25
k IIsland
l d &P
ifi R
il
C
30
&C
Co.,
yr. 4M% conv. gold bonds, due May 1, 1960;
1960 Speyer
S
32,228,000
W Seligman
Sli
& Co
C
National City Co., JJ. & W.
&
J. P. M. &
Co.'s commitment
262
STOCK EXCHANGE PBACTICE&
GROUP 7.—Summary of all issues and under writings of stocks and bonds by others,
in which the firm of J. P. Morgan & Co. took a financial participation or commitment—Continued
Par value of
offering
Mar. 10, 1930: Allegheny Corporation 5H% pfd. stock, series A
(additional issue) with stock purchase warrants detachable on
and after July 1,1930
__.-.
_-._•
Underwriting group
_
Special group
_"
Banking group.
_
_._Guaranty Co. of New York.
Mar. 10, 1930: The Baldwin Locomotive Works 3-yr. by2y0
gold notes, due Mar. 1,1933; Drexel & Co., White Weld & Co.
Mar. 12,1930: The Pennsylvania Railroad Co. 40-yr. 4K% gold
deb. bonds, due Apr. 1, 1970; Kuhn, Loeb & Co., National
City Co
Mar. 14,1930: Missouri Pacific Railroad Co. 1st & ref. mtge. 5%
gold bonds, series H, due Apr. 1, 1980; J. P. M. & Co.'s commitment *% ceded to First Natl. Bk., J4 ceded to-Natl. City
Co., Kuhn, Loeb & Co
Mar. 19,1930: The Virginian Railway Co. 1st mtge. 50-yr. 4 ^ %
gold bonds, series B, due May 1,1962; National City Co., Lee,
Higginson & Co., Kidder, Peabody & Co
_
Mar. 24, 1930: Boston & Maine Railroad 1st mtge. 5% gold
bonds, series II, due May 1,1955
Original group
Kidder, Peabody & Co., Lee, Higginson & Co., Harris,
Forbes & Co., First National Old Colony Corp.
Mar. 25, 1930: The New York, Chicago & St. Louis R.R. Co.
ref. mtge. 4 ^ % bonds, series C, due 1978
Original group
=.
Buying group
_
___•>.
Banking group
Selling group
Guaranty Co. of New York, Lee Higginson & Co.
Mar. 28, 1930: Chicago, Milwaukee & St. Paul Ry. Co. Genl.
mtge. gold bands, series F, dus May 1, 1939; Kuhn,
Loeb & Co., National City Co
Apr. 15, 1930: Consumers Power Co. 1st lien & unifying mtge.
gold bonds, series of 1928, <%%, due 1958; Bonbright & Co.,
Inc., National City Co., Bankers Co
Apr. 17,1930: Southern Pacific Co. Oregon Lines 1st mtge. 4.%%
bonds, series A, due Mar. 1,1977; Kuhn, Loeb & Co., National
City Co
Apr. 21, 1930: Niagara Share Corp. of Maryland 20-yr. §XA%
conv. gold deb., due May 1,1950, $500,000 bonds allotted to us
which were sold to a selected list; Lee Higginson & Co., Guaranty Co. of New York, Schoellkopf, Hutton & Pomeroy, Inc.,
The Marine Trust Co. of Buffalo
Apr. 23, 1930: The Delaware & Hudson Co., 1st & ref. mtge. 4%
gold bonds due May 1,1943; Kuhn Loeb & Co., First National
Bank.
Apr. 23, 1930: Chicago & North Western Ry. Co., genl. mtge.
gold 4%% due 1987; Kuhn Loeb & Co., National City Co
Apr. 24, 1930: Republic of Chile, external loan S. F. 6% gold
bonds due May 1, 1963; National City Co., Guaranty Co. of
New York Lee Higginson & Co
Apr. 26, 1930: General Steel Castings Corp., $6 cumulative pfd.
stock (convertible)
$12,500,000
Profit to
J. P. M. &
Co.
$3,125,000
2, 562, 500
179,400
150,000
$25,000.00
7, 634.97
1,099.17
2,062. 50
12,000,000
204,000
2,040.00
60,000,000
1, 250,000
10, 937.50
25,000,000
*4,000,000
*43,733.19
5,000,000
468,750
4,101.56
1,575,000
15,376.88
2,400,000
2,400,000
221,000
250,000
3,000.00
14,837.11
828.75
2,500.00
15,000,000
1,875,000
16,279.40
20,000,000
1,250, 000
4,062.5a
41,294,000
875, 000
7,656. 25
15,000,000
500,000
10,000,000
410, 000
3,749.00
5,031,000
251, 550
3,142.80
25,000,000
5,000,000
33,750.00
100,000
L,000 shs. @
100
1,000. 00
15,000,000
506,250
3,856.28
15,000,000
20,000 shs.
In selling group (no commitment).
Drexel & Co.
May 2, 1930: United States Rubber Co., 6% 3-yr. secured gold
notes due June 1,1933; Kuhn Loeb & Co., National City Co
May 13,1930: The Mead Corporation, first mtge. 6% gold bonds
series A due May 1, 1945 with warrants; National City Co.
Field, Glore & Co. Inc
May 23, 1930: The Brooklyn Union Gas Co., 20-yr. 5% debentures due June 1, I960; National City Co
May 28,1930: Public Service Corpn. of N. J., $5 cumulative pfd.
stock; Drexel & Co., Bonbright & Co. Inc
June 4, 1930: City of Brisbane, 20-yr. S.F. 6% gold bonds dated
June 1,1930, due June 1,1950; Lee Higginson & Co., National
City C o . . — — _
.__
_._..
June 16,1930: Union Gulf Corporation, collateral trust S.F. 5%
gold bonds, due July 1,1950; Union Tr. Co, of Pitts., Guaranty
Co. of N.Y., Bankers Co. of N.Y., National City Co., Mellon
National Bank, Pitts., Pa
J. P. M. &
Co.'s commitment
9,500,000
1,187,500
8,906. 25
18,000,000
1,833,333
6,875.00
150,000 shs.
3,500 shs.
875.00
5,000,000
625,000
4,786.41
60,000,000
750,000
6,281. 26
263
STOCK EXCHANGE PEACTICES
GROUP 7.—Summary of all issues and underwritings of stocks and bonds by others^
in which the firm of J. P. Morgan & Co. took a financial participation or commitment—Continued
Par value of
offering
July 11,1930: Canadian Pacific Kailway Co., 30-yr. 4}4% collateral-trust gold bonds, due July 1, 1960; National City Co.,
Guaranty Co. of N.Y
$25,000,000
July 17, 1930: Crane Company, 10-yr. 5% S.F. gold notes, due
Aug. 1, 1940; Continental Illinois Co., Lee Higginson & Co.,
First National Bank
12,000,000
July 29, 1930: Pacific Gas & Electric Co., 1st & ref. mtge. gold
bonds series F 4 ^ % , due 1960; National City Co., Blyth & Co.,
American Sec. Co
25,000,000
Aug. 1,1930: Minneapolis, St. Paul & Sault Ste. Marie Railway
Co., 1st ref'g. mtge. 5H% bonds, series B, due July 1,1978; Dillon, Read & Co., National City Co
4,106,000
Aug. 27,1930: New York, Chicago & St. Louis Railroad Co. ref.
mtge. 4K% gold bonds, series C, due Sept. 1,1978
36,600,000
Original group
_
Buying group.
Banking group
_
_
_
_
Selling group
__
___
Guaranty Co., Lee Higginson & Co.
Sept. 13,1930: Chicago & Northwestern Ry. Co., 1st & ref. mtge.
series C 4^%,due M a y l , 2037; Kuhn, Loeb & Co., National
City Co_._
.
12,000,000
Sept. 18, 1930: Consumers Power Co., first lien and unifying
mtge. gold bonds series of 1928 4H% due 1958; Bonbright &
Co., Inc., National City Co., Bankers Co. of N.Y
20,000,000
Sept. 18,1930: The Pittsburgh, Cincinnati, Chicago & St. Louis,
R.R. Co., genl. mtge. 4H% gold bonds series C due July 1,
1977; Kuhn, Loeb & Co., National City Co.
23,735,000
Sept. 18,1930: The Cleveland & Pittsburgh R.R. Co., genl. ref.
mtge. 4>£% gold bonds series A due Feb. 1,1977; Kuhn, Loeb
& Co., National City Co
7,182,000
Oct. 17, 1930: The Edison Electric Illuminating Co. of Boston,
2-yr. 4% coupon gold notes due Nov. 1, 1932; Lee Higginson
& Co., First Old Colony Corp., National City Co
20,000,000
Oct. 21, 1930: The American Rolling Mill Co., 3-yr. 4 ^ % gold
notes, due Nov. 1,1933; Guaranty Co. of New York, National
City Co
15,000,000
Nov. 26,1930: Washington Gas Light Go., 4y2% gold notes due
Apr. 1, 1933; Harris Forbes & Co., National City Co., Chase
Securities Corp
3,000,000
Nov. 28, 1930: Canadian Pacific Railway, equip, tr. 43^% gold
ctfs. C 1930 maturing $475,000 semiannually from June 1, 1931
to Dec. 1, 1945; Union Trust Co., Pittsburgh Bankers Co.,
14,250,000
Brown Bros., Bank of Montreal
Dec. 6, 1930: Toledo Light & Power Co., 5% secured gold notes
35,000,000
due Dec. 1, 1932: Harris, Forbes & Co., National City Co
Jan. 10, 1931: Pacific Gas & Electric Co., 1st ref. mtge. gold
bonds " F " &A% due July 1, 1960; National City Co., Blyth
25,000,000
& Co., American Securities Co
Jan. 13, 1931: The United Gas Improvement Co., 5% dividend
preferred stock syndicate; Drexel & Co., Bonbright & Co. I n c . 250,000 shs.
Jan. 14, 1931: International Match Corp. 10-yr. 5% conv. deb.
due Jan. 15, 1941; Lee Higginson & Co., Guaranty Co., Na50,000,000
tional City Co
Jan. 23,1931: The Pennsylvania, Ohio & Detroit Railroad Co.,
first & ref. mtge. 4H% gold bonds series " A " due Apr. 1,1977;
6,483,000
Kuhn, Loeb & Co
Jan. 23,1931: The Philadelphia, Baltimore & Washington R.R.
Co., general mtge. 4 ^ % gold bonds, due July 1, 1977; Kuhn,
11, 301,000
Loeb & Co
Jan. 24, 1931: The United New Jersey R.R. & Canal Co. genl.
mtgs. 4H% gold bonds, due Sept. 1,1979; Kuhn, Loeb & Co.,
6,020,000
National City Co
Jan. 29, 1931: Philadelphia Electric Co. 1st & ref. mtge. gold
bonds 4% series due 1971, in Syndicate Drexel & Co., Bon40,000,000
bright & Co. Inc
Mar. 10,1931; The Pennsylvania R.R. Co. genl. mtge. 4H% gold
bonds series D due Apr. 1,1981; Kuhn, Loeb & Co., National
50,000,000
City Co
Mar. 11, 1931: Boston & Maine R.R. Co. 1st mtge. gold series
J.J. 4t%% due Apr. 1, 1961; Lee Higginson & Co., Harris
Forbes & Co., First Old Colony Corporation, Kidder Peabody & Co
13,943,000
Mar. 23, 1931: The Youngstown Sheet & Tube Co., 1st mtge.
series " B " S.F. 5% gold bonds due Apr. 1,1970; Bankers Co.
of N.Y., Guaranty Co. of N.Y., Union Trust of Pittsburgh,
25,000,000
National City Co
—
—
-
J. P. M. &
Co.^ commitment
Profit to
J. P. M. &
Co.
$2,662, 500
$9,984,37
300,000
4,500.00
2,031, 250
12,187.50
213,850.75
1,797; .75
7,320,000
7, 320,000
322,000
550,000
9,150.00
64,050.00
1,207.50
5, 500.00
600,000
1,250,000
4,060.50
500,000
4,920.42
150,000
1,523.12
343,750
1,361. 54
375,000
2,283. 90
150,000
1, 734. 97
600,000
5,415. 00
2,843,750
10, 664. .06
2,187,500
13,125.00
2,500 shs.
(
2, 640. 68»
3,125,000
27,343.75
375,000
3,282.55
125,000
1,393.97
500,000
3,100.76
1,000,000
8,750,00
1,464,000
15,13,0.57
2, 500,000
18,750.00
264
STOCK EXCHANGE PRACTICES
GEOTJP 7.—Summary of all issues and underwritings of stock and bonds by others,
in which the firm of J. P. Morgan & Co. took a financial participation or commitment—Continued
Par value of
offering
Mar. 26,1931; Public Service Electric & Gas Co. 1st & ref. mtge.
gold bonds 4% series due Apr. 1,1971; in syndicate Drexel &
Co., Bonbright & Co
...
_
Mar. 26,1931: Southern Pacific Co., 50-yr. 4V£% gold bonds due
May 1,1961; Kuhn, Loeb & Co., National City Co
Mar. 26,1931: Hughes Tool Co., 1st mtge. 5 ^ % gold bonds due
Apr. 1,1936; National City Co...
_
Apr. 10, 1931: National Steel Cor. 1st (Collateral) mtge. S.F.
gold bonds 5% series due Apr. 1, 1956, National City Co.,
Bankers Co. of N.Y
___
_.
May 7,1931: Illinois Central Railroad Co. 3-yr. 4 ^ % gold notes
due June 1,1934, Kuhn, Loeb & Co., National City Co
May 21,1931: Public Service Electric & Gas $5 cumulative pfd.
stock; syndicate Drexel & Co., Bonbright & Co. Inc
May 27, 1931: Consolidated Gas Co. of N.Y., 20-yr. 4J4% gold
deb. bonds due June 1,1951
Original group
Selling group
_
_
National City Co.
July 28,1931: Delaware Power & Light Co., 1st mtge. gold bonds
4 ^ % series due 1971; Drexel & Co., Bonbright & Co. Inc., A. C.
Allyn & Co. Inc
J. P. M. &
Co.'s commitment
Profit to
J. P. M. &
Co.
$26,000,000
$750,000
50,000,000
1,000,000
8,750.00
3,000,000
750,000
8,250.00
40,000,000
3,254,250
19,118.72
20,000,000
625,000
2,733.63
300,000 shs.
5,000 shs.
6,764.62
11,400,000
1,200,000
96,900.00
15,000.00
226,000
2,260.00
60,000,000
6,000,000
$7,459.32
$3,631,501,600 $344,226,035 $2,877,043.91
5,646,373 shs. 318,500 Shs.
GROUP 8.—SUMMARY OF ALL ISSUES AND UNDERWRITINGS OF
STOCKS AND BONDS BY OTHERS IN WHICH THE FIRM OF DREXEL
& CO. TOOK A FINANCIAL PARTICIPATION OR COMMITMENT
[Drexel—C]
Jan. 6, 1927: General American Tank Car Corp. equipment
trust certificates, series " 1 8 " , 4 ^ % , due annually Jan. 15,
1929-Jan. 15, 1937; C. D. Barney & Co
Jan. 14, 1927: Government of the Argentine Nation external
sinking fund 6's, due Feb. 1,1961, J. P. Morgan & Co
Jan. 31, 1927: General Motors Acceptance Corp. 10-year sinking
fund debenture 6's, due Feb. 1,1937; J. P. Morgan & Co
Feb. 16, 1927: General Motors Corporation 7% preferred stock;
J. P. Morgan & Co
Mar. 21, 1927: City of Tokio external loan of 1927, sinking fund
5H's, due Oct. 1,1961; J. P. Morgan & Co
Mar. 22, 1927: Italian Credit Consortium for Public Works,
external loan sinking fund secured " A " 7's, due Mar. 1,1937;
J . P . M o r g a n & Co
Mar. 22, 1927: Italian Credit Consortium for Public Works,
external loan sinking fund secured series " B " 7's, due Mar. 1,
1947: J. P. Morgan & Co
Mar. 24, 1937: Chicago, Burlington & Quincy Kailroad Co.,
first & refunding mortgage, series " B " 4>£s, due 1977; J. P.
Morgan & Co
Mar. 29, 1927: City of Rome external loan of 1927 sinking fund
6M's, due Apr. 1,1952:
Intermediate group
Syndicate
J. P. Morgan & Co
Apr. 1,1927: Humble Oil & Refining Co. 10-year gold debenture
5's, due Apr. 1, 1937; J. P. Morgan & Co
Apr. 5, 1927: Atlantic Coast Line Railroad Co. general unified
mortgage series " A " 4^'s, due June 1, 1964; J. P. Morgan &
Co
Apr. 28,1927: Government of the Argentine Nation loan of 1927
external sinking fund 6's, due May 1,1961; J. P. Morgan & Co.
and National City Co
Apr. 28, 1927; Pirelli Co. of Italy sinking fund convertible 7's,
due May 1,1952; J. P. Morgan & Co
Par value of Drexel & Co.
offering
commitment
Profit to
Drexel &
Co.
$1,270,000
$635,000
27,000,000
100,000
$13,332.16
1,329.00
50,000,000
250,000
4,722.50
250,000 shs.
1,000 shs.
2,368.00
20,640,000
100,000
1,804.00
4,500,000
38,000
450.30
7,500,000
62,000
734.70
30,000,000
250,000
2,767.50
200,000
200,000
30,000,000
5,740.00
25,000,000
200,000
1,904.00
8,809,000
400,000
2,000.00
21,200,000
100,000
2,238.00
4,000, 000
100,000
1,464.00
265
STOCK EXCHANGE PRACTICES
GROUP 8.—Summary of all issues and underwritings of stocks and bonds by others
in which the firm of Drexel & Co. took a financial participation or commitment—
Continued
Par value of Drexel & Co.
offering
commitment
May 9,1927: Erie Railroad Co. refunding & improvement mortgage 5's, due 5/1/1967; J. P . Morgan & Co
$50,000,000
May 11,1927: The Chesapeake Corporation 20-year convertible
collateral trust 5's, due 5/15/1947:
Intermediate group
Syndicate
_
J. P . Morgan & Co
_
48,000,000
June 10,1927: Marland Oil Co. serial gold notes, 5%, $7,500,000,
due annually, 1929-1932; J. P. Morgan & Co
_._.
30,000,001
June 15,1927: International Telephone ^Telegraph Co. 25-year
debenture 4H's, due 7/1/1952; J. P. Morgan & Co
_
__..
35,000,000
July 8, 1927: General American Tank Car Corp. equipment
trust certificates, series "19," 4 ^ % , due annually, 8/1/19298/1/1942:
Original group
Intermediate group
—
Selling group
_
C. D. Barney & Co
_
3,710,000
Aug. 24,1927: Commonwealth of Australia external loan of 1927,
30-year 5's, due 9/1/1957:
Intermediate group
Syndicate
J. P. Morgan & Co
_
40,000,000
Aug. 31, 1927: General Motors Corp. 7% preferred stock; J. P.
Morgan & Co
_
_
_
250,000shs.
Sept. 19, 1927: Mobile & Ohio Railroad Co. Refunding & improvement mortgage 43^'s, due 9/1/1977; J. P. Morgan & Co..
13,879,000
Oct. 19, 1927: The Edison Electric Illuminating Co. of Boston
4J^% 3-year notes, due 11/1/1930; Lee Higginson & C o . . _
30,000,000
Oct. 19,1927: New York Power & Light Corporation first mortgage 4^'s, due 10/1/1967:
Original group
Intermediate group
Selling group
_
Bonbright & C o . . .
_
66,000,000
Oct. 24, 1927: Great Northern Railway Co. general mortgage
series " E " 4^'s, due 7/1/1977: J. P . Morgan & Co
20,000,000
Dec. 5, 1927: General American Tank Car Corporation equipment trust certificates, series "AA," 43^%, due annually
2/15/1929-2/15/1942:
Original group
Intermediate group
Selling group_._
C. D. Barney & Co
1,960,000
Dec. 5, 1927: Alabama Power Co. first and refunding mortgage
4M's due 12/1/1967:
Intermediate group
__
Selling group
_
40,000,000
Harris, Forbes & Co
-__
--.
Dec. 15, 1927: Duke Power Company first and refunding mortgage 43^'s, due 12/1/67:
Purchase group
Intermediate group
-..
_
Syndicate
40,000,000
Stone & Webster and Blodget, Inc
Dec. 22,1927: The New York, New Haven & Hartford Railroad
Co. first and refunding mortgage 4^'s, due 12/1/67:
Selling group
_
"§I,"666,"666"
J. P. Morgan & Co
Jan. 18,1928; Cleveland, Cincinnati, Chicago & St. Louis Rwy.
Co. refunding and improvement mortgage " E " 4>£'s, due
7/1/77:
Selling group__
_
J. P. Morgan & Co
15,000,000
Feb. 1, 1928: The Alabama Great Southern Railroad Co. first
consolidated mortgage series " B " 4's, due Dec. 1, 1943; J. P.
Morgan & Co
6,206,000
Feb. 1,1928: The Cleveland Union Terminals Co. first mortgage
sinking fund series " C " 4K's, due Oct. 1, 1977; J. P. Morgan
& Co.__.
___
-_
_
_
5,000,000
Feb. 20,1928: The Nashville, Chattanooga & St. Louis Railway
Co. first mortgage series " A " 4's, due, Feb. 1, 1978; J. P .
16,800,000
Morgan & Co
Feb. 23, 1928: Rochester Gas and Electric Corp. general mort6,000,000
gage series " D " 4H's, due Sept. 1, 1977; J. P. Morgan & Co_.
$200,000
Profit to
Drexel &
Co.
$4,094.00
50,0,000
500,000
12,690.00
300,000
3,000.00
300,000
4,308.00
1,855,000
910,000
728,000
23,161.86
500,000
250,000
4,802.50
500 shs.
500.00
100,000
1,315.00
100,000
500.00
5,000,000
2,644,000
1,000,000
67,658.11
150,000
1,374.00
980,000
680,000
500,000
21,451.04
1,000,000
1,000,000
17,500.00
7,125,000
2,860,000
1,350,000
101,279.66
350,000
" "1," 160." 50
375,000
3,281.25
100,000
625.00
200,000
1,856.00
610,000
3,818. 60
65,000
650.00
266
STOCK EXCHANGE PRACTICES
GROUP 8.—Summary of all issues and underwritings of stocks and bonds by others
in which the firm of Drexel & Co. took a financial participation or commitment—
Continued
Par value of Drexel & Co.
offering
commitment
Mar. 26, 1928: Engineers Public Service Co. convertible preferred $5 stock:
Intermediate group __
Selling group. __
_
Stone & Webster and Blodget, Inc
320,000 shs.
M a y 8, 1928: Commonwealth of Australia external loan of 1928
4H's, due May 1, 1956:
Intermediate group
Syndicate
1
J. P. Morgan & Co
$50,000,000
June 4, 1928: Tokyo Electric Light Co. Ltd. first mortgage 6%
bonds, due June 15, 1953:
Special group
_
Intermediate group. _
Guaranty Co. of New York
_
70,000,000
Sept. 5,1928: Alabama Power Co. first and refunding mortgage
5% bonds, due 9/1/1968:
Intermediate group
Selling group
Harris, Forbes & Co
_
_
15,000,000
Oct. 10, 1928: Engineers Public Service Co. cumulative preferred $$5.50 stock with warrants; Stone & Webster and Blodget,
I
Inc
-^ 130,000 shs.
Nov. 7,
7 1928: Atlantic Coast Line Railroad Co. general unified
2,800,000
mortgage series " A " 4J^'s, due June 1,1964; J. P. Morgan & Co.
Dec. 6,1928: The New York, Chicago & St. Louis Railroad Co.
refunding mortgage series " G " 4^'s, due Sept. 1,1978; Guaranty Co. of New York
_
_
_
11,275,000
Feb. 10, 1928: Alabama Power Company $5 cumulative preferred stock; Estabrook & Co., Putnam & Co
20,000 shs.
Jan. 28, 1929: The Chesapeake & Ohio Railway Co. refunding
& improvement mortgage series " A " 4^'s, due Oct. 1,1993:
Syndicate
24,784,000
J. P. Morgan & Co
Jan. 29,1929: Railway Express Agency Inc. serial " A " 5's, due
32,000,000
1929-1949; J. p : Morgan & Co-__
.
Jan. 30, 1929: Terminal Railroad Association of St. Louis general and refunding mortgage 4's, due Jan. 1,1953; J. P. Morgan
8,000,000
& Co.
Jan. 31, 1929: Alleghany Corporation 15-year collateral, 1944
35,000,000
Fet>. 1, 1929: Alleghany Corp. cumulative preferred series " A "
5/4% stock with warrants:
Intermediate group
Selling-group
Guaranty Co. of New York—
_
250,000 shs.
May 13, 1929: Alleghany Corp. 20-year collateral trust convert25,000,000
ible 5's, due June 1, 1949; J. P. Morgan & Co
..
May 14, 1929: Alleghany Corp. cumulative preferred A 5H%
stock with warrants:
Intermediate group
Selling group
Guaranty Co. of New York
_
250,0C0shs.
June 13, 1929: Southern Public Utilities Co. first & refunding
mortgage 5's, due 1943; Stone & Webster and Blodget, Inc._3,000,000
Oct. 10,1929: The Texas Corp. convertible sinking fund debenture 5's, due Oct. 1,1944; Continental-Illinois Co
100,000,000
Oct. 18, 1929: Southern Bell Telephone & Telegraph Co. first
mortgage sinking fund 5's, due Jan. 1,1941; J. P. Morgan & Co.
32,000,000
Nov. 12,1929: The New York, Chicago & St. Louis Railroad Co.
20,000,000
3-year 6% notes due Oct. 1,1932; Guaranty Co. of New York..
Jan. 10, 1930: The Edison Electric Illuminating Co. of Boston
30,000,000
three-year 5% notes, due Jan. 15, 1933; Lee, Higginson <fe Co..
Jan. 13, 1930: American Telephone & Telegraph Co. 35-year
debenture 5's, due Feb. 1, 1965; J. P. Morgan & Co
150,000,000
Jan.* 15, 1930; The Chesapeake & Ohio Railway Co. refunding
and improvement mortgage " B " 4J^'s, due Jan. 1, 1995;
J. P. Morgan & Co
35,088,000
Jan. 31, 1930: International Telegraph & Telegraph Corp. 25year debenture 5's due 2/1/1955; J. P. Morgan & Co
50,000,000
Feb. 7, 1930: Louisville & Nashville Railroad Co. first and refunding mortgage series " C " 4^'s due 4/1/2003; J. P. Morgan
& Co
15,000,000
Feb. 10, 1930: The Morris & Essex Railroad Co. construction
mortgage " A " 5's due 11/1/1955; J. P. Morgan & Co
10,000,000
Feb. 10, 1930: The Morris & Essex Railroad Co. construction
mortgage " B " 4^'s, due 11/1/1955; J. P. Morgan & Co
15,000,000
Profit to
Drexel &
Co.
1,000 shs.
1,000 shs.
2,750.00
$500,000
150,000
$3,665.00
500,000
500,000
6,250.00
375,000
375,000
9,375.00
600 shs.
1,350.00
150,000
750.00
250,000
718.73
750 shs.
1,125.00
150,000
937.50
300,000
3,375.00
100.000
500,000
1,500.00
6,837.50
3,000 shs.
3,000 shs.
6,232.80
350,000
4,550.00
3,000 shs.
3,000 shs.
5,125.00
750,000
8,930.11
100,000
1,187.50
225,000
3,523.50
440,000
1,650.00
100,000
750.00
1,000,000
22,590.00
250,000
3,350.00
350,000
6,340.00
100,000
2,200.00
80,000
896.00
125,000
1,400.00
267
STOCK EXCHANGE PRACTICES
.GROUP 8.—Summary of all issues and underwritings of stocks and bonds by others
in which the firm of Drexel & Co. took a financial participation or commitment—
Continued
Par value of Drexel & Co.
commitment
offering
Mar. 10,1930: Alleghany Corp. 20-year collateral trust convertible series of 1930 5's due 4/1/1950; J. P. Morgan & Co.—
$25,000,000
Mar. 11,1930: Allegheny Corporation cumulative preferred " A "
(with warrants) 5}i% stock:
Intermediate group__
Selling group
-.
1
Guaranty Co. of New York
125,000 shs.
Mar. 17, 19$0: The Pure pil Company 10-year sinking fund
5%% notes, due 3/1/1940; Guaranty Co. of New York
. 20,000,000
Mar. 18,1930: Pere Marquette Railway Co. first mortgage " C "
Ws, due 3/1/1980; J. P. Morgan & Co
14,000,000
Mar. 25, 1930: The Cleveland Union Terminals Co. first mortgage sinking fund " C " 4^'s, due 10/1/1977; J. P. Morgan & Co_
18,000,000
Mar. 26,1930: The New York, Chicago & St. Louis Railroad Co.
, refunding mortgage " C " 4J4's, due 1978:
Intermediate group—____
_
___
Selling group
_—
_
Guaranty Co. of New York
_._
12,000,000
Apr. 8,1930: Erie Railroad Co. refunding and improvement mortgage 5's, due 4/1/1975; J. P. Morgan & Co
50,000,000
Apr. 24,1930: Van Sweringen Corp. 5-year 6% notes (with warrants), due 5/1/1935: Guaranty Co. of New York
30,000,000
May 12, 1930: Imperial Japanese Government external loan of
1930, 35-year sinking fund 5^'s, due 5/1/1965:
Intermediate group
—-,
Syndicate
50,000,000
J. P. Morgan
ogan & Co
May 15
15, 1930
1930; G
Great
Railway Co. general mortgage
t Northern
N
20,000,000
/ / ;
g & Co
" E " 4J4's, due 7/1/1977;
J. P. Morgan
_
My
M 22, 1930 General
G l American
A i
Tank
T k Car
C Corporation
C t i
equipi
ment trust certificates series "20" 4^%, due annually June 1,
1931, to June 1, 1945:
Original group
_
_
Intermediat.e group.
__
-Selling group at 96.07
4,050,000
C. D. Barney & Co
,.
May 22, 1930: General American Tank Car Corp. equipment
trust certificates, series "21" 4^%, due annually June 1,1931456,000
June 1, 1944; C. D. Barney & Co
May 22, 1930: American Smelting & Refining Co. 6% cumula75,000 shs.
tive second preferred stock; Guaranty Co. of New York
June 4,1930: Electric Bond '& Share Co. $5 cumulative preferred
stock:
Intermediate group—
_
__.
Selling group
______
200,000 shs.
Bonbright & Co., Inc
June 12, 1930: German Government international loan of 1930,
35-year 5^%, due 6/1/1965:
Intermediate group--_Syndicate
___
___
98,250,000
J. P. Morgan & Co.-__
_
June 18, 1930: The Cleveland, Cincinnati, Chicago & St. Louis
Railway Co. refunding improvement mortgage 43^%, due
24,000,000
7/1/1977, series " E " ; J. P. Morgan & Co..
June 26, 1930: The Colorado & Southern Railway Co. general
20,000,000
mortgage " A " 4^'s, due 5/1/1980; J. P. Morgan & Co
June 26, 1930: Boston & Albany Railroad Co. improvement
5,700,000
bonds of 1928 4H's, due 8/1/1978; J. P. Morgan & Co.
July 1,1930; The Michigan Central Railroad Co. refunding and
improvement mortgage " C " 4H's, due 1/1/1979; J. P. Morgan
7,634,000
&Co
_
July 10, 1930: Reading Co. general and refunding mortgage
" B " 4*4% due 1/1/1997; First National Bank of the city of
15,000,000
New York
July 15, 1930: Austrian Government international loan of 1930
sinking fund 7's, due 7/1/1957:
Intermediate group
Selling group
_
25,000,000
J. P. Morgan & Co
—
—
_
—
Aug. 28, 1930: The New York, Chicago & St. Louis Railroad
Co. refunding mortgage " O" 43^'s, due 9/1/1978:
Intermediate group
_
—
Selling group
_
_
o .
36,600,000
Guaranty Co. of New York
t 24,
24 1930:
1930 General
G l Motors
Mt
Sept.
Corporation $5 preferred stock;
158,197 shs.
J. P. Morgan & Co
$350,000
Profit to
Drexel &
Co.
$5,675.00
4,000 shs.
4,000 Shs.
7,950.76
250,000
1,930.31
165,000
1,765.50
550,000
6,215.00
500,000
250,000
4,375.00
400,000
4,000.00
500,000
3,125.00
1,000,000
500,000
16,125.00
350,000
3,'500.00
2,025,000
1,100,000
750,000
34,983.39
378,000
7,852. 33
1,500 shs.
763.83
1,500 shs.
1,500 shs.
3,375.00
3,000,000
1,000,000
39,162.50
250,000
2,187.50
250,000
2,550.00
50,000
152,000
1,000,000
477.50
1,330.00
8,750.00
250,000
50,000
2,850.00
1,500,000
500,000
10,625.00
2,950 Shs.
2,950.00
268
STOCK EXCHANGE PRACTICES
GROUP 8.—Summary of all issues and underwritings of stocks and bonds by others
in which the firm of Drexel & Co. took a financial participation or commitment—
Continued
Par value of Drexel & Co.
offering
commitment
Sept. 25,1930: The Cincinnati Union Terminal Co. first mortgage series " A " 4H's, due 7/1/2020; J. P. Morgan & Co
$12,000,000
Oct. 1, 1930: Engineers Public Service Co. $6 cumulative divi75,000 shs.
dend preferred; Stone & Webster and Blodget, Inc
Oct. 2, 1930: The Philadelphia Inquirer Co. 10-year 6% notes,
due 9/1/1940; the Philadelphia National Co
6,000,000
Aug. 28,1930: The New York, Chicago & St. Louis Railroad Co.
refunding mortgage " C " 4^'s, due 9/1/1978:
Intermediate group
Selling group
_
Guaranty Co. of New York
36,600,000
Sept. 24, 1930: General Motors Corporation $5 preferred stock;
J. P. Morgan & Co
___
158,197 shs.
Sept. 25, 1930: The Cincinnati Union Terminal Co. first mortgage series " A " 4^'s, due 7/1/2020; J. P. Morgan & Co
12,000,000
Oct. 1, 1930: Engineers Public Service Co. $6 cumulative dlvident preferred; Stone & Webster and Blodgett, Inc
75,000 shs.
Oct. 2, 1930: The Philadelphia Inquirer Co. 10-year 6% notes,
due 9/1/1940; the Philadelphia National Co
6,000,000
Oct. 16, 1930: The Edison Electric Illuminoting Co. of Boston
4% 2-year notes, due 11/1/1932; Lee, Higgingson & Co
__ 20,000,000
Nov. 6, 1930: Mobile & Ohio Railroad Co. 5% secured notes,
5,000,000
due 9/1/1938; J. P. Morgan & Co
Nov. 19,1930: General American Tank Car Corporation equipment trust certificates series " 2 3 " 4^'s, due annually 11/1/1931
-11/1/1945:
Original group.
_
___
Intermediate group
_
_
Selling group
_
3,000;00G
C. D. Barney & Co..
_
Jan. 8, 1931: The Cleveland, Cincinnati, Chicago & St. Louis
. Railway Co. refunding and improvement mortgage series " E "
4H's, due July 1,1977:
Selling group
_
5,000,000
J. P. Morgan & Co
Jan. 9,1931: The Texas & Pacific Railway Co. general refunding
mortgage series " D " 5's due Dec. 1, 1980:
Selling group
13,000,000
J. P. Morgan & Co..Jan. 14,1931: Columbia Gas and Electric Corp. debenture 5's,
due 1961:
Intermediate group
_
Selling group
_
___
50,000,000
Guaranty Co. of New York
Jan. 22,1931: Buffalo General Electric Co. general and refunding
mortgage series " B " 43^'s, due Feb. 1, 1981:
Selling group
_
~26,~666,~666"
J. P. Morgan & Co
Jan. 26t-1931: Kansas City Power & Light Co. first mortgage 4^'s
due Feb. 1,1961:
Intermediate group
___
_
Selling group
_
_
27,000,000
Guaranty Co. of New York
___
_
Jan. 27, 1931: Missouri Pacific Railroad Co. first and refunding
61,200,000
mortgage series " I " 5's, due Feb. 1,1981; J. P. Morgan & Co_
Feb. 11, 1931: The Michigan Central Railroad Co. refunding
and improvement mortgage series " C " 4^'s, due Jan. 1,1979;
4,000,000
J. P . Morgan & Co
_
Feb. 26,1931: Pere Marquette Railway Co. first mortgage series
8,000,000
" C " 4^'s, due Mar. 1,1980; J. P. Morgan & Co__
—
Mar. 10, 1931: New York Central Railroad Co. refunding and
improvement mortgage series " A " 4J#s, due Oct. 1, 2013;
75,000,000
J. P. Morgan & Co
_
_
Apr. 1, 1931: Northern States Power Co. refunding mortgage
35,000,000
4^'s, due Apr. 1,1961; Harris, Forbes & Co
Apr. 7, 1931: Pennsylvania Power & Light Co. first mortgage
4K's, due Apr. 1,1981:
Special group
_
Intermediate group
_
Selling group
.-100,000,000
Guaranty Co. of New York..
.._
May 27,1931: Consolidated Gas Co. of New York 20-year debenture 4J^'s, due June 1,1951:
Intermediate group
--Selling group
60,000,000
National City Co
-
$540,000
Profit to
Drexel &
Co.
$5,778.00
1,000 shs.
2,000.00
250,000
4,375.00
1,500,000
500,000
10,625.00
2,950 shs.
2,950.00
540,000
5,778.00
1,000 shs.
2, boo. oo
250,000
4,375.00
100,000
375.00
150,000
1,500.00
1,500,000
1,035,000
663,000
19;.O77.12
300,000
2,454.00
400,000
"i'oiOo
1,500,000
250,000
8,375.00
310,000
~3,"686.~66
500,000
250,000
5,625.00
300,000
3,810.00
225,000
2,025.00
250,000
1,875.00
975,000
10,175.00
200,000
2,500.00
6,000,000
2,500,000
2,500,000
88,689.06
250,000
250,000
4,669.77
269
STOCK EXCHANGE PKACTICES
GROUP 8.—Summary of all issues and underwritings of stocks and bonds by others
in which the firm of Drexel & Co. took a financial 'participation or commitment—
Continued
Par value of Drexel & Co.
offering
commitment
June 26,1931: Taiwan Electric Power Co., Ltd., 40-year sinking
fund 5^'s, due July 1,1971; J. P. Morgan & Co
July 7,1931: St. Joseph Lead Co., 10-year convertible debenture
5^'s, due May 1,1941; J. P. Morgan & Co.._
Aug. 12, 1931: Electric Bond & Share Co., $5 cumulative preferred stock:
Intermediate group
_
Bonbright & Co., Inc
_
Sept. 15, 1931: Louisville & Nashville Railroad Co., 10-year
secured 5's due Oct. 1, 1941; J. P, Morgan & Co
Nov. 19, 1931: The Cincinnati Union Terminal Co., first series
" B " 5's, due July 1, 2020; J. P. Morgan & Co
_..
Profit to
Drexel &
Co.
$22,800,000
$200,000
$4,510.00
9,752,300
250,000
2,500.00
1,500 shs.
1,500 shs.
100,000
3,187.50
10,000,000
100,000
1,125.00
12,000,000
575,000
7,188.20
COMMITTEE EXHIBIT NO. 16 OF MAY 25,
1933
QUESTION 10
Lists of all pools, joint accounts, and/or syndicates in which either of said firms
or representatives participated, giving the names of security involved, names of
all participants, and all details with respect to the amount of the participation
and profits and losses therein
Allied Power and Light Corporation common and Commonwealth and Southern
Corporation common and opinion warrants joint arbitrage account
[Feb. 3,1930, Joint Arbitrage Account formed by J. P. Morgan & Co. and Asiel & Co.]
For Allied Power and Light Corp.
1 share 1st preferred
1 share $3 preferred. __
1 share common
Received, Commonwealth and Southern Corp.
% share preferred $6 series.
J4 share preferred $6 series.
2 ^ shares common and option warrant for 1H shares.
February 28, 1930, the account was closed.
Summary
Bought
1, 000 shares Allied Power & Light Corp. common.
Sold
100 shares Allied Power & Light Corp. common.
Balance—bought-_
900 shares Allied Power & Light Corp. common.
Sold
2, 250 shares Commonwealth & Southern Corp.
common.
Sold
1, 125 Commonwealth & Southern Corp. option
warrants.
Five percent interest, amounting to $79.94, charged on debit balances.
Profit $393.86, our share $196.93, the balance of $196.93 paid Asiel & Co. on
February 28, 1930.
The American Superpower Corporation Common "A" and " B " "Old" and common
"New" and rights—United Corporation common stock joint arbitrage account
May 2, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co.
American Superpower Corporation common-stock holders of record May 8,
1929, were entitled to purchase United Corporation common @ $30 per share,
at the rate of 1 share of United Corporation common for each 4 shares of AmeriSuperpower Corporation common (both "A" and "B"). Also to change two
Digitized forcan
FRASER
175541—33-—PT 1
18
270
STOCK EXCHANGE PRACTICES
classes of American Superpower Corporation common into one class of common,
the class "A" and " B " common to be exchanged for new common on a ratio of 5
new common for each share of class "A" and "B".
On June 15, 1929, the account was closed:
SUMMARY
AMERICAN SUPERPOWER CORPORATION
"Old":
Scares
Bought
Sold
7,800
300
Balance—Bought
.
"New":
Sold
Bought
\7, 500
40,400
2, 900
Balance—Sold
37,500
Rights:
Received free on purchases
Bought
5, 700
143,700
149, 400
21,400
Sold
Balance—Bought
128, 000
UNITED CORPORATION COMMON
Shares
Sold
38,100
Bought.
,
6, 100
Balance—Sold.
„
32, 000
May 7th to 15th, 1929, the account borrowed from J. P. Morgan & Co. 32,000
shares of United Corporation common.
May 24, 1929, the account subscribed to 32,000 shares United Corporation
common, through the exercise of the 128,000 rights mentioned above. May 29,
1929, the 32,000 shares borrowed were returned to J. P. Morgan & Co.
Eight and one half percent interest, amounting to $13,778.84, was charged on
debit balances.
Profit $60,684.53; our share $30,342.26, the balance of $30,342.27 paid Asiel &
Co. on June 15, 1929.
American Superpower Corporation rights, Commonwealth and Southern Corporation
common, joint.arbitrage account
June t5, 1929, a joint arbitrage account farmed by J. P. Morgan & Co. and
Asiel & Co.
American Superpower Corporation common stockholders of record on June 18,
1929, were granted the right to purchase common stock of the Commonwealth
and Southern Corporation at $15 per share, at the rate of 1 share Commonwealth
and Southern Corporation common for each 10 shares of American Superpower
Corporation common.
On July 18, 1929, the account was closed:
SUMMARY
AMERICAN SUPERPOWER CORPORATION
RIGHTS
Rights
Bought
Sold—.
Balance—bought
1
1,800 exrights.
45,700
6,000
39, 700
STOCK: EXCHANGE PRACTICES
271
COMMONWEALTH AND SOUTHEKN CORPORATION COMMON STOCK
Shares
Sold
*
4,470
Bought
500
Balance—sold
3, 970
July 2, 1929, we subscribed to 3,970 shares of Commonwealth and Southern
Corporation common stock, using the 39,700 American Superpower Corporation
rights and $59,550 ($15 per share).
Seven percent interest, amounting to $180.36, was charged on debit balances.
Profit $1,257.59; our share $628.79, the balance $623.80 paid Asiel & Co.,
July 18, 1929.
Anaconda Copper Mining Company capital stock, joint arbitrage account
March 7, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co.
Stockholders of record on April 30, 1929, were entitled to subscribe, at $55 per
share, for 2 shares of additional stock for each 5 shares then held.
On May 27, 1929, the account was closed.
SUMMARY
Bought
Sold
Shares
"old"
26, 100
i 3, 400
Balance—Bought
22, 700
Shares
"new"
Sold
Bought
..
Balance—Sold
23,510
810
22, 700
Rights
Bought
56, 650
Received free
23, 700
Total
,_ 80,350
Sold
...
1
80, 350
Eight percent interest, amounting to $65,923.28, was charged on debit balances.
Profit $113,765.07, J. P. Morgan & Co.'s share $56*882.53, the balance of
$56,882.54 paid Asiel & Co. on May 27, 1929.
/ . / . Case Company: common stock, joint arbitrage account
September 20, 1929, a joint arbitrage account formed by J. P. Morgan & Co.
and Asiel & Co.
Stockholders of record on October 4, 1929, were entitled to subscribe to 65,000
additional common shares at $150 per share, in the ratio of 1 new share for each
2 shares of old then held.
On December 6, 1929, the account was closed:
SUMMARY
Shares "old" bought
Shares "new" sold
Rights:
Bought
Received free
Sold
11,000 sold ex rights.
400
400
700
400
.
1,100
272
STOCK EXCHANGE PRACTICES
Eight percent interest, amounting to $689.76, was charged on debit balances.
Loss $5,723.51, our share $2,861.75, the balance $2,861.76 paid by Asiel & Co.
on December 6, 1929.
The Celluloid Corporation rights and first participating preferred stock arbitrage
account
Account formed August 27, 1927.
Percent
J. P. Morgan & Co
37H
Clark, Dodge & Co
37^
J. S. Rippel & Co
25
100
SUMMARY
Rights bought
Rights sold
_
„
Balance
Shares subscribed with balance of 11,572 rights
Shares sold
23, 708
12, 136
11,572
2, 893
2, 893
Account closed October 27, 1927. J. P. Morgan & Co.'s profit $10,105.42.
Columbia Graphophone Co., Ltd., American shares, joint arbitrage account
On June 10, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co.
Stockholders of record at the close of business June 14, 1929, were entitled to
subscribe to new shares on the basis of 1 new share for every 5 shares held,
subscription price $24.28 per share.
On October 10, 1929, the account was closed.
SUMMARY
Rights
Bought..
•Less
-
21,200
» 2, 200
19, 000
Shares
Sold
4,000
Bought
200
Balance—sold- .*.
- 3,800
On July 10, 1929, the account subscribed to 3,800 shares of stock, using the
19,000 rights which were bought and $92,264.
Eight percent interest, amounting to $4,327.68, was charged on debit balances.
Profit $2,885.15, J. P. Morgan & Co.'s share $1,442.58,,balance $1,442.57 paid
Asiel & Co. on December 10, 1929.
Commonwealth and Southern Corporation common stock; Commonwealth and Southern Corporation option warrants; Commonwealth Power Corporation common
stock; Southeastern Power and Light Company common stock; Southeastern
Power and Light Company option warrants; Penn-Ohio Edison Company common
stock; Penn-Ohio Edison Company option warrants "A"; and Penn-Ohio Edison
Company option warrants "B"; joint arbitrage account
On June 13, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co. The United Corporation also had an interest in this account.
Under the plan and deposit agreement, dated May 24, 1929, the offer of the
Commonwealth and Southern Corporation to exchange its common shares and
option warrants entitling the holders to purchase additional common stock at
$30 per share, was made on the following basis:
i Account 2,200 shares sold cum rights.
273
STOCK EXCHANGE PBACTICES
Receive in exchange
Commonwealth &
Southern Corp.
Deposit
Common Option
stock warrants
1 share Commonwealth Power Corp. common stock
1 share Southeastern P. & L. Co. common stock
1 share Southeastern P. & L. Co. common stock, voting trust
1 share Southeastern Power & Light Co. common stock, option warrant
1 share Penn-Ohio Edison Co. common stock__
1 share Penn-Ohio Edison Co. common stock, option warrant A
1 share Penn-Ohio Edison Co. common stock, option warrant B
Shares
8
4K
4H
2
3H
2H
2H
2H
On July 9, 1929, the account was closed.
Summary
Commonwealth Power Corporation common stock (bought)
South eastern Power & Ligh t Co. common stock (bought)
Penn-Ohio Edison Co. common stock (bought)
Southeastern Power & Light Co. warrants (bought)
Penn-Ohio Edison Co warrants A (bought)
Penn-Ohio Edison Co. warrants B (bought)
Commonwealth & Southern Corporation, new:
Sold
Bought
Balance, sold
Shares
11, 400
5,200
22, 300
4, 200
3, 400
7, 700
250,600
200
250, 400
Sold__
125,200
Seven percent interest, amounting to $7,660.14, charged on debit balances.
The account borrowed from the United Corporation 50,000 shares of Commonwealth & Southern Corporation common stock and 25,000 Commonwealth &
Southern Corporation common stock option warrants, and deposited with the
corporation on account of this loan $1,450,000 being at the rate of $24 per share
and $10 per option warrant.
Profit $78,228.99: X P. Morgan & Co. share, $31,291.59; the United Corporation share $15,645.80; and $31,291.60 to Asiel & Co.
CONSOLIDATED GAS COMPANY OF NEW YOKK COMMON STOCK JOINT ARBITKAGE
ACCOUNT
July 26, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co.
Stockholders of record on September 13, 1929, entitled to subscribe for 1 new
share of common stock at $75 per share for 10 shares of, common stock then
held.
October 22, 1929, the account was closed.
Summary
Rights
Bought (9,700 received free)
120, 127
Sold
120,127
Shares
Bought...
10,700
Sold
10,700
Eight percent interest, amounting to $19,953.32, was charged on debit
balances.
Total profit $39,243.54, of which our share was $19,621.77, and the balance of
$19,621.77 was paid to Asiel & Co. on October 22, 1929.
274
STOCK: EXCHANGE PRACTICES
E. I. DU PONT DE NEMOURS & Co.
COMMON STOCK JOINT ARBITRAGE ACCOUNT
November 20, 1928; joint arbitrage account in E. I. du Pont de Nemours &
Co. common stock, "old" and "new", formed by Asiel & Co. and J. P. Morgan
& Co.
Each share of "old" stock exchangeable for 3}£ shares of "newJJ stock.
The Grasselli Chemical Co. common stock was also exchangeable for E. I. du
Pont de Nemours & Co. common stock "old" on the basis offiveshares of Grasselli Co. common for each one share of Du Pont "old."
January 29, 1929, the account was closed.
Summary
Shares
Sold, common new.__
Bought, common new
15, 855 $2, 210, 846. 25
... 1, 575
223, 000. 00
Balance, sold (net)
14,280
Bought, common old
__ 1, 900
Bought, common old, received in exchange for 10,900 shares The Grasselli Chemical Co. common
2, 180
935, 775. 00
1, 026, 787. 50
4,080
Less:
Interest, 7 percent
Commissions
Tax
Advertising
Plus:
Interest, 7 percent
Dividend
1, 987, 846. 25
1, 962, 562. 5Q
25, 283. 75
21, 606. 46
1, 553. 75
126. 84
544. 80
23, 831. 85
1, 451. 90
77.61
27, 405. 00
27, 482. 61
Net profit
28, 934. 51
January 29, 1929, one half of profit paid Asiel & Co., $14,467.26, and $14,467.26
was paid J. P. Morgan & Co.
THE FLEISCHMANN COMPANY COMMON STOCK JOINT ARBITRAGE ACCOUNT
June 21, 1929, a joint arbitrage account formed by J, P. Morgan & Co. and
Asiel & Co.
Eeceive in
exchange
Standard
Brands
Inc. common stock
For, old company:
Shares
1 share Fleischmann Co. common
2%
1 share Royal Baking Powder Co. common
1
1 share E. W. Gillett Co., Ltd., common.
_______ 10
For:
1 share Fleischmann Co. pre- 4 shares Standard Brands, Inc., common
ferred.
stock or, at option of holder, 1 share
Standard Brands, Inc., cumulative preferred series A.
1 share Royal Baking Powder Co. 1 share Standard Brands, Inc., cumulative
preferred.
preferred series A.
On September 25, 1929, the account was closed.
STOCK EXCHANGE PRACTICES
The Fleischmann Co. common:
Bought
____
Sold
_-
Summary
•___
Balance, bought
275
Shares
71,400
8,900
62, 500
Royal Baking Powder Co. common:
Bought
Sold
_
Balance, bought
_
49, 500
5,500
44, 000
E, W. Gillett Co., Ltd., common, bought
25
Standard Brands, Inc., common:
Sold____
200,950
Bought
450
Balance, sold
200,500
Eight percent interest, amounting to $79,235.81, was charged on debit balances.
Total profit $124,613.48, of which J. P. Morgan & Co.'s share was $62,306.74,
and $62,306.74 was paid to Asiel & Co. on September 25, 1929.
GENERAL ELECTRIC COMPANY COMMON STOCK JOINT ARBITRATE ACCOUNT
December 9, 1929, a joint arbitrage account formed by J. P. Morgan & Co.
and Stokes, Hodges & Co.
January 15, 1930; the General Electric Co. stockholders authorized the change
of 7,400,000 shares (no par value) into 29,600 shares (no par value), (4 shares of
new for 1 share of old).
January 31, 1930, the account was closed.
Summary
Shares
Bought (old)
45,000
Sold (old)
20, 000
Balance bought (old)
25,000
Sold (new)
153, 800
Bought (new)
53, 800
Balance sold (new)
100, 000
Six percent interest, amounting to $35,468.45, was charged on debit balances.
Total profit $60,104.62, J. P. Morgan & Co.'s share of which, $30,052.31, was
paid on January 31, 1930, Stokes, Hodges & Co. retaining their own share of
$30,052.31.
GENERAL ELECTRIC CO. COMMON STOCK, JOINT ARBITRAGE ACCOUNT N O . 2
January 2, 1930, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co.
Seven million four hundred thousand shares (no par value) exchangeable into
29,600,000 shares (no par value, 4 shares of new for 1 share of old).
February 5, 1930, the account was closed.
Summary
Shares
Bought, old
600
Sold, new
2, 400
Six percent interest, amounting to $660.76, was charged on debit balances.
Profit $660.74, J. P. Morgan & Co.'s share $330.37, balance of $330.37 paid
Asiel & Co. February 5, 1930.
276
STOCK EXCHANGE PRACTICES
GENERAL MOTORS CORPORATION COMMON STOCK, JOINT ARBITRAGE ACCOUNT
August 15, 1927, a joint arbitrage account in General Motors Corporation
common stock, old and new, formed by J. P. Morgan & Co. and Asiel & Co.
Total purchases amounted to 30,600 shares of old. Six hundred shares of
old were sold and 60,000 shares of new were sold.
On September 27,1927, the account was closed. Profit amounted to $62,419.17,
of which J. P. Morgan & Co. paid Asiel & Co. $31,209.59 and retained $31,209.58.
GENERAL MOTORS CORPORATION 7 PERCENT PREFERRED, STOCK JOINT ACCOUNT
September 2, 1927, a joint account was formed, viz:
Per
cone
J. P. Morgan & Co
Wood, Struthers & Co
75
25
100
Five thousand eight hundred shares were bought and 2,041 shares sold.
October 6, 1927, the account was closed and the balance of 3,759 shares were
delivered against payment at an average price of 125.10819, as follows:
Shares
J. P. Morgan & Co. (stock account)
_
Wood, Struthers & Co
2, 819
940
3, 759
GENERAL MOTORS CORPORATION COMMON STOCK, JOINT ARBITRAGE ACCOUNT
November 9, 1928, a joint arbitrage account in General Motors Corporation
common stock, old and new, formed by Asiel & Co. and J. P. Morgan & Co.
One share of old common stock (par $25) exchangeable for 2% shares of new
(par $10).
January 12, 1929, the account was closed.
Summary
Shares
Sold, new
Bought, new
Balance sold
Bought, old
Sold, old
Balance bought
Less:
Advertising expenses
Interest, 7 percent
Commission
Taxes
13, 600 $1, 178, 718. 75
350
26,256. 25
13, 250
$1, 152, 462. 50
5, 400
1, 147, 762. 50
100
18,436. 50
5, 300
1, 129, 326. 00
23, 136. 50
277. 33
11, 273. 39
781. 88
54. 40
12, 387. 00
Plus: Dividend
10, 749. 50
15, 000. 00
Net profit
25, 749. 50
January 12, 1929, Asiel & Co. were paid $12,874.75, being one half of the net
profit.
GUARANTY TRUST CO. OF NEW YORK CAPITAL STOCK AND RIGHTS, JOINT ARBITRAGE ACCOUNT
June 7, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Grannis, Doty & Co., to deal in Guaranty Trust Co. of New York, capital stock
and rights.
STOCK EXCHANGE PBACTICES
277
The Guaranty Trust Co. increased its capital stock by $20,000,000, or 200,000
shares, i.e., from $70,000,000 to $90,000,000, stockholders being entitled to subscribe to 1 share of new stock at $500 per share for each 3% shares of stock held.
On August 6, 1929, the account was closed:
Summary
Shares.
Sold._
.
Bought
Balance sold
.
_.
7,957
1,957
6, 000
Rights
Bought
48,499^
Sold
27, 499^
Balance bought
21, 000
Stock borrowed
Shares
From our own stock account
5, 563
From Beech Corporation
437
Total borrowed
6, 000
On July 22, 1929, we subscribed to 6,000 shares of stock, using the 21,000 rights
which were bought and $3,000,000 ($500 per share).
Total profit $35,944.19, of which our share was $17,972.09, the balance of
$17,972.10 paid to Grannis, Doty & Co. August 6, 1929.
INTEENATIONAL
TELEPHONE & TELEGRAPH CORPORATION
ARBITRAGE ACCOUNT
STOCK,
JOINT
March 18, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co.
May 9, 1930, the International Telephone & Telegraph Corporation authorized
the split up of its 5,000,000 shares of stock of $100 par value into 15,000,000
shares of no par value (3 shares of new for 1 share of old).
On May 21, 1929, the account was closed:
Summary
Shares
Bought, old
9, 000
Sold, old
2, 600
Balance bought, old
6, 400
Sold, new
20, 600
Bought, new
1, 400
New
19,200
Eight percent interest, amounting to $19,052.35, was charged on debit balances.
Total profit $24,053.46, our share $12,026.73, balance of $12,026.73 paid to
Asiel & Co. May 21, 1929.
INTERNATIONAL TELEPHONE & TELEGRAPH CORPORATION 10-YEAR CONVERTIBLE 4}£ PERCENT GOLD DEBENTURE BONDS, DUE JAN. 1, 1939, AND
COMMON STOCK, JOINT ARBITRAGE ACCOUNT
June 18, 1929, a joint arbitrage account formed by J. P. Morgan & Co., and
Asiel & Co.
Bonds convertible into stock at the rate of 15 shares for each $1,000 bond.
On July 10, 1929, the account was closed.
278
STOCK EXCHANGE PRACTICES
Summary
Bought bonds, $20,000; sold shares stock, 300.
Six percent interest, amounting to $114.13, was charged on debit balances.
Total profit, $298.44; our share, $149.22; the balance of $149.22 paid to Asiel
& Co. July 18, 1929.
KENNECOTT COPPER CORPORATION STOCK JOINT ARBITRAGE ACCOUNT
January 2, 1929, a joint arbitrage account in Kennecott Copper Corporation
stock, old and new, formed by Asiel & Co. and J. P. Morgan & Co.
Holders of 1 share of stock at close of business February 7, 1929, were to receive an additional share.
On February 28, 1929, the account was closed.
Summary
Shares
Sold (new)
Bought (new)
6, 700 $552, 162. 50
500
40,175.00
Total sold (new)
,____-
Bought (old)
Sold (old)
6,200
3,400
300
Old
$511,987.50
543, 400. 00
47, 688. 00
3, 100
Less:
Commission
Taxes
Advertising expenses
Debit interest at 8 percent
495, 712. 00
16, 275. 50
710. 00
268. 00
191. 25
5, 918. 87
7, 088. 12
9, 187. 83
On February 28, 1929, Asiel & Co. were paid $4,593.69, being one half of the
net profit.
MONTGOMERY WARD & Co.
COMMON STOCK, JOINT ARBITRAGE ACCOUNT
October 17, 1928, a joint arbitrage account in Montgomery Ward & Co.
common stock, old and new, formed by Asiel & Co. and J. P. Morgan & Co.
Holders of old common were entitled to subscribe for additional shares of
common stock in the proportion of 2 shares to each 1 share then owned at a price
of $35 for each 2 shares.
On December 14, 1928, the account was closed:
Summary
Shares
Sold common (new)
Bought common (new)
63, 000 8, 129, 200
5, 700
843, 925
Balance sold (net)
Bought common (old)
Sold common (old)
57,300
$7,285,275.00
20, 900 7, 119, 825
1, 800
729, 303
Balance bought (net)
Less:
Interest
Advertising
Commission and tax stamps
Subscriptions
Subscription expenses
19, 100
6, 390, 522. 00
894, 753. 00
$65, 357. 37
1, 600. 00
7, 356. 00
668, 500. 00
191. 00
743, 004. 37
151, 748. 63
STOCK EXCHANGE PBACTICES
279
Summary—C ontinued
Plus:
Dividend
Interest
$18, 100. 00
2, 030. 93
$20, 130. 93
Net profit
„
171, 879. 56
On December 14, 1928, Asiel & Co. were paid $85,939.78, being one half of the
net profit.
MONTGOMERY WARD & Co.,
INC., COMMON STOCK, JOINT ARBITRAGE ACCOUNT
June 14, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co.
Stockholders of record on July 17, 1929, were entitled to subscribe to additional
shares at $50 per share in the ratio of 1 additional share for each 3 shares then
held.
On August 17, 1929, the account was closed.
Summary
y
Shares
Sold
Bought
Balance sold
6,900
4,700
2, 200
Rights
Bought..
Sold
28, 500
21,900
Balance bought
6, 600
August 2, 1929, subscribed to 2,200 shares of stock, using 6,600 rights and
110,000 ($50 per share).
Eight percent interest, amounting to $469.76, was charged on debit balances.
Total profit $11,789.18, our share $5,894.59, the balance of $5,894.59 paid Asiel
& Co.
NIAGARA
HUDSON
POWER
CORPORATION COMMON STOCK
ACCOUNT
JOINT
ARBITRAGE
On June 20, 1929, a joint arbitrage account formed between J. P. Morgan &
Co. and Asiel & Co. to trade in Buffalo, Niagara & Eastern Power Corporation
class A Stock, Buffalo, Niagara & Eastern Power Corporation common stock,
Northeastern Power Corporation common stock, Mohawk-Hudson Power Corporation common stock, Mohawk-Hudson Power Corporation warrants, NiagaraHudson Power Corporation common stock, Niagara-Hudson Power Corporation
class A warrants, and Niagara-Hudson Power Corporation class B warrants.
Under a plan and deposit agreement, dated June 19, 1929, holders were invited
to deposit their stock for exchange on the following basis:
Receive: Niagara-Hudson Power Corp. class A 15-year option warrants to purchase 1 share common stock, at $35.
Deposit:
1 share Buffalo, Niagara & Eastern Power Corp. common stock
Shares
or class A stock
4
1
1 share Northeastern Power Corp. common stock
2%
%
7
1 share Mohawk-Hudson Power Corp. common stock
3}_
/$
1 Mohawk-Hudson Power Corporation warrant class A 15-year
option warrant to purchase % of a share of common stock,
at $35 per full share and class B2 option warrant to purchase
3}_ shares of common stock for $50.
On August 30, 1929, the account was closed:
280
STOCK EXCHANGE PRACTICES
Summary
Buffalo, Niagara & Eastern Power Corp. class A, and common stock:
Bought:
Class A
Common
Shares
500
200
Total bought
700
Northeastern Power Corporation common: Bought
6. 100
Mohawk-Hudson Power Corporation common: Bought
2, 200
Mohawk-Hudson Power Corporation warrants: Bought
600
Niagara Hudson Power Corporation common:
Sold
27, 166%
Bought
_
400
Balance sold
26, 766%
Niagara Hudson Power Corporation class A warrants: Sold
7, 216x%t
Niagara Hudson Power Corporation class B warrants: Sold
600
Eight percent interest, amounting to $10,001.81, was charged on debit balances.
Profit, $22,828.85; our share, $11,414.42; the balance of $11,414.43 paid
Asiel & Co. August 20, 1929.
PACKARD MOTOR CAR CO. CAPITAL STOCK JOINT ARBITRAGE ACCOUNT
May 24, 1929, a joint arbitrage account formed by J. P. Morgan & Co. and
Asiel & Co.
On June 19, 1929, the Packard Motor Car Co. authorized the split-up of its
5,000,000 shares of $10 par value to 25,000,000 shares of no par value (5 shares
of new for 1 share of old).
September 20, 1929, the account was closed.
Summary
Shares
8, 600
60O
Bought, old
Sold, old
Balance, bought, old
8, 000
Sold, new
Bought, new
41, 500
1, 500
Balance—sold, new
40, 000
Eight percent interest, amounting to $14,396.58, was charged on debit balances.
Profit, $11,251.30; our share, $5,626.65; the balance paid Asiel & Co., $4,725.87
on September 20, 1929; $899.78 on September 25, 1929.
UNION CARBIDE AND CARBON CORPORATION CAPITAL STOCK, " O L D AND N E W " ,
JOINT ARBITRAGE ACCOUNT
On March 14, 1929, a joint arbitrage account formed by J. P. Morgan & Co.
and Asiel & Co.
Increase of capital stock from 3,000,000 shares to 12,000,000 shares (3 new
shares for each old share).
On May 15, 1929, the account was closed.
Summary
Bought, old
Shares
2, 000
Sold, old
1,500
Balance—bought, old
Sold, new
Bought, new
Balance—sold, new
i
500
4, 300
2, 800
1, 500
STOCK EXCHANGE PKACTICES
281
Eight percent interest, amounting to $2,231.80, was charged on debit balance.
Profit, $4,931.27; our share, $2,465.63; the balance of $2,465.64 paid Asiel & Co.
May 15, 1929.
UNITED CORPOBATION COMMON STOCK AND RIGHTS, JOINT ARBITRAGE ACCOUNT
No. 2
On June 7, 1929, a joint arbitrage account was formed between J. P. Morgan
& Co. and Asiel & Co.
Stockholders of record at close of business on July 10, 1929, were entitled to
subscribe to additional common stock at $37.50 per share, in the proportion of
1 share for each 5 shares then held.
On August 23, 1929, the account was closed:
Summary
Shares
Sold (400 ex rights)
Bought (200 ex rights)
.
81, 300
8,000
.
Balance—sold
73,300
Bought (rights)
466, 600
Sold (rights)
.
Delivered against stock sold cum. rights (rights)
27, 000
73, 100
Total (rights)
100, 100
Balance—bought (rights)
366, 500
The account borrowed from J. P. Morgan & Co., between June 10 and 12, 1929,
4,700 shares of United Corporation common stock, which were returned on
June 13, 1929.
On August 15, 1929, the account subscribed to 73,300 shares, at $37.50 per
share, using the 366,500 rights and $2,748,750.
Eight percent interest, amounting to $13,848.63, was charged on debit
balances.
Profit, $73,777.94; our share, $36,888.97; balance, $36,888.97, paid Asiel & Co.
August 23, 1929.
UNITED GAS IMPROVEMENT CO. COMMON " O L D " AND " N E W " AND PREFERRED
STOCKS, JOINT ARBITRAGE ACCOUNT NO. 1
On May 27, 1929, a joint arbitrage account was formed by J. P. Morgan & Co.
and Asiel & Co.
Exchange of 1 share of old capital stock for one eighth of a share of preferred
stock and 5 shares of common stock.
On October 10, 1929, the account was closed.
Summary
Share
Bought, old
Sold
28,000
_.
.
500
Balance—bought, old
_
27, 500
Sold, new
Bought, new.
Balance—sold, new
152, 300
-
14, 800
137, 500
Sold, preferred
_ 3, 562^
Bought, preferred
_
125
Balance—sold, preferred
_
._
3, 437}£
Eight
percent interest, amounting to $147,560.10, was charged on debit bal
ances.
http://fraser.stlouisfed.org/
Profit, $138,890.69; our share, $69,445.34; the balance, $69,445.36, paid Asiel
Federal &
Reserve
Bank of10,
St. 1929.
Louis
Co. October
282
STOCK EXCHANGE PBACTICES
UNITED GAS IMPROVEMENT CO. COMMON STOCK AND RIGHTS, JOINT ARBITRAGE
ACCOUNT NO. 2
June 1, 1929, a joint arbitrage account was formed by J. P. Morgan & Co.
and Asiel & Co.
Stockholders of record on October 31, 1929, were entitled to subscribe at $20
per share for 1 share of stock for each 10 shares then held.
On December 18, 1929, the account was closed.
Summary
Shares
Bought, new
Sold, new
Sold, rights
Received a/c stock on hand
Bought, rights
1
50, 800
508, 800
51, 500
51, 500
559, 600
559, 600
Six percent interest, amounting to $32,700.94 was charged on debit balances.
Profit, $130,503.79; our share, $65,251.89; the balance, $65,251.90, paid Asiel
& Co. on December 17, 1929.
UNITED STATES STEEL CORPORATION COMMON STOCK JOINT ARBITRAGE
ACCOUNT
January 4, 1927, a joint arbitrage account in United States Steel Corporation
common stock "old" and United States Steel Corporation common stock "when
issued" formed.
Interest
J. P. Morgan & Co
45%
Johnson & Wood
- 45%
Lindley & Co
10%
On June 1, 1927, the account was closed.
Summary
Shares
Bought, old
Sold, old
Balance—Bought, old
-___
___
29, 500
— 7, 600
21, 900
Shares
Sold, new
„_-- 41,060
Bought, new
10, 400
Balance—Sold, new
30, 660
Against the 21,900 shares of "old" held, the account received from the United
States Steel Corporation the stock dividend of 40 percent, total of 30,660 shares
delivered to Lindley & Co. against payment of $3,673,013.10.
Interest at 5 percent per annum on debit balance, $39,336.52.
New profit ($29,153.33) paid June 1, 1927, as follows:
J. P. Morgan & Co
$13, 119. 00
Johnson & Wood
_ 13, 119. 00
Lindley & Co
2, 915. 33
(
Special suspense account
J. P. Morgan & Co
4/25ths
First Securities Co
4/25ths
s
Chase Securities Corporation
4/25ths
Guaranty Co. of New York
4/25ths
National City Co
4/25ths
Bankers Co_
4/25ths
Daniel, Murry, S. R. and Simon Guggenheim
l/25ths
J. P. Morgan & Co.'s net profit, $170,776.78.
Special suspense account 1929 and 1930
Bought
Alleghany Corporation
_
Allied Chemical & Dye Co.
:
American Can Co_
American Smelting & Refining Co....
American Telephone & Telegraph Co
Anaconda Copper Mining Co
Atchison, Topeka & Santa Fe Ry. Co..
Baltimore & Ohio Railroad Co
Bethlehem Steel Corporation
The Chesapeake CorporationColumbia Gas & Electric Co
Columbia Graphophone Co_
Consolidated Gas Co', of N.Y.:
E. I. du Pont de Nemours & Co
General Electric Company
General Motors Corp. (common)
Great Northern Railway Co. (pfd.)
International Nickel Co. of Canada
International Telephone & Telegraph Corp.
Johns-Manville CoKennecott Copper Corporation
Montgomery Ward & Co
New York Central Railroad Co
Pennsylvania Railroad Co
_
_
Public Service Corp. of N.J
_
Radio Corporation of America
Sears, Roebuck & Co
_
Southern Pacific Co
Southern Railway Co
-.
Standard Oil Company of N.J..
_
The Texas Corporation. __
_
_.
Union Pacific Railroad Co
_.
United Aircraft & Transportation Corp
United Gas Improvement Co. of Phila
_.
U.S. Steel Corporation
Western Union Telegraph Co
_.
Westinghouse Electric & Manufacturing Co.
Total.
Average
Price
Shares
3,500
940
106,200
17,100
71,400
76, 200
15,000
10,000
12, 700
1,000
60,000
31,600
88,700
2,000
66,600
54,000
13,400
26,600
92,400
6,500
32,300
47,100
25,900
$35.15
272.25
122.854
76.957
232. 313
85. 488
239. 316
118. 540
101.852
71. 675
66. 940
25. 622
104.407
167. 25
238. 769
43. 940
100.973
34. 904
78.423
170. 25
60. 720
60. 487
7,200
100
27,000
28,269
2,000
1,600
27,000
6,000
2,100
5,000
1,200
148,400
11,200
18,400
92. 274
93.95
48.123
105.705
131. 750
144. 250
59. 471
50.80
247.945
79.20
34.40
182.450
234.764
155.828
1,146,6
182. 698
Cost
Sold
Shares
3,500
$123,025. 00
940
255,915.00
106,200
13,047,100.00
17,100
1,315,970.00
71,400
16,586,805.00
76, 200
6,514, 215. 00
15,000
3,589,750.00
10,000
1,185,400. 00
12, 700
1, 293, 525. 00
1,000
71,675.00
60,000
4,016,425.00
31,600
809,675.00
88, 700
9,260,940.00
2,000
334,500. 00
66, 600
15,902,050.00
54,000
2,372, 787. 50
13,400
1,353,050.00
26,600
928,465.00
92,400
7,246,290.00
6,500
1,106, 625. 00
32, 300
1,961,277.50
47,100
2,848,942.50
JRts. 25,900
4, 731,900.00 \ R t s . 25,900
JRts. 6,300
664,377.50 \ R t s . 7,200
100
9,395.00
27,000
1, 299, 325.00
2,988,200.00
263, 500.00
2,000
230,800.00
1,600
27,000
1,605,725.00
6,000
304,800.00
2,100
520,685.00
5,000
396,000.00
1,200
41,280. 00
148, 400
27,075,700.00
11,200
2,629,360.00
18, 400
2,867,250.00
137,752,705.00
1,146,609
Average
$36. 324
272.205
124. 539
79.035
233. 238
77.045
234.12
119. 552
102.631
72.010
77. 034
28.866
105.920
136. 992
248.066
44.102
98. 534
37.455
79. 734
138.436
62.124
61.898
5.919
179.540
2.948
84. 566
97.885
48.364
91.402
122.385
135.460
63. 248
56.898
243.901
47.84
36.810
184. 650
243.907
157. 509
Proceeds
Profit
$4,110.00
$127,135.00
255,873.40
13,226,063.00
178,963.00
1,351,511.00
35, 541.00
16,653, 231. 50
66,426. 50
5,905,821.00
3, 511,800.00
10,125.00
1,195,525. 00
1,303,417.00
9,892.00
72,010.00
335.00
4,622,060.00
605, 635.00
848,984.58
39,309.58
9,395,164. 50
134, 224.50
273,984.00
16,521,258.50
619,208.50
2, 381, 559.00
8, 771.50
1,320,359.00
996,308.50
67,843.50
7, 367,469.00
121,179.00
899,840.00
2,006,615. 50
45,338.00
2,915,423. 50
66,481.00
153,310.19 } 71,499.19
4, 650,089.00
18, 576.18
608,878.50
393.50
9, 788. 50
6, 520.00
1,305,845.00
2,583,860.19
244,770.00
216, 736.00
101,980.00
1, 707,705.00
341,390. 00
36,590.00
512,193. 50
239, 200.00
2,892.00
44,172.00
27,402,184.00
326,484.00
2,731,767.00
102,407.00
2,898,182.00
30,932.00
}
138,820,060.04
2,693,080.77
1,625,725. 73
1,067,355.04
Loss
$41.60
608,394.00
77,950. 00
3
O
60,516.00
W
X
'"~32,~69T66
"206,"785."66
36,922.82
a
W
§
a
H
404,339.81
18,730.00
14,064.00
8,491. 50
156,800.00
1,625,725.73
M
a
284
STOCK EXCHANGE PRACTICES
ALLEGHANY CORPORATION COMMON STOCK OPTION ACCOUNT
May 11, 1929, J. P. Morgan & Co. agreed to loan to General Securities Corporation and to O. P. & M. J. Van Sweringen $9,675,000.
With the object of liquidating this loan the General Securities Corporation
and O. P. & M. J. Van Sweringen offered to us an option to purchase during the
term of such loan at $29 per share 272,500 shares of Alleghany Corporation
common stock with the provision that if, upon the sale of this stock, we should
realize any net profit we would pay to them the amount of such profit up to but
not exceeding $1 a share.
J. P. Morgan & Co. ceded to the guaranty company a 40 percent interest in
this option upon original terms.
The guaranty company sold the 272,500 shares; J. P. Morgan & Co.'s 60 percent of profit amounted to $803,929.20.
Apr. 18, 1928:
Beacon Oil Co. common stock account:
J.P.M. & Co.'s commitment, 60,030 shares.
J.P.M. & Co. took up 21,868 shares.
J.P.M. & Co.'s profit, $35,741.57.
Apr. 18, 1928:
Louisiana Oil Refining Corp. common stock account:
J.P.M. & Co.'s commitment, 73,834 shares.
J.P.M. & Co.'s profit, $22,323.89.
Oct. 24, 1929:
Bethlehem Steel Corp. common stock:
Our participation of 7,500 shares in a special account by members of
the Underwriting Group.
Account terminated Jan. 13, 1930 on which date it was long 102,700
shares at cost of approximately $116.0459 per share.
Our final liability 3,081 shares, which we took up at a cost of $116.0459
per share.
Jan. 18, 1929:
The Borden Co. common stock 10 percent interest in account with Wood
Struthers & Co.
J. P. Morgan & Co.'s profit, $64,490.07.
CELANESE CORPORATION OF AMERICA 7 PERCENT CUMULATIVE PRIOR PREFERRED
STOCK JOINT ACCOUNT
May 4, 1928, joint account formed by J. P. Morgan & Co. and Clark, Dodge
& Co. Account closed September 9, 1929. Summary:
Total shares purchased
20, 216
Total shares sold
5, 115
Balance
15, 101
We took up our 50 percent interest, viz., 7,550 shares at an average cost price
of $105.6713 per share which we sold to joint account no. 2 at an average price
$93.69831 per share with the resultant loss of $90,396.
CELANESE
CORPORATION OF AMERICA, 7 PERCENT CUMULATIVE PRIOR
PREFERRED STOCK JOINT ACCOUNT NO. 2
September 1, 1929, account formed by J. P. Morgan & Co. and Clark, Dodge
& Co. to purchase 7,550 shares at average cost of $93,698 per share. Summary:
Cost of 7,550 shares at average price $93,698 per share
Sales, 410 shares at average price $78,439 per share
$707, 422. 30
32, 160. 06
CONGOLEUM-NAIRN STOCK
June 1, 1926, received from Clark, Dodge & Co. an option of 20 percent of
25,000 shares of stock (5,000 shares), until December 31, 1927, at $20 per share.
June 14, 1926, this option was increased by 10,000 shares, divided equally
between Clark, Dodge & Co. and J. P. Morgan & Co.
September 30, 1927, J. P. Morgan & Co.'s proportionate interest in option to
purchase at $17 per share 35,000 shares was extended for 2 years from January
1, 1928, to January 1, 1930.
http://fraser.stlouisfed.org/
May 10, 1928, received from Clark, Dodge & Co. profit of $124,812.50.
Federal Reserve Bank of St. Louis
STOCK EXCHANGE PRACTICES
285
CROSLEY RADIO CORP. COMMON
Jan. 18, 1929. Participation of 6,720 shares.
Received participation from Dominick & Doininick in account formed to
purchase stock from Powel Crosley, Jr. The account also held an option on
additional shares. Summary:
Net cash received
$642, 317. 79
Shares received
5, 618
Oct. 17, 1929:
General Italian Edison Electric Corp. ordinary shares.
Participation of 49,000 shares in purchase group with National City Co«
J. P. M. & Co.'s profits, $42,096.42.
50,000 SHARES GENERAL MOTORS CORPORATION 7 PERCENT PREFERRED STOCK
PURCHASE
On August 30, 1927, J. P. Morgan & Co. and Wood Struthers & Co. purchased
from Sun Life Insurance Co. of Canada, 20,000 shares General Mortors Corporation 7 percent preferred stock at $122.50 per share flat and 30,000 shares as
$122.50 per share plus accrued dividends from August 30, 1927.
J. P. Morgan & Co. formed a syndicate of 20 members which offered the stock
at $124.17 and accrued dividends per share with a selling commission of $1 per
share. J. P. Morgan & Co.'s profit:
Original group (75 percent interest)
Selling group
. _ $44, 710. 43
7, 000. 00
Total
51, 710. 43
Profits received by J. P. M. & Co. March 30, 1928:
New York, Chicago & St. Louis Railroad 6 percent cumulative preferred stock series A, 16,540 shares
$3, 308. 00
Our interest in buying group 20 percent, or 3,308 shares.
Our interest in distributing group, 3,308 shares which we took up. 7, 378. 23
Guaranty Co.
THE
PROCTER & GAMBLE CO. COMMON STOCK (NEW NO PAR) JOINT ACCOUNT
July 15, 1929, J. P. Morgan & Co. contracted to purchase from the company
150,000 shares common stock at 66% per share and received an option to purchase
additional 100,000 shares at 80 per share.
July 26, 1929, J. P. Morgan & Co. formed joint account to assume purchase
and option. F. S. Moseley & Co. had a 30 percent interest in this account.
August 2, 1929, J. P. Morgan & Co. purchased for joint account 150,000 shares
of stock at 66% per share. J. P. Morgan & Co. withdrew 12,000 shares at cost.
October 28, 1929, the account exercised option to purchase 10,000 shares at
80 per share.
January 14, 1930, the account delivered to F. S. Moseley & Co. 5,100 shares
at cost, the amount being the equivalent of J. P. Morgan & Co.'s withdrawal on
August 2d.
July 15, 1929, and June 2, 1930, the joint account purchased 26,900 shares of
stock. Summary:
Shares purchased
Shares sold
Account closed June 2, 1930.
186, 900
186, 900
J. P. Morgan & Co.'s profit, $1,853,959.18.
January 28, 1929:
Pirelli Company of Italy (Societa Italiana Pirelli) series A common stock:
J. P. M. & Co.'s participation of 12,500 shares, with National City Co.
J. P. M. & Co.'s profits, $37,729.22.
July 24, 1929:
Rhodesian Congo Border Concession shares 30 percent interest in Newmont
Mining Corporation's }i share in underwriting.
J. P. M. & Co.'s profits, $3,066.52.
175541—33—PT *
19
286
STOCK EXCHANGE PRACTICES
SOUTHLAND ROYALTY COMPANY CAPITAL STOCK
May 5, 1929, F. S. Smithers & Co. offered to J. P. Morgan & Co. a participation
of 5,000 shares in an account which they were forming in the above named stock.
March 3, 1930, J. P. Morgan & Co. took up from F. S. Smithers & Co. 4,600
shares at a cost of $98,184.18.
TIDEWATER ASSOCIATED OIL COMPANY (NEW COMMON) STOCK
Account opened June 8, 1927, J. P. Morgan & Company having a 50% interest.
Shares purchased
Shares sold
36, 900
8, 400
28, 500
Account closed April 15, 1931, J. P, Morgan & Co. took up 14,250 shares.
H. Fleishhacker.
J. P. Morgan & Co.
UNITED CORPORATION $3 PREFERENCE STOCK JOINT
A/C
April 17, 1929 joint account formed between J. P. Morgan & Co. and Bonbright
& Co.
Between April 17, 1929, and August 30, 1929, a total of 99,200 shares were
purchased and sold.
Purchases were made by Bonbright & Co. Sales were made jointly by Bonbright & Co. and J. P. Morgan & Co.
September 14, 1929, Bonbright & Co. paid J. P. Morgan & Co. $93,941.22 our
one half share of the net profit.
DREXEL & Co.
CHAS. E. HIRES COMPANY CLASS "A"
July 5, 1927, account formed.
Cassatt & Co
Edward B. Smith & Co
Drexel & Co
Cassatt & Co., managers.
May 23, 1928, account closed.
COMMON STOCK
Percent
40
. 35
25
Drexel & Co. received $1,965.09 profit.
OLD BEN COAL CORPORATION FIRST MORTGAGE 6 PERCENT BONDS
April 9, 1928, Drexel & Co. and Cassatt & Co. formed a joint account.
November 1, 1928, account closed. Drexel & Co. received profits $1,387.51.
PHILADELPHIA ELECTRIC COMPANY $5 DIVIDEND PREFERRED STOCK
April 15, 1931, Drexel & Co. and Harnall & Co. formed a joint account.
June 1, 1931, account closed. Each participant received $3,953.50 profits.
SHARP & DOHME, INC.—$3.50 CUMULATIVE CONVERTIBLE PREFERENCE STOCK,
SERIES A
June 28, 1929, account formed by Drexel & Co., Alex. Brown & Sons, Chas.
D. Barney & Co., and Brown Bros. & Co., Chas. D. Barney & Co., managers.
Stock was purchased by above four firms from Drexel & Co. and Alex. Brown
& Sons, who had purchased 162,500 shares preference stock and 260,000 shares
common stock from company for $13,543,750.
Purchase group:
Chas. D. Barney & Co. (Synd. Mgr.)
Drexel & Co
Alex. Brown & Sons
Brown Bros. & Co
Shares
40, 625
40, 625
40, 625
40, 625
162, 500
Drexel & Co.'s profit, $83,941.90.
287
STOCK EXCHANGE PBACTICES
SHARP <& DOHME, INC.—$3.50 CUMULATIVE CONVERTIBLE PREFERENCE STOCK,
SERIES A
Account formed July 22, 1929:
Alex. Brown & Sons
Brown Bros. & Co
Drexel & Co
Chas. D. Barney & Co. (managers)
Shares
5, 000
5, 000
5, 000
5,000
Commitment increased from 20,000 shares to 40,000 shares pro rata.
Account closed March 31, 1931. Derxel & Co. took up their one quarter share
(6,498 shares) and paid $418,148.96.
Loss to Drexel & Co., $28,268.96.
SHARP & DOHME, INC.—COMMON STOCK TRADING ACCOUNT
July 22, 1929, syndicate formed with Chas. D. Barney & Co. as managers.
Syndicate obtained options from the following participants:
Shares
Optioned
at 20
Chas. D . Barney & Co
Drexel & Co
Alex. Brown & Sons (own account)
Alex. Brown & Sons (for others)
Brown Bros. & Co
»
Optioned
at 28
16,350
26,100
26,100
30,000
9,450
6,450
8,700
8,700
10,000
3,150
108,000
36,000
September 25, 1930, Chas D. Barney & Co. reported that they had made total
sales of 57,000 shares average price of $24.9919. Drexel & Co.'s share of the
above total amounted to 13,775 shares.
TRADING ACCOUNT NO. 2
September 25, 1930, a new account was formed with the same participants and
the same percentage, based on total options from the same group of 51,000 shares
at 20, Drexel & Co. having extended options on 12,325 shares at 20.
Account closed April 20, at which time none of the options had been exercised.
Drexel & Co. took up their proportionate share, amounting to 1,426 shares, for
which they paid $24,242.00. Drexel & Co. received from Chas. D. Barney & Co.
$6,146.66, as their share of profit.
SHARP & DOHME, INC.—COMMON STOCK
Account formed February 20, 1931, to expire on April 20, 1931:
shares
Alex Brown & Sons___,
20, 000
Drexel & Co
10, 000
Brown Bros. Harriman & Co
10, 000
Chas. D. Barney & Co
10, 000
Chas. D. Barney & Co. managers. The account received options at prices
varying from $14 to $18 per share.
April 15, 1931, the account was closed, Drexel & Co. having delivered 8,000
shares. Chas. D. Barney & Co. paid Drexel & Co. $6,479.84, as their share of
profit.
COMMITTEE EXHIBIT N O . 18, M A T 25,
1933
QUESTION 11
The names of all governments, States, municipalities, and corporations for
which either of said firms has acted as fiscal agent during that period and a
statement of the services rendered for each of the same.
With the exceptions below stated neither J. P. Morgan & Co. nor Drexel &
Co.
not fiscal agents for any governments, States, municipalities, or corDigitized
for are
FRASER
porations:
288,
STOCK EXCHANGE PKACTICES
1. J. P. Morgan & Co. and the Guaranty Trust Co. jointly made an agreement
wherein they are appointed fiscal agents in the United States for the Belgian
Government. The agreement is dated September 11, 1919, and may be terminated by either party upon thirty days' notice. No Belgian bonds were issued
by the Government or publicly offered by the fiscal agents during the period in
question.
2. In certain instances indentures covering the bond issues, which were offered
by the firm contain a paragraph stating with substantial uniformity that J. P.
Morgan & Co. or Drexel & Co. are appointed the fiscal agents of the obligor for
the service of the loan covered by the indenture. In other instances J. P. Morgan
& Co. and another are jointly appointed. The service of the loan includes all
routine details incident to effectively issuing the bonds in the first instance, and
thereafter to the payment of coupons when and. as due, and the payment of the
bonds at maturity. There is attached hereto, in answer to this question, a list
of all governments or corporations for which we pay coupons or dividends or act a&
sinking-fund agents, or for which maturing bonds have been paid during the period
in question.
DIVIDEND PAYING AGENT
Alaska Development & Mineral Co.
Allegheny Corporation. ,
Chesapeake Corporation.
Chesapeake & Ohio Railway Co.
Chicago Great Western Railroad Co.
Chicago, Indianapolis & Louisville
Railway Co.
Columbus & Greenville Railroad Co.
Copper River & Northwestern Railway
Co.
Detroit & Mackinac Railway Co.
Erie Railroad Co.
Foreign Finance Corporation.
General Steel Castings Corporation.
International Mercantile Marine Co.
Johns-Manville Corporation.
The Lehigh Valley Coal Corporation.
Memphis & Charles town Railway Co.
Missouri Pacific Railroad Co.
Morgan Building Corporation.
New Orleans, Texas & Mexico Railway
Co.
Niagara Hudson Power Corporation.
Northern Pacific Railway Co.
Philadelphia & Reading Railway Co.
The Pittston Co.
Pullman, Incorporated.
Southern Railway Co.
Southern Railway Co. in Kentucky.
Southern Railway Mobile & Ohiostock trust certificates.
St. Louis Bridge Co.
Standard Brands, Incorporated.
The Texas & Pacific Railway Co.
Tunnel Railroad of St. Louis.
The United Corporation.
COUPON, SINKING FUND OR REDEMPTION AGENT
Alleghany Corporation.
American Refrigerator Transit Co.
Argentine Nation (Government of).
Atlantic & Yadkin Railway Co.
Atlantic Coast Line Railroad Co.
Big Sandy Railway Co.
Buffalo General Electric Co.
Canadea Power Corporation.
Central Branch Union Pacific Railway
Co.
Chesapeake & Ohio Railway Co.
Chesapeake & Ohio Grain Elevator Co.
Chesapeake & Ohio Northern Railway
Co.
Chesapeake Corporation.
Chicago & Erie Railroad Co.
Chicago Great Western Railroad Co.
Chicago, Indianapolis & Louisville
Railway Co.
Cleveland Union Terminals Co.
Coal River Railway Co.
Columbus & Hocking Valley Railroad
Co.
Columbus & Toledo Railroad Co.
Copper River & Northwestern Railway
Co.
Cuba, Republic of.
Detroit & Mackinac Railway Co.
East Tennessee, Virginia & Georgia
Railway Co.
Erie Railroad Co.
General Motors Acceptance Corporation.
General Steel Castings Corporation.
Georgia Midland Railway Co.
Greenbrier Railway Co.
Hocking Valley Railway Co.
Hudson Bay Mining & Smelting Co.r
Ltd.
International-Great Northern Railroad
Co.
International Telephone & Telegraph
Corporation.
Kansas City Terminal Railway Co.
Lehigh Valley Coal Co.
Long Dock Co.
Louisville & Jeffersonville Bridge Co.
Manitoba, Province of (Dominion of
Conada).
Missouri-Illinois Railroad Co.
Missouri-Pacific Railroad Co.
Missouri-Pacific Railway Co.
New Orleans, Texas & Mexico Railway
Co.
289
STOCK EXCHANGE PRACTICES
New York, New Haven & Hartford
Railroad Co.
New York & Erie Railroad Co.
New York, Lake Erie & Western Coal
& Railroad Co.
New York, Lake Erie & Western
Docks & Improvement Co.
Norfolk Terminal & Transportation Co.
Northern Pacific Railway Co.
Ohio State Telephone Co. (Ohio Bell
Telephone, successor).
Pacific Railroad Co. of Missouri.
Philadelphia & Reading Coal & Iron
Co.
Philadelphia Electric Power Co.
Philadelphia Electric Co.
Public Service Electric '& Gas Co.
Raleigh & Southwestern Railway Co.
Reading Co.
Reading Co. and Phildelphia & Reading Coal & Iron Co.
St. Louis, Iron Mountain & Southern
Railway Co., river and gulf division.
St. Paul & Duluth Railroad.
Southern Railway Co.
Spartanburg, Union & Columbia Railroad.
Texas & Pacific Railway Co.
Texas Pacific-Missouri Pacific Terminal Railroad of New Orleans.
Terminal Railroad Association of St.
Louis.
United Kingdom of Great Britain
and Ireland (Government of).
United States Steel Corporation.
Virginia Midland Railway Co.
Western Pocahontas Corporation.
Zanesville & Western Railway Co.
DIVIDEND PAYING AGENT (CLOSED ACCOUNTS)
Hocking Valley Railway Co.
| Postal Telegraph & Cable Corporation.
COUPON, SINKING FUND, OR REDEMPTION AGENT (CLOSED ACCOUNTS)
'Chesapeake & Ohio Railway Co.
•Chicago .& Western Indiana Railroad
Co.
East Tennessee Virginia & Georgia
Railroad Co.
Erie Railroad Co.
^General Motors Acceptance Corporation.
Jeddo Highland Coal Co.
Jefferson Railroad Co.
Kanawha & Hocking Coal & Coke Co.
Lehigh & New York Railroad Co.
Lehigh Valley Railroad Co.
Lehigh Valley Terminal Railway Co.
Dominion of Canada-Province of Manitoba.
J^ewburgh ,& New York Railroad Co.
New York, Lake Erie & Western Railroad Co.
New York & Erie Railroad Co.
Penn Central Light & Power Co.
Public Service Electric & Gas Co.
Public Service Corporation of New
Jersey.
Dominion of Canada—Province of
Saskatchewan.
South Carolina-Georgia Railroad.
St. Louis Iron Mountain & Southern
Railway Co.
St. Paul & Duluth Railroad.
Texas & Pacific Railway Co., Louisiana
division branch lines.
United States Steel Corporation.
Weatherford Mineral Wells & Northwestern Railway Co.
COUPON PAYING AGENT
Adam Opel, Aktiengesellschaft 7 percent 10-year gold bonds coupons, Apr.-Oct.., ,at
.
Alabama Great Southern R.R. Co. 5 percent equip, tr. series UG"
ctfs. int. a/c, Apr.-Oct., at
Alleghany Corp. 20-year coll. trust conv. 5 percent bonds coupons,
June—Dec, at
Alleghany Corp. IS-year colL trust conv. 5 percent bonds coupons,
Feb.-Aug., at
Alleghany Corp. 20-year coll. trust conv. 5 percent bonds series of
1930 coupons, Apr.-Oct., at
American Refrigerator Transit Co.:
American Refrigerator Transit Co. equip, trust series " D "
6 percent bonds coupons, Jan.-July, at
American Refrigerator Transit Co. equip, trust series " E "
5}_ percent bonds coupons, May-Nov., at
American Refrigerator Transit Co. equip, trust series " F "
5 percent bonds coupons, June-Dec, at
American Refrigerator Transit Co. equip, trust series " G "
5 percent bonds coupons, Feb.-Aug., at
Anglo-French 5-year 5 percent ex. loan coupons, Apr. 15-Oct. 15, at_
$3, 500. 00
25. 00
25. 00
25. 00
25. 00
30. 00
27. 50
25. 00
25. 00
25. 00
290
STOCK EXCHANGE PRACTICES
Coupon Paying Agent—Continued
Argentine Gov. sterling 5 percent internal gold loan of 1909 coupons, fI
at
^
Mar.-Sept, at
11. Argentine Nation Gov't of the ext. s/f 6 percent gold bonds,
due October 1, 1959, coupons due April 1, 1931, at
Apr.-Oct., at
12. Argentine Nation Gov't of the ext. s/f 6 percent gold bonds,
due October 1, 1959, coupons due October 1, 1931, at
Apr.-Oct., at
13. Argentine Nation Gov't of the ext. s/f 6 percent gold bonds,
due October 1, 1959, coupons due April 1, 1932, at
Apr.-Oct., at
14. Argentine Nation Gov't of the ext. s/f 6 percent gold bonds,
due October 1, 1959, coupons due October 1, 1932, at
Apr.-Oct., at
15. Argentine Nation Gov't of the ext. s/f 6 percent gold bonds,
due October 1, 1959, coupons due April 1, 1933, at
Apr.-Oct., at
16. Argentine Nation Gov't of the ext. s/f 6 percent gold bonds,
due October 1, 1959, coupons due October 1, 1933, at
Apr.-Oct., at
12. Argentine Nation Gov't of the ext. S/F 6% gold bonds, issue of
June 1, 1925, due June 1, 1959, coupons due June 1, 1931, at_
June-Dec, at
13. Argentine Nation Gov't of the ext. S/F 6% gold bonds, issue
of June 1, 1925, due June 1, 1959, coupons due December 1,
1931, at
June-Dec, at
14. Argentine Nation Gov't of the ext. S/F 6% gold bonds, issue
of June 1, 1925, due June 1, 1959, coupons due June 1, 1932,
at
June-Dec, at
15. Argentine Nation Gov't of the ext. S/F 6% gold bonds, issue
of June 1, 1925, due June 1, 1959, coupons due December 1,
1932, at
June-Dec, at
16. Argentine Nation Gov't of the ext. S/F 6% gold bonds, issue
of June 1, 1925, due June 1, 1959, coupons due June 1, 1933,
at
June-Dec, at
17. Argentine Nation Gov't of the ext. S/F 6% gold bonds, issue
of June 1, 1925, due June 1, 1959, coupons due December 1,
1933, at
_-_
June-Dec, at
9. Argentine Nation Gov't of the Ext. S/F 6 percent gold bonds
issue of May 1, 1926, due May 1, 1960, coupons due November 1, 1930, at
May-Nov., at
10. Argentine Nation Gov't of the Ext. S/F 6 percent gold bonds,
issue of May 1, 1926, due May 1, 1960, coupons due May 1,
1931, at May-Nov., at
_"__..
11. Argentine Nation Gov't of the Ext. S/F 6 percent gold bonds,
issue of May 1, 1926, due May 1, 1960, coupons due November 1,1931, at
May-Nov., at_
12. Argentine Nation Gov't of the Ext. S/F 6 percent gold bonds,
issue of May 1, 1926, due May 1, 1960, coupons due May 1,
1932, at.__l
^
May-Nov., at
13. Argentine Nation Gov't of the Ext. S/F 6 percent gold bonds,
issue of May 1, 1926, due May 1, 1960, coupons due November 1,1932, at
May-Nov., at
$24
^^ S25
1625
2.4325
121. 625
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30.00
15. 00
30. 00
15. 00
30.00
15. 00
STOCK EXCHANGE PEACTICES
14.
15.
7.
8.
9.
10.
11.
12.
13.
9.
10.
11.
12.
13.
14.
7.
Coupon Paying Agent—Continued
Argentine Nation Gov't of the Ext. S/F 6 percent gold bonds,
issue of Mav 1, 1926, due May 1, I960, coupons due May 1,
1933, at
May-Nov., at
Argentine Nation Gov't of the Ext. S/F 6 percent gold
bonds, issue of May 1, 1926, due May 1, 1960, coupons due
November 1, 1933," at
May-Nov., at
Argentine Nation Gov't of Ext. S/F 6 percent gold bonds dated
February 1, 1927, sanitary works loan due February 1, 1961,
cpns. due August 1, 1930, at
Feb.-Aug., at
.
Argentine Nation Gov't of Ext. S/F 6 percent gold bonds dated
February 1, 1.927, sanitary works loan due February 1, 1961,
cpns. due February 1, 1931, at
Feb.-Aug., at
Argentine Nation Gov't of Ext. S/F 6 percent gold bonds dated
February 1, 1927, sanitary works loan due February 1, 1961,
cpns. due August 1, 1931, at
Feb.-Aug., at
Argentine Nation Gov't of ext. S/F 6 percent gold bonds dated
February 1, 1927, Sanitary Works loan due February 1, 1961,
cpns. due February 1, 1932, at
,
Feb.-Aug., at
Argentine Nation Gov't of ext. S/F 6 percent gold bonds dated
February 1, 1927, Sanitary Works loan due February 1, 1961,
cpns. due August 1, 1932, at
Feb.-Aug., at
Argentine Nation Gov't of ext. S/F 6 percent gold bonds dated
February 1, 1927, Sanitary Works loan due February 1, 1961,
cpns. due February 1, 1933, at
Feb.-Aug., at
Argentine Nation Gov't of ext. S/F 6 percent gold bonds dated
February 1, 1927, Sanitary Works loan due February 1, 1961,
cpns. due August 1, 1933, at
Feb.-Aug., at
Argentine Nation Gov't of ext. S/F 6 percent gold bonds,
Public Works issue of October 1, 1926, due October 1, 1960,
coupons due April 1, 1931, at
Apr.-Oct., at
Argentine Nation Gov't of Ext. S/F 6 percent gold bonds,
public works issue of October 1, 1926, due October 1, 1960,
coupons due October 1, 1931, at
•_
Apr.-Oct., at
Argentine Nation Gov't of Ext. S/F 6 percent gold bonds, public
works issue of October 1, 1926, due October 1, 1960, coupons
due April 1, 1932, at
_•_•
Apr.-Oct., at
Argentine Nation Gov't of Ext. S/F 6 percent gold bonds, public works issue of October 1, 1926, due October 1, 1960,
coupons due October 1, 1932, at
Apr.-Oct., at__
Argentine Nation Gov't of Ext. S/F 6 percent gold bonds, public works issue of October 1, 1926, "due October 1, 1960,
coupons due April 1, 1933, at
Apr.-Oct., at
Argentine Nation Gov't of Ext. S/F 6 percent gold bonds, public works issue of October 1, 1926, due October 1, 1960,
coupons due October 1, 1933
Apr.-Oct., at
Argentine Gov't Loan 1927, Ext. S/F 6 percent gold bonds,
public works issue of May 1, 1927, due May 1, 1961, coupons
due November 1, 1930, at
May-Nov., at
291
$30. 00
15. 00
%
30.00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30.00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30.00
15. 00
30. 00
15. 00
292
STOCK EXCHANGE PRACTICES
Coupon Paying Agent—Continued
8. Argentine Gov't loan 1927, ext. S/F 6 percent gold bonds, public
works issue of May 1, 1927, due May 1, 1961, coupons due
May 1, 1931, at
May-Nov., at
9. Argentine Gov't loan 1927, ext. S/F 6 percent gold bonds, public
works issue of May 1, 1927, due May 1, 1961, coupons due
November 1, 1931, at
May-Nov., at
10. Argentine Gov't loan 1927, ext. S/F 6 percent gold bonds, public
works issue of May 1, 1927, due May 1, 1961, coupons due
May 1, 1932, at
May-Nov,, at
11. Argentine Gov't loan 1927, ext. S/F 6 percent gold bonds, public
works issue of May 1, 1927, due May 1, 1961, coupons due
November 1, 1932, at
May-Nov., at
12. Argentine Gov't loan 1927, ext. S/F 6 percent gold bonds, public
works issue of May 1, 1927, due May 1, 1961, coupons due
May 1, 1933, at
May-Nov., at
13. Argentine Gov't loan 1927, ext. S/F 6 percent gold bonds, public
works issue of May 1, 1927, due May 1, 1961, coupons due
November 1, 1933, at
May-Nov., at
Atlantic City Railroad Co. first mortgage 4 percent bonds coupons,
Jan.-Jul.,at
Atlantic Coast Line R. R. Co. L. & N. coll. trust 4 percent bonds
coupons, May-Nov., at
Atlantic Coast Line R. R. Co. series " D " &% percent equip, tr.
ctfs. coupons, Feb.-Aug., at
Atlantic Coast Line R. R. Co. series " E " 4}^ percent equip, tr. ctfs.
coupons, Feb.-Aug., at
Australia Commonwealth of. ext. loan 30-year 5 percent gold bonds
of 1925 coupons, at
Jan. 15-July 15, at
Australia Commonwealth of. ext. loan 30-year 5 percent gold bonds
of 1927 coupons, Mar .-Sept., at
Australia Commonwealth of. 4J^ percent gold bonds ext. loan of
1928, due May 1, 1956 coupons, May-Nov., at
L
Austrian Gov't. Guar. Loan 1923-1943 7 percent S/F gold bonds/
coupons, at
\
June-Dec, at
Austrian Gov't international loan, 1930, 7% " D " Bank for Inter-f
national Settlements, trustee, at
\
Jan.-July, at
1. Austrian Gov't international loan, 1930, S/F 7% gold bonds]
interim certificates, warrants due January 1, 1931, U.S.A. >
issue, at
I
j
Jan.-July, at
2. Austrian Gov't international loan, 1930, S/F 7% gold bonds]
interim certificates, warrants due July 1, 1931, U.S.A. issue, >
at
J
Jan.-July, at
Belgium, Kingdom of, ext. 20-year 8% gold bonds, due February
1, 1941, coupons, at
.
Feb.-Aug., at
Belgium, Kingdom of, 25-year 6}£% gold bonds of 1949 coupons,
at
Mar.-Sept., at
Belgium, Kingdom of, 25-year ext. gold loan 7%% S/F bonds
coupons, at
June-Dec, at
Belgium, Kingdom of, ext. loan 30-year S/F 6% gold bonds, due
January 1, 1955, coupons, at
At
Jan.-July, at
$30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
30. 00
15. 00
20. 00
20. 00
32. 50
22. 50
25.00
12. 50
25. 00
22. 50
35. 00
17. 50
3. 50
35. 00
17. 50
3. 50
35 00
? ' -n
u7
' ^
3. 50
35 00
j»n
1 7 ' 0U
iL
3. 50
40. 00
20. 00
32. 50
16. 25
37. 50
18. 75
30. 00
15.00
3. 00
STOCK EXCHANGE PRACTICES
Coupon Paying Agent—Continued
Belgium, Kingdom of, 30-year 7% ext. loan S/F gold bonds, due
June 1, 1955, coupons, at
June-Dec, at
Belgium, Kingdom of, stabilization loan 1926, ext. S/F 30-year
7% gold bonds, due November 1, 1956, coupons, at
May-Nov., at
^Buffalo General Electric Co. genl. & refdg. mortgage 4% gold bonds
series " B " coupons, at
Feb.-Aug., at
_
Canadea Power Corp. 1st mtge. 30-year 5% bonds due 1958
coupons, Apr.-Oct., at
Chattanooga Station Co. first mtge. 4% bonds coupons, Jan.-July,
at
Chesapeake Corp., The 20-year 5% conv. coll. tr. bonds of May 15,
1927, coupons, May 15-Nov. 15, at
___
"Chesapeake and Ohio Railway Co.:
C. & O. Grain Elevator Co. 1st mtge. 4% gold bond of 1938
coupons, Apr.-Oct., at
C. & O. Ry. Big Sandy Ry. Co. 1st mtge. 4% gold bonds of 1944
coupons, June-Dec, at
C. & O. Northern Ry. Co. 1st mtge. 5% 30-yr. gold bonds of
1945 coupons, Apr.-Oct., at
C. & O. Ry. Coal River Ry. Co., 1st mtge. 4 percent gold
bonds of 1945 coupons, June-Dec, at
C. & O. Ry. Co. Craig Vy. branch 1st mtge. 5 percent gold
bonds of 1940 coupons, Jan.-July, at
C & O. Ry. Co. 1st consd. mtge. 5 percent 50-year gold bonds
of 1939 coupons, May-Nov., at
C. & O. Ry. Co. genl. mtge. 4}£ percent gold bonds of 1992
coupons, Mar .-Sept., at
C. & O. Ry. Co. Greenbrier Ry. Co. 1st mtge. 4 percent gold
bonds of 1940 coupons, May-Nov., at
C & O. Ry. Norfolk Term. & Trans. Co. 1st mtge. 5 percent
gold bonds of 1948 coupons, Feb.-Aug., at
<3. & O. Ry. Co. Paint Creek Branch 1st mtge. 4 percent gold
bonds of 1945 coupons, Feb.-Aug., at
C. & O. Ry. Co. Potts. Creek Branch 1st mtge. gold bonds 4
percent of 1946 coupons, Jan.-July, at
C. & O. Ry. Raleigh & So. Western Ry. Co. 1st mortgage 4
percent gold bonds of 1936 coupons, Jan.-July, at
C. & O. Ry. Co. Richmond & Alleghany Division 1st consd.
mtge. 4 percent gold bonds of 1989 coupons, Jan.-July, at__
C. & O. Ry. Co. Richmond & Alleghany Division 2nd consd.
mtge. 4 percent gold bonds of 1989 coupons, Jan.-July, at__
C. & O. Ry. Co. Virginia Air Line Ry. Co. 5 percent 45-year
gold bonds of 1952 coupons, May-Nov., at
C. & O. Ry. Co., Warm Spring Vy. branch, 1st mtge. 5 percent
gold bonds of 1941 coupons, Mar.-Sept., at
C. & O. Ry. Co., 4:}i percent 20-year conv. gold bonds of 1930
coupons, Feb.-Aug., at
C. & O. Ry. Co., equip, tr. seiies " S " 6}£ percent certificates
coupons, June-Dec, at
C. & O. Ry. Co., equip, tr. series " T " 5% percent certificates
coupons, June-Dec, at
C. & O. Ry. Co., equip, tr. 5 percent certificates series "V"
dividend warrants, Jan.-July, at
C & O. Ry. Co. equip, tr. series "W" 4}i percent certificates
coupons, Apr.-Oct., at
C. & O. Ry. Co., ref. and imp. mtge. 4% percent series "A"
bonds coupons, Apr.-Oct., at
C. & O. Ry. Co., ref. and imp. mtge. 4% percent gold bonds
series " B " coupons, Jan.-July, at
C & O. Ry. Co., 4% percent equip, tr. series of 1929 certificates
coupons, May-Nov., at
293
$35. 00
17. 50
35. 00
17. 50
22. 50
11. 25
25. 00
20.00
25. 00
20. 00
20. 00
25. 00
20. 00
25. 00
25. 00
22. 50
20. 00
25. 00
20. 00
20. 00
20. 00
20. 00
20. 00
25. 00
25. 00
22. 50
32. 50
27. 50
25. 00
22. 50
22. 50
22. 50
22. 50
294
STOCK EXCHANGE PKACTICES
Coupon Paying Agent—Continued
Chesapeake and Ohio Railway Co.—Continued.
C. & 0. Ry. Co., 4}£ percent equip, tr. series of 1930 certificate
coupons, May-Nov., at
C. & O. Ry. Co., 2-year 6 percent notes due Jan. 31, 1934,
coupons, at
Feb.-Aug., at
Chicago Gt. West. R.R. Co., 1st mtge. 50-year 4 percent gold bonds
interest. Mar.-Sept., at,
Chicago, Indianapolis
olis & Louisville Ry. Co., coupon accounts, viz.:
1st & gen. mtge. 5 percent bonds series "A" coupons, at
1st & gen. mtge. 5 percent bonds series "A" coupons, MayNov., at
1st & gen. mtge. 6 percent bonds series " B " coupons, at
Jan.-July, at
Refunding 4 percent bonds coupons, Jan.-July, at
Refunding 5 percent bonds coupons, Jan.-July, at
Refunding 6 percent bonds coupons, Jan.-July, at
Chinese Government Imperial Hukuang Ry.'s S/F 5-percent
bonds, American group coupons, June 15-Dec. 15:
American, at
<
American, at
<
American, at
<
American, at
I
Chinese Government Imperial Hukuang Ry.'s S/F bonds, foreign
group coupons, June 15-Dec. 15:
English, at
{
English, at
<
English, at
<
Chinese Government Imperial Hukuang Ry.'s s. f. 5 percent
bonds, foreign group coupons, June 15-Dec. 15:
French at
<
French at__
French at__
German at_
German at_
German at_
German at_
German at_
German at_
Cincinnati Union Terminal Co. lsi mtge. 4% percent gold bonds
series "A" coupons, Jan.-July, at
Cincinnati Union Terminal Co. 1st mtge. 5 percent gold bonds
series " B " warrants, Jan.-July, at
Cincinnati Union Terminal Co. 1st mtge. 5 percent gold bonds
series " B " coupons, Jan.-July, at
Cincinnati, New Orleans & Texas Pacific Ry. Co. 5 percent equip.
trust series " G " ctfs. interest, Apr .-Oct., at
Cleveland Union Terminals Co. series "A" 1st mtge. 5}i percentf
S.F. gold bonds coupons, at
\
Apr .-Oct., at__
$22. 50
300. 00
150. 00
20.00
25.00
12.50
30. 00
15.00
20. 00
25.00
30.00
£2. 10, .
0. 10. u
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10.
0. 10.
2. 10.
0. 10.
2. 10.
0. 10.
0
0
0
0
0
0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
2. 10. 0
0. 10. 0
$22. 50
25. 00
25.00
25. 00
27.50
13.70
27.55
STOCK EXCHANGE PRACTICES
295
Coupon Paying Agent—Continued
Cleveland Union Terminals Co. series " B " 1st mtge. 5 percentf
S.F. gold bonds coupons, at
,
\
Apr.-Oct., at
Cleveland Union Terminals Co. series " C " 1st mtge. 4}£ percent
gold bonds, coupons, Apr.-Oct., at
Cuba, Republic of, ext. debt 5 percent bonds of, 1914 coupons, a t _ _ |
Feb.-Aug., at
,
Cuba, Republic of, serial 5% percent gold bonds dated July 1, 1927,
annually from July 1, 1928, to July 1, 1937, inclusive, coupons,
Jan.-July, at
Cuba, Republic of, ext. loan 30-yr. 5}i percent gold bonds coupons./
Jan. 15-July 15 at
Detroit & Mackinac Ry. Co. mtge. 4 percent bonds coupons, JuneDec, at
Detroit & Mackinac Ry. Co. first lien 4 percent bonds coupons,
June-Dec, at
F.I.A.T. 20-yr. S.F. 7 percent gold debenture bonds due July 1,
1946, coupons, at
Jan.-July at
Florida East Coast Ry. Co. 1st & ref. mtge. 5 percent series "A" f
bonds coupons at
\
Mar.-Sept. at
Florida East Coast Ry. Co., W. R. Kenan, Jr., and S. M. Loftin,
receivers equip, trust series D certificates coupons. Jan.-July at_
Florida East Coast Ry. Co., W. R. Kenan, Jr., and S. M. Loftin,
receivers equip, trust series E certificates coupons, Mar.-Sept. atFraAmericaii Industrial Dev'l Corp'n 20 yr. 7% percent bonds due
Jan. 1, 1942 coupons, Jan.-July at
French Republic, Gov't of, 20-yr. 5% percent bonds coupons,
Apr.-Oct. at
French Republic, Gov't of, 20-yr. ext. gold loan 7% percent bond f
coupons at
_\
June-Dec. at_
French Republic, Gov't of, external loan 1924, 25-yr. S.F. 7 percent f
gold bonds coupons at
\
June-Dec, at
French Republic, Gov't of, 25-yr. ext. 8 percent S.F. gold loanf
bonds coupons at
\
Mar. 15-Sept. 15 at
_
Gen'l Steel Castings Corp. 1st mtge. gold bonds 5% percent series
" A " coupons at
Jan.-July at
General Motors Acceptance Corp. 5 percent serial gold notes coupons, Mar.-Sept. at_
Gen'l Motors Acceptance Corp. 10-yr. S.F. 6 percent gold deb.
coupons due Feb. 1, 1937, coupons, Feb.-Aug. at
German External Loan 1924, trustees of 7 percent " D " coupons at_<
Apr. 15-Oct. 15 at
German Gov't international 5}£ percent loan 1930 " D " bank forf
international settlement, trustee at
\
June-Dec, at
1. German Government international 5% percent loan 1930—35]
year gold bond interium receipts warrants due Dec. 1, 1930,}U.S.A. issue at
J
June-Dec, at
2. German Government international 5% percent loan 1930—35]
vear gold bond interim receipts warrants due June 1, 1931,}
U.S.A. issue at
J
June-Dec, at
German Gov't international 5}i percent loan 1930 " F " A.C. coupons, bank for international settlement trustee issue, JuneDec, at
$25.00
12. 50
2. 50>
22. 50
^ 50
2. 50
27. 50
jg 75
% 75
20. 00
20. 00
35. 00
17. 50
25. 00
12. 50
2. 50
25. 00
22. 50"
37. 50
27. 50
37. 50
18. 75
3. 75
35. 00
17. 50
3. 50
40. 00
20. 00
4. 00
27. 50
5. 50
25. 00
30. 00
yj g/v
3.' 50
27. 50
13. 75
2. 75
07 50
* Se
1Q
i6
' '°
2. 75
07 50
10'lSSK
-lb
2. 75
2. 75
296
StOCK EXOHAKGE PRACTICES
Coupon Paying Agent—Continued
Hocking Valley Railway Co.:
Hocking Valley Ry. Co. 1st consd. mtge. 4^ percent gold bonds
of 1999 coupons, Jan.-July, at
Hocking Valley Ry. Co.-Col. & Toledo R.R. Co., 1st mtge. 4
percent extension gold bonds of 1955 coupons, Feb.-Aug. at
Hocking Valley Ry. Co.-Col. & Hocking Valley R.R. Co., 1st
mtge. 4 percent extension gold bonds of 1948 coupons, at__
Apr .-Oct. , at
^
Hocking Valley Ry. Co. equip, tr. 5 percent series of 1923
coupons, Apr.-Oct., at
Hocking Valley Ry. Co. equip, tr. 5 percent bonds series of
1924 coupons, Jan.-July, at
.
Humble Oil & Refining Co. 10-yr. b}{ percent deb. gold bondsf
coupons, at
\
Jan. 15-July 15, at
___
Humble Oil & Refining Co. 10-yr. 5 percent gold deb. bonds coupons, Apr.-Oct., at__^
^
Humgerford Brass Corp. & Hungerford Brass Corp. by Chase
Brass & Copper Co., Inc., 5 percent serial gold bonds coupon
A.C., at
Jan.-July, at
Hudson Bay Mining & Smelting Co., Limited, 5-year 6 percent f
conv. gold debs, due July 1, 1935 coupons, at
\
Jan. 15-July 15, at
Interborough Rapid Transit Co., 10-yr. secured conv. 7 percent gold f
notes interest at
\
Mar .-Sept., at ^
International-Great Northern R.R. Co.:
International Great Northern R.R. Co. 1st mtge. series "A"f
6 percent bonds coupons at
\
Jan.-July at
International Great Northern R.R. Co. 1st mtge. series " B "
5 percent bonds coupons, Jan.-July at
International Great Northern R.R. Co. 1st mtge. series " C "
5 percent bonds coupons, Jan.-July at
International Great Northern R.R. Co. adjustment 6 percent I*
bonds coupons at
\
Apr.—Oct. at
International Great Northern R.R. Co. equip, trust series "A"
4J^ percent bonds coupon, June-Dec, at
International Great Northern R.R. Co. equip, trust series " B "
4^ percent bonds coupons, Apr.-Oct. at
International Committee of Bankers on Mexico Special Account 37:
(Republic of Mexico 6 percent 10-yr. treas. notes of 1913 coupons series A), Jan.-July at
$22. 50
20. 00
20.00
10.00
25.00
25.00
27.50
13.75
2.75
25.00
25.00
125. 00
30.00
15.00
3.00
35.00
17.50
3. 50
30.00
15.00
3.00
25.00
25.00
30.00
15.00
3.00
22. 50
22. 50
2. 425
2.91
12. 125
14. 55
24.25
29. 10
International Committee of Bankers on Mexico Special Account 38:
(Republic of Mexico 4 percent external gold loan of 1910 coupons) , Jan.-July at,.
1.455
1.94
7.275
9.70
14. 55
19. 40
297
STOCK EXCHANGE PRACTICES
Coupon Paying Agent—Continued
International Committee of Bankers on Mexico Special Account 39:
f
(Republic of Mexico 5 percent cons'd external gold loan 1899^
coupons), Jan.-Apr.-July-Oct., at
International Tel. & Tel. Corp'n 10-yr. conv. 4C percent gold deb.
bonds coupons, at
Jan.—July, at
International Tel. & Tel. Corp'n 25-yr. 4C percent gold bonds, due
1952 coupons, Jan.-July, at
International Tel. & Tel. Corp'n 25-yr. 5 percent gold deb. bonds
coupons, Feb.-Aug., at
__
Italian Credit Consortium for public works ext'l loan S. F. 7 percent secured gold bonds due Mar. 1, 1937, series "A" coupons,
Mar.—Sept., at
«,
Italian Credit Consortium for public works ext'l loan S. F. 7 percent secured gold bonds due Mar. 1, 1947, series " B " coupons,
Mar .-Sept., at
Italy, Kingdom of, external loan S.F. 7 percent gold bonds eou-f
pons, at
\
June-Dec, at
Kansas City Terminal Ry. Co. first 4 percent bonds coupons, Jan.July, at
Ky. & Ind. Term. R.R. Co. 1st 4% percent bonds coupons, Jan.-f
July, at
\
Leavenworth Term. Ry. & Bridge Co. 1st 5}i percent gold bonds
coupons, May-Nov., at
Lehigh Valley Coal Co. 1st 4 percent coupons, Jan.-July, at
Lehigh Valley Coal Co. 1st 5 percent coupons, Jan.-July, at
Lehigh Valley R.R. Co. Coupon acct. viz:
Lehigh Valley Ry. Co. 1st 4J^ percent coupons, Jan.-July at__
Lehigh Valley Ry. Co. coll. tr. 4 percent coupons, Feb.-Aug.,
at
_,
Lehigh Valley Ry. Co. 4}£ percent equip, tr. series coupons,
Mar .-Sept., at
Lehigh & New York first 4 percent coupons, Mar.—Sept., at__
Lehigh & Lake Erie 4% percent coupons, Mar .-Sept., at
Lehigh Valley Terminal first 5 percent coupons, Apr .-Oct., at__
Lehigh Valley General con. 4 percent coupons, May-Nov., at__
Middlesex Valley first 5 percent coupons, Nay-Nov., at
Lehigh Valley first mtge. 4 percent coupons, June-Dec, at
Lehigh Valley general cons. 4% percent coupons, May-Nov.,
at
Lehigh Valley general cons. 5 percent coupons, May-Nov.,
at
Lehigh Valley Harbor Term. Co. 1st mtge. 5 percent gold bonds
series due 1954 coupons, at
Feb.-Aug., at
Long Dock Co. cons. 6 percent bonds coupons, Apr .-Oct., at
Louisville & Nashville, So. Ry. joint Monon. coll. trust bonds 4 percent coupons, Jan.-July, at
Missouri-Illinois Railroad Co. first mortgage series "A", 5 percent bonds coupons, at
Jan.-July, at
Missouri Pacific Railroad Co.:
The Pacific R.R. (of Missouri) first mortgage, 4 percent bonds
coupons, Feb.-Aug., at
The Pacific R.R. (of Missouri) second mortgage, 5 percent
bonds coupons, Jan.-July, at
$0. 7275
3.6375
7. 275
18. 1875
36. 375
1.2125
6.0625
12. 125
30. 3125
60. 625
22. 50
2. 25
22. 50
25. 00
35.00
35.00
35.00
17.50
3.50
20.00
22.50
10.95
27.50
20.00
25.00
22.50
20. 00
22.50
20.00
22.50
25.00
20. 00
25.00
20. 00
22.50
25.00
25.00
12.50
30.00
20. 00
23.00
12.50
20.00
25.00
298
STOCK EXCHANGE PRACTICES
Coupon Paying Agent—Continued
Missouri Pacific Railroad Co.—Continued.
The Pacific R.R. (of Missouri) real-estate mortgage, 5 percent
bonds coupons, at
May-Nov., at
The XPacific R.R. (of Missouri) carondelet branch first mtge.
4L /2 percent bonds coupons, Apr.-Oct., at
Missouri Pacific Railway Co. third mtge., 4 percent bonds
coupons, May-Nov., at
The central branch Union Pacific Railway Co.firstmtge., 4 percent bonds coupons, June-Dec, at
St. Louis, Iron Mountain & Southern Railway Co. general
cons'd. ry. and land grant, 5 percent bonds coupons, Apr.Oct., at
St. Louis, Iron Mountain & Southern Railway Co. river and
gulf divisions, 5 percent bonds coupons, May-Nov., at
Missouri Pacific Railroad Co. first and ref d'g series "A", 5 percent bonds coupons, at
Feb.-Aug., at
Missouri Pacific Railroad Co. first and ref 'd'g series "F ", 5 percent bonds coupons, at
Mar.-Sept., at
Missouri Pacific Railroad Co. first and ref d'g series "G", 5
percent bonds coupons, May-Nov., at
Missouri Pacific Railroad Co. first and ref d'g series "H", 5
percent bonds coupons, Apr.-Oct., at
.
Missouri Pacific Railroad Co. first & ref d'g mortgage 5
percent gold bonds, series " I " coupons, Feb.-Aug., at
Missouri Pacific Railroad Co. gen'l mtge., 4 percent bonds
coupons, at
Mar.-Sept., at
Missouri Pacific Railroad Co. conv. series "A" 5% percent
bonds coupons, May-Nov., at
Missouri Pacific Railroad Co. secured serial 5J^ percent certificates coupons, June-Dec, at
Missouri Pacific Railroad Co. equip, trust series "A" 6}£ percent certificates coupons, Feb.-Aug., at
Missouri Pacific Railroad Co. equip, trust series " B " 5}£ percent certificates coupons, May-Nov., at
Missouri Pacific Railroad Co. equip, trust series " C " 5 percent
certificates coupons, May-Nov., at
Missouri Pacific Railroad Co. equip, trust series " D " 5 percent
certificates coupons, Mar.-Sept., at
Missouri Pacific Railroad Co. equip, trust series " E " 4}£ percent certificates coupons, June-Dec, at
Missouri Pacific Railroad Co. equip, trust series U F " 4J^ percent certificates coupons, May-Nov., at
Missouri Pacific Railroad Co., due prior to Aug. 19, 1915
coupons.
Verdigris Valley Independent & Western Ry. Co., 5 percent
bonds coupons, at
•
Manitoba, Province of, 20-yr. 4% percent deb. bonds, series
"DDD" due Dec. 1, 1947, coupons, June-Dec, at
Manitoba, Province of, 20-yr. 5 percent ceb. series "CCC"
due Dec 1, 1941, coupons, June-Dec, at
Marland Oil Co. serial 5 percent gold notes interest, June 15Dec 15, at
New Orleans & Northeastern R.R. Co. ref. .& imp. 4:}i percent
bonds coupons, Jan.-July, at
New Orleans, Texas, and Mexico Railway Co.:
New Orleans, Texas and Mexico Railway Co. 1st mtge. seriesf
"A" 5J4 percent bonds coupons, at
\
Apr.-Oct., at
New Orleans, Texas and Mexico Railway Co. 1st mtge. series f
" B " 5 percent bonds coupons, at
\
Apr.-Oct., at
$25. 00
12. 50
11. 25
20. 00
20. 00
25. 00
20. 00
25. 00
12. 50
25. 00
12. 50
25. 00
v
25. 00
25. 00
20. 00
10. 00
27. 50
26. 25
32. 50
27. 50
25. 00
25. 00
22. 50
22. 50
25. 00
22. 50
25. 00
25. 00
. 50
27. 50
13. 75
2. 75
25. 00
12. 50
2. 50
STOCK EXCHANGE PRACTICES
299
Coupon Paying Agent—Continued
New Orleans, Texas, and Mexico Railway Co.—Continued.
New Orleans, Texas and Mexico Railway Co. 1st mtge. series/
" C " 5>i,bonds coupons, Feb.-Aug., at
\
New Orleans, Texas and Mexico Railway Co. 1st mtge. series
"D" 4% percent bonds coupons, Feb.-Aug., at
New Orleans, Texas and Mexico Railway Co. income series /
"A" 5 percent bonds coupons, at
\
Apr.-Oct., at
New Orleans, Texas and Mexico Railway Co. equip, trust
series "A" 5 percent certificates coupons, May-Noy., at
New Orleans, Texas and Mexico Railway Co. equip, trust
series " B " 4% percent certificates coupons, June-Dec, at__
New Orleans, Texas and Mexico Railway Co. equip, trust
series " C " 4% percent certificates coupons, Apr.-Oct., at
New Orleans, Texas and Mexico Railway Co. 1st mtge. series
"A" 6 percent bonds coupons, at
N. Y., N. H. & H. R.R. Co. 15-yr. 6 percent secured gold bonds/
due 1940 coupons, at
\
Apr.-Oct., at
N. Y., N. H. & H. R.R. Co. 40-yr. 1st & ref. 4}_ percent gold
bonds series of 1927 coupons, June—Dec, at
N. Y., N. H. & H. R.R. Co. 4% percent equipment trust of 1930
coupons, Second Nat'l Bank of New Haven, trustee, Mar. 15Sept. 15, at
Nord. Ry. Co. 6J4 percent ext. s/f bonds dated Oct. 1, 1924 coupons,
at
Apr.-Oct., at
Northern Pacific Railway Co. coupon accts.:
General lien 3 percent bonds coupons, at
Feb.-May-Aug.-Nov., at
Prior lien 4 percent bond coupons, at
Jan.-Apr.-July-Oct., at
Nor. Pacific Ry. Co. refunding & imp. 4J4 percent series " A" bonds
coupons, Jan.-July, at
Northern Pacific Ry. Co. refunding & imp. mtge. 6 percent/
series " B " gold bonds coupons, at
\
Jan.-July, at
Northern Pacific Ry. Co. ref. & imp. 5 percent series "C"(
bonds coupons, at
\
Jan.-July, at
Northern Pacific Ry. Co. ref. & imp. mtge. 5 percent gold bonds/
series "T>" coupons, at
_
\
Jan.-July, at
St. Paul-Duluth div. 4 percent bonds coupons, June-Dec, at
St. Paul & Duluth 1st cons. mtge. 4 percent bonds coupons, JuneDec, at
Northern Pacific Ry. equip, tr. £>f 1925 4}£ percent serial tr. gold
ctfs. coupons, Mar. 15-Sept. 15, at
„
Northern Pacific Ry. Co. 4}| percent equip, tr. of 1922 gold ctfs.
dividend warrants, Feb. 15-Aug. 15, at
Ohio State Tel. Co. conv. & ref. s/f 5 percent bonds coupons,
Jan.-July, at
Pere Marquette Railway Co. 1st mtge. series "A" 5 percent gold/
bonds coupon, at
\
Jan.-July, at
Pere Marquette Railway Co. 1st mtge. series " B " 4 percent gold
bonds coupons, at
Jan.-July, at
Pere Marquette Railroad Co. Lake Erie & Detroit River division
coll. trust m percent gold bonds coupons, Feb.-Aug., at
Pere Marquette Railroad Co. 1st mtge. series "C" 4y2 percent
gold bonds coupons, Mar.-Sept., at
Pere Marquette Railway Co. 4J4 percent equipment trust certificates series of 1930 dividend warrants, May-Nov., at
$25, 00
25. 00
22. 50
25. 00
12. 50
2. 50
25. 00
22. 50
22. 50
30. 00
30. 00
15. 00
3. 00
22. 50
22. 50
32.50
16. 25
7. 50
3. 75
10. 00
5. 00
22. 50
30. 00
15. 00
3. 00
25.00
12. 50
2. 50
25. 00
12. 50
2. 50
20. 00
20. 00
22. 50
22. 50
25. 00
25. 00
12. 50
2. 50
20. 00
10. 00
22. 50
22. 50
22. 50
300
STOCK EXCHANGE PRACTICES
Coupon Paying Agent—Continued
Phila.Electric Power Co. 1st mtge.5% percent goldbonds.coupons, at.
Feb.-Aug., at
.___.
Philadelphia Electric Co. 1st & ref d'g mtge. gold bonds 4 percent
series of 1971 coupons, at
•
Feb.-Aug., at
Phila. & Reading Coal & Iron Co. ref. mtge. 5 percent s/f goldf
bonds cupons, at
\
Jan.-July, at
Phila. & Reading Coal & Iron Co., 20-year conv. 6 percent deb. f
b6nds coupons, at
\
Mar.-Sept., at
Postal Telegraph and Cable Corp., 25-year coll. 5 percent gold
bonds coupons, at
Jan.-July, at
Reading Co., gen'l & ref. mtge, 4% percent gold, bonds series "A"f
coupons, at
\
Jan.-July, at
Reading Co.-Jersey Central collateral tr. 4 percent bonds coupons,
Apr.-Oct., at
Rome, city of, ext. loan of 1927, s/f 6% percent gold bonds due Apr. f
1, 1952, coupons, at
\
Apr.-Oct., a t _ _
Rhodesian anglo American, Limited, 7% percent debentures coupons, at
June 30-Dec. 31, at
St. Paul Union Depot Co., 1st & ref. 5-percent gold bonds, series
"A" coupons, at
Jan.-July, at
St. Joseph Lead Co. 10-yr. conv. 5j4-percent gold debenture bondsf
coupons, at
\
May-Nov., at
!
Jan.-July, at
Societa Italiano Pirelli (Pirelli Co. of Italy) S/F 7-percent gold bonds
coupons, May-Nov., at
Southern Improvement Co. 5-percent bonds coupons, at
Jan.-July, at
Southern Railway Co. coupon acct.:
Aitken Branch 1st 4 percent bonds coupons, Jan.-July, at
Atlantic & Yadkin Ry. Co. 1st mtge. 4 percent bonds coupons,
Apr.-Oct., at
Development & gen'l mtge. 4 percent bonds coupons, Apr.Oct., at
Development & gen'l mtge. 6 percent bonds coupons, Apr.Oct., at
Development & gen'l mtge. 6)4 percent bonds coupons, Apr.Oct., at
East Tenn. reorganization mtge. 5 percent bonds coupons,
Mar.-Sept., at
East Tenn., Va. & Ga. R.R. Co. cons. mtge. 5 percent bonds
coupons, May-Nov., at
First consolidated mtge. 5 percent bonds coupons, Jan.-July,
at
Georgia Midland R.R. 1st mtge. 3 percent bonds coupons,
Apr.-Oct., at
Memphis Division 1st 5 percent bonds coupons, Jan.-July, at_
Mobile & Birmingham 1st mtge. 4 percent bonds coupons, at_
Jan.-July, at
Mobile & Birmingham prior lien 5 percent coupons, at
Jan.-July, at
Mobile & Ohio R.R. Co. coll. 4 percent bonds coupons, Mar.
Sept., at
$27. 50>
1,3. 75
20. 00
10. 00
25. 000
12. 50
2. 50
. 30. 00
15. 00
3. 00
25. 00
2. 25
22. 50
11. 25
2. 25
20. 00
32. 50
16. 25
3. 25
37. 94
38. 75?
25. 00
12. 50
27. 50
13. 75
2. 75
2, 750. 00
'275 00
137! 50
27. 50
35. 00
25. 00
2, 50
10. 00
20, 00
20. 00
30. 00
32. 50
25. 00
25. 00
25. 00
15. 00
25. 00
20. 00
4. 00
25. 00
5. 00
20. 00f
STOCK EXCHANGE PRACTICES
Coupon Paying Agent—Continued
Southern Railway Co. coupon acct.—Continued
Richmond & Mecklenberg R.R. Co. 1st mtge. 4 percent bonds
coupons, May-Nov., at
St. Louis Division 1st mtge. 4 percent bonds coupons, Jan.July, at
Spartanburg Union & Col. R.R. Co. 1st mtge. 4 percent bonds
coupons, Jan.-July, at
Virginia Midlands Ry. Co. gen'l. mtge. 5 percent bonds coupons,
M&y-Nov., at
Mobile & Ohio R.R. Co. 5 percent secured gold notes coupons,
Mar .-Sept., at
Syracuse Lighting Company, Inc., 1st and ref'd'g. mtge. 5 percent
gold bonds series " B " coupons, at
Jan.-July, at
Standard Oil Co. (Inc. in N.J.) 20-yr. 5 percent gold deb. bonds
coupons, Feb.-Aug., at
Swiss Confederation 20-yr. 5% percent ext. loan gold notes coupons,
at
Apr.-Oct., at
Terminal R.R. Ass'n of St. Louis Coupon Acct. viz:
First consol. mtge. 5 percent bonds Feb.-Aug., at
First mtge. 4}£ percent bonds coupons, Apr.-Oct., at
General mortgage refunding 4 percent bonds coupons, Jan.July, at
The Texas and Pacific Railway Co.:
Texas and Pacific Railway Co., The, 1st mtge. 5 percent bonds
coupons, June-Dec, at
Texas and Pacific Railway Co., The, gen'l & ref'd'g series " B "
5 percent bonds coupons, at
Apr.—Oct., at
Texas and Pacific Railway Co., The, gen'l & ref'd'g series
" C " 5 percent bonds coupons, Apr.-Oct., at
Texas and Pacific Railway Co., The, gen'l ref'd'g m't'ge 5 percent gold bonds series " D " coupons, June-Dec, at
Texas and Pacific Railway Co., The, second income 5 percent
bonds coupons, Mar. 1st, at
Texas and Pacific Railway Co., The, equip, trust series "GG"
5 percent certificates coupons, May-Nov., at
Texas and Pacific Railway Co., The, equip, trust series " H H "
4^ percent certificates coupons, Mar.—Sept., at
Texas and Pacific Railway Co., The, equip, trust series " J J "
m percent certificates coupons, Apr.-Oct., at
Texas and Pacific Railway Co., The, equip, trust series "A"
4% percent certificates coupons, Feb.-Aug., at
Texas and Pacific Railway Co., The, equip, trust series " B "
4 percent certificates coupons, May-Nov., at
Texas and Pacific Railway Co., The, equip, trust series " C "
4}i percent certificates coupons, June-Dec, at
Texas and Pacific Railway Co., The, Weatherford, Mineral
Wells & Northwestern Railway Co. equip, trust "A" 5 percent certificates coupons, Feb.-Aug., at
Texas and Pacific Railway Co., The, Texas Pacific MissouriPacific Terminal R.R. of New Orleans 1st mtge. 5% percent bonds coupons, Mar .-Sept., at
Guaranty Trust Company of New York as pledgee under the'
instrument of pledge dated Nov. 1, 1916, securing $300,000,000 three-year and five-year 5J4 percent secured loan
gold notes account, for the payment of coupons from the
United Kingdom of Great Britain and Ireland 5-year
5}i percent gold notes due Nov. 1, 1921, May-Nov., at
United Kingdom of Great Britain and Ireland 10-yr. 5}£ percent conv. gold notes due Aug. 1, 1929, coupons, at
Feb.—Aug., at
175541—33—PT 1
20
301
$20. 00
20. 00
20. 00
25. 00
25. 00
25. 00
12. 50
25. QO
27. 50
13. 75
25. 00
22. 50
20. 00
25. 00
25. 00
12. 50
25. 00
25. 00
50. 00
25.00
22. 50
22. 50
22. 50
20. 00
22. 50
25. 00
27. 50'
27.50
137. 50
275. 00
27. 50
13.75
2.75
302
STOCK EXCHANGE PRACTICES
Coupon Paying Agent—Continued
The Texas and Pacific Railway Co.—Continued
Guaranty Trust Company of New York—Continued
United Kingdom of Great Britain and Ireland 20-yr. 5% per-1
cent gold bonds coupons, at
J
Feb.-Aug., at
Utica Gas and Electric Company 20-yr. gen'l mtge. 5 percent
gold bond series E coupons, Jan.-July, at
United States Steel Corporation coupon acct. viz:
Series B, due Feb.-Aug., at
"
"
"
"
"
B,
D,
D,
F,
F,
"
"
"
" Apr.-Oct., "
"
'<••
"
" June-Dec,"
"
"
"
$27. 50
13. 75
2. 75
25. 00
25. 00
125.00
25.00
125.00
25.00
125.00
U.S. Steel Corp. 10-60-yr. S/F 5 percent bonds coupons, MayNov., at
25. 00
Vermont, State of (Vermont State flood bonds), loan of 1927 3%
percent gold bonds coupons, dated December 1927, June-Dec,
at
18.75
Western Electric Co., Inc., 20-yr. 5 percent gold deb. bonds cou-1
25. 00
pons, at
/
12. 50
Apr.-Oct., at
2. 50
Western Pocahontas Corpn. lands purchase money 1st mtge. 4%
percent gold bonds of 1945 coupons, Feb.-Aug., at
22. 50
Western Pocahontas Corpn. lands purchase money ext. mtge. No.
1, 4:}i percent gold bonds of 1945 coupons, Feb.-Aug., at
22. 50
Western Pocahontas corpn. lands purchase money ext. mtge. No.
2, 4% percent gold bonds of 1946 coupons, Apr.-Oct., at
22. 50
First National Bank of Boston, a/c N. Y., N. H. & H. R.R. Co. 5
percent equip, tr. of 1925 coupons, Jan.-July, at
25. 00
First National Bank of Boston, a/c N. Y., N. H. & H. R.R. Co. 4^
percent equip, tr. of 1927 coupons, June-Dec, at
22. 50
First National Bank of Boston, a/c N. Y., N. H. & H. R.R. Co. 4^
percent equip, tr. of 1931 coupons, Jan.-July, at
22. 50
Fidelity Union Trust Co., a/c Public Service Newark Terminal Ry.
Co. 5 percent s/f bonds coupons, June-Dec, at
25. 00
Fidelity Union Trust Co., a/c Public Service Electric & Gas Co. 1st
& ref. mtge. 5 percent gold bonds series of 1965 coupons, at
25. 00
June-Dec, at
12. 50
Fidelity Union Trust Co., a/c Public Service Electric & Gas Co. 1st
& ref. mtge. 4}£ percent gold bonds series of 1967 coupons, at
22. 50
June-Dec, at
11. 25
Fidelity Union Trust Co., a/c Public Service Electric & Gas Co. 1st
& ref. mtge. 4% percent gold bonds series of 1970 coupons, at
22. 50
Feb.-Aug., at
11. 25.
Fidelity Union Trust Co., a/c Public Service Electric & Gas Co. 1st
& ref. mtge. 4 percent gold bonds series of 1971 coupons, at
20. 00
Apr.-Oct., at
10. 00
Girard Trust Co., a/c Phila. Electric Co. 1st lien & ref. mtge. gold
bonds tyi percent series due 1967 coupons, at
22. 50
May-Nov., at
11. 25
Anglo American Oil Co., Ltd., serial 4% percent gold note coupons.
Public Service Corp. of New Jersey secured gold bonds, 5% percent series of
1956, coupons.
Hocking Valley Ry. Co. 6 months 5 percent notes coupons.
Jeddo Highland Coal Co. 1st mortgage leasehold S. F. 6 percent gold bonds,
due Nov. 1, 1941, coupons.
Public Service Electric & Gas Co. 1st & ref. mortgage gold bonds, 5 percent,
series of 1965, coupons.
Hocking Valley Railway Co. 6-month 4)4 percent gold notes, due September 1,
1927, coupons.
Erie Railroad Company refunding & improvement mortgage 5 percent gold
bonds, series of 1927 (paid no. 1 warrant only).
Mobile & Ohio Railroad Co. refunding & improvement mortgage 4J^ percent,
series of 1977 (paid no. 1 warrant only).
Public Service Corp. of New Jersey 20-year 4% percent conv. gold debentures
http://fraser.stlouisfed.org/
coupons.
Federal Reserve
Bank of St. Louis
STOCK EXCHANGE PRACTICES
303
Government of French Republic 5 percent bonds coupons.
Rhokana Corp., Ltd., 20-yeai* conv. 7 percent debentures, coupons.
Boston & Maine R.R. 1st mtge. 5 percent bonds, series " A C " coupons.
Boston & Maine R.R. 1st mtge. 5 percent bonds, series " I I " coupons.
Boston & Maine R.R. 1st mtge. 5 percent bonds, series " J J " coupons.
Drexel & Co.
Dividend paying agent:
Niagara Share Corporation of Maryland.
Transfer and dividend paying agent:
General Asphalt Co.
Keystone Watch Case Corporation.
Keystone Corporation.
Markle Corporation.
National Umbrella Frame Co.
The Philadelphia & Reading Coal & Iron Corporation.
Phoenix Iron Co.
Public Service Electric & Gas Co.
Red Jacket Consolidated Coal & Coke Co.
Hall Electric Heating Co.
Drexel & Co.
Coupon paying agent:
The Baldwin Locomotive Works.
The Lehigh Valley Coal Co.
The Philadelphia & Reading Coal & Iron Co.
Public Service Electric & Gas Co.
Public Service Electric Power Co.
Reading Co.
COMMITTEE EXHIBIT NO. 19 OF MAY 25,
1933
QUESTION 12
List of all bond or debenture issues, foreign or domestic, of which either of
said firms was the syndicate manager and which issues have been or are now in
default; and any issue floated prior to 1927 which were in default at any time
during the period 1927 to 1931.
J. P. Morgan & Co.
1927-31: Of the issues during the period in question, there were no defaults
during that period as to interest or principal. However, of the issues made
during that period, default occurred on—
Mobile and Ohio Railroad Co. 5 percent secured gold notes due
Sept. 1, 1938, and refunding & improvement 4}£ percent mtge.
gold bonds due Sept. 1, 1977___
Sept. 1, 1933
Missouri Pacific R.R. Co. first & refunding mtge. series I, 5 percent
gold bonds due Feb. 1, 1981
Apr. 1, 1933
T
Of issues made prior to 1927 by J. P. Morgan & Co. and still outstanding, the
following are in default as to interest or prinicpal:
Default date
Chicago City & Connecting Rys. collateral trust sinking fund
gold 5's issued Jan. 1, 1910, due Jan. 3, 1927
Jan 3, 1927.
Florida East Coast Ry. first and ref. mtge. 5 percent gold bonds
issued Sept. 1, 1924, series A, due Sept. 1, 1974
Sept. 1, 1931.
Interborough Rapid Transit Co. 10-year secured convertible 7
percent gold notes issued Sept. 1, 1922, due Sept. 1, 1932
Sept. 1, 1932.
Imperial Russian Government
credit of 1916 issued June 1916.
J
RepHblic of Mexico 4's, 5 s, 6's of 1899, issued prior to July 1913.
304
STOCK EXCHANGE PRACTICES
Drexel & Co.
Default date
DeBardeleben Coal Corporation first mortgage 6 percent bonds,
1953, issued May 22, 1928
Dec. 1, 1931.
Franklin County Coal Co. first mortgage 6 percent bonds, issued
Jan. 8, 1924
Jan. 1, 1931.
Terre Haute, Indianapolis & Eastern Traction Co. first and refunding mortgage 5 percent bonds, 1945, issued May 23,1930. Oct. 1, 1930.
Indianapolis, Crawfordsville & Danville Electric Railway Co.
first mortgage 5 percent bonds, 1952, issued June 1, 1912
Nov. 1, 1930.
The Baldwin Locomotive Works 3-year 5}£ percent notes, 1933,
issued Mar. 11, 1930
Mar. 1, 1933.
Lehigh Valley Coal Co., first mortgage 4 percent bonds, 1933,
issued in 1904
Jan.
1,1933.
Red Jacket Consolidated Coal & Coke Co., consolidated mortgage
5 percent bonds, 1944, issued in 1940
Jan. 1, 1932.
COMMITTEE EXHIBIT NO. 20, OF MAY 25,
1933
QUESTION 17
The names of all issues in which either firm had any participation, which are
now or have been at any time during above period in default; such information
to include date of default, present market value of securities and names an£
addresses of the secretaries of committees formed to protect the interests of
investors or for reorganization purposes.
Issues by J. P. Morgan & Co. or Drexel & Co. now in default are given in the
answer to no. 12.
Issues by others in connection with which either or both of said firms had some
financial participation or commitment which issues are now in default as to
interest or principal, are as follows:
Date of
. default
Republic of Peru, secured 7-percent S.F. gold bonds due Sept. 1,1959
Protective committee secretary* Jesse Knight, 63 Wall Street, N.Y.C.
Republic of Peru Peruvian national loan 6-percent ext. S.F. gold bonds, 1st
series, due Dec. 1, I960Protective committee secretary, Frederick G. Curry, 22 William Street,
N.Y.C.
Republic of Peru Peruvian national loan 6-percent ext. S.F. gold bonds, 2d
series, due Oct. 1,1961
_
_
_
Protective committee secretary, Frederick G. Curry, 22 William Street,
N.Y.C.
Chicago Rapid Transit Co. 1st and ref. mtge. 6V6-percent bonds, series A, due
1953.
Protective committee secretary, Harry R. Mosser, 209 South La Salle
Street, Chicago, ill.
Chicago Rapid Transit Co., 1st and ref. mtge. 6-percent bonds, series B, due
1944.
Protective committee secretary, Harry R. Mosser, 209 South La Salle
Street, Chicago, 111.
United States of Brazil, 6H percent ext. S.F. bonds due Oct. 15,1957
International Match Corp. 5 percent 20-year S.F. debentures due Nov. 1,1947_.
Protective committee secretary, William R. Biggs, 48 Wall Street, N.Y.C.
International Match Copr. 5 percent 10-year conv. debentures due Jan. 15,1941.
Protective committee secretary, William R. Biggs, 48 Wall Street, N.Y.C.
Williamsport Wire Rope Co. 1st mtge. S.F. 6 percent bonds due Nov. 1,1947__.
Protective committee secretary, John M. Fisher, 55 Wall Street, N.Y.C.
City of Vienna ext. loan S.F. 6 percent bonds due Nov. 1,1952
Republic of Chile ext. loan S.F. 6 percent bonds due Sept. 1,1961
Republic of Chile ext. loan S.F. 6 percent bonds, due Mar. 1,1962
Republic of Chile ext. loan S.F. 6 percent bonds, due May 1,1963
Republic of Chile Railway ref. 6 percent S.F. ext. bonds due Jan. 1,1961
Mortgage Bank of Chile guaranteed S.F. 6 percent gold bonds due Apr. 30,1961.
Mortgage Bank of Chile guaranteed S.F. 6 percent gold bonds due May 1,1962.
Savoy-Plaza Corp. Realty extension 1st mtge., hy% percent S.F. ctfs. due Feb.
1, 1945.
Protective committee secretary, Ralph E. Morton, 22 William Street,
N.Y.C.
State of Minas Geraes (U.S. of Brazil) 6J4 percent secured ext. S.F. gold bonds
due Mar. 1, 1958
State of Minas Geraes (U.S. of Brazil) 6J^ percent secured ext. loan of 1929,
series A, due Sept. 1 1959
_
Market
value
Sept. 1,1931
June 1,1931
Apr. 1,1931
July
1,1932
July
1,1932
Apr. 15,1932
May 1,1932
25
July 15,1932
Nov. 1,1932
Nov.
Sept.
Sept.
Nov.
Jan.
Oct.
Nov.
1,1932
1,1931
1,1931
1,1931
1,1932
31,1931
1,1932
Dec. 1, 1932
Mar. 1,1932
do
23
305
STOCK EXCHANGE PRACTICES
Date of
default
Abitibi Power & Paper Co.. Ltd., 1st mtge. series A 5 percent gold bonds due
1953
Protective committee secretary, Frederick G. Curry, 22 William Street,
N.Y.C.
State of Rio Grande de Sul 6 percent ext. S.F. gold bonds due June 1,1968
Rossville Commercial Alcohol Corp. 20-year S.F. 6,percent conv. debentures
due Jan. 1,1949
_.—
Protective committee secretary, Nelson Stuart, 22 Wiliiam Street, N.Y.C.
Kreuger & Toll Co. 5 percent S.F. secured gold debentures due Mar. 1, 1959.
Protective committee secretary, Tristan Antell, 52 Broadway, N.Y.C.
Secretary, Bernard Henick, 46 Cedar Street, N.Y.C.
Central of Georgia Railway Co. ref. & genl. mtge. 5 percent bonds, series O,
due Apr. 1,1959
T——,_
Protective committee secretary, Churchill Rodgers, 15 Broad Street, N.Y.C.
The Lautaro Nitrate Co., Ltd., 1st mtge. 6 percent conv. bonds due July 1,1954_
Protective committee secretary, Robert N . West, 55 Wall Street, N . Y . C
Pennsylvania Dock & Warehouse Co., leasehold mtge., 6 percent S.F. gold
bonds due Aug. 1,1949
Protective committee secretary, Nelson Stuart, 22 William Street, N.Y.C.
Missouri Pacific Railroad Co. 1st & ref. mtge., 5 percent gold bonds series H
due Apr. 1,1980-J
COMMITTEE EXHIBIT N O . 21 OF M A T 25,
June
Market
value
1,1
Dec.
1,1931
Jan.
1,1932 No quote.
Sept. 1,1932
13H
12H
Apr.
1,1933
2%
July
1,1932
3H
Aug.
1,1931
34M
Apr.
1,1933
26H
1933
QUESTION 13
Names of all issues in which a member or representative of either of said firms
acted as a member of a protective or reorganization committee.
The answers to this question include the period of January 1, 1927, to March
24, 1933.
New York
Mobile & Ohio R.R. Co. refunding and improvement mortgage gold bonds,
m percent, series of 1977, due September 1, 1977.
Mobile & Ohio R.R. Co. 5 percent secured gold notes, due September 1, 1938.
Thomas S. Lamont, member.
Florida East Coast Ry. Co. first and refunding mortgage 5 percent gold bonds,
series A.
A. M. Anderson, member.
John M. Young, secretary.
Interborough Rapid Transit Co. 10-year secured convertible 7 percent gold
-notes.
J. P. Morgan and A. M. Anderson, members.
Charlton MacVeagh, secretary.
Interborough Rapid Transit Co. first and refunding mortgage 5 percent gold
bonds.
J. P. Morgan and A. M. Anderson, members.
Charlton MacVeagh, secretary.
Imperial Russian Government 5-year 5J4 percent bonds.
Thomas Cochran, member.
Harold Stanley was a member of this committee. Resigned January 1928.
International Committee of Bankers on Mexico.
T. W. Lamont is chairman of the American section of this committee.
Philadelphia
Lehigh Valley Coal Co. first mortgage 4 and 5 percent bonds, due 1933, protective committee.
Horatio G. Lloyd, member.
Edward Starr, jr., secretary.
Baldwin Locomotive Works 5% percent notes, due 1933, protective committee.
Horatio G. Lloyd, member.
Edward Starr, Jr., secretary.
Red Jacket Consolidated Coal & Coke Co. consolidated mortgage 5 % bonds,
due 1944, protective committee.
Arthur E. Newbold, Jr., member.
Robert H. Lee, secretary.
306
STOCK EXCHANGE PBACTICES
DeBardeleben Coal Corporation first mortgage 6% bonds, due 1953, protective
committee.
Edward H. York, Jr., member.
Franklin County Coal Co. first mortgage serial 6% bonds, protective committee.
Edward H. York, Jr., member.
Indianapolis, Crawfordsville & Danville Electric Ry. Co. first mortgage 5%
gold bonds, due 1952, protective committee.
Arthur E. Newbold, Jr., member.
Indiana, Columbus & Eastern Traction Co. general and refunding mortgage
5% bonds, due 1926, protective committee.
Thomas S. Gates, member.
Edward Hopkinson, Jr., counsel.
Terre Haute, Indianapolis & Eastern Traction Co. first and refuding mortgage
5% bonds, due 1945, protective committee.
Thomas S. Gater, member.
Philadelphia Rapid Transit System, underlying companies, general committee.
Thomas S. Gates, member.
Edward Hopkinson, Jr., secretary.
Springfield Ry. (Ohio), reorganization committee.
Edward Hopkinson, Jr., member.
X
@FedFRASER