The Marion daily mirror. (Marion, Ohio) 1892-1912, 1911-07-01
REPORTS STEEL
STOCK WATERED
Smith Finds Excuse For
Trusts Existence.
TO PREVENT COMPETITION


Exhaustive Research, Announces
That Chance For Huge Promoters
Profit Is Another Reason For Cor
poration's organlzation--Entlr Is
sue Of Common Stock Not Backed
by Dollar Of Tangible Property.
Washington. July 1.-Herbert Knox
Smith, commissioner Of corporations.
made public his lonR-heralded report
on the United States steel corpora
tion. In It he sweeps aside the rea.
sons advanced by officers of the cor.
poration for its creation AMI holds
that it was called into being primar-
lily for the purpose of restricting or
preventing competition.
The bureau of corporations fails.
however. openly TO characterize the
combine as a monopoly, as it did the
tobacco trust aud the Standard Oil
company. Obviously this is in the
corporations favor so far as threat
ening proceedings under the Sherman
antitrust law are concerned. The re-
port charges that the opportunity for
reaping huge promoters rr1dt was
another consideration that led to the
launching Of this giant corporation.
Commissioner Smith finds otter an
investigation that has extended over
several years that the steel corpora
tion. when u was organized in 1901.
was heavily overcapitaliZed"
The entire issue OF S508 900 900 Of
the common stock. the commits .ssloner
declares, had no physical property
back OF it, and from one-dfth TO two
lifths Of preferred stock was likewise
unprotected by tangible assets.
Even granting, says the commits
sioner that there may have been a
considerable value IN TIE intangible
considerations, II is reasonably clear
that at least the entire issue Of com
mon stock. except insofar as what
may be termed merger value may be
considered, represented nothing but
water"
Water, Water, Everywhere.
The commissioner finds that In the
years that have elapsed since the
steel corporation came into existence
considerable Of the water" has been
squeezed through additional invest
ments made partly from earnings.
The excess of capitalization never in.
vested at the end of the last year, as
figured by Commissioner Smith. was
$2Sl .222, as compared with s72O.
S4G,Sl7 of water" in 1901
The report is unsparing in It's con-
demnation Of the commission paid TO
the syndicate which underworld Unit
ed States Steel This syndicate. he
charges. got SG2 100000, OF which
one-iifth, Sl2,50000O, went to ]. p.
Morgan and syndicate managers. The
! commissioner makes the startling
statement that at least $3.50. 600 900
of the steel corporations stock, in
cluding S4O,0O0,O00 of the preferred
stock, in 1901 went directly or indi-
rectly for promotion or underwriting
| services. The enormous amount in
| cludes of course the old commission
| allowed promoters of earlier combi-
nations which were finally embraced
| WllllH Nht Iulltu DldltN 0iftl tOIpO-
ration. The bureau Of corporations
report clearly indicates that II there
is trouble ahead for United States
Steel because of the Sherman anti.
trust law complications. II Is likely
to be on the score of the corpora
tion's control Of ore deposits and in
the transportation facilities 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
materially enhanced by the corpora
tion's grip upon the railroad situa-
tion. lie looks askance at the Great
Northern ore lease, apparently view
ing II as n move TO prevent indepen-
dent operators from reaching this
supply. As regards the production Of
steel, the commissioner finds that the
| relative proportion Of the business
controlled by the trust has been
gradually diminishing since Us organ.
| ization. The corporation, according
to his figures, controls a little more
than 80 per cent OF the crude and fin
ished steel production as against 60
Ter cent in 1901.