The Washington times., 1933-05-23
Morgan Statement Defends His Practices;
Confesses to Errors of Judgment

their friends and clients, in
times of panic and distress, to
an extent that an incorporated
bank might well feel it had no
right to do with its StOckhOld-
erS' money.
AID TO INDUSTRY
another very important use
of the banker is to serve as
a channel whereby industry
may be provided with capital to
meet it needs for expansion
and DEVELOPMENT. To this end
the private banker can serve
well. Since, as he has at stake
not only his clients interests
but his own reputation, he is
likely to b especially careful.
"If he makes a public sale
and puts his own name at the
foot of the prospectus he has a
continuing obligation of the
strongest kind to see, so far as
he can, that nothing is done
which will interfere with the
full carrying out by the ObIigOr
of the contract with the older
of the security. To accomplish
this it is frequently desirable
that the private banker should
be a director of the company,
the securities Of which he has
sold.
"As to the charge as is fire.
quenlty and as 1 believe, care
lessIy made that bankers force
their way into boards Of direc-
tors, 1 can only say that, in
my experience of over 40 years,
/ cannot remember any partner
of the house taking q director
ship except at the earnest re-
quest of the board of directors
of the company in question.
USEFUL TO COMPANIES
"It is often useful for the di-
rectOrS of a company who are
not financial experts to have
experts of that sort, in whom
they have confidence at hand
for consultation. This is why
1 regret the tendency of so
much present-day legislation
which endeavors to prevent
bankers from being directors of
one thing or another; or which
throws on directors such liza
bilitieS for errors for which
they could not be responsible
as to make it too dangerous
for any man Of experience or
means to assume such reSp0n-
SibilitieS.
eve must not lose sight Of
the fact that a steady supply of
capital for industry is an es-
Sential of our system, and that
anything which may hinder the
flow of such a supply, or need
lessly diminish the confidence
of the investor in the safety of
his investments, is undesirable.
At the present moment, owing
to the destruction of confidence
in this time of depression, there
is no flow of capital into indus
tries, and consequently no in.
veStment possible for the saw
ings Of people which are turned
over daily to savings banks and
insurance companies to be in.
vested.
Gust at present these are
the only sources from which in
dustry can obtain its needed
capital. AS the savings of the
incomes of private persons have
been SO greatly reduced by the
depression and by the extreme
weight Of taxation on incomes
and estates; and as the de-
preston, for the first time as
far as know in the history of
the world, is so widespread, no
country can lend money in any
other.
NO DEMAND NOW
"ThOugh at the present time
there is no demand for capital
for industry, this condition will
pass, and we should not by any
means force the organization
for distribution of securities out
of business. Lest, when there
is again a Legitimate demand
for capital, it be found that the
machinery of distribution has
disappeared.
mo private banker, whether
ne is las we are) a wholesale
merchant Of securities or deals
directly with the ultimate in
vestOr, could continue in the
business if he had no other sort
Of business to fall back on in
such times as the present.
"The question has been raised
whether private banker should
be permitted to accept deposits.
The laws of the State of New
York very wisely, as 1 think,
and under careful restrictions
have sanctioned the practice.
Those restrictions prevent,
among other things, our hold.
ing ourselves out as depOsitors
for the public and from paying
interest on deposits of less than
$500.
"The bulk Of our deposits has
come from our having done
work for some client, or because
we are the paying agents for
coupons, or the cuStOdianS of
sinking funds.
DEPOSITS ESSENTIAL
If we, for instance, should
be deprived of the right to
receive deposits which clients
wish to leave with us, we
should very probably have to
diSband a large part of our