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The CHAIRMAN. President Green said before the Senate committee that labor would strike, did he not?

Mr. FREY. I do not know.

The CHAIRMAN. He said labor would either strike or use force; and when he was questioned as to what he meant by “force” he said labor would strike.

Mr. LOVETTE. I think the greatest thing that can be done is to get this subject squarely before the country, if there is not enough work to go around, and there is not. Obviously, our civilization can not stand unless there is work reasonably to go around and provide a living for all.

Mr. Frey. If it were not for public opinion I would not have the privilege of appearing before this committee this morning.

The CHAIRMAN. I am told that Mr. Green said before the Senate subcommittee that, if necessary, labor would strike.

Mr. FREY. Labor will never surrender its right to strike. I have been on strike many times. While the right to strike remains, yet labor has not placed its sole dependence upon its power to strike. Its greatest strength has been in public opinion, because without the support of public opinion and education strikes would be suicidal to labor.

Mr. RAMSPECK. I do not think the country realizes the extent to which finance and industry are controlled by a few people, and for that reason I am very much interested in your statement about the interlocking directorates. I read some time ago in Labor a statement in substance to this effect: In 1929, of the 303,000 corporations that made income-tax returns 200 of the largest ones, less than one-sixteenth of 1 per cent, had 45 per cent of all the corporate assets of those 303,000 corporations and their net income represented 40 per cent of the total net income of those 303,000 corporations. Further, those 200 corporations were controlled by probably not more than 2,000 directors. If that statement is true, taken with your testimony about interlocking directorates, it is entirely possible that these bankers controlled half of the industry of the country.

Mr. Frey. I would now like to put into the record the statistical tables relative to value of manufactured products, volume of wages, and per capita production from which I have been quoting.

The CHAIRMAN. Without objection you may do so.

Railroads-number of employees, including executives

1920. 1929

2, 022, 832 1, 660, 850

Number of executives and total compensation class 1 steam railroads

Year ended December 31

Average Total comnumber pensation

1921 1

1922. 1923. 1924. 1925. 1926. 1927 1928. 1929

15, 187 15, 502 16, 334 16, 283 16, 510 16, 848 17, 006 16, 890 16,995

38, 139, 690 77, 952, 729 83, 635, 986 85, 107, 94 87, 433, 0-1 90, 038, 6 93, 006, 5 93, 076, 10 96, 048, 24

1 Last 6 months.

Aggregate compensation of all employees of railroads with annual operating revenue over $1,000,000, excluding switching and terminal companies : 1920. $3, 681, 801, 193 | 1925_

$2, 860, 599, 920 1921 2, 765, 218, 079 1926

2, 946, 114, 354 1922 2, 640, 817, 005 1927.

2,910, 182, 848 1923. 3, 004, 071, 882 1928.

2, 826, 590, 471 1924. 2, 825, 775, 181 1929.

2, 896, 566, 351 $785,234,842 less in 1929 than in 1920.

TABLE III.—Number of employees in the manufacturing and railroad industries,


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TABLE IV.-Productivity in manufactures, 1923–1929 *

(1919= 100)

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1 Aryness Joy, Index of Production of Manufactures Derived from Census Data, 1927, Journal of the American Statistical Association, December, 1930, p. 457.

Value of manufactured products, wages and salaries-revised statistics Value of manufactured products : 1923.

$60, 555, 998, 200 1925.

62, 713, 713, 730 1927

62, 718, 347, 289 1929.

70, 434, 863, 443 Total wages : 1923.

11, 009, 297, 726 1925.

10, 729, 968, 927 1927_

10, 848, 802, 532 1929.

11, 620, 973, 254 Salaries : 1923.

2, 806, 408, 011 1925.

2, 921, 815, 878 1927

3, 229, 524, 618 1929

3, 595, 064, 061

Number of employees in bituminous mines, from report of the Bureau on
Mines :

622, 000 1929_

503, 000 Anthracite mines : 1919

155, 000 1929

52, 000 Coal mines per capita production : Bituminous1921

4. 20 1930_

5. 06 Anthracite1921

2. 09 1930_

2.21 Mr. LOVETTE. I should like very much to have a copy of the article you are putting out and about which you told us a little while ago.

Mr. Frey. I will see to it that every member of the committee gets a copy of that article.


(By John P. Frey, Secretary-Treasurer, Metal Trades Department, American Federation

of Labor) The full part which the great bankers play in shaping and dominating business and industrial policy is an almost unfathomable subject. The political, industrial, and commercial influence which the bankers exert, the part they take in shaping national and international relations, could not be adequately described by anything less than a series of books.

But it is not impossible to secure a reasonably accurate understanding of the bankers' activities by taking a few representative samples and examining them. In fact, it is highly advisable that this should be done, for the evidence which is accumulating seemingly places more responsibility upon the bankers for the economically unsound practices which have developed in our country than upon any other group.

Much responsibility rests with the great captains of industry and commerce, but behind them, encouraging, directing, and financing them, have been the great banking houses whose control of credit has, more and more, made them a dominant factor in the shaping of industrial and commercial policies.

The picture of the banker as a directing or controlling spirit in business management is comparatively new. The popular conception of the banker has been that of the man who safeguarded the deposits intrusted to him and loaned them to those who could supply satisfactory collateral.

Whether intentionally or not, the American banker, in addition to being the source from which credit could be secured, has rapidly become a dominant figure-frequently the dictator-in questions of business policy and management. From the question of purely business transactions to the subject of wages, hours of labor, and other condit.ons of employment, the banker has rapidly established a position where, in many instances, the final determination rests in his hands. In addtion some banks, through their affiliated organi. zations, carry on activities which are almost as varied as the business of the modern drug store.

Some years before the crash of 1929, a banker sat opposite to me at the luncheon table. I was interested in the interview for two reasons. Many years before, while this banker was acting as receiver for a large foundry, I had met him in connection with the subject of moulders' wages. The interview had been unsatisfactory in its character as well as in results.

In more recent years, this banker had given his public support to the proposition that the prosperity of business depended in large measure upon the capacity of the people to buy, and that as the purchasing power of the great majority was determined by the wages they received, it was necessary for the welfare of industry and commerce that the wages paid should reflec the increased capacity of industry to produce.

I asked the banker to give the reasons for his changed point of view relativ to wages. His story was decidedly illuminating and thought provoking.

In substance, he said: “ Originally I was a mechanical and production engineer. I finally went into banking as a partner in a private bank, which

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was building up its business by making loans to manufacturing corporations, The bank dealt only in large loans, the minimum being $500,000. From that we loaned sums in the many millions.

“When a corporation desired a loan I visited the plant to make a physical inspection, look into its business methods and learn something concerning the market in which its goods were sold and its competition. If my report was satisfactory and our bank decided to make the loan, the provision was attached that I should be made a member of the borrowing corporation's board of directors until the principal with interest had been repaid.

“As time passed, I became a member of the board of directors of some 24 or 25 corporations, and the president of one because of the many million dollars which we had loaned to it.

“As a banker, responsible to my partners and also to those who had placed their money in our bank for investment, I found myself becoming more and more disturbed, for I faced the problem of determining how these corporations were to repay the huge sums we had loaned to them.

" Their product went into the domestic and the foreign market; many of them were competitors in both fields. Repaying the loans depended upon a continually enlarging market, and it was the study of this market, and the fact that it depended so largely upon the volume of wages being paid, which forced me to a realization that, while the wage earner was all important as a producer, the part which he played as consumer was equally important to industry and commerce.'



It is obvious that this banker's presence upon the manufacturing corporation's board of directors had a powerful influence upon their business and their employing policy, for banking methods and ethics are such that having once borrowed from a bank the corporation was not in a position to go to other banks for additional loans. Its source of credit for the future was the bank which, to protect its interests, had placed one of its partners upon the corporation's board of directors.

This banking practice of demanding the placing of a partner or director of the bank on the borrowing corporation's board of directors, goes back to the period when the great railway systems were being financed shortly after the Civil War. It did not become a feature in the manufacturing industries until more recent times. It has not as yet become a universal practice, for many large loans are made to corporations without an officer of the bank or trust company being seated in the borrowing corporation's board of directors. But whether the banker sits upon the corporation's board of directors or not, the control over credit remains the same, and the banker has, more and more, insisted upon having a voice in the corporation's business policy.

Probably this practice, which developed so extensively after the World War, was not the result of a deliberately planned program on the banker's part. It developed as a result of the banker's desire to protect his loans. But it did bring the banker, more and more into control of business; sometimes because this was deliberately planned, sometimes because circumstances forced his hand. The classical story of Ginsberg, the cloak and suit man, illustrates the latter.

Ginsberg walked into the bank president's office and informed the banker that he must have a loan of $50,000, because his business condition was such that unless the loan was made he would be unable to carry on. The bank would then have to take over the business to protect itself.

True to his instinct and training, the banker thought for a few moments, and then said, “ It is impossible for us to make the loan; we have already let you have $100,000 and from the reports we have of your business we would not be justified in loaning you any more."

Ginsberg inquired whether this was the final word, and upon being assured that it was, he asked : “Do you understand the cloak and suit business? The banker assured him that he did not, and furthermore did not intend to. The cloak and suit man's rejoinder was, “ If you don't understand it, you had better learn it in a hurry for you are in the cloak and suit business now."

If information relative to commercial banks is desired, the reports of the Treasury Department and the Federal reserve will supply much data relative to the national and State banks in the Federal reserve system, these constituting some 37 per cent of all banks, these banks handling about 60 per cent of the loans and investments made by commercial banks. These Government remonto supply us with the amount and the changes which have taken place

tal, the surplus at addition to profits, the undivided profits, the





dividends paid on bank stocks, and the total deposits from the period when the Federal reserve system was established. The books of these banks are open at all times to the Federal bank inspectors.

But these State and national banks are but a part of our banking system. Outside of the Federal reserve, and in a most definite manner influencing the policies of the great commercial banks, who in turn play so definite a part in the activities of the smaller local banks, are the great private banking houses, the largest of which is the House of Morgan. When we look for data concerning their activities we find a blank page. The private banking house is a private institution, unchartered by the State or Federal Government. Its board of directors is composed of the partners. Its books are not open to State or Federal bank examiners, or other authorities.

The nation was given but a brief glance into the business of the private bankers when the Pujo committee began its investigation

years ago. But before the committee had carried on its investigation to a definite extent, something happened, and the investigation ended. The far-reaching character of the private bankers' activities, with their influence over the great commercial banks, will probably remain a closed book until Congress decides that the Nation's welfare demands a thorough-going investigation into the part which the private bankers have played.

While the doors of information are closed to those who would study the private bankers' activities, we are not entirely denied information which would indicate their connections, and the commercial banks through which they carry on some of their financial and other activities.

Poors' Register of Directors, and the Directory of Directors in the city of New York, enable us to trace the partners of the private banking houses to the boards of directors of the large commercial banks, and in turn trace these same partners of the private banks to the boards of directors of the great manufacturing, insurance, public utility, and railroad corporations upon which they sit.

From the Directory of Directors in the city of New York for 1931-32, we have taken the 16 leading private banks, for the purpose of studying their connections. This list includes such private banks as J. P. Morgan & Co., Lee Higginson & Co., Kuhn-Loeb & Co., Dillon-Read & Co., Speyer & Co., J. and W. Seligman & Co., and others as well known.

The partners of these private banks have 71 directorships in the le:ding commercial banks of New York City, and they hold 996 additional directorships in some of the largest public utility, insurance, transportation lines, manufacturing, and other corporations.

The list of the commercial banks in which the private bankers sit as directors includes the largest in New York, those that are popularly designated as the Wall Street group. In many instances the partners of more than one private bank sit upon the board of directors of the same commercial bank.

Of particular significance is the tieup of the private bankers with the Chase National Bank, the largest commercial bank in the United States. Clarence Dillon of Dillon-Read & Co., Henry S. Bowers of Goldman Sachs & Co., Otto H. Kahn of Kuhn-Loeb & Co., Frederick W. Allen of Lee Higginson & Co., John McHugh of J. H. Schroder Banking Corporation, Francis F. Randolph of J. W. Seligman & Co., and Harold B. Clark of White, Weld & Co., are members of the Chase National Bank board of directors.

Of particular significance is the tie-up of the private bankers with the Chase National Bank, but when these partners sit upon the board of directors of the Guaranty Trust Co., the New York Trust Co., and several other large commercial banks, they sit with the partners of other private banks who are also directors of the Chase National Bank. Through these directorships held by the partners private bankers have the interlocking control through the leading commercial banks, which enables them to carry out the financial policies which seem the most advantageous to them.

It is significant that in addition to these directorships in commercial banks, the private bankers also sit upon the board of directors of 996 of the largest transportation, public utility, insurance, and manufacturing corporations.

When the ramifications, the interlocking interests between the large com mercial banks and the corporations of our country are examined, the pictur becomes more definite and clear. It is no longer difficult to understand ho bankers' influence has more and more dominated business policy. The directors of the Bank of America National Association, the Manhattan Trust Co., the Bankers Trust Co., the Chase National Bank, the Chemical

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