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 re to the national and State banks in the Federal reserve system, these ing some 37 per cent of all banks, these banks handli the loans and investments made by commercial reports supply us with the amount and the ch in the capital, the surplus, the net addition to hat be n to e W upa irect ck t after ies ass usines tend d it 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 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 bank also sit upon the board of directors of 996 of the largest Transportation tility, insurance, and manufacturing corporations. the Jaa' s, the interlocking interests between the large com was building up its business by making loans to manufacturing corporations.ds The bank dealt only in large loans, the minimum being $500,000. From that Federal we loaned sums in the many millions. at all "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 market in which its goods were sold and its competition. If my report walices of satisfactory and our bank decided to make the loan, the provision was attache activiti that I should be made a member of the borrowing corporation's board directors until the principal with interest had been repaid. the lar ning thei "As time passed, I became a member of the board of directors of some rivate ins or 25 corporations, and the president of one because of the many millif direct dollars which we had loaned to it. or Federal "As a banker, responsible to my partners and also to those who had placation wa their money in our bank for investment, I found myself becoming more & when more disturbed, for I faced the problem of determining how these corpout before tions were to repay the huge sums we had loaned to them. something "Their product went into the domestic and the foreign market; manyer of the them were competitors in both fields. Repaying the loans depended upommercial Ifact that it depended so largely upon the volume of wages being paid, wwhich 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 imporbankers' ac to industry and commerce." adicate their It is obvious that this banker's presence upon the manufacturing cory on some o 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, enable us once 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 wale partners o bank which, to protect its interests, had placed one of its partners upohufacturing, in corporation's board of directors. y sit. the bank on the borrowing corporation's board of directors, goes back to the 16 lea This banking practice of demanding the placing of a partner or directe Directory period when the great railway systems were being financed shortly after This list Civil War. It did not become a feature in the manufacturing industries son & Co., more recent times. It has not as yet become a universal practice, foran & Co.. large loans are made to corporations without an officer of the bank orners of the company being seated in the borrowing corporation's board of directors, banks of whether the banker sits upon the corporation's board of directors dome of the the control over credit remains the same, and the banker has, more andring, and ot of the comm group. In insisted upon having a voice in the corporation's business policy. Probably this practice, which developed so extensively after the Worlde largest in was not the result of a deliberately planned program on the banker'set It developed as a result of the banker's desire to protect his loans. on the boa did bring the banker, more and more into control of business; sometimes bicular signific this was deliberately planned, sometimes because circumstances ford Bank, the la hand. The classical story of Ginsberg, the cloak and suit man, illustrat Dillon-Read latter. of Kuhn-Loel Ginsberg walked into the bank president's office and informed the bf J. H. Schr 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 Ba would then have to take over the business to protect itself. ticular signifi True to his instinct and training, the banker thought for a few mo Bank, but wh and then said, "It is impossible for us to make the loan; we have a Trust Co.. let you have $100,000 and from the reports we have of your business webanks, they si not be justified in loaning you any more." I of the Chase Ginsberg inquired whether this was the final word, and upon being aners private b that it was, he asked: "Do you understand the cloak and suit busiial banks, whi The banker assured him that he did not, and furthermore did not inte most advanta The cloak and suit man's rejoinder was, "If you don't understand significant that 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 rtation, public Treasury Department and the Federal reserve will supply much data r the " to the national and State banks in the Federal re in the capital, the surplus, the net a als ificatio SIX-HOUR DAY-FIVE-DAY WEEK 167 dividends paid on bank stocks, and the total deposits from the period when the Federal reserve system was established. open at all times to the Federal bank inspectors. The books of these banks are But these State and national banks are but a part of our banking system. The nation was given but a brief glance into the business of the private But before the committee had carried on its investigation to a definite hile the doors of information are closed to those who would study the ors' Register of Directors, and the Directory of Directors in the city of the Directory of Directors in the city of New York for 1931-32, we partners of these private banks have 71 directorships in the leading st of the commercial banks in which the private bankers sit as directors ular significance is the tie-up of the private bankers with the Chase ificant that in addition to these directorships in commercial banks, tions, the interlocking interests between the large com- of America National Association, the Manhattan al he he ent ker er's rac a se mix. ould ncial ne end igu up of tl was building up its business by making loans to manufacturing corporations.ds The bank dealt only in large loans, the minimum being $500,000. From that we loaned sums in the many millions. Federa at all at these "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 of market in which its goods were sold and its competition. If my report walices of satisfactory and our bank decided to make the loan, the provision was attachee activi that I should be made a member of the borrowing corporation's board the la directors until the principal with interest had been repaid. rning the "As time passed, I became a member of the board of directors of some rivate ins or 25 corporations, and the president of one because of the many milli of direct dollars which we had loaned to it. or Federal "As a banker, responsible to my partners and also to those who had plac nation w 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 corpout before something tions were to repay the huge sums we had loaned to them. "Their product went into the domestic and the foreign market; manyer 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, 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 impor bankers' ac to industry and commerce." adicate thei It is obvious that this banker's presence upon the manufacturing cory on some their employing policy, for banking methods and ethics are such that hak, enable us tion's board of directors had a powerful influence upon their business Register of once borrowed from a bank the corporation was not in a position to ards of dire other banks for additional loans. Its source of credit for the future wae partners o bank which, to protect its interests, had placed one of its partners uponfacturing, i corporation's board of directors. sit. This banking practice of demanding the placing of a partner or directe 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 lis Civil War. It did not become a feature in the manufacturing industriesson & Co.. It has not as yet become a universal practice, for an & Co.. an large loans are made to corporations without an officer of the bank or thers of th company being seated in the borrowing corporation's board of directors. banks of whether the banker sits upon the corporation's board of directors oome of the the control over credit remains the same, and the banker has, more and aring, and of insisted upon having a voice in the corporation's business policy. more recent times. of the comm Probably this practice, which developed so extensively after the Worlde largest i was not the result of a deliberately planned program on the banker'set group. I It developed as a result of the banker's desire to protect his loans. on the bo did bring the banker, more and more into control of business; sometimes becular signif this was deliberately planned, sometimes because circumstances force Bank, the 1 hand. The classical story of Ginsberg, the cloak and suit man, illustrat Dillon-Read latter. of Kuhn-Lo Ginsberg walked into the bank president's office and informed the of J. H. Sch that he must have a loan of $50,000, because his business condition was & 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 mol Bank, but w and then said, "It is impossible for us to make the loan; we have a 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.' 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 busirial banks, wh The banker assured him that he did not, and furthermore did not intee most advan The cloak and suit man's rejoinder was, "If you don't understand itignificant tha 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, public Treasury Department and the Federal reserve will supply much data re the to the national and State banks in the Federal reserve system, these con ing some 37 per cent of all banks, these banks handling about 66 inks. 1 a the loans and investments made by comme reports supply us with the amount and the in the capital, the surplus, the net additio |