Evening star., 1941-03-31

cheaply and that even the Zee
charged by the Underwriters was
fair. But under an arbitrary rule
for whose existence there is no eX-
plicit sanction OF law, it appears
that the s. f. c. thinks the under
writer's might possibly be related &c
the Issuing company in such a way
that bargaining did not exist be-
tween issuer and underwater.
To understand the transaction II
Is necessary TO state that the S. f. c
feels it has the power TO supervise
the f1otation of securities not merely
to protect investors or stockholders
but TO protect investment bankers
as against each other so that II one
firm has too much or too little bank
ing business the all-WlSe govern
mental commission in Washington
shall endeavor to equallze the differ
ence. And if this principle is ac-
Cepted As a proper governmental
function then it can be easily applied
to any other kind OF business, and
the result is a Government by men
who make arbitrary rules comes into
being instead of the historic system
of a Government by laws written by
the peoples elected representatives.
PrpiudiceS Against MOrganS.
The case in question involves the
firm Of Morgan, Stanley q Co, ana
because this institution was formed
several years ago by former part
ners of J. P. Morgan e. Co, 1t ap-
pears to have inherited the preJu-
dices which the S. E. c. has deVel-
oped against the MorganS. But
unfortunately in this instance 1t Is
not merely the Morgans who are IN
jured. but the reputation OF gov
ernmental commission for fairness
and equity. Thus it has been re-
ported that very soon a rule WouId
be announced by the S. E. c. pro-
claiming competitive bidding IN the
investment world. There Will BE-
however. little confidence hereafter
in such a rule if it is to be super
viSpd bv a commission which at any
time can decide TO upset the bidding
because it doesn't like the color OF
the hair of the firms doing the bid
ding or because some member OF a
banking firm once went to college
with the treasurer of the company
whose bonds are offered for sale.
The testimony in the case OF the
Electric Power Co., whose bonds
were sold by Morgan, Stanley d Co,
was taken many months ago. In
fact. it is Just IA months since the
bonds were distributed to the pubic,
and the fee due the banking trm
was impounded while the S. E. c.
took the matter under conSldera-
tion. The cumbersome machinery
of a governmental commission Is
obvious which takes IA months to
decide that a banking firm couIdn
have its fee because its partners
used to be members OF another
firm which in turn was related
to another company that owned
a second company which in turn
wanted to float a bond issue and
hence went to the bankers 1t
thought could obain the money
cheaplv. Such q chain of clrcum-
stances brought no evidence OF col
lusion at the hearing, and yet the
S. E. c. decided adversely because,
IT said, the collusion might have oC-
Cured.
To substitute inference for Judg-
nent is not to be judicial This
charge has been made again and
again in discussing the arbitrary
powers of the little groups OF die
tatorships set up under the name
of so-called administrative law
hereaboutS. Not often is the proof
so clear, however. that arbitrarlneSs
has been exercised. Not so tre-
quently is it as apparent in the
actual text of an opinion. For about
the only substantial ground that
can be discovered for denying the
Morgan. Stanley firm their fee is
that they happened to be connected
once with the evidently to be perse-
cuted Morgans. The public interest
wasn't in any way affected, for the
money was the cheapest obtained by
a utility in five years. Still the pet
peeVeS of New Deal commissions
have to be served in the full. Per-
haps that's the reason why corpo-
rate issues are not being financed
in large volume today, so that Amer
lean industry can move ahead in
proper expansion for future needs.
The banking fraternity doesn't
know from one day to another what
the rules are or, reading the rules,
what the meaning thereof may be
when a governmental commission
takes more than a year to find this
out for itself.
Justice for All.
Under a fair system of govern
ment even the Morgans are entitled
to justice, though, because the vic
tim happens to be a banking firm
of prominence, there will doubt
less be few in Congress who will
rise to denounce injustice. The
oath which a Supreme Court justice
takes requires him to swear that he
Will duIIllIiISGtI JuoJICC " 1ISA4 anu
poor alike" 1t is unfortunately
true that officers of the executive
commissions and agencies are not
required to take the same oath.
The decision will doubtless be
appealed to the courts. Meanwhile,
in the court of public opinion, the
S. E. C. has done itself irreparable
harm. The New York Times edi-
torially calls the decision CON
fusing" and speaks of the be
wildering effects sometimes achieved
by the workings of administrative
law and then adds significantly:
Business men are entitled to
reasonably clear definitions of the
regulations to which they are ex-
pected to conform. If they are to
be subjected to highly complex
rulings by administrative bodies, it
is at least to be expected that the
administrative body will itself un-
(See LAWRENCE, Page A-21)