Evening star., 1932-10-04
Holding Company Regulation.

? Holding Company Regulation.
It is Of course, small comfort TO the
holders Of some two billion dollars
worth Of practically worthless insult
securities to believe that they may have
contributed, through their losses, to q
delayed national reform in regulating
the holding company, one of the most
efdcient devices ever perfected for
mulcting the innocent public. For
these security holders would prefer that
the reform took place without such
heavy personal cost to themselves.
Their horse has gone, and it is ironical
now to witness efforts at stable-locking.
But apparently such reforms as pro-
tecting the public against manipulation
ak the hands of holding companies anS
The men who set them up depend. mort
cr less, upon the sort of catastrophe
that the insult crash represents. In
his address last night in The Stars
National Radio Forum DR.. George Otis
Smith, chairman of the Federal Power
Commission, recalls thS:
A year ago a high official of a promi-
nent holding company group asked me
why all this public concern about hold
ing companies ard their control over
subsidiary companies; what was the
public interest involved? The answer
was that the public didn't like to see
the utility COW MIXED to death-that
to justify itself with the public the
holding company must not endanger
the health of the operating company.
! regret to add that the figure of speech
I then used proved to be an unhappy
one-Several cows in that particular
herd are now at the point of death.
And q large number Of small investors
have lost thereby their savings.
With all due respect to safeguarding
the milk Of the herd of utility operating
companies, 1t is this latter phase of the
business that will hasten the inevitable
regulation Of holding companies. The
utility operating companies may have
been milked, but what they have lost
is as nothing compared to the syste-
matte and extensive milking of the in
vesting public by means OF the holding
company. In the majority OF cases
there Is no rhyme or reason for hold
ing company, outside Of its use as an
instrmentality for milking the public
Few thigh officials" OF any prominent
holding company would presume to
ask the question today that was asked
Of DT. Smith year ago.
But regulating these concerns is an
other matter. 1t will prove, despite the
illustration Of necessity provided by the
h1sun crash, q long -drawn-out and
tedious process. The Federal Trade Com
mission at present is engaged in a
lengthy investigation of the holding
company, in connection with its inquiry
Into the whole field of power utilities.
The House Interstate Commerce Com
mittee ordered, at the last session OF
Congress, an investigation of the hold
ing company and engaged counsel to
do the work. The report Of this in
vestigation will presumably be ready at
the short session of Congress, and on
the basis Of the report legislation will
be drawn. But once the legislation has
been introduced, it will require more
time than can be provided in the short
session for proper consideration. 1t will
be opposed by resourceful interests from
It's introduction until the hearings are
over. The Interstate Commerce Com
mission has recommended legislation for
the Federal regulation of railroad hold
ing companies, and such legislation will
occupy an extensive field in itself.
The Federal regulations that would
result from an act of Congress would
be designed to cover, of course, only
interstate business in the power and
nailroad industries. This business, as
Dr.. Smith pointed out last night, covers
IN the case Of transmission of elec-
tricity, less than fifteen per cent Of the
total But the business is rapidly grow
Ina. When it is realized that the Fed
eral Government has no effective super
vision over or regulation OF holding
companies. and that only half the
States have any statutory regulation
over the issue of power company securi-
ties, it is not difficult to understand, on
the one hand, the rapid rise to wealth
and power by the insult interests. Nor
H it difdcult to understand, on the
other hand, why, having risen SO high
they crashed SO completely, once ele-
mental laws of economies could nc
longer be ignored.