The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1933-05-26

it has an even
larger task to per-
form, and that is VI
to throw light up
on the manage Lippmann
ment and control
of the capital market.
In the mass of the testimony it is
difficult to discover whether the
committee and Mr.. Pecora have any
clear plan of investigation into this
subject.
There is a very great deal that
it is most desirable to find out
about the function and practices of
the large private banking houses,
about their place in our economic
system, and about public policy in
regard to them.
The present investigation is an
unusual opportunity. The bankers
themselves, as any one can see from
the testimony of Mr. Morgan and
Of Mr.. Whitney, are in a mood,
which is unprecedented, to remove
the wells of mystery which Sur-
round them. There is an admin
istration in Office, and a congress
which are obviously not afraid Of
new departures in public policy.
All that is lacking is the knowl-
edge to formulate reforms, and that
knowledge it ought to be the bust
ness of Mr.. Pecora and his commit
tee to supply.
1T is clear enough, 1 think, why
n this inquiry has been undertaken.
The chief function of the large pri-
vate bankers is to direct the flow of
the peoples savings into long~term
investments in securities. They
transact other businesses, but this is
their principal role in the economic
life of the country.
Now, in the period up to 1929, a
very great volume of securities, rep
resenting loans to domestic corpora
tons, to local governments, and to
foreign corporations and foreign
governments, was issued through
these houses and sold to the public
and to institutions which are trus-
tees of the peoples money.
On these securities there have
been heavy losses. The fundamen-
tai question, therefore. is whether
the system under which savings are
converted into capital investments is
managed properly and sufficiently
regulated.
IN seeking an answer to this queS-
Il ton the first thing that would
need to be explored is whether the
business of long-term capital in
vestment is in fact a monopoly
whether, in other words, there is a
money trust directed by J. P. Nor
gan & Co.-or whether the bust
ness is in fact highly competitive
and dangerously chaotic.
In developing public policy, and
in fixing personal responsibility, it
is of first importance to know
which of these two diagnoses is the
true one. If there is a monopoly
which directs the flow of American
long-term capital, then those who
direct this monopoly I chargeable
with that obvious disbursement at
home and abroad which happened
during the '20s.
If, on the other hand, there is
sharp competition, then it is most
likely that the basic cause Of the
disbursement of capital lies in the
waste and disorder of an unregu-
lated and blindly competitive sys-
tenn.
1t is to be hoped that Mr. Pecora
will make a clear demonstration as
to which of these two equally I'M
desirable, but essentially different,
conditions confront US.
For until we know the answer, we
do not know whether u task is to
break up a monopoly, to regulate a
monopoly. or to control, as. we are
now beginning to do in industry, a
destructive competition.
THIS seems to me the essential
Il line of the inquiry, not only
with a view to fixing responsibility
for what has happened in the past,
but with a view to reforms for the
future. Moreover, until the truth on
this point has been developed there
really is no standard by which judg-
ment can be passed on the conduct
Of the various banking houses.
Suppose there is in fact a money
trust. Then the rulers of that
monopoly are accountable not mere
ly for each particular issue of Sc
curities, but for the total volume.
The previous investigation by the
senate of the large loans to Ger
many indicated rather clearly, for
example, that While almost all the
individual loans were based on what
was regarded at the time as sound
security, the total volume of those
loans was greater than the German
economy could bear.
The same condition undoubtedly
prevailed in other debtor countries,
and right here in the United States
for particular industries.
1t follows that if there is a mo-
nopoly, the monopoly has been badly
directed. But If there is chaotic com
petition among the issuing houses
then a wholly different set of ques-
tons needs to be asked.
What one would want to know
then is whether the bankers were
honest according to the prevailing
code, whether they were as prudent
as it is possible TO be under COM
petitive conditions. whether they
were as far seeing about the whole
situation as men of their standing
ought reasonably to be expected
to be.
Copyright. 1881
ROOSEVELT ABOLISHES