Evening star., 1936-12-14
RAIL DEAL ERROR,
BANKER BELIEVES
Van Sweringen Purchase of
Missouri-Pacific Termed
Mistake.
By the Associated Press.

William c. Potter. chairman OF
the Guaranty Trust Co. of New York,
told Senate investigators today he be-
lieved the late Van Sweringen BROTH
ers' purchase of the Missouri Pacific
Railroad System was a mistake of
judgment"
He gave his testimony before the
Senate committee investigating rail-
road financing in asserting that bonds
of Allegheny Corp, major holding
company in the Van Sweringen rail
empire, we're sound investment"
The Allegheny Corp" he said,
"was designed primarily as a means Of
bringing about consolidation of the
Eastern railroads in which the Van
Sweringens were interested.
These roads included all the So
called Van Sweringen railroads, with
the exception of the Missouri Pacific
which was purchased by the Van
Sweringens to give Allegheny a d.
versification of earnings
Purchase Held Mistake.
"In the light of hind sight, believe
the Missouri Pacific purchase was q
mistake of judgment"
Potter contended the Van Sweringens
activities were founded on the policy
favoring consultations of railroads
into a few great systems that was de-
clared by Congress in the transporta-
ton act of 1920"
Chairman Wheeler of the Investi-
eating Committee interjected that
Congress has never favored CONSOLE
dation through holding companies"
The Interstate Commerce Commits
sion has repeatedly denounced holding
companies" he declared.
No Congress would ever dare 70 on
record as favoring consolidation
through such a corporation as Allie
gheny"
you have tried to give us the i'm
preston" Wheeler added. that the
Van Sweringens were acting in ac-
eordance with the will of Congress.
Executives to Be Called.
Nothing could be further from the
facts"
Perhaps they were trying to &C
eomplish the same ends in a different
way" Potter replied.
Wheeler expressed surprise that
John w. Davis, one-time Democratic
candidate for President and we'll
known New York attorney, would
permit his name to be used" on a
prospectus for Allegheny Securities.
II don't think any attorney ought
to let his name be used that way"
Wheeler said.
Senator White, Republican of Maine
broke in to assert that it was uni
versal practice" for lawyers to put
their names on security prospectuses
after passing on the legality of the
issue.
We don't take any liberties with
Mr. Davis" Potter said with broad
smile. He is pretty smart, and would
soon check up on U.S."
Held "Sound Investment"
Potter went on to assert that "the
record of the last six years demon
strates' that Allegheny bonds were a
SOunQ investment.
Despite the greatest depression in
the worlds history, which has par
ticularly affected railroads" he said
''two out of the three issues have con-
tinually paid their interest and are
now selling at approximately the issue
price"
Executives Of the Missouri Pacific
system. one Of the six major strands
in the Van Sweringen network, will
be summoned before the committee
later this week The roads presi-
dent, L. w. Baldwin, already has been
subpoenaed.
They will be asked to describe the
working railroad properties, charac-
terized by investigators as "the second
layer in the Van Sweringen pyramid"
Hearings last week centered on the