Evening star., 1933-06-29
|PR|EST[Y BANKERS
SEEN DUE T0PROBE
Conservatives and Liberals
Would Make PubIic's
Money Safe.
BY MARK SULLIVAN.

The investigation Of Kuhn, Loeb &
Co. and its senior partner Otto Kahn,
Is less dramatic than that Of j. P. Nor
gan & Co., attracts a smaller audience,
and Is not accompanied by the same
tenseneSs. Nevertheless, the keeping up
OF the investigation into this and other
private banking houses has q large
purpose, which may emerge in the next
session Of Congress.
The early purpose Of the whole in
vestigation was to get information on
which to base legislation to regulate sale
OF securities and to reform banking in
general. These objectives have been
accomplished In the passage Of the
securities act and the Glass -Steagall
banking bill, both now laws This ac-
complishment, however. is only partial
The securities bill may be regarded as
complete. Much more, however, will be
done about banking.
As to the future objectiyes there are
two Views. Some of President Roose-
velt's advisers. of the type embraced
IN the so-called brain trust" would 70
very far indeed. They not only would
regulate the issue Of securities in the
sense OF protecting the purchaser, as
the present bill does. They would look
upon the whole matter of capital invest
ments from public and social point O.
view AS part of their theory of a
planned society, they would not permit
any corporation to borrow money and
enlarge its plant at will.
Would Pass On Expansion.
They would have public regulatory
body pass on the question of whether an
increase in producing capacity in the par
ticular field OF industry is necessary or
desirable. They would not permit, for
example, q steel manufacturer to en-
large his plant until the Government
should decide that larger output of steel
is desirable. They would have the Gov
ernment allocate capital investment for
increasing production only in areas
where 1t is judged that increase is de-
slrable from the public point of view.
This extreme theory about capital
and banking, while held by some now
in important positions, Is not likely to
be attempted in practice For the fore
seeable future it can be ignored
There IS. however. another and more
practical school of thought which Sc
riously and earnestly hopes to express
Itself in early legislation. Those who
hold this other view hold it as complete
believers in the present social system
and with no thought Of fundamental
change. Their objective is to restore
the word banker" and the business Of
banking" to the function Of safeguard
Ing money and nothing else. They
would ele 'ate bankers into a kind OF
priesthood whose sole trust and func-
ton would be caring for the public s
money and keeping it safe To this
end. they would in the priestly analogy,
require the banker TO foreswear all per-
sonal interests other than the safe
keeping Of money.
Would Divorce Banks.
Concretely. they would require that
q banker, certainly an oficial Of q ma
tional or other public bank. should not
be director on the boards OF other
corporations and not even hold stock
in other corporations. They would di-
vorce bank officials from temptation to
serve outside interests as completely as
judge refrains from having q private
interest in q matter upon which he
passes judicially. Some would extend
this regulation to the so-called private
banks, typified by the Morgan and
Kuhn. Loeb firms They would require
three or four score of relationships in
corporations which they now .lold.
Whether to extend this kind OF regula-
ton to private bankers is precisely the
question for deciding which the present
investigation is being carried on
The principle underlying 1t all Is that
banking should be q priestly and judi
cial function. The further principle Is
that banking is one business and that
the issue and sale OF securities is an
other business. not only different but
directly inconsistent with the first Mr.
Morgan, In his testimony, described
himself as q merchant Of securities"
Those who have immediate regulatory
legislation IN mind would say that Is q
perfectly respectable business but that
it must be divorced from the business
OF accepting deposits They would say
that persuading the public to buy Sc
curities for the sake Of the profit made
on the sale, entails state Of mind in
consistent with a mind forused solely
on keeping the public's money abso-
lutely safe
This latter Is no fantastic view held
by theorists or radicals. 1t conforms
to the spirit Of the legal words trust"
and trustee" still sacred in spite Of
recent misuse of them This view Is
held by some Of the most orthodoxy
conservative men in Congress; and it
is certain legislation will be attempted
to confine bankers to the function here
described.
(copyright. 1933)