Wheeling register. [volume] (Wheeling, W. Va.) 1878-1935, 1901-09-09

Special to the Register.
WASHINGTON, D. c., Sept. S.-The
Industrial Commission, in a review Of
testimony on trusts, made public to-
day considers the question of over
capitalization with respect to the Uni
ted States Steel Corporation. The fig
ures given show that the greater part
Of the enormous capitalization of this
concern is based upon good will, or ex-
pectation of earnings, and upon its
ownership Of unmined coal and iron
ores. Mr.. Schwab in his testimony laid
! great stress upon this last as a justi-
ieatiOn Of the immense capitalization
OF his corporation. Commenting on
this the Industrial Commission 0b-
serves:
1T should be noted that the addition
of large capitalization representing val
ues OF unmined ore is not usual, al
though it has doubtless a certain basis
Of jurisdiction. If we grant that a ma
terially added value comes from the
fact that the supply is limited and that
the United States Steel Corporation is
to get the benefit of this limited supply
by virtue of the fact that II own some
so per cent of the Lake Superior ore
in sight, this is a capitalization which
may possibly be entirely proper, but
which is clearly a capitalization of ma
tural monopoly
According to circular letters issued
by J. p. Morgan & Co. the total Capt
talization of the United States Steel
Corporation is s74, 1873, 035 more than
the total capitalization Of the separate
companies of which it was at first
formed. not counting the Carnegie
company nor the companies taken in
since organization. Evidence given by
officers Of most OF the constituent
companies as to their actual cash value
in 1899 showed that this cash value at
a liberal estimate was $29S $4,000,
leaving S15S, SEQ. 900 - good will. Add
ing to this last sum the increase in
capitalization above mentioned and the
good will is increased to 1922, 3,035.
provided there had been no increase
in the tangible assets. Continuing the
Commissions review says:
"A falrer basis of comparison be-
tween the separate COMPANIES would
be that made in substance by the Uni
ted States Steel Corporation itself in
purchasing the shares of the different
companies. The shares of the Federal
Steel Company were all of them taken
at somewhat lower rates than those of
the National Steel Company or the
American rim Plate Company. In the
case of those two companies all Of the
common stock at any rate. and probab-
ly considerably more was to DE con-
sidered as issued for good wilt. e.,
expectation of earnings. On that basis,
as has often been assumed without al
lowances for increase in values during
the last two years taking all the COM
mon stock of all the companies pur-
chased by the United States Steel
Corporation, with the exception of the
Carnegie Company and the Lake Su-
perior Consolidated Mines, neither Of
which had n preferred stock, the
good will in the constituent compa-
MES amounts to s270, 1886 100. If we
may also assume that the added com
mon stock is to be considered as good
will, and add this to the sum mention
ed above, it results that the good will
Of the consolidated companies amounts
to 1902, 118, 1858, or, if one were even to
include the added preferred also, it
would amount to $3.50. 918,111.
st is, OF course, true that there are
increased values of the properties, be-
cause they have doubtless added ma
terially to their pants and cash on
hand. and there has doubtless been also
some added value given to the plants
by the prosperous conditions of the
last two years. How much is to be so
%reckoned, how much is to be credited
to good will or actual earning capaci-
ty, of course is a matter for individual
judgment; but, according to officers Of
the Steel Corporation Itself, not less
than SITE, 600, 900 have been added in
actual values since the testimony of
the officers of the different plants re-
ferred to was given. 1t has been tes-
titled also that in certain cases good
will alone in its narrower sense is Of
more value than all the tangible assets
of ar establishment.
There is no evidence before the
commission and there has been no pub
: lished statement showing the issue OF
stocks and bonds paid for the Carne-
gle properties. In a circular letter is
sued by J. P. Morgan & Co., March 2,
1901, it was stated that the bonds of
the United States Steel Corporation are
to be used only to acquire bonds and
so per cent of the stock of the Carne-
! SIC COMPANY. II Aao oNCh iLOquOlASbJ
stated, though not published on au-
thority, that the bonds were exchanged
at par. and that Mr.. Carnegie received
81, 500 in bonds for each 81, 900 Of his
Carnegie stock. At those rates he
would have received for
Bonds of u. S.
Steel Corporation.
SlbO.O0O,oW DondS .................. sloo,Ovo,oou
SOC, 900 900 stock at $50 in bonds 144, 0o0,o 900
/ 1904, 900. 900
CAS- this sun agrees exactly with
the amount of bonds issued, it seems
a reasonable Interpretation.
1T is generally supposed that most
OF the remainder of the Carnegie stock
was taken at $50 preferred stock with
an equal bonus of common, though
some little was bought for $1,000 or
81 800 cash. Assuming all taken at
the first rate, and that $3.50 0 900 cash
was raised with s25, 900 900 par of pre-
ferred with equal bonus of common, a
generally accepted inference, the re-
malnder of the Carnegie holdings and
the lash would have cost as follows:
New Stocks.
Preferred. Common.
For s25, 000.o 600 cash.. s25. OoO. Go0 s25, 900. 600
For s64, 5000, 900 Carne-