The Washington times., 1933-06-30

All. No Kuhn-Loeb client ap
peared to have come any where
near matching this beneficence
The hearing will close this
afternoon with publication OF
lists of loans made by Kuhn-Loeb
to bankers and corporation Off
cials.
Saved Millions
Kahn expressed pride in the
fact that he advised the organizers
of the Pennroad Corporation not
to pay bankers for underwriting
their stock issues. This advice
saved the stockholders millions of
dollars"
The Pennroad Corporation was
organized, as w. w. Atterbury,
president of the Pennsylvania rail-
road, told Kahn, to preserve the
interests and integrity of the
Pennsylvania railroad" against en-
croachments by the Morgan con-
trolled Allegheny Corporation,
Kahn said:
"The advice he gave the Or
ganiZerS of the PennrOad Cor
pOratiOn was the best we ever
gave. We created this corpora
ton without creating any fixed
charges. Fixed charges are a
burden, just like the Allegheny
Corporation was created with
fixed charges.
"We told the organizers not
to burden themselves with any
fixed charges. We told them
not to issue preferred stock,
which involves a moral ObIi-
CATION to strain yourself to pay
dividends.
1--WE realize our great re-
SpOnSibility in advising you we
told them to issue so large a
block of security without hav-
ing it underwritten.
TURNED OUT WELL
Eve told them to take a
chance because the cost of
underwriting was so great we
could not cOnscientiOuSIy ad-
wise it. I am vain enough to
say that all these items of
advice turned out SOundly. The
act of underwriting inevitably
means millions of dollars and
we saved that expense"
Kuhn, Loeb made a nice fee
through commissions, Kahn said.
He explained his firm received
$1.50 per share for distributing
voting trust certificates covering
100000 shares of stock. Other
commissions brought the firm s
profits on this sale up to $5,251,-
586.
The firm also received options
to buy 100000 shares at prices
ranging from SIS to $19 per
share. 1t bought under option or
otherwise total of 742 900 shares.
I. C. C. Overruled
When the Pennroad directors
decided in September, 1929, to
issue 3,025,O 900 additional shares,
Kuhn Loeb underworld the
offering. The new voting trust
certificates were to be sold at
$3.50 per share, compared with
SIS for the first issue. A total
of 1.596,828 shares were sub
scribed. Kuhn Loeb took the re-
manning 1,428,172 shares.
On cross-examination, Kahn
pointed out that validity of the
Pennroad Corporation purchase
of stock in the Lehigh Valley
railroad recently was upheld in
a United States circuit court de-
cision.
The court overruled the Inter
state Commerce Com m S S n,
which sought to divest the Penn
road Corporation of part of it's
railroad holdings.
Great Shrinkag9
The Kuhn, Loeb balance sheet
for December 81, 1882. revealed
the firm had been hit a ire
mendous blow in recent years.
It's assets shrank from $120,402,-
103 at the end of 1929 to but
$34,266, ,405 at the end Of 1882.
This was a fair greater per-
centage of shrinkage than that ex-
perienced by j. P. Morgan & Co.
On December 81, 1882, Kuhn,
Loeb reported the following as
sets.
Cash, oo,996.62; call loans
secured by U. S. Government
bonds, $1,OOO,OO0: all other loans,
$2,279,772.85; accounts receivable,
$l,076, ,009.17; U. S. Treasury bills,
certificates and notes, $18,739-
404.34; State and municipal
bonds, $3,945. .SO4.93: other bonds
and stocks, $3,624,417.19. Total,
$34, ,266, ,4O5.10.
It's liabilities we're: Capital,
$17,500,000; deposits. $15,21O,-
248.09; accounts payable, ST.
556,15701. Total, $34,266, ,4O5.10.
Deposits Fall
The Shrinkage of Kuhn. Loeb
capital was startling. In 1927 and
1928 the firm had capital of
$20,000,000. This was increased
to $25,000,000 in 1929. when the
firm held deposits totaling So
549,766. In 1880 it held to the
$25. 100000 capital while the de-
posits fell to $57,032,847.
Then in 1881, the capital
shrank to $21,25O,0OO and in
1882 to but $17,5OO,OOO, the low
est figure in a decade. Deposits
with the firm fell to $29.11S,918
in 1884 and to but $l5,2l124s
In 1922