Evening star., 1939-12-13

The Monopoly Committee today
continued its investigation Of the
underwriting business after hearing
its counsel contend yesterday that
two leading New York banks had
|; retained proprietary interest" in
underwriting certain security issues
after passage of the 1888 Banking
! Act. The legislation required bank
ing and underwriting to be divorced.
The contention was denied by
, banking witnesses before the COM
! mittee which sat into the early
/. evening to hear testimony.
= Peter R. Nehemkis, Securities
. and Exchange Commission lawyer
q. acting as counsel for the investiga-
ton, sought to show that j. P.
Morgan G. Co. and the First National
Bank of New York had retained an
interest in 1885 and 1896 refunding
bond issues of the Chicago Union
Station Co. aggregating SIT 900.
He based his contention on the man
ner in which banking syndicate,
headed by Kuhn, Loeb g. Co. and
Lee Higginson Corp, divided par
ticipation in the issues among other
investment bankers after the banks
originally participating IN the syn
dicate quit the underwriting busi-
ness.
Sturgis Testifies.
Henry s. Sturgis, vice president OF
the First National Bank of New
York, denied that his company had
any interest in underwriting the
issues, but conceded it had been
permitted to suggest the companies
which were to participate in its
stead.
Mr.. Nehemkis asserted that in the
case of j. P. Morgan &, Co. pro-
prietary interest" was shown by
the assignment to the underwriting
firm of Morgan Stanley & Co. of
the participation formerly held by
j. P. Morgan, with a small addl-
tional percentage.
Morgan Stanley e. Co. had a
number of the same officers and
employees who we're engaged in the
underwriting business for j. P. Nor
gan & Co. before the Banking Act.
Edgar N. Jesup, vice president Of
Lee Higginson, said, however, that
his company felt no obligation to
give a share of the 1886 financing
to Morgan Stanley & Co. because of
the previous participation of j. P.
Morgan & Co.
Did you regard Morgan Stanley
& Co. the heir to j. p Morgan S
share of the syndicate?" he was
asked.
Certainly not a legal heir" Mr.
Jesup replied. 1--WE did not feel that
we had any legal or moral obliga-
ton to offer this participation to
Morgan Stanley. 1t was something
we wanted to do because of the his
tory of the account"
Say No Fee Was Received.
Leon Henderson, S. E. c. member,
asserted that Mr. Nehemkis had
established a "reversionary interest"
on the part of the First National
because of testimony that the COM
pany hoped to recover its participa-
ton in the Chicago business if the
law were ever changed to permit it,
"It was business we had had for
a long time and hoped to be back
in when we could be-" Mr.. Sturgis
told the committee.
What were you doing in the
underwriting business, anyway, at
this time?" Mr.. Nehemkis inquired
with reference to a memorandum
referring to the banks allotment of
its former participation to other
underwriting companies.
I'VE weren't in the underwriting
business" the witness answered.
You were parcelling out this
participation and designating the
successor to your proprietary inter-
est" Mr.. Nehemkis insisted.
do you call that being in the
underwriting business?" Mr.. Sturgis
asked. I'VE got no fee for it, and
I claim you are not in the business
II you don't get paid for it."