Evening star., 1933-05-25
PROBE SPOTL|GHTS
BANKING TO PUBLIC
Effect of Morgan Inquiry on
Legislation Likely to Be
Considerable.
CONTINUED From First Page.)

(COQtlnueO fTOm ElISI fdee.l
sharply criticized efforts to make 1t ap-
pear there had been something slnlsteI
back of the sale OF tnls STOCK 10 hlin
by the Morgan Co..
He pointed out that the sale had been
made in 1929, 10 years after he had
left public life, and four years pelore
he again entered it. He said that the
offer had been made to him because
former Assistant Secretary OF the Treas
urv I,effingwell. now partner OF MOI
pan. had been an old friend OF MS. ne
called the attention OF the commltIee
TO the fact that it was he hlmse1 VINO
had brought Mr.. Leffingwell INTO Ine
picture in Washington during the VII
son administration by selecting him 1or
Assistant Secretary of the Treasury
when Mr.. McAdoo was secretary OF that
department.
He denied fatty that he had ever
heen a friend of Mr.. Morgan, or MOI
gan & Co., and he added That In tnree
Transactions for the purchase OF STOCK
through that company, at the sugges-
tion of Mr.. Lefhngwell, he had mace q
aet loss of 1856. .,.
A defense of the private sale OF stock
to friends and clients OF the Morgan
firm. as in the case OF the Ailegheny
Cornoration STOCK. was made by George
Whitnev. a partner of the firm, at the
hearing TODAY. The burden OF this de-
tense was that Morgan & Co. does not
male a practice of selling publicly COM
mon stock issues, and that, Wnere ~
did take over large blocks OF STOCK II
offered them privately to people we
tnoi,bft knew conditions" MI, whit
ney denied that in selling the Aiieeneny
Corporation stock, for example, MS com-
par,y had had in mind that us chents
would obtain the stock primary 20.
speculative purposes. He lnsiSSeI s,;s,u 'i,as ha
this stock was not offered puphciy pe-
cause IL might get into tn hands OF
neople who did not know what tney
were buying. 'tf
Defends Stock Purchas%
Mr.. Whitney defended the purchase
by his company of 1,250,oo0 mares OF
the Allegheny Corporation sssck out of
a total issue of 3,5oo,ooo shares, on the
ground that 1t mad faith IN the van
sweringens and the railroad consolida-
tion which they were seeking to bring
about through this holding corporation.
: OF the total block OF stock tne
Morgan firm purchased 1t sofa So''ooo
shares 10 clentS anu NY"
mainder for itself. -r,,...
nlaced a statement summarizing tne
t,1Iblic offerings of securities, forelgn
and domestic, that J. p. Morgan q Co
had made since the World War. Tne
total was 5000, ,444, 200, OF which
81 .098. .953, 400 had been retired. Tne
stateneut showed that the obligations
of foreign Governments and foreign
eorporations so offered aggregated $z,-
232 2757 900, and that Of these opnea-
fions, 40 per cent had been retireo,
either by payment at maturity, by re-
demption at prices ranging from lUf11
Der cent to lis per cent, or by purchase
st various prices through sinking funds.
OF the remaining outstanding obhga-
tions from these foreign sources,
amounting to 1,348, ,902 600, SO per cent
were selling above the original price
on May II this year, and the average
offering price to the public OF these
obligations was 94.69 per cent, and the
average current market price on May
IL was Sl.07, decline Of less than 13
and "a points 13.75).
Receive Interest Regularly.
It was further stated that no investor
I'm this period failed to receive the reg
ular payment of principal when due.
The firm pointed out that the only
German bonds it had offered were gov
ernment bonds at per cent and 5h
per cent, both Of which were issued In
pursuance of international plans for
German reconstruction. and under the
auspices of the "great powers"
The Morgan Co.'S sale Of railroad
company bonds, public utility bonds,
industrial bonds and industrial pre-
ferred stock, municipal bonds and rail-
road holding company bonds, despite
the depression, was shown IN the state
ment to have been largely sound. The
only issues in default, bonds Of the
Florida East Coast Railway, the Mobile
& Ohio Railroad and the Missouri
Pacific Railroad, were purchased In
part by the Morgan Co., which still
holds them.
Has No Bond Statesmen.
. The Morgan Co. emphasized in this
statement that 1t employs no bond
statesmen and that 1t has never adopted
any methods of high-pressure salesman
ship. 1t has distributed securities
through syndicates or selling groups
consisting In the cases Of the largest
issues of as many as l 100 or 1.200 dis
distributing houses.
: The Morgan Co., the hearing has dis
closed, while 1t makes unrestricted
loans, adopts the practice Of setting
aside large reserves to cover those loans.
And Mr. Morgan and his associates
have sought to impress upon the Senate
Committee that their private bank busi-
ness has been conducted soundly and
with no loss to depositors, although
other banks subject to Federal and State
examination have failed in many in
stances.