Evening star. [volume] (Washington, D.C.) 1854-1972, 1939-12-21
Business Bankruptcy
Warning Is Given
Monopoly Committee
Morgan Partner
Says More Freedom
Is Essential


Is Essential
From the house of Morgan, the
Monopoly Committee today had a
prediction that unless the Govern
ment allows business more freedom,
bankruptcy is inevitable.
II guarantee business will go
bankrupt" Russell Lef1iingwell,
white-haired partner in j. P. Nor
gan g. Co., told the committee yes
terday at the committee hearing in
which he protested against man
aged money and planned economy"
as threatening eventual doom of
"the profit system"
Il think we ought to give $780,
600, 900 people in this country more
rope" said the witness, who served
as Assistant Secretary of the Treas
ury in the World War.
Tax Declared Evaded.
The general discussion came after
Peter Nehemkis, committee counsel,
offered exhibits purporting to show
that deposits in J. P. Morgan g.
Co. had greatly increased in re-
cent years and that an increasing
proportion of them had been in
vested in tax-exempt securities. AS
result, Mr.. Nehemkis commended,
the Morgan partners paid no in
come tax on their earnings of nearly
100000 in 1898.
Mr.. LeffingWell recalled, however,
that as long ago as the World War
he had advocated removing the ex-
emption on future Government is
sues. He also Endorsed the Gov
| ernment's abandonment of the gold
standard and its relief program, but
added that. although they were
necessary, they did not increase
business confidence.
Senator King, Democrat, of Utah
and other committee members re-
sponded warmly to the Morgan part
ner's insistence that opportunity
still exists in the American eco
nomic system.
There's life in the old gal yet
said Leon Henderson, S. E. C. com
missioner
Splendid" echoed Mr.. Letting
well. Only I don't think she is an
old gal"
Investment Table Shown.
In the course of the hearing. Mr..
Nehemkis entered in the record a
table showing the approximate per-
centage' Of the capital investment
of the partners in the j. P. Morgan
firm on the basis of 1888 partner
ship tax returns, and promptly drew
a challenge from George Whitney,
a Morgan partner, as to the re-
liability of the figures.
According to this chart, J. P. Nor
gan accounted for only 81 per cent
of the firms capital. The estate
| of Charles Steele accounted for the
largest proportion-366 per cent.
with Thomas W. Lamont's holdings
of 34.2. The rest was scattered.
While Mr. Whitney declared these
percentages were inaccurate, he de-
clined to give the correct" figures
Mr.. Morgan still is the dominant
factor in the concern, he said.
Earlier, Mr. Henderson replied
tartly to the contention of Sydney
A. Mitchell, president of Bonbrigh,
& Co., that an industrial firm
needed continuing relationship
with the firms serving as its under
writer's. Mr.. Henderson told Mr.
Mitchell that reading of the COM
mittee's testimony would serve to
cure you of any wonder why we
have emphasized continuing rela-
tionships." The S. E. c. commits
sioner also asserted that there had
been stubborn resistance to the
intimation that there was a con-
tinuing relation"
| He seemingly referred to the en-
phatic denials of Mr.. Whitney that
the investment firm of Morgan
Stanley & Co.. created after J. P
Morgan & Co. was divorced from
the securities business by the 1888
Banking Act. was to all intents a
branch of the house of Morgan.
Testimony Presented.
Testimony was elected to show
| that:
Three former Morgan partners
Harold Stanley, William Ewing and
Henry S. Morgan, son of j. P. Nor
gan-controlled Morgan, Stanley, a
firm with s7,50000O capital, through
holdings of only 100000.
Eight of the 16 Morgan partners
furnished the s6,6OO,OOO capital for
preferred stock.
The list of Morgan, Stanley S
clients conceded almost exactly
with those who formerly patronized
j. P. Morgan & Co.
Proceeds of securities sold by Nor
gan, Stanley &, Co. went directly to
j. P. Morgan for deposit, in many
instances.
Efforts of Mr. Nehemkis to show
that the Morgan partners invested
in the new firm almost directly in
proportion to their interest in j. P.
Morgan & Co. caused a row in the
committee.
Both Senator OMahoney, Demo-
crat, of Wyoming. chairman, and
Senator King argued that the chart
showing the relative investments
was questionable. but Senator OMa-
honey finally read it into the record