Martinsburg herald. [volume] (Martinsburg, W. Va.) 1881-1920, 1905-09-23
ASKS ABOUT MUTUAL
Treasurer Cromwell Drawn
Out by Inquisitor Hughes.
WHY MILLIONS DRAW But 3 PER CENT
Tells Armstrong Investigating Com.
mittee That Big Insurance Conn
pany Cannot BE Retailer
of small Loans.

NEW YORK, Sept. 15,-Inquiry oil
the special legislative committee on In
suranee in aldermanc chambers was
confined to a further investigation into
the affairs Of the Mutual Life Insur
ance company, Chief Inquisitor Hughes
having called at the outset Frederick
Cromwell, the treasurer of tlsat COM
pany, who had already given consider
able testimony. Mr.. Cromwell was
followed by James y. Jarvie of Ar
buckle Bros, by Charles r. Hender.
son of Henderson Bros, and also by
George F. Baker, president of the First
National bank, because all three of
those men We're membeds of the
finance committee of the Mutual Life
Insurance company.
Mr.. Hughes spent three and halt
hours In trying to ascertain why 1t
was that the Mutual Life when it
bought large blocks of railroad securi-
ties did not go direct to the railroads
instead of having to join in with some
syndicate, and he also was apparently
not able to understand why the Mutual
Life left many millions on deposit with
the National Bank of Commerce draw
ing only . per cent interest when
money on call was frequently as high
as 8 and 4 per cent.
Treasurer Cromwell and the three
other members of the Mutuars finance
committee explained to the investiga-
tors that the insurance company could
not go direct to the railroad companies
for its securities because when a COM
pany issued big amount of bonds 1t
wanted to wholesale them through
some concern which would undertake
to dispose of the entire lot. The In
surance company, he said, could not
afford to take an entire issue, and the
unless the underwriting concern would
take the entire issue.
Other witnesses showed that unless
the issue of securities was to be very
small the insurance company could not
take the entire lot. 1t was even
shown that once, when the Mutual
wanted to go direct to the Illinois
Central road for its securities, Presi-
dent Stuyvesant Fish told the insur-
ance men plainly that the railroad
could not sell to the insurance COM
pany direct because the railroad COM
panies always needed the assistance
of the bankers to float big loans. 1t
was the testimony of all the members
of the finance committee that the syn
dictate method of buying securities was
not only the most profitable, but the
only practical way.
Each member of the finance commit
tee said that he had never been in a
syndicate which had sold securities to
the Mutual, but that they had been in
syndicates of which the Mutual was
one Of the participants. 1t was ex-
planned that the reason why the Mu-
tual had to deposit many millions at 2
per cent was that it hadn't the ma
chlnery for lending money at retail.
The finance committeeman testified
that the insurance company did not
have the machinery to put out lot of
small loans on mortgages from Seattle
to Atlanta, but that the trust company
was in position to make speciality
of that kind of business.
Mr. Cromwell testified that the rea-
son why the Mutual kept an average
of 100000 on deposit with the Ma
tional Bank of Commerce from Jan. 8,
1905, to June 6, 1905, was merely that
1t was necessary for the insurance
company to store up big sums in some
bank to offset large syndicate pay
ments and also that even when no
large payments were to be met and
even when call money was 3 and 4
per cent it was more profitable in the
long run to let the bank handle a
lump sum of many millions, for which
it paid the Mutual per cent fiat, than
it would be for the insurance com
pany to try to peddle out the millions
in many small call loans.
Mr.. Cromwell denied emphatically
that it was because the insurance com
pany controlled the bank that it kept
on deposit in the bank unnecessarily
large sums merely for the purpose of
letting the bank make big profit by
getting a lot of insurance money much
cheaper than the market rate.