The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1932-01-02
HUGE PROFITS
REVEALED ON
FOREIGN LOANS
Rich Harvest Reaped by
U. S. Bankers, Senate
Group Is Told.
ASSAILED BY JOHNSON
Californian Charges Small
investor Is Holding
the Bag
BY RAY TUCKER
Times STAFF Correspondent

WASHINGTON, Jan. Bankers
profits Of more than $122,000000
from handling $6,205, $4,000 worth
of foreign loans, and default of
100000 worth of South Amer
lean securities we're revealed today
by the senate finance committee, in
a summary OF testimony taken in
It's inquiry.
Failure of J. P. Morgan 81 Co.
to submit detailed figures on its
profits, as requested by the COM
mittee, prevented an exact estimate
of the commissions paid to the
several banking houses. Further
computations may bring their
profits as high as $14O,000000.
Senator Johnson of California,
who denounced the excessive
rates" charged, in view of the fact
that the securities have been "un-
loaded" on small purchasers
throughout the country, will insist
on additional details.
Profits Called Amazing
Although some members Of the
committee, including Chairman
Reed Smoot (Rep, Utah). point
out that the interest rate is pro-
portionately small-about 3per cent
or less-Johnson retorted with the
statement that it actually was an
amazing profit"
The bankers, according to the
Californian, took comparatively lit
tie risk, acting only as 'mer-
chants" and received their mil
lions in commissions simply for
serving as middlemen.
Johnson also pointed out that the
story is only begun, as but three
banking representatives have been
heard. They are Thomas w. La
mont of j. P. Morgan 81 Co.,
Charles E. Mitchell of the National
City bank and otto P. Kahn of
Kuhn, Loeb e. Co, The inquiry will
resume Monday with Kahn, on the
stand.
other houses originated or par
ticipated in the flotation of the is
sues already described, but these
three firms handled the largest part
bf the total.
Cash Harvest Reaped
The National City Company
hoted as manager for $1,071 ,955, 900
worth, and made a profit of $13,-
BOZ 600 for its managerial services
with respect to $653, 1866 100 of the
total. Others who helped to handle
these issues profited to the extent
OF S24, l67,841.
The National City company, as
well as other firms, collected COM
missions in their various capacities
as originators, participators, under
Writers and distributors. In each
step of the transaction profit was
taken.
Firms which acted as managers
for this group of securities includ-
ed: j. p. Morgan e. Co., Chatham
Phenix Corporation, Lee, Higgin-
son g. Co., Dillon, Read 81 Co.,
White Weld Company, Speyer &
Co, Kidder, Peabody Company,
Kuhn. Loeb & Co., Field, Glore &
Co. and Potter Bros. g. Co.
"A bOldl Ol 9O :, tVV,VOO IA ASeeAAS
was handled by Kuhn, Loeb q Co.,
but has told only part of his
Nrn's transactions. Profits on this
mount were $3,153,231. The Ma
NAL City company acted as man.
er in floating $500, 255,0O0 worth
Cuban and Canadian issues, and
profits from handling about one
d of the total was $1,315,4l4.
n this basis, the commissions to
the bankers for the whole issue
were approximately $S,e46,242.
Some Cities Default
Other houses originated $795, 295,-
300 worth of Cuban and Canadian
kecuritieS, with profits of about So
k0O0 The firms which managed
lhese loans were Harris Forbes, w.
i. Read Company, the guaranty
company, the Morgan house, Dillon
Read, Lee Higginson, the First Ma
honal bank and the Union Trust
little Company.
The defaulted South American is
kles consist of bonds of cities. states
! d federal governments of Bolivia,
cru, Brazil and Chile. Cities of
Colombia and Uruguay also have
defaulted