The Washington times., 1933-06-30
BANKER SCORES MORGAN'S
METHODS, LAUDS OWN
PENNROAD PROJECT
BY International News Service

- Pennroad Corporation as rail-
road holding company to rival the
Morgan-dominated Allie h a ny
: Corporation, otto H. Kahn de-
6 clared today at the Senate bank
ing inquiry He is head of Kuhn,
Loeb & Co.
Kahn shed light on the furious
Fstruggle between the Pennsyl-
vania Railroad, backed by Kuhn
Loeb, and the van Sweringen in
terests, who were financed by j..
P. Morgan and Company, to
create rival railroad empires.
=. Kahn was slightly critical Of
the methods used by Morgan to
finance the Allegheny Corpora
.tion and very proud of his own
plan that set up the Pennroad
Corporation.
A Race for Power
Pecora summoned Henry H.
Lee, president Of the Pennroad
=; Corporation. as a witness to ex-
plain the creation Of an empire
Z to rival Morgan's.
This corporation was financed
: by Kuhn Loeb and garnered $140 =
100000 in railroad assets. It was
opposed to the Morgan controlled
Allegheny Corporation with its
$600,000,000 of assets, including
the rail interests Of the famous
Van SWeringen brothers,
:. The revelation of Kuhn-Loeb
interests in railroads will feature
the closing session. The inquiry
then will be adjourned until Octo-
ber 8, when the New York Stock
Exchange, investment trusts, and
:, the international loans of J. P.
Morgan and Kuhn-Loeb will be
>! Investigated.
r., Other Lines Involved
: There may be an emergency re-
sumption of the inquiry during
the summer to probe the Roose-
velt bull market, but only if evil
J'dence is acquired showing Specu-
lators are initiating market prices.
: The railroad inquiry will give
the public an insight into how
st pays the cost of huge financial
battles. The Pennroad Corpora
tion was financed by Kuhn-Loeb
so the Pennsylvania railroad
might acquire ownership, of num-
.>erous connecting lines.
It subsequently purchased Sc
curities in a dozen railroads,
ranging from the Boston and
Maine to the Pittsburgh and West
Virginia and including such prom
inent roads as the Chicago and
Northwestern, Lehigh Valley,
Katy, Atlantic Coast Line. Sea-
board Air Line, and Southern.
Later COllapses
The firm of Kuhn-Loeb floated
the Pennroad securities. They took
5down a promoters profit of $5,-
c251586. The stocks were unloaded
son the public, reaching $50 once,
but collapsing later to SO.
This expansion was undertaken
by the Pennsylvania railroad, with
Kuhn-Loeb's aid. while the Nor
gan firm was financing the Ale
,ghany Corporation that gobbled
Up the interests of the Van Swer-
1ngen brothers.
Into the Morgan corporation
went controlling interests in such
roads as the Erie, the Pere Mar
quette, Chesapeake and Ohio,
Missouri Pacific and Hooking Val
ley lines.
The Morgan firm sold stock in
various holding corporations to
the public. so that the American
investor really financed the ex-
pansion.
Profits TrifIing
The Morgans scattered benefi-
cence as they created their rail-
road empire. Through lists Of
favored clients" allowed to buy
choice securities at submarket
values, they gave away literally
$30,000000 in potential profits.
The Kuhn-Loeb firm failed to
match this generosity.
Kuhn-Loeb had it's list of "fa-
vored clients" who we're allowed
to participate in underwriting
various security issues. The
profits shared were trifling COM
pared to those scattered by Nor
gan.
Percy A. Rockefeller, New York
capitalist, for instance, was listed
for over 100000 of underwriting
and drew down profit of only
$4,000. Newcomb Carlton "riSked"
$1,000,000 and got but $9,375.
Mere Pocket Money
The Kuhn-Loeb generosity in in
viting friends to help underwrite
the Pennroad Corporation issue
was illustrative of all their deals.
Rockefeller made $4,000, the larg-
est single profit among the "fav-
ored clients" w. H. Williams,
Charles E. Mitchell. and Henry w.
DeForest we're tied for second
place. each with $4,000 profit.
Rockefeller led with a $4,000
profit on the list of those who
helped float a U. s. Rubber secur-
1ty. Albert H. Wiggin and
Mitchell tied for second place.
each with a $4,000 profit. DeFor-
est came third with $4,000. Will
Iams and L. F. Loree got $4,000
each.
There was a choice Mid-Con-
tinental oil security floated by
Kuhn-Loeb, Loree, Wiggin. Will
liamS, Mitchell. and DeForest
each made $500 profit help
ing to underwrite it.
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