Evening star., 1935-02-01
PERIL TO INVESTOR
SEEN IN NEW DEAL
Policy on Holding Companies
Declared Threatening
Savings of Many.
BY DAVID LAWRENCE.

For some people the depression is
just beginning. They saved their
money in years gone by. invested it
in what years ago were considered
gilt-edge securities and today the
Roosevelt administration stands ready
to destroy some of those investments
on the ground that abuses have ap-
peared in the financial arrangements
which need correction.
The extent of the deflationary
movement going on today is some
what obscured by the fact that many
lines of business are really improving.
The fate of the investor who hap
pens to have the securities of hold
ing companies, whether in the elec-
trio light industry or any other busi-
ness, has come to be somewhat of an
issue upon which sentiment is rap
idly crystalizing. For if the Federal
Government can destroy holding COM
panies in one industry it can do so
in another. Here is one of a large
number of letters received by this
correspondent apropos of the holding
company problem:
Specific Case Cited.
about 20 years ago invested s5,-
600 in the A. N. Co. per cent pre-
ferred stock. The company was in
corporated in 1890. and 10 years ago
invested $4,000 in the 6 per cent
preferred of a conservative company,
A. E. & w.
Il read your article about taxing
the holding companies and regula-
tion. Do you, sir, think that in a
country like hours, with our Consti-
tuition. these companies could be de-
stroyed by the Federal Power Com
mission with the sanction of the
President? know since he was Gov
ernor he has never been a friend of
utilities. The stocks are so low that to
sell now would be to give them away.
Myself and wife are over so years
old and the loss of our investments
at this time in life would be great
blow to us. What shall 1 do?"
Letters like the above are coming
TO members Of Congress as well as
the administration.
Million Believed Threatened.
The answer made by some of the
officials here is that it is lust too BAD:
that other people have lost money,
too, and that old investments cannot
be safeguarded. But some of the let
ter writers say if they lose their life's
savings they will have to go on the
dole and they can't see how the Gov
ernment is benefiting itself by adding
to its relief rolls.
OF course, the number of persons in
this class, the small holders of secur-
tiles IN utilities. may not be more than
million individuals, but they and
their dependents feel the acuteness
OF the threat. To them the idea of
destroying holding companies is not
an academic question at all. but a con-
crete menace to their means of live
ihood.
The possibilities of deflation. how
ever. are not confined to these in
vestors. Many banks have made loans
on utility securities as collateral. and
II the Government proceeds with its
announced program banks will have
to call certain loans and perhaps sus-
tain losses.
ShdhSc IN fOiCy dlnte0.
Within the last few days there have
been signs of recognition by the ad-
ministration of the def1ationary char
acter OF its policy on holding COM
panies, and this has prevented what
otherwise might have been. disastrous
liquidation on the part of those who
wanted to sell before all values were
wiped out. Indeed, some recovery in
market values of these securities has
been evident This arises solely out
of belief that when the administra-
ton gets face to face with the facts
it will not go to extremes. Certainly
the defiation that began during the
Hoover administration did not help
recovery, but added to the unemploy-
ment rolls.
In this case the deflation is having
tWofold effect. 1t is threatening
the income of those who have saved
as well as those who have manipulated
or been guilty of abuses. Also. it is
preventing the Unemployment of per-
SONS who would be put to work if the
funds so much needed in order to
replace wornout or obsolescent equip
ment could be obtained through re-
financing operations. But with the
sword of DamocleS hanging over old
investments, new investors are not
likely to be obtained.
tCopyright. 1881