The people's voice. [volume] (Helena, Mont.) 1939-1969, 1939-12-27
On TheCapital's
Cuff
BY HENRY ION

In a quiet room in the senate office
building during the week before
Christmas there was related story
of American finance and industry as
important and fascinating as any that
has come out of the buildings on capt.
toll hill all year.
| 1t was the story of the house of
Morgan and it was told by Morgan
partners with the aid of the securi-
ties and exchange commission and the
| temporary national economic commit
| tee
| Back in 1888, when banks were top
pling and bankers were in deep-and
according to some, deserved disre-
pute, the new deal conducted an in
vestigation of banking practices. Out
of the investigation came the bank
ing act of 1888
One of the features of the 1888 legis-
lation was a requirement that banks
of deposit divorce themselves from
the flotation of securities. Sound poll
cy, according to the act, required that
the money of bank depositors be safe
guarded from speculative use by the
bankers.
bank, the problem was relatively
simple. For banks of deposit like the
house of Morgan, however, the require
ment presented something of problem
for one OF the controls in the hands of
the Morgan firm is it's power over the
huge industrial firms who have need,
periodically, of selling stocks to ac-
quire new capital.
What the Morgans did, according
to the TNEC testimony In the week
before Christmas, was to set up
separate firm, Morgan, Stanley & Co.
The Morgan partners stoutly denied
that the house of Morgan has any
connection with Morgan, Stanley, the
new firm, yet they would not correct
figures which showed, according to
the SEC, that Morgan partners hold
approximately the same percentage
of interest in Morgan, Stanley as they
do in j. P. Morgan & Co.
That percentage, for Morgan, STAN
ley, was listed as $3.50 for the estate
of Chas. Steele, 34.2% for Thomas W.
Lamont, and 9.1%o for ]. P. Morgan.
The Morgan, Stanley firm, according
to the testimony, was "grubstaked"
by nine of the II Morgan partners
to the tune of $6,6O0,O0O out of the
total initial stake of $7,5OO,OOO.
With this $7,500,000 the new firm
made gross of over $4,000, 900 in four
years and net profit of approximate
ly $7,000000, return of about $50 a
year.
More important than the profit
made, however, was the fact that al
most all of the underwriting done pre-
viously by the. house of Morgan was
done by the new firm of Morgan,
In other words, major con-
Germs seeking new funds have to go
through a firm controlled by the same
people and in precisely the same man
ner as the house of Morgan.
These disclosures precipitated a.
dispute between the Morgan brothers
of the rich, being anxious that there
should be no intention that the great |
and powerful house of Morgan was |
doing anything not entirely kosher
To ease the tension and put the |
hearings more in a holiday spirit, the |
TNEC investigators conducted little |
discussion as to govern
nent and financed and the rights of
W hCiS anu lCiiCl anu iCldlSu SUI
iects.
Russell Leffingwell, the bland part |
ner of the Morgan concern, was the |
chief Morgan spokesman. He opined |
hat business will go bankrupt if |
you keep on paying relief and borrow
ng and don't let prices come up" He
wanted it understood, however, that
lie was a liberal as the next fellow,
lot a hardshell, skinflint
He said he was intellectually in
avor of good wages and believed re-
ief was a necessity but 1--WE must cut
eliefy which we cannot do, or we must
tut taxes, which we cannot do, or
PERMIT prices to rise, or else business
will go bankrupt"
Leffingwell went on to expound on
he cost of these things. We've had
IL these things forcing to a higher
ost of doing business. There is very
.reat burden of taxation yet the taxes
re wholly inadequate to support the
ost of government" he said.
This weeping about taxes reminded
'eter Nehemkis, SEC attorney, of
He wanted to know if it