Evening star., 1939-05-21
Bond Sa|esmenFa
Bewi|dering Changes
Under New Deal
Flow Of Capital Logs
And Privute SoIes
Take Business
By the Associated Press.

iOke business
BY the Associated Press.
NEW YORK, May 2o.-The bone
salesman, the man with the bright
smile, who was Wall Street in per.
son to prosperous Americans alons
Main street, has become a puzzlec
individual fighting for existence ir
a changing world of business.
In the busy postwar years O,
corporate financing, young mer
from Princeton, Harvard and YALE
f1ocked into Wall Street by tht
thousands to try their hands al
selling first mortgage IS and de.
benture 512s to a well l-heeled pub.
lie.
1t was a booming business anc
many young men found it paic
well. Main street had money, wa.
willing to listen to the sales talk.
of the eager merchants of Wal
Streets wares.
Today, after nearly a decade OF
lean times, some of the college
graduates who bounced into bone
selling straight from the campu.
in the postwar years suspect the,
boarded the wrong boat.
Washington turned the spotlight
on the bond salesman's troubles the
past week in launching its inquiry
into reasons for the drying up OF
the capital flow into private in
vestment.
At the same time direct sales
OF corporate securities to large in
vestment -eliminatine
the bond man from the transac-
tion-attained what the financial
community thought was a spectacu.
lar development.
Takes 1t on Chin.
The bond seller, nursed on the
American gospel of optimism from
the early days of the business, has
taken 1t on the chin from the right
and the left. Depression after the
1929 stock market collapse curtailed
the market for new securities. In
dustry's needs for capital declined
The fall in security prices impeded
financing.
Then came the New Deal with q
string of Federal agencies to finance
public works, extend credit and ster
into the shoes of the Wall Street
security seller. The S. E. C. in 1884
swung into action with set of reg
ulations for the securities business
In wake of this change has come
the rapidly increasing practice OF
selling securities directly from the
lssuer to large investors, something
without parallel in Wall Street. al
least on the present scale. This
practice, estimated to have resulted
in the direct placement of nearly
$500, 100000 in corporate securitie.
the last three years, reached a high
point recently in the sale of STA.
10000 in 3l4 per cent bonds of thu
Commonwealth Edison Co.. Chicago
to a group of IS insurance com.
panies.
Distributor Avoided.
Following that huge transaction
the General Motors Acceptanc,
Corp. side-stepped the bond distrib.
utor, marketed with Wall Stree
banks a $4,000 900 five-year loar
on Il per cent interest basis. Ap.
proximately $25o,000,00O in loan.
have been placed privately this year
bond men figure. or about as much
as have been sold through the usua
channels of public offerings.
Before direct sales became ths
growing vogue, corporations in neec
of capital on large scale or de.
string to refinance old loans made 8
deal with an underwriting house
The leading underwater formed 6
syndicate of sellers, Nation wide /,
the issue was big enough, and these
in turn let loose a swarm of bono
statesmen to finish the job of trading
claims on borrowers for the savings
of Main street.
Why this machine now creaks anc
stalls and shows streaks of rust from
disuse Is many-sided story which
in the Wall Street controversy II
evokes, usually gets down to the
question whether business languishe.
primarily because of war fear OF
because of too much or the wrone
kind of regulation from Washington
There are many views on the sub.
ject and bond men expect them tt
be paraded in the capital flow phase
of Washingtons monopoly inquiry
But this coincidence has been OBJ.
vious to the bond fraternity: Pri'
vate sales to insurance companie!
and banks began to flourish aftel
the S. E. c. took up its post as thu
Wall Street policeman and great
surplus of idle funds accumulated ir
investing institutions.
Interval Is Obstacle.
Some Wall Streeters say the mair
obstacle is the clause in the 1913;
Securities Act requiring an interva
"a 6o odyo UCGWCCll 1CS AoOA oVAOA
of an issue and the offering of it tt
the public. This is called the "in'
cubation" period, originally designed
to give buyers opportunity to study
the registration data.
The incubation" clause, it wa
said, really gummed up the works fol
underwriters when Adolf Hitler, un
corking the aggressive German driv'
for expansion, began to pull unex
pected coups, making the phrase
European crisis" synonymous II
money centers with a case of jitters
The repeated European crises spoiled
some important underwriting plan
in the incubation" stage, made in
vestment houses cautious, movet
corporate borrowers to look for
more expeditions route to financing
The Securities Commission ha
been studying the problem OF private
sales and investment dealers hop
something concrete to help thel
business will come out Of 1t.
E.~-~>