The free lance. (Fredericksburg, Va.) 1885-1926, 1911-07-04
.AITSSTEEL TRUST.
Report Says It Was Formed
to Kill Competition.
STOCK IS WELL WATfRfD
Smith Says All Common Stock and
One.lfth Of the Preferred is
Unprotected by Tangible
Assets.

Washington, July 1.-The long ex'
pected and the much discussed report
from the bureau Of corporations on the
United States Steel corporation, re-
Gently submitted to President Taft,
was made public here.
Signed by Herbert Knox Smith, the
commissioner of corporations. the re-
port makes no recommendations ana
is almost wholly narrative In form.
Mr. smith declares that restrictions
oil competition was a prime object OF
the organizers of the steel corporation
on SO called trust"
Commissioner Smith finds after an
investigation that has extended over
several years that the steel corpora
ton when II was organized In 1901
was heavily overcapitalized"
The entire issue OF s5OS.0OO,OOO OF
the common stock. the commissioner
declares. had no physical property
back OF it. and from one-ffth to two
afths of the preferred stock was like
wise unprotected by tangible assets.
Much Watered Stock.
Even granting" says the commits
,loner. that there may have been a
considerable value in the intangible
considerations. it is reasonably clear
that at least the entire issue of com
mon stock. except in so far as what
may be termed merger value may be
considered, represented nothing but
water.
The commissioner finds that in the
years that have elapsed since the
steel corporation came into existence
considerable OF the water has been
squeezed out through additional in
yo.tments, made partly from earn
ngs. The excess Of capitalization over
investment at the end OF last year. as
figured by Commissioner Smith, was
S2Sl .05l222. as compared with SI2O,'
ICI6.Sl7 Of water" In 1901.
The report Is unsparing in It's con-
demnation Of the commission paid TO
the syndicate which underworld the
I United States Steel corporation. This
syndicate. lie charges. got S62,j0O. 600,
Of which one-hfth. Sl2.5OO.0O0. went to
j. p. Morgan & Co. as syndicate man
ayers
The commissioner makes the start
/ ling statement that at least Sl5O,OOO.-
900 Of Tie steel corporations stock.
/ including sl0.OOO,O00 of the preferred
stock IN 1901 went directly or indi-
rectly for promotion or underwriting
services. The enormous amount In
dudes. OF course. the old commissions
allowed promoters OF earlier combina-
lions which were finally embraced
within the United States Steel cor
poai'on
During the ten years OF it's opera
ton. the report says. the steel trust
has ,aid average annual profits Of IL
Der cent on the money invested.
Ore Control Large.
The bureau Of corporations report
CLEARLY indicates that II there Is trou-
bic ahead for United States Steel be-
cause Of the Sherman antitrust law
complications. it is likely 10 be on the
score Of the corporations control OF
ore deposits and transportation facili-
ties leading from the ore fields.
The commissioner charges that the
steel corporation controls Is per cent
Of the lake ores" on which the pres
ent steel Industry OF the country IS
based. and that this advantage Is ma
.elially enhanced by the corporations
grip upon the railroad situation. He
lo1ks askance at the Great Northern
ore lease, apparently viewing 1t as a
move to prevent Independent operators
from reaching this supply.
As regards the production OF steel,
the commissioner finds that the rela-
tive proportion OF the business con-
iroIled by the trust has been grad
ually diminishing since its organiza-
ton. The corporation. according to the
governments figures. now controls
only a little more than 50 per cent OF
the crude and finished steel produc-