The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1932-09-26
UTILITY POLICY
Of ROOSEVELT
COMMENDED
BY LEWIS HANEY
Professor of Economic, New
York University

PROFESSOR OF ECOuOHllCS NC"
York University
Mr.. Roosevelt's talk on the util-
lty question had more fire and
sincerity than any he has yet
made. 1t also showed a more de-
tailed knowledge of the subject
and more definite proposals for
reform.
AS I see it, the two outstand-
ing points in his thought are
"a his insistence that the fl
nances of the utility companies
be subjected to more drastic reg
ulation, and 90 that public own
ership be given more serious con-
Sideration as a means OF entorc-
ing fair service and rates.
Holding Firm Evils
Needless to say, he gives espe-
cial attention to the evils OF the
great utility holding companies,
such as the "Insull monstrosity"
as he rightly calls it.
In my opinion, the Roosevelt
ideas concerning utilities are not
as disturbing" as some had
feared. But they are not on the
whole stated with moderation and
due qualification. Most of what
he says is in line with the
thought of careful students OF
the utility problem.
Mr.. Roosevelt's attitude toward
the Government ownership queS-
ton is as follows: First, he be-
lieves that "aS a broad general
rule the development of utilities
should remain with certain ex-
ceptions a function for private
initiative and private capital
Exceptions are Listed
Second, he believes that the ex-
ceptions are that (a) "the natural
hydroelectric power resources Of
the United States or the several
States" shall remain forever in
their possession" and that CD
the voters in any community
should hold the threat of owner
ship and operation over the util-
ity companies as a means of Sc
curing fair service and rates,
The whole problem is empha-
sized by the current news concern
ing utility holding companies"
We learn that further legal action
is threatened against the insults
because of disclosures of their
financial malpractices.
Apparently they figure as
profits" the fictitious gains on
sales of the stock of one subSid-
larry to another subsidiary, and
treated intercompany stock divi-
dendS as income.
Assets Written Up
We also learn how Associated
Gas and Electric wrote up" the
assets of companies it bought,
made trading profits by swapping
stocks among subsidiaries, and
MIXED subsidiaries by service
charges" So Government investi-
gators indicate.
So Mr.. Roosevelt advocates
strong program of publicity and
regulation.
l. He urges a publicity that
would include capitalization in
detail, assets and liabilities, and
earnings. It would include the
ownership of securities, and the
interests of the officers of utility
companies. It would include all
intercompany contracts (Which
would cover the purchase of ma
terialS and supplies, and the fur
nishing of management and fl
nancial services).
The holding companies are
especially in his mind in all the
foregoing.
Prudent Investment
2. He favors strong regulation,
particularly of utility financing
and securities. He would place
the big utility holding companies
under the supervision of the Fed
eral Power ComiSsion, as would
most students of the existing sit
uation. The issuance of utility
company securities should be reg
ulated-somewhat as railway is
sues now are, no doubt.
In this connection Roosevelt
stands for the so-called prudent
investment" basis of valuation
and capitalization, and he de-
mands legislation to make that
basis effective. The courts have
leaned toward a cost-of-reproduc-
ton basis. This may differ
widely from the original invest
ment honestly and wisely put
into a company, which is sound
basis favored by Mr.. Roosevelt
and many others.
I can't see that honest and eff
ficient utility arrangements have
anything to fear from this pro-
gram.