Perrysburg journal. (Perrysburg, Wood Co., O. [Ohio]) 186?-1965, 1911-07-07
FINDS MILLIONS OF
WATERIN |TSST
COMMISSIONER SMITHS REPORT
ON INVESTIGATION OF STEEL
TRUST is MADE PUBLIC.
HEAVY COMMISSIONS PAID PROMOTERS
Document Submitted to Taft Goes.
Into Minute Detail Concerning His
tory, capitalization and Larger
Operations of Corporation.


Washington, d. C.-Restriction OF
competition is declared the prime OBJ
ject of the organizers of the billion
dollar steel trust. This declaration is
made to the president of the United
States in the most remarkable report
on a world.embracing industry ever
submitted to an American chief ex-
ecutive That there is S72O, 100000 in
watered stock in the steel trust-or
that there was that much when the
corporation was formed-is the second
of many astonishing declarations. That
the trust controls rs per cent of the
lake ores and on this control bases its
monopoly, is the third. The report to
the president, just made public, was
submitted by Herbert Knox Smith,
commissioner of corporations. A sum-
mary of this report, which is merely
the first part of detailed history and
analysis of the steel trust, embraces
$4,000 words. There will be second
and third parts equally as long.
Commissioners Findings.
After reciting that when organized the
sOiStVNVsVSN
ferred stock sos 100000 of common stock,
5000 900. 600 of corporation bonds and $751;
100000 of underlying and miscellaneous
oblisations-a total in excess of sl,4O2,-
000,000-the report says:
Speaking broadly, such capitalization
amounted to the claim that there was a
value in this concern which would justify
a fair business return on this capitaliza
tion. The bureau finds. on the contrary,
m In Nyhf oh mi
Zation was efrected) the face market
value of its tangible property was about
S700ooO.00o. slightly less than one half
of its capitalization. The other half the
excess of about s70O.0Oo,0o0 is thus sep
arated and stands out embodying the es-
sential public questions raised by the
bureau analysis of its investment. In
so far as that excess represented value
in 1901, II was value due either to in
creased earning power from elimination
OF competition, concentrated ownership
OF the basic natural resources, iron ore
and coal, or in some degree, integraton
efficiency
Imitation of Capitalization.
In timely consonance with the govern
ments action few days ago in startling
criminal prosecution OF the wire pool,
the report says: THE consolidation of
wire interests is conspicuous ilustra-
tion of the great imitation of capitaiza-
tion thus brought about. In the organ
ization of the American Steel & Wire
Co., of Illinois "a subsidiary of the trusD
in March, 1898, each 500 of the stock
of the Consolidated Steel & Wire. Co.,
one of the constituent concerns and itself
a consolida tion of seven plants received
$175 of preferred stock and $175 in COM
mon stock of the new company, or $3.50
of new securities for 500 of old. IN
doubtedly the stock of the consolidated
steel and wire company was worth con-
siderably more than par from the stand
point of earnings. A few months later
each 500 of the preferred stock of the
American Steel G. Wire Co. of Illinois
received 500 in preferred stock and $50
in common stock of the American Steel
& Wire Co. of New Jersey, while each
500 of the Illinois company common
stock received 1920 in common stock of
the new concern. Tins each 500 stock
of the old consolidated company became
$3.50 In the stock of the New Jersey con-
Germ"
Big Commissions Paid Promoters.
The report touches upon the heavy
commissions paid to promoters as n fac
tor In the general imitation which 1t says
marked the organization of the steel
trust. In the case of the American Tin
plate Co.. one of the largest subsidiaries,
1t is found that 100000 of common
stock went to the organizers. and in the
case of the National Steel Co. and the
American Steel Hoop Co. at least $5,-
VVu,vuu lie ana unuerWrlterS
of the American Steel & Wire Co. re-
ceived Si1 100000 of the common stock
while the bankers and promoters who
brought about the merger of the Ma
tional Tube Co. got $50. .O00. 900 of its COM
mon stock. Proportionately large COM
missions In stock were paid to the pro-
moters of the merger of federal steel
who received S5,6S0, 900 in preferred and
$500, 600 common. This concern was di-
rec'ly brought into the trust by Ell. Gary
Commissioner Smith finds that from
financial point of view there were four
important groups of financiers directly
concerned I'm the organization of the trust
Morgan. Moore. Carnegie and Rookie
feller. The Morgan group. he says. which
Included the Federal Steel, National Tube
and American Bridge companies, were
extensively committed in other lines of
business. especially in railroad hnancier-
ing.
Stock Market Profits.
THE Moore concerns" the commits
sioner adds, were the most heavily over
capitalized and suffered from a dstinc-
lively speculative backing" He declares
that the Carnegie interests were appa-
rently In the best position Of any of these
groups to meet price war. The Rookie
feller interest, according TO the report
were entirely concerned with the pro-
duction and transportation of iron ore
an.. their financial resources were abun-
dant for any emergency.
The commissioner adds: "It is evil
dent, therefore, that both from the point
of view OF the iron and steel industry
and that of the stock market there was
great inducement to avert the threat
ened outbreak of violent competition be-
tween these rival interests. A steel war
might have meant the sudden end of the
extraordinary period of speculative activ-
ity and profit, On the other hand an
averting Of this war and the coalition of