Evening star., 1933-06-27
KAHN DESCRIBES
PRIVATE BANKING
Likens Business to Practice
of Physicians-Do Not
Go After Clients.
a BY G. GOULD LINCOLN.

banking houses of the country. j. Pier
pont Morgan, jr., and the partners of
the Morgan firm had starred in the
first act, which closed more than two
weeks ago.
Mr.. Kahn, patron of the arts and
more particularly of the opera. under
the questioning of Ferdinand Pecora,
the committees chief counsel. gave his
conception of the functions which q
private banker, particularly engaged in
the underwriting of securities for cor
porations, should perform.
The private banker, such as banker
cf the firm of Kuhn. Loeb & Co., which
has been in existence for 65 years or
moIe and has run through three gen.
erations, is, according to Mr.. Kahn, a
kind of financial physician to whom
clients-or patients-go for treatment
Clients Come to Them.
Like physicians, such bankers as
Kuhn, Loeb & Co. do not go out after
clients-or patients. Their clielits come
to them.
"Our business can succeed" suggest
ed Mr.. Kahn, "only as long as we have
the confidence Of our customers. Our
good name is our show window. If
our. good name goes, then our business
IS gone"
For the better part Of two hours Mr..
Pecora sought to draw from Mr.. Kahn
q categorical admission that bankers,
particularly private bankers and invest
ment bankers. never seek to take clients
away from each other after the clients
have been firmly attached to any one
bank
Mr.. Kahn, with much patience, again
and again-explained to the committees
counsel that his firm did not GO out
after clients, but that they came to
Kuhn, Loeb & Co. He insisted that his
firm would not go in search of the
clients of other bankers. Indeed, he
expressed horror at the thought.
Would Give Assistance.
Mr.. Kahn pointed out, however, that
If the clients of other bankers became
convinced that Kuhn, Loeb &, Co. gave
good service, better service than they
had received at the hands of other
bankers. there was nothing to prevent
those clients from appealing to Kuhn
Loeb & Co., for assistance in working
out their problems of financing.
Indeed, Mr.. Kahn said, such clients
would be made entirely welcome, pro-
vided they had severed their connec-
ton with their former bankers.
The senior partner of Kuhn, Loeb &
Co. and Mr.. Pecora spared for long
time over the question whether it was
to the advantage of railroad corpora
tions or other corporations, wishing to
float securities, to have them bid for
by a number of bankers: Mr.. Kahn
insisted that such bidding was in
reality drawback: that 1t would bene-
fit in the end neither corporations nor
the public and certainly not the bank
ers. Mr.. Pecora. on the other hand,
took the view that such bidding would
enable corporations to dispose Of their
securities at greater advantage.
Many interested Spectators.
. The investigation Of Kuhn. Loeb g. |
Co., despite the hot weather. drew many |
interested spectators to the Senate Of
fice Building, where the hearing Is be- |
ing conducted in huge marble caucus
room whose acoustics are frightful,
but in which loud speakers have been
introduced to order to permit the Sen |
ators on the committee as we'll as the
spectators to hear what the witness Is
saying
Mr.. Kahn, the son Of German cit
izen who came to the United States in
1848 after the attempted revolution in
Germany and became q naturaliZed cit
izen of the United States, was himself
born in Germany in 1867. He learned
his banking in Germany, spent five
years in the Deutsche Bank in Lon
don and came to the United States in
1893, entering the banking house Of
Speyer 6 Co. 1t was in 1897 that he
became mepber OF the firm OF Kuhn,
Loeb & Co.
Speaks With Accent.
Mr.. Kahn speaks with an accent,
but with entire fluency and command
Of English Not tall, but well set up,
Mr.. Kahn carries his sc years remark
ably well. His hair, cut rather short,
is gray and he wears a gray mustache
He is tanned as though he lives out
doors a good deal Of the time. On the
witness stand he is alert and ready
with his answers. In the past he has
been president Of the Metropolitan
Opera Co. and chairman OF its board.
AT present he is a director Of that COM
pany, as well as one Of the leading
bankers of the country.
The firm OF Kuhn, Loeb & Co. My.
Kahn told the committee, has made a
specially Of the business Of marketing
railroad securities. The principal
clients of his company, he said, are
railroad corporations, although 1t has
had relations with other big corpora
tionS, among them the American Tele-
phone & Telegraph Co. Rather whim-
sically, Mr. Kahn admitted his firm had
stuck to dealing in railroad securities
when other securities, perhaps more
tempting. had offered.
Mr.. Kahn and his firm made no
bones about Offering for the record the
terms Of partnership OF the company,
emitting from the public record the
exact financial interest that each part
ner had. as was done in the case Of
j. P. Morgan & Co. There was in
troduced into the record also the finan-
cial statements OF the company cover
ing number Of years. Mr. Kahn. in
reply TO questions, told the committee
his banking house did not seek de-
lO5itorS but accepted deposits from their
clients. These deposits ran as high as
SSS coo ,000-pluS at the close of the fiscal
year 1929. The balance sheet of the
company in December, 1881, showed
total Of s66 74845 46 The balance in
earlier years ran as high as Sl20 600 00G.
Describes Underwriting.
Mr.. Kahn described for the commit
tee the way in which railroad securi
his banking house. First, the corpora
his banking house FIRST, the corpora
ton approaches Kuhn, Loeb & Co. for
advice as TO the kind Of securities,
the best time for issue and so forth in
cluding the rate OF interest A price
IS fixed, at which the banking house
Is to take over the securities and gay
the corporation Mr. Kahn said that
the spread between the price paid the
corporation and the price at which the
securities were sold to the public ran
from pa TO 2l2 per cent gross. Out OF
that spread all the expense OF market
ing the securities must come The In =