The Washington herald., 1921-08-12
BANK COMMITTEE
MEMBERS IN HOUSE
HEAR TESTIMONY
g Comparisons
Made in Relation to
McFadden Bill.
REPORT is READ
Financial Methods Used by
European Nations Are
Brought Out.

Hearings began yesterday. on-the
MeFadden rural credit and multiple
insurance bill before the subeom-
mittes of the House Banking and
Currency Committee appointed by
Chairman McFadden last week.
The first witness to be called
was r. c. Milliken. lnonetary statist
for the rural credit committee OF
the National Society OF Pure-Bred
Livestock Associations, who showed
how this bill would wrest from
Wall Street the control Of the big
life Insurance companies by placing
such control in the hands Of their
responsible policyholders by the ap-
pIication Of the sound and well
tried principles of local self-gov-
eminent.
The witness read from the
Money Trust" hearings in 1912 to
show that at the last three annual
elections of the directors Of one OF
the big life insurance companies
the number Of votes cast by policy
holders were So. SO and Al. respec-
lively. which he characterized as a
perfect farce. in view of the fact
that the company had nearly 1.o00.-
900 policyholders, each entitled to
one vote for the directors.
Compares Foreign Firms.
He contrasted the control of our
big mutual life insurance compa-
nies with the method OF control of
such important European public
service corporations as the Bank OF
England. Bank OF France. Bank of
Belgium and the rural credit So
cieties Of those countries. institu-
tions which. he contended, were
free from government inspection or
other interference. whereas similar
institutions in this country were
cursed with all sorts of paternalism
and government inspection. Yet. he
contended there had never
been a scandal in the management
Of any Of those European institUH
tions. whereas our business was all
upset periodically over some life ir-
surance scandal He said that the
remedy did not lie in more pater-
nalism. but in the application of the
sound principles Of local selt-Eov-
ernment by responsible policy
holders.
The witness paid glowing
tribute to the craftsmanship Of
Napoleon for the charter of the
Eank of France which he created
He said that France for more than
two centuries under the ROurbon
kings had been cursed with bu-
reaucracy. all Of which was clint
mated in the Bank of Frances char
ter Napoleon. he said. placed the
control in the hands of the great
merchants of France. giving them
full authority to do a banking busi-
ness and then created bank
parliament for them to legiSlate for
themselves. He said that il was
siXty-three years later that the
French parliament applied that
philosophy TO all the credit institu-
tions of the country. thus giving
her the greatest and frGest credit
institutions in the world
Prestige OF Companies.
The witness then proceeded TO
show the financial prestige of the
life Insurance companies. calling at
teRtion to the fact that one of them
created more than s1os.0Oo.O0O or
new wealth last year. declaring
that was in excess OF the average
annual profits Of the whole Federal
Reserve system. He c,ontended that
that one insurance company could
be worth more to the rural credit
system than the Federal Reserve
system. as it's new capital acquisi-
tion was cumulative year after
year, while the profits of the Fed
eral Reserve system were turnes
into the Treasury yearly. He said
the small investors in our cities had
unbounded confidence in the insti-
tuition of life Insurance. and its
employment as an acceptance house
Of the paper of the rural credit So
ciety would inspire unbounded con-
hdence in such paper among those
investors
The witness was asked by a MEM
Der of the committee what the
prospects were for the acceptance
OF the Federal multiple insurance
charter by one of the big life in
surance companies. and he replied
that the officers of those companies
were now controlling from s5OOr-
100000 to $1,000. 100000 of policy
holders trust funds each. and that
II would be unreasonable to suppose
that they were busying themselves
about plan which would take such
control out of their hands and place
il in the hands of responsible policy
holders. as this bill would do.
But" continued the witness. "the
general agents of those companies
are always interested in the clean
corporate management of those
companies, and a scandal at the
homo ONCE ruins their business, for
their life work is tied up in re-
newal premium contracts. There
fore, show the general agents you
have a plan which will insure clean
management at the home office. and
they will force the officers to ac-
kept n"
Points to Scandals.
The witness illustrated this point
by citing facts. He called atten-
tion to the fact that the 1906 scam
dads were uncovered as a result Of
the fight of the general agents of
the Equitable to force Jimmie Hyde
to, mutualize" that company. the
cortrol of which was then by the
$4,000 of the capital stock owned
by Hyde The fight with those gen.
eral agents waged against Hyde
NOT only caused the naturalization
of that company. but forced Hyde
to- leave his native country. which
he. has never visited since. The
witness further contended that no
Institution was so absolutely de-
pendent on public confidence for
new business as was the life in
surance company. and IL Congress
should Greats a charter which