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AY WEEK

SIX-HOUR DAY--FIVE-DAY WEEK

167

n a position to r future

manufacturing and dividends paid on bank stocks, and the total deposits from the period when being $500,000 pie the Federal reserve system was established. The books of these banks are

open at all times to the Federal bank inspectors. Ehe plant to make at But these State and national banks are but a part of our banking system. rn something contents, putside of the Federal reserve, and in a most definite manner influencing mpetition. If my peor the policies of the great commercial banks, who in turn play so definite a part 11, the provision was the activities of the smaller local banks, are the great private banking ving corporation's wpuses, the largest of which is the House of Morgan. When we look for data repaid.

ncerning their activities we find a blank page. The private banking house ard of directors of a private institution, unchartered by the State or Federal Government. Its cause of the Diantard of directors is composed of the partners. Its books are not open to

ite or Federal bank examiners, or other authorities. co to those who had the nation was given but a brief glance into the business of the private myself becoming makers when the Pujo committee began its investigation some years mining how these che But before the committee had carried on its investigation to a definite them.

lent, something happened, and the investigation ended. The far-reaching foreign market; aracter of the private bankers' activities, with their influence over the e loans depended out 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 wages being paid, t part which the private bankers have played. er was all importak hile the doors of information are closed to those who would study the was equally importate bankers' activities, we are not entirely denied information which

d indicate their connections, and the commercial banks through which wa their business ors? Register of Directors, and the Directory of Directors in the city of manufacturing a car 20 some of their financial and other activities. Care such that he York, enable us to trace the partners of the private banking houses

boards of directors of the large commercial banks, and in turn trace

same partners of the private banks to the boards of directors of the Is tpartners una manufacturing, insurance, public utility, and railroad corporations upon E'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., ing industries ligginson & Co., Kuhn-Loeb & Co., Dillon-Read & Co., Speyer & Co., J. and practice, for ligman & Co., and others as well known.

partners of these private banks have 71 directorships in the leading of directors. Ercial banks of New York City, and they hold 996 additional director

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 World 8 the largest in New York, those that are popularly designated as the

In many instances the partners of more than one private e banker's street group. 5 loans. Bot upon the board of directors of the same commercial bank. netimes ber articular significance is the tieup of the private bankers with the Chase aces forced 31 Bank, the largest commercial bank in the United States. Clarence illustrate of Dillon-Read & Co., Henry S. Bowers of Goldman-Sachs & Co., Otto

an of Kuhn-Loeb & Co., Frederick W. Allen of Lee Higginson & Co., John sed the bath of J. H. Schroder Banking Corporation, Francis F. Randolph of J. W. ition was an & Co., and Harold B. Clark of White, Weld & Co., are members of The ase National Bank board of directors.

articular significance is the tie-up of the private bankers with the Chase few mom | Bank, but when these partners sit upon the board of directors of the

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Trust Co., the New York Trust Co., and several other large comanks, they sit with the partners of other private banks who are also of the Chase National Bank. Through these directorships held by

private bankers have the interlocking control through the leading lal banks, which enables them to carry out the financial policies which most advantageous to them.

that in addition to these directorships in commercial banks, e bankers also sit upon the board of directors of 996 of the largest

public utility, insurance, and manufacturing corporations. e ramifications, the interlocking interests between the large com

he corporations of our country are examined, the picture

and clear. It is no longer difficult to understand how
hore and more dominated business policy.
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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 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 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 reports supply us with the amount and the changes which have taken place in the capital, the surplus, the net 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 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 & 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 leading commercial banks of New York City, and they hold 996 additional directorslips 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 commercial banks and the corporations of our country are examined, the picture becomes more definite and clear. It is no longer difficult to understand how bankers' influence has more and more dominated business policy.

The directors of the Bank of America National Association, the Manhatt
Trust Co., the Bankers Trust Co., the Chase National Bank, the Chemi

Bank & Trust Co., the Guaranty Trust Co., the National City Bank, and the New York Trust Co., all of New York City, hold 3,741 directorships in other banks, insurance, manufacturing, transportation, public utility, and miscellaneous corporations.

All told, the directors of these eight commercial banks hold directorships in 287 insurance, 301 other banks, 521 public utility, 585 railroad, steamship, and airplane transportation companies, 846 manufacturing, and 1,201 other corporations, some of which are directly identified with one or more of the above groups.

In this group of eight large commercial banks in New York City, the Chase National Bank heads the list, its directors holding directorships in 69 other banks, 262 miscellaneous corporations, 55 insurance, 236 manufacturing, 133 transportation, and 73 public utilities. This list of corporations and those of the other seven banks constitute a directory of our largest corporations.

Our present purpose is to supply little more than a bird's-eye view of the bankers' interlocking connections with our great business institutions and the results which logically follow. But it is well, because of the great importance of the subject, to call attention to the bankers' relationship to insurance companies.

The Chase National Bank holds 82 directorsh'ps in 55 insurance companies. In a number of these the bank has not been satisfied with one director. They hold 6 directorships in the American Surety Co. of New York, 3 in the Equitable Assurance Society, 6 in the Metropolitan Life Insurance Co., 4 in the National Surety Co., and 2 in a number of the other large insurance companies. The eight banks now under considerat on hold 287 of these insurance companies' directorships.

As has been pointed out, they hold numerous directorships in public utility, transportation, manufacturing, insurance, and other corporations. These corporations sell many of their long-term notes and their bonds through the private banker to the larger commercial banks. These banks in turn pass them on to those who purchase the securities, securing their share of profit through the transac on.

There are the best of reasons for believing that if a thorough going investigation were made, it would be found that much of the reserve in bonds held by insurance companies, has been purchased through the commercial banks whose directors sat upon the insurance companies' board of directors, and that the same would hold true for many of the trusts and foundations whose income is based largely upon securities.

The interlocking interests through boards of directors and joint-stock ownership between the commercial banks and the insurance companies, explains one of the reasons why banking influence is always brought to bear to assist insurance companies when legislation, more thoroughly safeguarding the public interests and the welfare of wage-earners, is being considered.

The public has been given but little knowledge of the methods and structure through which holding companies have manipulated public utilities, so that the price of gas and electric light and power is much higher than is justified, while the producing companies and the stockholders, instead of receiving the full measure of the profits, are forced to transmit large amounts to the holding companies, with the bankers at the apex of the holding companies' structure securing their share.

Between mergers, stock split-ups, new financing, holding and superholding management and investment companies, an amazing structure of interlocking directorships and joint stock ownerships has been built up, which even the Government's experts find it difficult to unravel.

In the field of public utility corporations, we find a typical illustration of the intentionally complicated methods adopted in the effort of the Chase Harris Forbes Corporation to secure control of the Washington Gas Light Company and other gas companies in the vicinity of Washington, D. C.

The information concerning the part played by the Chase National Bank of New York, through holding companies and interlocking directorships, was made public through the statement filed with the Public Utilities Commission of the District of Columbia by the Solicitor for the District.

In this brief, with its demand that the Chase Harris Forbes Corporation be prohibited from voting the stock of the local gas companies, a diagram was prepared indicating the complicated structures of the intervening holding companies operating between the gas producing companies and the Chase National Bank.

Between these companies and the Chase National Bank were 21 holding compan.es and 2 voting trusts. Directly connected with the Chase National Bank were the Chase Secur.ties Corporation, the Chase Harris Forbes Corporation, and through affiliations the Harris Forbes Trust Company and the Harris Trust & Savings Bank. Of the 19 directors of the Chase Securities Corporation, 12 are also directors of the Chase National Bank. These directors include Mr. A, H. Wiggin, chairman of the board of directors of the Chase National Bank. Of the 19 directors of the Chase Harris Forbes Corporation, 11 (including Mr. A. H. Wiggin) are directors of the Chase National Bank. Of the 4 directors of the Harris Forbes Trust Company, 1 is a director of the Chase National Bank. Of the 3 directors of the Harris Trust & Savings Bank, 2 are directors of the Chase National Bank.

The immediate subordinate holding companies under control of the Chase Harris Forbes Corporation are the United Founders Corporation, American Founders Corporation, Public Utilities Holding Corporation of America, and the United States and Overseas Corporation.

A director of the ('hase National Bank is a member of the board of directors of the United Founders Corporation and the American Founders Corporation. Two directors of the Chase National Bank are members of the board of directors of the Public Utilities Holding Corporation of America and the United States and Overseas Corporation.

Through a voting trust, representing members of holding corporations, the e is dirert relationship in the Central Public Service Co., the Central Public Service Corporation, the Central Gas & Electric Co., the Southern Cities Public Service Co., the Federated Utilities Incorporated, the Utility Engineering Corporation, the Safety Engineering & Management Co., the Public Service Engineering ('0.. and the Patuxent Gas Co.

At this point in the structure another voting trust intrudes its control ; after which we reach the base of the pyramid—the producing companies.

There are eight gas producing companies in the District of Columbia and vicinity, which the Chase National Bank and the Chase Harris Forbes Corporation, operating ough subsidiary holding companies, had endeavored to (oultrol. In fact, bad secured control in violation of both the letter and the spirit of the law relative to public utilities in ths District of Columbia.

It is in particular the bankers influence over business and industrial policies which is being presented at this time, and but a small cross section of the system which has been erected by the banker's is being examined. If, instead of this cross section sample of New York banks, the study of what has developed was carried to the banking centers of Boston, Pittsburgh, Cleveland, Chicago, St. Louis, San Francisco and Los Angeles, the only result would be a larger picture, but with practically no difference in its outline and its colorings.

The bankers in developing their activities have made practical use of the public press for propaganda purposes. They have endeavored to prevent legislative action which would place any limitations upon their activities. In addition to their direct influence through the directorships they hold in business corporations, and the paid publicity they have secured through the press, they have at times not hesitated to cajole or to threaten.

But a short time ago the editor of a small local newspaper in the Central Northwest, finding himself in financial difficulties went to the president of the largest local bank to discuss his business problem. He felt certain that he could carry on successfully if it were not for the fact that the large department stores in the city had been unwilling to use his advertising columns.

With an attitude of kindly interest and sympathetic understanding, the banker pointed out that the department stores' attitude was probably due to the paper's editorial policy, which had been unnecessarily critical of certain business practices on the part of bankers and manufacturers in the city. It was of course a noble thing to be a crusader, but crusading and business did not always mix. The banker felt certain that if the paper modified its editorial policy it would be possible for it to secure the advertising which was so necessary to financial Success.

The editor did not want to lose his paper, which represented a lifetime of effort. He informed the banker that while he would be unwilling to surrender his editorial policy, it was quite possible that he had carried his campaign a little too far. The banker, convinced that his words of advice had fallen upon fertile soil, made the loan. To the editor's surprise, within a week all of th large department stores placed advertisements in his paper,

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