Evening star., 1935-01-28
HOLDING COMPANY
|ST0CK LOSS FACED
Roosevelt Must Determine
Extent to Which Abuses
Can Be Removed.
BY DAVID LAWRENCE.


the point Of deciding how far he
thinks the country can at this time
absorb billions of dollars Of losses in
the stocks and bonds Of holding COM
panies.
Irrespective of how desirable it may
be to eliminate the "evil features of
holding companies" as described in
the presidential message of early this
month, the President is confronted
now with the actual task Of how to
remove these abuses and yet prevent
a further decentralization of the assets
of innocent investors.
Latest statistics show that lust
since the subject was broached by ad-
ministration officials the current value
of the securities of the electric light
and power industry has dropped about
billion dollars.
Loss Serious One.
Such a lass in the course of a few
weeks, at time when the Nation is
trying to get to its feet financially.
is a serious one and is known to be
engaging the attention of high off,
cials conversant with the problem.
The informal discussions between
marked by an extraordinary frank
ness and directnesS in the interchange
of views. 1t all boils down to this:
The President asked the electric
light executives to sit down with off,
cialS Of the Federal Power Commits
sion and try to develop a program of
action. But the main objective-the
reduction of rates-is closely tied into
the question Of how watered stock
investments can be encouraged when
there is official distrust cast upon
private ownership
Some understanding whereby the
Government would withhold the use
of Federal funds for competitive
plants, if the existing companies
would agree to observe a certain rate
schedule, was the first goal, but it
soon observed that this would be a
waste OF time unless the fundamental
question was decided as to where the
crusade against holding companies
would stop.
Investors an Obstacle.
There has been an idea that hold
ing companies might be eliminated
and that operating companies of a
certain size could be licensed federally
to take care of the electric light and
power needs of the country. But this
only brings the discussion squarely UP
against the question of how to get rid
OF the existing holding companies
without destroying the investors.
No other single industry, with the
exception of the railroads, is in such
a plight; and, as for railroads, the
Government hasn't yet figured out a
way to take care of the conflicting in
terests OF shippers and investors and
owners, to say nothing Of the labor
employed.
Normally the utilities spend hum
dreds of millions Of dollars q year for
construction, and this is one of the
main reasons for the large unemploy-
ment in the so-called heavy industries
The latter are ofdcially recognized
now as including the largest block OF
Unemployed.
y Mr.. Roosevelt Is as anxious as any
body to bring about Unemployment
and 1t is understood he believes that
in certain localities an increased con-
sumption Of electricity can be de-
veloped, but whether it can be done
I hy simple operating units, without the
Fhenef1t Of parent companies that fur
ntsh the funds for development, is
something else again.
Dumping on Market Feared.
A holding company which owns the
common stock equity of many operat-
ing companies may 60 out of business
by bankruptcy or 1t may voluntarily
dissolve and divide up the assets, but
IL the divorce were immediate, a lot
OF securities would be dumped on the
market and would depreciate in value
to such an extent as to sell actually
below their real value.
The problem of performing major
surgical operation on any $4,000
OOO, 900 industry is no casual affair
and cannot help having repercussions
on the whole financial and business
structure of the Nation. That's why
Mr.. Roosevelt. though driving hard
for lower electric rates and for a re-
moval of the abuses of financial ma
nipulation that have grown up in
holding companies, is rather hard
pressed to find a formula that will not
start wave of dehation throughout
the country.
There is clear evidence that the ad.
ministration is fully aware of the dan
gers and pitfalls and If guess were
to be made at this time as to how il
would all come out, there is basis for
the belief that the President will not
let the whole financial structure OF
the electric light and power industry
disintegrate, but that he will be salts
fled with program that achieves the
main objectives over long period Of
time.
(Copyright. 1935)