Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-08-13
HOLDING COMPANY
IDEA IS DEFENDED
Martin insult Tells Institute
Government Regulation
Is Harmful.
BH THOMAS r. HENRY,
STAFF Correspondent of The Star.


defended as a public benefactor which
| should largely be exempted from Gov
eminent regulation, by Martin j. insult
of Chicago. president of the Middle
West Utilities Co., before the Institute
of Public Affairs here last night.
insult declared that the picture of the
holding company as an Unfortunately
greedy business ogre gobbling up Local
interests is due to miSconception OF
its purposes and methods. Without its
intervention in the power field, he in
sisted, American industry would re-
main scattered and inefficient
The agitation for Government regu-
lation to protect the interests of power
consumers and bondholders, he said,
should be confined to the actual opera
ting companies, since the position OF
holding companies is that of common
stockholders who have nothing to do
with the actual operation of the plants.
Risks Make Large Capital Necessary.
The risks that commonly attend in
vestment in the common stock of such
companies. he said, make 1t necessary
that it be held oy groups with sufficient
capital and varied interests to enable
them to assume such risks. In no other
way, he indicated. can the national
power supply be adequately capitalized.
Let us assume he said. IAN operat-
ing electric power company which has
capitalization of S20,000.000. OF this
amount. $10.000,000 consists of bonds,
S5.000.000 of preferred stocks and S.
900. 900 of common stock. This COM
pany is allowed by the State commits
sion regulating 1t to earn a reasonable
return on the $50 600. 900 invested. After
operating expenses and to- IS are paid
the amount due the bondholders for the
use of their money must be paid. Next
come the preferred stockholders. The
common stockholders get what is left.
IF the service is extended into new
territories or rates are reduced, in the
expectation that consumption will in
crease. the investment of the bond
holders and preferred stockholders is
this happens or not. 1t is the common
stakeholder who risks the possibility of
less.
1T is the industrys job to meet the
demand of consumers at present prices,
to increase the uses of electricity, to
extend it to more consumers, and to
make it constantly less expensive. The
determining factor is the attitude of the
owners of the common stocks. This
determines whether the operating COM
pany shall pursue a progressive course
progress of the industry is due largely
to the ownership of the common stock
bv organizations trained in the utility
business which can take risks because
of their diversified investments If the
common stock is owned by individual
investors, who generally own the bonds
and preferred stocks, policy of caution
would be applied and entensicn of serv-
ice and reduction of rates retarded. The
owners of common stocks take the re-
sponsibility involved in progressivoness.
Small Town Plant Passing.
ITO the credit of the holding COM
panies is the passing of the small town
plant and its replacement by the pres
ent operating units furnishing the same
class of electric service to town. ham,
let and countryside as that given in
metropolitan areas, and, considering the
difference in density of population
served, at comparable rates. This con-
tribution alone has had an extraordi-
nary effect upon the economic structure
of the Nation"
insult said that the electric industry
in America had started with innumer-
able small plants, mostly owned by local
investors, which were engaged almost
entirely in lighting communities. Gen.
to undertake any risky expansions
Some OF them ran only from dusk TO
dawn, and even then intermittently
Each made its own power, with conse-
Quent high overhead. Then, he said,
began the consolidation of these plants,
which required much financing. Be-
cause of the risks the common stock
was practically unstable to the pub
lie and the owners had to supply the
money themselves. When their re-
sources were exhausted they turned TO
the holding company" plan by which
to place common stock investment on
a secure basis.
Since the holding company Is not
directly concerned with anything af-
fecting the public interest, he said, 1t is
doubtful whether it can legally be sub
jected to Government regulation.
Canal Zone Not "Protectorate."
1.-THE Panama Canal Zone is still the
territory of the Republic of Panama, -
declared Dr. r. j. Alfaro Minister from
Panama to the United States, before
the institute today.
DR.. Alfaro said that diplomatic nego-
tiations are now under way for a treaty
which will make clear the positions OF
both nations on this delicate question
Of international relationships. The in
situation that it is s'protectorate'
of the United States, he said, is very
diStasteful to his country.
In the original hastily concluded
agreement following the revolt of Pan.
anna from Colombia, which made pos.
Sible the construction of the canal
Dr. Alfaro pointed out, the new re-
public ceded TO the United States al
rights it would possess "if it we're tn
sovereign" The very wording of thu
treaty. ne insisted, conveys clearly thu
idea that the United States was not Il
become actually the sovereign" The
treaty really provides. he said. onl!
for an American right of way across
Panama territory and by no means car
be construed as setting up foreign
colony in the middle of the republic
Assumed Rights Are Irritating.
Some of the rights assumed undo
the treaty by American officials, h
said. have been irritating to Panama
which at first thought that 1t woul'
prosper from the great sums spen
in the construction and MAINTENANCE
of the canal But. he said, mos
of these millions have been spent II
| the United States" Thus, it was ex
pected that the American commits
saries would supply the necessities o
| lie 10 NDTkIIlpn anu va
| Panama did not contemplate the settinl
/ up of great advertising department
stores dealing in such things as Orr
entail rugs and diamonds. Panam
| merchants expected to profit by tn
marine trade. supposing that the Unite'
| States would confine itself to sellin
| coal and fuel oil Actually, he said, /
/ was selling everything ship coul'
want and has established great refrig
! Grating plants. storehouses and can
/ ming factories against which 1t is use
I less for Panama business men u
/ compete.
Another source of irritation. DR.. Altar
said. has been the application of tn
i L.. 4 a. inl