Evening star., 1911-05-27
REVEALED BY GATES
Story of the Formation of
Steel Corporation.
TELLS HOUSE COMMITTEE
Portrays All-Night Meeting in ]. P.
Morgan's House.
VALUABLE OPTION FORFEITED
Sale of Tennessee Coal and Iron
Company In 1907
Described

The formation of the United States
Steel Corporation was described interest
ingly by John w. Gates, who appeared
as witness before the special House
committee investigating the steel trust
today. In his testimony he declared that
the accumulation by the Trust Company
great block OF the collateral of the Ten
nessee Coal and Iron Company made
possible the acquisition of that company
by the United States Steel Corporation.
Mr.. Gates said he regarded the transac-
ton as a forced sale
The crux of his testimony was that
during the panic of 1907 a committee of
the New York clearing house found In
the assets of the Trust Company of
America an undue amount of stock of the
Tennessee Coal and Iron Company, held
as collateral, and this discovery led to the
deal by which Morgan took over the
Tennessee Coal and Iron stock. exchang-
ing therefor second sinking fund bonds
Of the United States Steel Company.
Not dollar changed hands," said Mr.
Gates 1T was only shifting of securi-
ties. / regarded 1t as forced sale, and
in my opinion the owners of the Tennes-
see Coal and Iron property got the worst
Of the bargain"
There was very little Of the dramatic In
the opening hour of the committees ses-
sion this morning. but it was rather Z
matter-of-fact proceeding, the disclosure
OF q vast business transaction which
could be summed up in a nutshell. Mr..
Gates was accompanied by counsel, ant
from time to time during the recital was
prompted In his replies, qualifying them
by assertion of his personal opinion.
At no time did he give the appearance
Of trying to conceal anything from the
committee, but was entirely frank
Neither did he seem to have any ak to
grind or old scores to settle with any
one. He talked in conversational tone
of voice. perfectly at ease. and extended
to the committee the same respectful
treatment he was accorded by the investi-
gators.
A great deal Of the testimony given
was but mere churning Of water that
has already gone over the wheel. Some
Of 1t was set forth in former President
Rooseyelt's communications, in official
documents. and in statements en-
bodied in various Teports to Congress
upon this transaction.
Cost Of Birmingham Metal.
One very interesting feature OF his
testimony. however. was his fiat state
ment that iron and steel can be pro-
duced cheaper in the Birmingham dis
trtct; where the Tennessee Coal and Iron
Company operates, than anywhere else In
this country: that steel rails can be pro-
duced cheaper and better there than
anywhere else.
He also averred that in his opinion
the real property, iron ore, limestone
and coal. owned by the company which
was absorbed was more valuable than
the property of the Steel Trust itself.
Mr.. Gates began by describing the or
ganization of the T. c. 4 l Co, its cap
italization, etc. He said there were ten
or fifteen men in the syndicate and the
affairs were in the hands Of Messrs
Schley and Guthrie, and after Guthrie's
death. L. c. Hanna, brother Of Mark A.
Hanna, succeeded him.
These men were authorized to dispose
OF the stock of the syndicate at WILL II
sold at profit. but not If sold at a loss
Meeting in Morgan's House.
Mr.. Gates told how he was returninf
from abroad In November. 1907. and
picking up a newspaper on shipboard
saw that the T. c. & I. was being sold
to the steel trust. When he got ashore
he found q note from schley & Co. ask
ing him to come to their office
He hurried over to the Office about II
o'clock on the day Of November 6. 1907,
and there was told that meeting was in
progress at Mr.. Morgan's residence; that
Judge Gary and Mr.. Frick. for the steel
| trust, and Mr. schley and Mr. Hanna for
the T. C. and l.. were talking over terms
for the disposal Of the Tennessee corpora
ton to the steel trust.
The following morning he met the
others and was told the terms. The
h.nlI % % olx
| 119 and a fraction per cent Of the second
sinking fund bonds of the steel trust for
their stock. On the market value of those
bonds at that time, that was equivalent
| to 500 share for the Tennessee stock.
| A year previous. Mr.. Gates and his col
| leagues had refused an offer from Morgan
| Of $3.50 a share for their stock. but. In
| the circumstances they were compelled to
| accept the terms thus offered
Stood Out for Minority.
| Mr.. Gates said that Judge Gary ad.
! mitted the plan was to take over only
the majority portion OF the stock and
leave the minority out I'VE don't care
anything about the minority" Judge Gary
had said. but Mr.. Gates insisted that tn,
minority should have the same treatmen
given the majority. and it was done.
Mr.. Gates expressed the opinion tina
at the time this transfer was made th'
value Of the Tennessee stock was from
$12O to $50 a share. The steel bonds
which the stockholders took in payment
for their stock were selling at from so tc
IS. and have since sold up to 1O8
| Those bonds were simply promise &c
pay" said MIR. Gates. backed by the
stock OF the steel company. while the
stock OF the T. c. and ]. represented ar
equity in the property over and above
the bonded Indebtedness"
| Questioned as to the value of the prop
erty OF the T. c. and L.. Mr.. Gates said
it could not be set down in exact figures
| but he held ii to be more valuable thar
the steel trusts property. For instance
! his company assumed that there were
300. 600 900 tons OF iron ore in the prop
erty, but II might run up to roc. 100000.
Advantages of Birmingham.
TN the Birmingham district" said Mr.
Gates. 1T is possible TO make a ton O.
pig iron cheaper than anywhere els,
In the world
| oa{l hat fhera Of y,ye