Evening star., 1939-12-10
Report to Picture Government
Fling in Field of High Finance
Corporations and Credit Agencies Resemble Huge
Investment Trust System, With
$12,8632OOOOO in Assets
By Richard L. Stokes.

Dy senator harry r. BYRD OF virginia,
the Treasury Department will send
to Congress next month report under
taking to flash the light of noon into
the mysterious jungle of Government
corporations and credit agencies. With
the survey as basis, Senator Byrd plans
to suggest far-reaching reforms in this
gigantic terrain of Federal enterprise.
The present article seeks to construct
tentative preview of the report. 1t de-
rives partly from discussions with Under
secretary John W. Hanes and Assistant
Secretary Daniel W. Bell of the Treas
ury and partly from an independent
mapping expedition which traversed,
among other documents, the November
bulletin of the Treasury Department,
the summary statement of the budget for
the fiscal year 1939-40 and the United
States Government Manual just issued
by the Office of Government Reports,
formerly the National Emergency Coun-
Gil The region explored is largely an un-
discovered bourne. 1t has yielded up
volume of quaint, curious and fantastic
lore.
1t may appear singular enough that
the Government has seen fit to avail it
self on wide .,cale of the corporate form.
Scarcely a generation has passed since
this artificial being" figured in economic
mythology as the most horrendous of
bugaboos Yet the Government corpora
tion dates at least from the purchase of
the Panama Railroad Co. in 1904.
What is arrestingly novel is that there
has gradually emerged from a wilder
ness of details and statistics picture
bearing an uncanny likeness to the most
modern invention of high finance. While
currently assailing the investment trust,
through the Securities and Exchange
Commission, with devastating study,
the administration seems to have fiat
tered the device with the sincere COM
pliment of imitation.
Has Investment Trust Appearance.
A chart of Federal corporate and lend
ing institutions resembles nothing so
closely as diagram of some colossal in
vestment trust system. such as the North
American Co. or Floyd B. Odlum's Atlas
Corp. At the summit stands the United
States Government, including Congress.
The role of top finance corporation is
played by the Treasury, with portfolio
as diversified as any banker could desire.
At times the Treasury operates on its own
account, as in its direct ownership of
stock in the Farm Credit Administration
group. Generally speaking, its functions
are not far from synonymous with those
of the Government
Next in rank come what in private in
dustry would be classified as eight hold
ing and management trusts, correspond
ing, say to the Utilities Power & Light
Corp in the Atlas system. The list COM
prises not merely the Federal Loan and
Works Agencies, but the Departments Of
the Interior, Agriculture. Commerce,
Justice and War. 1t may even be
fancifully taken to include the presiden-
tial Office itself, insofar as the Executive
serves as a sort of management trust"
for three independent establishments,
the Federal Deposit Insurance Corp, the
United States Maritime Commission and
the Tennessee Valley Authority. OFF,
cially, the Treasury is co-equal with
other cabinet departments. Financially,
1t is parent company" to five of them,
to the extent that it owns six corpora
tions or agencies which they happen to
administer.
Beneath the eight trusts" throng in
turn "a Government stock companies,
three non-stock corporations and eight
unincorporated establishments in which
the Government owns capital or pro-
prietary interest. They form veritable
maze of operating, finance and holding
concerns, including affiliates and sub
sidiaries at first, second and third re-
move.
Combined Assets of IL Billions.
It is probable that few persons have
just notion of the pecuniary mass of this
far-fung system. AS of September 80
last. it reported an aggregate surplus OF
s643 800 900, Government proprietary in
terests in non-corporate institutions to-
falling sS53,6S2.9 800, Government-owned
capital stock of s2017,O 7,O97,755 and COM
bined assets of $12,863 100000. The
largest private corporate system in his
tory, the American Telephone & Tele-
graph Co., rises to less than half that
stature. with assets of mere $4,000 ,000,-
600. And this is only one segment of the
Governments business enterprises 1t
excludes, for example, the vast insurance
operations of the Social Security Board
and the banking activities of the Postal
Savings System with more than billion
dollars each of deposits and investments.
In bulk of capital investment, the
corporation-credit system is predomi-
nantly New Deal creation, with the Re-
construction Finance Corp. as notable
exception. Debates in Congress on pro-
posed reforms are likely therefore, to be
spiced with pleasantries regarding prac-
tices upon which in private business the
administration turns censorious eye,
but which freely prevail in its own
operations.
The device of interlocking directors
and officers is sternly regulated among
its member banks by the Federal Reserve
System, and among public utilities and
their gas and electric subsidiaries by the
Federal Power Commission. Yet it is far
from unknown in Government COM
panies. An instance that comes to mind
Is the Reconstruction Finance Corp.
group. Largely stated with R. F. c. men
are its four wholly owned subsidiaries,