Evening star., 1940-01-02

undertaken to tell American buSi-
neSSmen that they must issue COM
mon stock instead of bonds, increaS-
ing the expenses of their companies
even though they can borrow money
more cheaply by selling bonds. In
effect, the S. E. c. disregards the
prospect that its action may cause
electric light rates in America to be
forced upward when they ought to
be coming down.
Whether the S. E. C. is at fault
because its personnel, instead of
being an independent commission,
has been guided by the White House
or by disgruntled investment bank
ers or by an honest belief in State
socialism. or whether the existing
law is so broad that its discretionary
powers can be applied to produce
extremes is something which the
Congress will want to find out. But
the net effect of the sensational and
unprecedented ruling made by the
S E. C. in the case of the financing
of the Consumers Power Co. is to
open up all sorts of questions on
which a majority of the House Of
Representative will want the public
to have the facts.
Divided in Recent Case.
If the S. E. C. has nothing to con-
ceal as to what influences caused it
to take this remarkable step in
stopping employment and interfer-
ing with the opportunities of Mlchl-
gan people in this case to get lower
electric light rates, then the COM
mission unquestionably will not op-
pose but welcome the inquiry as
study of the workings OF an i'm
portant law.
The S. E. c. was divided on the
Consumers Power case, three New
Dealers voting one way and Two
Progressive Republicans, who again
and again have shown themselves
not at all friendly to the power
companies, voting the other way.
The issue is fundamental. After
telling the country that not only
the law, but the regulations, forbid
the S. E. c. in any way to guaran-
tee or be responsible for the
merits of the securities requested
before it, the commission boldly
rejects bond issue which the
Consumers Power Co., because OF
its excellent credit status, wanted
to sell to the public and which
would cost only about per cent
annually in interest. Instead, the
S. E. C. practically dictates that the
s10,0OO,OOO should be raised by COM
mon stock, for which annually the
company would have to pay about 8
per cent. What can be obtained
for 100000 a year, the S. E. c. in
effect says, should be loaded up to
100000, and this, of course, be-
comes a burden on electric light
rates.
Opposed Selling Common Stock.
The company in question did not
want to sell common stock for two
major reaSons-one that 1t would
mean increased annual cost and the
other that if the present public
Utility holding company act is later
koing to require certain changes in
"integrating" corporate structures,
1t would be easier to accomplish this
alteration if the common stock is
held. for the time being anyway,
by the parent company, instead of
by scattered or inharmonious in
terests.
The minority in the commission
thought these were good reasons
an intent in good faith to comply
with the spirit of the law and
argued also that Government must
not invade the managerial func-
ton.
But entirely apart from the rea-
sons given, the fact remains that
three members of the S. E. G. deem
a bond issue is mot necessary" and
a stock issue is more appropriate"
This practically opens the way for
the public hereafter to claim that
the S. E. c. undertook a moral re-
sponsibility for such a common
stock issue and later, if the T. V. A.
or other forms of Government COM
petition should force confiScatlon
and hurt the common stock, the
common stockholders would have
a moral claim for payment and the
taxpayers of America would be eX-
pected to make up the loss.
None Sold Since 1888.