Evening star., 1939-12-14

ton or otherwise, but there was
nothing in the law which gave the
S. E. C. the power to decide who
shall make a commission and who
shall not in the matter of selling
securities. Governmental control
of the security business was de-
signed to regulate practices as they
relate to investors and not to equal
ize handicaps between competitors
or to take business away from one
set Of investment dealers and give
1t to another.
If, indeed, as it begins to look, the
s. E. G. can exercise the power to
distribute the profits in the invest
ment business, then some day the
political machines of the country,
Republican or Democratic, will find
the S. E. c. one of the best sources
of gravy" and patronage in the
whole Government, because millions
of dollars are involved in these
transactions.
The S. E. C.'s position as non
political institution has thus far
been well maintained and there is
an excellent impression nationally
as to its integrity. But the strange
case of what has just been happen
ing to the issue of the Consumers
Power Co. introduces an element of
conjecture as to whether the S. E. G.
has not permitted itself to be used
by competitors in the investment
business to establish precedent for
governmental Intervention in the
private business of distribution and
selling.
Prospectus Approved.
The security prospectus required
by law in the case of the Consumers
Power Co. was fully approved by
the S. E. G. Every technicality in
this respect was met and the S. E. c.
itself only a year ago gave permis-
sion for the same holding company
to buy common stock in one of its
own operating companies, so that
there could hardly be any question
as to whether the Consumers
Power Co. issue of securities was
in conformity with the Public Utility
Holding Company Act If there
were, something might have been
said by the s. E. c. when the pros
pectus was formally before the COM
mission on the preceding issues of
securities, of which there were five.
Nothing was heard publicly until
some investment dealers, about 10
days ago, began to complain that
New York houses had a larger share
of the issue than competitors
thought they deserved. These deal
ers testified that their only in
terest in the whole matter was to
get bigger cXT in the distribution
money. The commission set a pre-
cedent by being willing to listen to
such charges even though it ad-
mitted in public statement that
1t possessed no authority over such
things.
In a letter to Senator Brown of
Michigan, discussing the question
raised by the Consumers Power
Co. case, the Securities and Ex-
change Commission said:
Even though we do not have
direct power to control the dis
tribution of underwriting participa-
ton, 1t may be that way can be
found to secure greater regional
distribution of corporate financing"
Conforms Early Fears.
To allow hearings on quarrel |
between competitors when a gov
ernmental commission comedies it |
has no legal jurisdiction is to con-
firm fear expressed by some when |
the S. E. c. law was passed. Namely
that it was but the entering wedge
of governmental intrusion into
every angle of the business of hand
ling investments If the law doesn't
provide a way, officials openly con-.
fess that "a way can be found"
The whole country has been
waiting for the public utility busi-
ness to get financed so that en-
ployment could be expanded and |
raw materials bought. For 1910,
about $200,0O0,0OO additional funds
will have to be borrowed by the
utility companies for their needs.
If the S. E. c. is going to require
that these issues be handled so
that everybody who runs down to
Washington for a piece of commits
sion financing can have it, the
whole investment banking machin-
cry will become political.
The amazing thing is that, while
most investment bankers have been
deriding governmental interference
in private business, yet among
them are some who do not hesitate
20 drag a governmental agency into
the picture so as to enable them to
get a profit.
May Touch Commodities.
Lately there has been quite a