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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 facel 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 contii ally enl ng market, and it was the udy 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 a 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 is did bring the banker, more and more into control of business; sometimes because if 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 'Hi 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 le 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 li 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 per to the national and State banks in the Federal reserve system, these ing some 37 per cent of all banks, these banks handlin

GQ the loans and investments made by commercial reports supply us with the amount and the chr in the capital, the surplus, the net addition to

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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 some 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 & ('0., 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 leading commercial banks of New York City, and they hold 996 additional directorsliips 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 bankaan also sit upon the board of directors of 996 of the largest transportation

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prporations of our country are examined, the picturi a clear. It is no longer difficult to understand how pre and more dominated business policy. sank of America National Association, the Manhattan Trust Co., the Chase National Bank, the Chemical aboya the loans and investments made by con reports supply us with the amount in the capital, the surplus, the net as

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

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

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

“As a banker, responsible to my partners and also to those who had plac nation is more disturbed, for I faced the problem of determining how these corput before tions were to repay the huge sums we had loaned to them.

" Their product went into the them were competitors in both fields. continually enlarging market, and it was the study of this market, and that the Nic

Repaying the loans depended upommercial fact that it depended so largely upon the volume of wages being paid, w which the a producer, the part which he played as a consumer was equally impor bankers' ac to industry and commerce.” tion's board of directors had a powerful influence upon their business Register of their employing policy, for banking methods and ethics are such that h&k, enable uonce borrowed from a bank the corporation was not in a position to bards of dire other banks for additional loans. Its source of credit for the future walle partners bank which, to protect its interests, had placed one of its partners uponufacturing, i corporation's board of directors.

This banking practice of demanding the placing of a partner or directe Directory the bank on the borrowing corporation's

boardetinte directors, goes back to the 16 period when the great railway systems were being financed shortly afte This les more recent times. It has not as yet become a universal practice, for den & Co., an

... large loans are made to corporations, without an officer of the bank or iners of in company being seated in the borrowing corporation's board of directorsal banks of Whether the banker isits mupon the corporation's board of directors awme of the the control over credit remains the same, and the banker has, more andring

, and of Probably this practice, which developed so extensively after the Worldhe largestiwas not the result of a deliberately planned program on the bankerst group. I It developed as a result of the banker's desire to protect his loans. mon the bo did bring the banker, more and more into control of business; sometimes bicular signif this was deliberately planned, sometimes because circumstances forc Bank, the i hand. The classical story of Ginsberg, the cloak and suit man, illustrat Dillon-Rea latter.

of Kuhn-Loe Ginsberg walked into the bank president's office and informed the lof J. H. Sch that he must have a loan of $50,000, because his business condition wa & Co., and that unless the loan was made he would be unable to carry on.

The National E would then have to take over the business to protect itself.

ticular signi True to his instinct and training, the banker thought for a few mo Bank, but i and then said, “ It is impossible for us to make the loan; we have & Trust Co.. let you have $100,000 and from the reports we have of your business webanks, they not be justified in loaning you any more.”

of the Cha Ginsberg inquired whether this was the final word, and upon being aners private that it was, he asked : “Do you understand the cloak and suit busițial banks, w The banker assured him that he did not, and furthermore did not inte most advar The cloak and suit man's rejoinder was, “ If you don't understand significant th had better learn it in a hurry for you are in the cloak and suit businessate bankers

If information relative to commercial banks is desired, the reports station, public Treasury Department and the Federal reserve will supply much data in the

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pen at all times to the Federal bank inspectors. le plant to make 24. But these State and national banks are but a part of our banking system. on something monteres putside of the Federal reserve, and in a most definite manner influencing petition. If my hear he policies of the great commercial banks, who in turn play so definite a part the provision was in the activities of the smaller local banks, are the great private banking -ing corporation's puses, the largest of which is the House of Morgan. When we look for data repaid. ucerning their activities we find a blank page. The private banking house rd of directors of sea private institution, unchartered by the State or Federal Government. Its ause of the many card of directors is composed of the partners. Its books are not open to

ite or Federal bank examiners, or other authorities. to those who had the nation was given but a brief glance into the business of the private uyself becoming mor akers when the Pujo committee began its investigation

years But before the committee had carried on its investigation to a definite

ent, something happened, and the investigation ended. The far-reaching Foreigu market; muracter of the private bankers' activities, with their influence over the loans depended or commercial banks, will probably remain a closed book until Congress of this market, and des that the Nation's welfare demands a thorough-going investigation into vages being paid, wart which the private bankers have played. r was all importa, hile the doors of information are closed to those who would study the was equally impruikte bankers. activities, we are not entirely denied information which

indicate their connections, and the commercial banks through which banufacturing contrary, on some of their financial and other activities. on their business ors" Register of Directors, and the Directory of Directors in the city of are such that be York, enable us to trace the partners of the private banking houses

boards of directors of the large commercial banks, and in turn trace is partners upon manufacturing, insurance, public utility, and railroad corporations upon r the future was same partners of the private banks to the boards of directors of the artner or direct the Directory of Directors in the city of New York for 1931-32, we “S, goes back to taken the 16 leading private banks, for the purpose of studying their This list includes such private banks as J. P. Morgan & Co.,

Read & Co., Speyer & Co., J. and practice, for igman & Co., and others as well known.

partners of these private banks have 71 directorships in the leading of directors, rcial banks of New York City, and they hold 996 additional directordirectors or in some of the largest public utility, insurance, transportation lines, more and acturing, and other corporations.

list of the commercial banks in which the private bankers sit as directors The Worlds the largest in New York, those that are popularly designated as the banker's freet group. In many instances the partners of more than one private

loans. It upon the board of directors of the same commercial bank. Les forcegail Bank, the largest commercial bank in the United States. Clarence illustrate of Dillon-Read & Co., Henry S. Bowers of Goldman-Sachs & Co., Otto

a of Kuhn-Loeb & Co., Frederick W. Allen of Lee Higginson & Co., John d the best of J. H. Schrader Banking Corporation, Francis F. Randolph of J. W. ion waslin & Co. and Harold Bi Clark of White, Weld & Co., are members of The National of

articular significance is the tie-up of the private bankers with the Chase few mus Bank, but when these partners sit upon the board of directors of the have any Trust Co., the New York Trust Co., and several other large com

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was building up its business by making loans to manufacturing corporations, as na 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 these inspection, look into its business methods and learn something concerning the of 1 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 attache that I should be made a member of the borrowing corporation's board & the lara directors until the principal with interest had been repaid.

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

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

Their product went into the domestic and the foreign market; many of the them were competitors in both fields. Repaying the loans depended upommercial continually enlarging market, and it was the study of this market, and that the Na fact that it depended so largely upon the volume of wages being paid, w) which the forced me to a realization that, while the wage earner was all importan the doors a producer, the part which he played as a consumer was equally importlankers" to industry and commerce." tion's board of directors had a powerful influence upon their business Register of their employing policy, for banking methods and ethics are such that h&k, enable i once borrowed from a bank the corporation was not in a position to eards of dire other banks for additional loans. Its source of credit for the future wa de partners bank which, to protect its interests, had placed one of its partners upoufacturing, corporation's board of directors.

This banking practice of demanding the placing of a partner or directhe Directory the bank on the borrowing corporation's board of directors, goes back to the 16 period when the great railway systems were being financed shortly after this liCivil War. It did not become a feature in the manufacturing industries Inn & Co. more recent times. It has not as yet become a universal practice, for an & Co.,' large loans are made to corporations without an officer of the bank or iners of company being seated in the borrowing corporation's board of directors. l banks of Whether the banker: sits upon the corporation's board of directors Olsome of 11 the control over credit remains the same, and the banker has, more and aring, and insisted upon having a voice in the corporation's business policy.

Probably this practice, which developed so extensively after the World the largest was not the result of a deliberately planned program on the banker's

et group. It developed as a result of the banker's desire to protect his loans. Jupon the did bring the banker, more and more into control of business ; sometimes beicular sign this was deliberately planned, sometimes because circumstances force Bank, the hand. The classical story of Ginsberg, the cloak and suit man, illustrat Dillon-Re: latter.

of Kuhn-L Ginsberg walked into the bank president's office and informed the Ef J. H. SC that he must have a loan of $50,000, because his business condition wai & Co., an that unless the loan was made he would be unable to carry on.

The National would then have to take over the business to protect itself.

ticular sig True to his instinct and training, the banker thought for a few mo Bank, but and then said, “It is impossible for us to make the loan; we have at Trust Co let you have $100,000 and from the reports we have of your business we banks, they not be justified in loaning you any more.”

f of the CL Ginsberg inquired whether this was the final word, and upon being anners privat that it was, he asked : “Do you understand the cloak and suit busirial banks, The banker assured him that he did not, and furthermore did not intele most adva The cloak and suit man's rejoinder was, “ If you don't understand itignificant had better learn it in a hurry for you are in the cloak and suit business rate bankers

If information relative to commercial banks is desired, the reports atation, publ Treasury Department and the Federal reserve will supply much data re the mi to the national and State banks in the Federal reserve system, these coil' ing some 37 per cent of all banks, these banks headling about the loans and investments made by commer

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whi: reports supply us with the amount and thi in the capital, the surplus, the net additio

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