Evening star., 1933-06-02
DEMOCRATS LEAD
ON MORGAN LISTS
Exceed Republicans in Num-
Der on Rosters of Pre-
ferred Clients.
BY G. GOULD LINCOLN.

In the Senate investigation Of the
House Of Morgan two facts have stood
out in the public mind as startling.
sensational revelations. One of these
was the practice of the Morgan firm
by which large blocks of stock were
sold at ground floor" prices TO Sc
lected lists Of investors. These lists
included men prominent in business
and politics, dubbed preferred clients"
by investigators and observers.
The other fact which struck the
public right in the eye was the dis
closure that none of the 20 partners
of the Morgan firm paid any income
taxes in 1891 and 1892, and that their
combined payment Of income taxes in
1880 was only $4,000.
The Morgan partners, and particu-
larly George Whitney, who has been
on the stand longer than any OF the
other witnesses. including J. P. Nor
gan himself, have their explanations
for their method of sale Of stock to
selected lists Of investors and also of
their failure to pay income tax
Mr.. Whitney and the other partners
fail to see any wrongdoing, any i'm
method Of distributing large blocks OF
stock. They assert that their stock
sales were good business" and made
for business reasons alone, without any
idea OF influencing government, poll
tics, the courts or the Congress.
Selected List Explained.
AS Mr.. Whitney has undertaken to
explain to the committee, the sales Of
stock by private offering were In ef-
feet underwriting operations in an ef-
fort to distribute some of the risks of
business. He said that it was not con-
sidered good business by members Of
the Morgan firm for them to hold
large blocks Of common stock for the
account Of the company; that it was
not good business for banking house
like Morgan's to continue to hold all
OF these stocks. Therefore, Mr.. Whit
ney explained, they had undertaken to
distribute these stocks in large part
to selected list Of investors, investors
who had several qualifications. First,
they were financially able to purchase
the securities Second, they were In
vestors seeking investments rather than
speculations and likely to hold on to
the stock and not dump 1t on the
market right away.
These lists of investors apparently
were selected by the 20 directors of the
Morgan f1rm more or less personally.
On the lists were number Of finan-
cial houses as well as individuals.
Another point made by Mr. Whitney
IN his testimony regarding these lists
was that the contracts for sale or Of
ferings to the private investors were
made before there was a real market
Tor the stocks offered, although the
delivery and payment for the stocks
came on dates when trading in the
stocks in the markets showed a con-
siderable margin Of increase in price
over that price the Morgans had sold
to their selected clients.
Called Santa Claus
1t is this difference in price paid by
the selected clients of the Morgan firm
from the price on the market at the
date Of actual purchase and delivery
that has caused the Morgan f1rm to be
called a Santa Claus by Senator
Reynolds of North Carolina during the
hearing. The Alleghany stock, for ex-
ample, was bought by Morgan at $40
share and sold at that figure to the
firms selected clients at the same
figure. But when the deliveries were
made the stock was selling on the
market for $35 and even $37.
Mr.. Whitney has insisted that this
discrepancy in price must not be con-
sidered favor" to the selected clients
He argued that it was just one of those
things that happen in business, and
that there was not the slightest obli-
cation on the investors to favor the
Morgan firm in any way. He left the
impression, or tried to leave 1t, that
the selected clients had conferred a
favor or at least had done a good
stroke Of business for the Morgan firm
by subscribing to the stock.
No charge has been made that the
Morgan partners violated the law when
they failed to pay income taxes in 1891
and 1882 and produced only s4s, 900 In
income taxes In 1880. The Morgan
partners and the firm manager. who