The st and ope of monopoly in the United Sta THE EMPIRE OF foo NS AS N S iL add BY VICTOR PERLO CLL LALA ternational Publishersg ‘ABOUT THE AUTHOR VICTOR PERLO is a New Yorker, with a background in mathematics, sta ties, and economies (M.A. Columbia University). During the 1930's he was cone of the group of young govern. mont economists who assisted in the New Deal reform measures. An eco nomic consultant over the past dec- ade, he is best known for his books— oll published by International Publish- ers—and periodical writings. The frequently cited “American Impe- rialism” (1951) has received world- wide recognition, being translated into @ dozen languages. "The Negro in Southern Agriculture" (1954) is a basic treatise on an important sub- ject The booklet "The Income ‘Revolution’ " (1954) is a critique of the thesis that America's income has been redistributed at the expense of the wealthy. ds the present volume as a logical counterpart of "American in the study of the structure and operation of U. S. capitalism By the Same Author AMERICAN IMPERIALISM A well-documented study of how U.S. big business has extended its foreign holdings and spheres of influence abroad since the end of World War Il, and how this has been reflected in foreign policy. Cloth $2.75; Paper $1.25 THE NEGRO IN SOUTHERN AGRICULTURE A detailed economic study of the plantation system and sharecropping since the end of World War Il, and the effect of postwar changes upon the Negro fon the land. Cloth $1.75; Paper $1.00 INTERNATIONAL PUBLISHERS 381 Fourth Avenue, New York 16, N. ¥. e201$5.50 THE EMPIRE OF HIGH FINANCE By VICTOR PERLO Four great banks and insurance companies 2 mare assets today than all foncil institutions had in 1912. Ten industrial cor- porations make more taxable profits yearly than all did in the boom year 192% The reign empire of American high finance now exceeds in value the combined nafional income of Canada, Britain and tho Nether- lands. War industry and foreign. inves ments combined aczount for one-half the Profits of the American super-trust These are some of the facts, with far reaching implications for the’ American people, which are uncovered and analyzed in this book. But the main concern ef the thor is fo show hw the monopoly giants ‘grouped in great ‘financial empires, He traces the spider wob of comploy cor: poral and financial relations fo expe the real posifon ofthe principal interest groups that stand et the peak of the entre eee nomic structure and control it. Each clearly defined in terms of monopoly co trol and influence—the Morgan group, the Rockefellers, du Ponts, Mellons, Netionel City Bank “and the lesser Wall Street groupings. The position of import fional groups, such as the Midwestern, the Galfornian and Texs milfionaires, are ao studied in relation to. the peak financial conters, os In the process of uncovering the inner connections of the mulcilionir fame and thei banks and corporations, Mr. Perla details the various modes of ‘corporate control and the workings of the entire big business structure, He examines the changes in monopoly relations, analyzes the batiles and shiffs among the tycoons, ond advances new concepts toward a better understand: a of contemporary. American. finance (Continued on back Aep) (continued from front flap) He probes the grand merger of monopoly ‘and government at Washington an cates its implications for the Am ple and world politics. Based or research and careful scholar with analytic ta appendices, this book part the dream-world of "People's Capitalism,” spun by Madison Avenue hucksters, and fells the story of streamlined monopoly and vested interests grown larger and more powerful than ever. . OTHER BOOKS OF INTEREST LABOR FACT BOOK 13 (1957-58) Labor Research Association $2.50 ECONOMIC THEORY AND SOCIALISM Maurice Dobb $4.00 STUDIES IN THE LABOR THEORY OF VALUE: Ronald L. Meek $5.00 AUTOMATION AND SOCIAL PROGRESS 5. Lilley $3.75 WAR ECONOMY_AND CRISIS Hyman Lumer Cloth $2.78: Paper $1.75 WOMEN WHO WORK Graco Hutchins Cloth $1.50; Paper 75e ATOMIC. IMPERIALISM James S. Allen Trade $3.25; Pop. $2.90 MONOPOLY IN BRITAIN Som Aaronevitch $2.50 Labor Research Assn. pamphlets: BILLIONAIRE CORPORATIONS, 35¢ APOLOGISTS FOR MONOPOLY, 50 THE BURDEN OF TAXES, 25¢ US. OVER LATIN AMERICA, by Herman Olden, 502 THE, INCOME “REVOLUTION” by. Victor Pel, 380 INTERNATIONAL PUBLISHERS 381 Fourth Ave., New York 16, N. Y.THE EMPIRE OF HIGH FINANCEThe EMPIRE of HIGH FINANCE By VICTOR PERLO Author of American Imperiale A NEW YORK INTERNATIONAL PUBLISHERSCHARTS BY ELLEN PERLO Library of Congres Catalog Card Naber: 7.1288 (© BY INTERNATIONAL PUBLISHERS CO, INC, 157

2h Oxremine: regulon and thy” prevent Sian domin The bas fats about the gro nthe scope of Gani nations4 Tite EAUPIRE OF HICH FINANCE undercut all of these arguments, Raymond Goldsmith, @ conservative ‘eonomist, provides a convenient summary in a recent monograph, He ‘atimates the national wealth in 19 at $598 billion, of which the brake, insurance companies, and other financial institutions held $832 hillon, of almos hall?" These financial asets were multiplied 23 times in a half century. More significant was che increase in thee Share ofthe national wealth. In 1900 they owned 2196, in 1923, 35%, land in IMD, 48% The bankers increased their power not only during the period of open manipulations, mergers, and pyramiding of fortunes thar culminated in the stock market crash of 1922. They increased ix fevea more rapidly thereafter, when a “osle government” and the “SInanagerial revolution” were supposedly sapping their strength! ‘When we diferetiate among various kinds of wealth, the ssing share of the financial oligarchy is even more impressive. Securities in freddern capitalism, are the decisive claims to ownership and control ‘of industry. In 190) the financial institutions held 23% ofall securities; in 1929 this had increased only to 2566. Bur by 1949 it had risen to 589. The huge wartime rise in the federal debt, mainly held by the banks, contributed to thi, but the pes1929 rise in the bankers share of corporate securities was almost as dramatic. ‘As is typical of those National Bureau publications which contain significant information, the author is constrained to avoid explaining the meaning of his findings exeept in the most ianocvous and genet ized fashion, ‘Thus Goldemith says: "From the economist’ point of ‘ew, the development of financial intermediaries and the trend oftheir Share in national astets and wealth deserve attention as an indication of the extent and character of financial interrelations, which in tara help to determine how capital expenditures are financed and how existing ascts ate sifted among owners." ‘But the lesson which Goldsmith did noe draw i clear enough: The ‘extent and character of financial interrelations” has intensified great “The control of eapital expenditures ie more Brmly than ever in the hands ofthe fnanialolgatchy, and “existing assets are shifted” more and more into theie hands lee is more evidence, concerning the ideniy of the very largess mest powerful. corporations. In 1935, out of 62 corporations with ucts Of over $500 millon, 28 were banks and insurance companies tnd they had 42% of the assets of the 62 giants” Seventeen yeat® Tater, in 1952, ou of 66 corporations with asesof over 2 bilion dollar, [3 ere banks and insurance companies, and these had 64% of all the anes of the giants: WALL STREET STILL RUttE 5 ‘he share of profits siphoned off by the financial nsutons has aap incensed, The afertax profits of financial corporations (including 247 tte) lncreated from $09 bilon in 125 to 42 ballon in 3S, 125 fan 1496 ofthe profs ofall corporations to 2% ofthe toa aves capitalism, roe are the ukimate arbiter of power and postin, ‘Te aly of the Financial corporations to extac arising share of isthe seat sign thatthe dependence of indy, and Bini socey gency on financial power has incese, and not Srivid ‘Thee proving shares of national weskh and income accrue ta amaler number of nancial insiiions, for awe have sen, cnr ‘aatcn of capital procerds with epecialrapty in banking ‘Now It ut tin to the connecting links between finance and indonry, and sce wisthor the Baancies have rely been pated ot ral Sweety, who did important work in the analy of he rctre ti finance capital during the New Deal perio, wrote in 19 that tankert power had become divorced from economic function, and "is ound to weaken and evenly appear «Bank capil, bavi {Sti ay of ply fale tack gun Wo space adr to dial capil thus reesablishing the relation which exined prior te the combination movement. «today the entre banking se tool bez n the United Sten, for example, witout eating tore than a temporary pple inthe van of bg eptal™ “The Federal Trade Commision in 181 analyzed the intelocking dietortes ofthe lage thovsind indetal companies. In lest fey bac industry, the financial corporations hd more represent Sr than any the group. Among 72) interocks of 112 mechiney companies, 24, or 51%, were with banks, investment bankers inves fem crus, and insurance ompanier—an average of two financier spr machinery company This goverment repr: emmenteds Pe high royocny of mahinery company into wth anc! inatens tes the fst te iy cue prc in get open gocgnes of cpl fr pln and henry equpocet, Sout ee Spl Sie pyc guetta te form, epson, reuguniaton om ops, ad py moking of many he rg achinry Spero ese fone oss abe saved te pins conecing nk sting th acing machinery producers, wl btwn uchiny companies SBE tee psc conpases oi pal spre cane her Raced There is reilly on C re is relly only one significant piece of evidence offered to ove the sopposed weakening of Snancislindustial nk, That is 26 crite Brine OF HICH FINANGE dhe irene in corporate sel nancing. The theory of the fnancialy th ace Jpn pew during che stagnant 193, when there sn te of epucy,ad intra ends largely eed for Se ee of equipment tat tok plac. Heweve, inthe boom oo ar I corporation ced icrensingy to ole Roan seer one head ia the race for sutamaton of production and e pron of apc. a est rate large nachos often prefer welt anne ee sod scaven poi waout remoning them from Fann aerator, But the exten of dependence on ouside fends i err aan implied by Bele and ater and quite deve semis A Spansion, Goneramene tabulations dow ch in the i ee 6, same CA of gros capil spending was from 1 9 lee and depresiaon reve, while 36% was fom ouside rec these figures it neces to aaa how the funds 1S Word War abou Bl of corporat apa pending Fe Be cman of bolt and wormaut eta ad about Mei de espuaden The txmer ie inaned out of decane ae a ease necewaryy ot of retained pots, Compare Fractal fo are let oc expansion, Roughly and approxima, Hie frre wing os gana te 50%. wal spendin fo Tee er kt 4 of sternal funds nd the 36% of use Serer Pout be raed forthe purpose. Ths te ouside fund serra or ap much a2 22% ofthe expan cpt Tue Ot dacive prt of the investment, Ie decries which cone a ge ead which mus fall behind and ter be Saree ongh merge or wrecked through bankrupt. The st Sr ee one and Teepaph Corpraion borrows almost ae ee piroogh financial intone Tere ie bacdly major Fen Tatlny which has not gone to the cpl marks nce sree dee af al oporans inesed SHLD ion o 131% i Fee ce Weed War Il ax compared with $355 bilion, or Gein the decade afer World Wat icy eon sel ie ce te 1 a A fundsebsined throngh fnancalinons Pri leno cae any qlee change i the depend oa recey om thse ntttons And this nly prt of th sory “Wat many overlook is thatthe merging of financial and indusal capital means jut that, This is exprened most direly in the owner ” ship bythe same groups of coneling shares in banks and inde BF ihe omeship by financial institutions of indusrial shares As Bown in Choptr Il, this has increaed so markedly that in thee Bato, the relationships berween big finance and big indy a Spe timate chan ever befoe. {THE AUTO INDUSTRY AND THE BANKS, Ta ae Se al opel el ee ea a ee bese eee ree oe dad geen Fed shel nanny in Slag nO ee ‘by mergers or forced out of production. pica lot sel eo ten iers have the last word. ae ce ee ee ee ae Sec it ln Che Ta es ie en ae ro eh iy fe oy de eePrudential Insurauce Co. (which has ditectors in common with the Principal Morgan banks as well as with Char) and with it id did ai some lost ground ia 1957 Again in 1955, General Motors sold Theses co exiting stockholders for $329 million, with Morgan, Stoley Geferwriang the issue. Finally, a the beginning of 1956, The Ford Mace Company, which had always boasted independence of the Daokers authorized the Ford Foundation to sell 10,200,000 shares for $08 vellion dollars, throug a large Wall tret syndicate headed by Biyth ee Co. (connected with the First National City Bank). This file of Ford shares did not direcly make fonds available w Ford Mowrs for expansion, but paved the way for future sles of shares for that purpose. “The role of banking is even more important in financing distsbution of eas chan in financing prodvetion. The corporation which can lon Se deniers fands for cutthroat competition, and which can provide the eases installment credit to car buyers, wil survive and rise to the 1 ‘Gereral Motors, through the General Motors Acceptance Corp. and its Motors Holding Plan, has advanced $2 billion to car buyers and Gealern, The dealers, backed financially by the corporation, can hold the atck of care with which GM saddles them, can afford to slice their profit margin, and to engage in ll sorts of sharp practices, Chrys Pret recetaly, bad no scheme for financing its desler, and the Iargcx ‘Ghyser desir, Bishop, McCormick and Bishop, bad to go out of busines carly in 1954, a serious blow to the Chrysler Corp. ‘Bue the eatent of GM's financial backing of dealees and buyers ix not a measure of its “independent” financial strength, but rather of {he arength of the Bnancial circles with whic it is connected. At the thd of 1955 General Motors carried an investment of §231 million io Gencral Motors Acceptance Corp. But the banks and insurance com: panies had over § bilion invexed in GMAC. The banking invertment EEGMAC increased more than 15 times beeween 1947 and 1955. Combining, the producing company and its sles subsidiary, new courte sacs inthe three years 195355 alone totalled $240 milion Ne inducerial company has ever Before gone so decply into debs tothe leading financial interests at General Motors has since World War Il. ‘Now let us turn to the interaal structure of General Motors and the ole of Gnanciers within i, To Begin with, Geneeal Motors toy te ituclf moce a financial holding company than an industrial corpore tion, Even without any outide banking fonds, the ruling group 59 General Motors would be in truth a financial oligarchy. Ths is quite Wate srmeer sritt xutas 9 from the widerpread lending acvites of General Motors, sch Sas sel sls, Seis ad cate eh moe ‘Esl in the macvadverited operating independent of the varius Panufacturing divisions. : : “What is the mechanism by which the top circles of General Motors onate the aves of fu varius divsens? Danan Brown, qo tespreidea sod ail's dinate of Genel Mowers, wots Sh yeas ego in a paper presented to the American Management Asociation: a he cof Genel Mots he nd of irs aro smite 1 Gaane commines response fr general Eancal ply sed an ecevre ‘tee rayne lar pring ec The func ome nde Tig nnd th uta it iin pr em one were he tas cf Gancl Mors Tos nad sng, he eee comms Sere fran commie ts opine apn po faunal pase Atch ee tc fans pl mete sateen operons ‘will not be deprived of any legitimate development. ..™ a The arcs vicualy the same toy, J same today, exept atthe Exectve Cummins now calle the Operations Poy Commie: Ths GM i ongmized ax a cever for cntling the operons of 2 werzs of tana cospanes sod he pelipal rg of cots Financial Policy Committee. eee dae Who are the men of "large asi” that rn the d i” that run the deve Financial tpi The ning sec of Gener More 2% 1 oe by hed Po Copy, wich a he eg of) ie reeves onthe GM Dud of ier te hem ont ancl Pig Comite Te da Potteries ie Be of he onc sgh, snl ngert bone ion 10 the indus erp. Bar the fica reoor=s Satlled by the ds Pons are far fmm suicen tw insure the pe Sinene of GM. The bilons whch have flowed nto GM in rte vex reflect the iteree of 2 group of finances with al greater ho i he famous lowe of Morgan, banker for bth the dh ‘land for OM. The chaiman ofthe bur and the president AEP. Mor 6 oc deen of OM, whi she chatman of Ohi cur iP Mga Co wl af Pot Te an men are both onthe Financial Policy Commits, toster withthe three dla Pont men and the Mergan-du Poot chaieman ef GML ably the du Poot voce is moe poweril than that ofthe» mime Be Morgans in GM affairs, if only becuse in the event of confit the se Bants wich the controlling block of shares, could switch GM feansing to she equally wealthy institutions centering around the searcttir Interests But the balance between the du Pont and Morgan TRooncial interests ia GM. i aot the point at isue. Clearyy their ‘Rpreenttives, and not Charles E. Wilson por his succor as cic saeresive Harlowe H, Curtie, dominate the affsirs of GM. Te all its power, General Motors Corp. cannot be regarded as an independent center of finance capital, but a8 & major part of the stl Taeger Morgan and du Poat empires "Fendy, consider the role of the financial oligarchy in one of the reecnt big mergers. The Studebaker-Packard merger was worked ou iy ahvee Wall Stee houses, Lehman Bros. (Studebaker “traditional Benker’), Glore Forgan & Co. (als on the Studebaker Board), and Kaaba Leeb & Co, Here is how the bankers worked: “If present plans velop, a merger program . . will be submized to Studebaker Packard management within 20 days... Several suggested methods if bringing Stidcbaker Packard under one roof have been scrapped Sichout ever teaching the atenton of the principals «« «only one oie wil submit the final suggestion for bringing the companies together Th the fate of these two companies was worked out wholly by the banking house, with the industrial managers not even being eformed ae to what was going op, and the final result was brought fo them sa fait accompls by the bankers spokesmen. “The industrial managers role is discussed further in Chapter 1 “The final srgument government regulation and hostility, is discused in Par Theee- WAU STREET ‘Ta center of the mency markt isin dwntomn New York Gis, ste eet iced Wal Sere nc Tah aen bonds te ain of the et era eta or fcen bunks which «- «provide the major pat of de PERT ht wo eer the tamer of money, adits a conmaton of 2 ce sau themselves which Bow agai onthe bass word ‘Beta Sercmcty oer te kpone Beeaen men whoare knowa teach oh {ad whore inert anno be essen.” So writes a Federal Reserve Bank official, Robert V. Rosa, in the mont authontative description of the present-day money marke: “The economic life of the country is largely controlled from thi WALL sreeer arity Rute 3 So ee cee gr ee ween nt re : ee ee difosed throughout the country. me a Pieter fa bento earn hetero Se ees SE preg ery ‘ame into full play during the economic crisis of the 1930's, Wall Street erential emer Sere sie Pa re se noe Fei oe nye eas Sona es SS Sal a rani cr eet ee ee eater voice in polit political afsrs atthe expense of the New York Fox) = ‘existence of different financial centers, and struggles among Sarre a ene changeit blanc of power. Along ‘much publicized specific gains of ouvottawn groups, Newz {THE EMPIRE OF HICH FINANCE ‘York circles have quietly extended their positions in the orginal areas of operation of thee rival, Even without a detailed analysis of these feroggles (w be found in Pare B of this volume), & it posible to xaumine the overall evidence to determine whether Wall Stret has ‘actually been undermined, "The facts show that New York remains far ahead in all fnancia) statistics Is lead has diminished in some, but increased in others of renter significance, Ke premier position is most marked in-the new End rising fotms of nancial power. Altogether, the financial domains tion of ‘he Stee is unshaken, while with the continuation of central zation of economie power at a whole, its overall weight in the life of the couatry is enhanced. "The most summary measure of financial acivity is the volume of bank clearings. These toiled $531 million in New York City in 1953 ‘This was nine times the clearings of the second most active city Philedziphia, and exceeded the combined clearings ofthe next twen'y civics?” One might say, considering all secondary centers, that Phila ‘Eiphia i "frst among equals.” But this snot the ease with New York, Handling each year mote dollars chan the total national income cf the United Stats, ici in a class by itself. “The sandard statistical evidence cited to “prove” the demise of Wall Stcee domination is the decline in New York's ciy’s share of ‘commercial bank deposits from over 308 in 1940 to 1896 in. 1954" However, this comparison vses an unrepresctative stating point ard does not include al banks. Deposits ofall banks in New York Ste ‘Goring the carly 1950's were 25% of the national cota, as against 2% ‘luring most ofthe peiod 191419222" This isa drop, bt not of major proportions: ‘Bven this smaller decline does not signify a diusion of financial power, It flees the growth of “retail” or consumer banking, ( Caper IV), which is spread ut geographically more or less according to population, "Wholesale" or big Business banking is the decisive instrument of nancial power. I x the traditional means of banking penetration into indvst}, of the merging of financial and industri! eit Hn this crucial fed, the role of the New York City banks has ne iminithed at all 36° compared with immediate prewar years, 03 har increased markedly as compared with the 1920. ‘The share of all banks in New York State ia the business loans of the counted twas 325% in 193, rising to 34.1% in 1953 Sec ee ee WALL STREET STILL ROLES B ve ne pri ering 0 mente an in the Fea esr Syste, the share of those in New York City rose from 195% R378 2 B50 85 Tas gt New Ver Cy ah nt lost hlé the national total of loane t0 ght corporations ith assets of over $100 million, fae “The share of New York banks in financial loans, connected most imately with sck market manipulations and the one of eorore- Sons, inteaed just ar markedly, and by 195354 amounted to almoxt {096 of the national val." ‘Business Week, in commenting on a “aquczs” on deposits in New Yerk banks, ward tha thee might have co cual Iw: “And it that happens, every corporate tenner will fel the effects with wrerkebecause New York i the money ceter of the country. CENTRALIZATION OF WORLD-WIDE PROFITS [A favorite explanation of the supposed decline in. Wall Stes has been the movement of population to the Wes, and the "shite by industry to new ceaters”™ “The physic fact of this diperal i irelevant. Gulf Oil and Standard of New Jevsey have shited much oftheir industrial oper tons our of the United States and get mos of their erude ol abroad. Bot this merely signifies a great ineese in the power of the United Sate il compan, Win the United Sas, thee has ber, Sgaifcane movement of indusry away from the higherwage, older toreatera enters Dt Willm Zeckendot, largesse New York real esate developer, pointed out that industries faving New York have been replaced with executive units “ten times mote valuable than, industrial space” Since 197, he said, 20 millon square fet of ofce space hasbeen newly constricted or planned in New York City, more than the entre oe space in the ty of Chicago” The office space is "ten mes moe valle” boase 1 wed a acne of conto kaw the profits from developing industry allover the countey and actin hanking trong the county i dominated fom the am etre by te conespntentctntip with onto tok and indie. The male oreponer bank anand a2 ont ina meopaan bat toe ed for prc of wears lun patito, ee ‘The hearer bank spries w 4com re exe the dng aie fhe sale any canning ‘sure nos portfolio sad suggesting loan prion Ye te cen holds sock In coregpondet banks” ‘rin enpine OF HICH FINANCE "The First Nacional City Bank, with over a billion in inter-bank depois, writes, “OF the hundred largest non-financial corporations in the country, 95 have accounts with our bank. Our correspondent bank ing relationships are similarly wide. All of the hundred largest banks invche country outside New York City maintain accounts with us We work joiatly with our correspondent banks in eases where ‘bonnes in ther areas is of ste and importance to warrant including 2 New York bank as depositary and lender."™ Large midwestern banks have important correspondent relationships also. But, considering those connections carrying influence as distinct from purely nominal deposits, the banks in other cites generally exert ‘only regional influence while the New York banks alone exert uly axonal influence. Foreign banking is a field of erucal importance; it affects inter- rational telatons; ic involves close connections with the most profit ble foreign dealings of US. corporations. Because of the increased ‘world role of the dollar, this foreign business has become more in portant and in some rexpecte has multiplied in volume. For eximpls, {posits of foreigners in United Star banks increaed ght cies between 1981 and 1954 "A recent Federal Reserve study showed that 15 banks wholly dominate foreign transactions. OF these, ten New York City banks held 7606 of the total claims on foreigners, and $495 of the total deposits of foreigners” “Phere are just nine US. banks with foreign branches or subsi aries, Two Wall Street banks account for the majority of branches land over half the deposits in foreign offices, These are the Firs ‘National City Bank, traditional bank of the raw materials merchants, tnd Chase Manhattan, bank of the iternational oil companies, Four ther New York banks with foreign oes bring the cify's share of deporte abroad up to tworthirds “Tone passes from the field of ordinary commercial banking to other fields of finance, the predominance of Wall Steet is shown to be ven greater. Tn investment banking, dusing the period 195044, 16 large New ‘York City firms headed the underwriting of 655% of all secuiis issued Tn sock exchange transctons, 9295 of the 1953 national total were fon the New York exchanges. Tn lfe insurance, New York and Newark companies held 61496 of all life insurance company corporate loans at the end of 1952 Wane saree sribt RULES co ‘Ninetenths of all such loans are held by life insurance companies (Operating from 5 northeastern centers. Trust departments of banks in Sew York City handle almost half of this vital busines. "The activities of these various forms of financial institutions are ceocdinated by the intelocking oligarchy of Wall Steet. Their fanctioning ie described in Chapter 1V. ‘Sweezy thinks that “economic and politcal changes in the lst chiety years (especially changes in the structure and functions of the banking Fystem and the expansion of the economic role of the state) ha Teduced the relative importance of New York wo a marked degree. "The development of life insurance companies tast departments, and international financial connections are among the more important hanges in financial ructure and forms during the past chircy years ‘Bur as can be seen, these all serve to enhance the domination of ‘Wall Street, rather than the opposite. As for politcal changes, the specific weight of Wall Steet ia the control of the government by the financial oligarchy i discussed in Chapter XVI. Againy the increased economic role of the state means more power for the New York centers. ‘Wall Steer is less brash in @aunting its power than it was thirty years ago. However, that poster has not been succesfully challenged. Practically all of the leading journals join in the game of denying the realty of “Wall Stet.” But occasionally, when other issues are fat sake, the truth comes out. In 1953 the Mellons were trying to got the Engineering Societies to move their headquarters from an unsvit- able New York building to Passburgh. A New York group had plans for them to remain in that city. The New York Times commented cdtorially: “The temptations tossed at the engincering societies by the outlanders seem to be in the form of money or other articles of value, But we remind them that New York isthe beaten track. Ie if the gathering point, From ere, incemparably, great corporations fun their busineses, make their plans, execte the decisions for coa- ‘eruction and expansion programs. Here isthe financing capital. Can any of the inviting cities make this claim?" ‘The Engineering Societies stayed in New York.CHAPTER IIL The Ownership and Control of Corporations Mosr sorts xxow that a few hundred corporations dominate the ‘conomic life of the country. But to understand his domination fly it is necessary to go behind the anonymous front of the corporation and to see who runs it Who consol the grea exporuions? How do hey exec that THE CONTROLLING LARGE STOCKHOLDERS Those wio do contol try to convince the public of the exence of & corporate “democracy” of millions of smal shares This lea ie stewed repestely in apeches of eceaten in corporation Sérstienats ed ctpateespered ronach woke it min fare of the newline’ phate, “poop eam” eis however, eamplte fon, The myth ws efatly auld by F. D. Rowers, who wites, ‘The mece numberof scutity hoes give ite de wo the se of thei ind idan holdings to thr aby to bane a vie in the management Is fe ation of stock ovneship of corporations in the bans cf 1 Gay ‘Bini cf the population mate the esnentston of copra ete ‘The year 1929 was a banar yea for dtuton ef ck nea, Buti tat year thvetenths of | percent of ar pelo rreved 8 percent he dividends epetd by sndvideas hoe who sponsor the “people's cpt” fine kaow ths beter than anybody ce But hey ave revved and ited he prope ganda, in a polticallymotivated tempt mild spec gullible public. . eo Through stock ownership, writes Profestor Marcus Nadler for the OWNERSIEP AND CONTHOL OF CORPORATIONS 37 Hanover Bank, “the people own the means of production? But the 86 million stockholders estimated for 1955 is lower than the number then estimated in 1930. Half a million wage-carner families own stock, bur the total stock owned by all of them equals about twoenths of fone percent of the toc value of stock outstanding. A single family, the du Pont clan, owns ten times as much stock as all the wage-carers of the country put together. The dividends recived by the average workersteckholder amount annusly to about two days wages, of & tiny percentage of the profits derived by the large stockholder from his labor. And 979 of all wageearaers do not even bave this token “share inthe means of production.” ‘Actually the corporation is run by a ay clique of large shareholders and thei bankerasxiates, Almost every day the financial pages report an individwal or group purchasing control of 8 corporation ftom, another individual or group. The thousands of sinall sharcholders in the corporation are not consulted, are usally unaware of what is going on, and may be toally unaffected by the shift in contol in 2 politcal democracy, there is umslly one vote per voter. But in the affairs of the corporation, thee is one vote per share of sock, ‘The holder of 10000 shares has 25 much influence as 1,000 holders of 10 shares each, even if one assumes the uabicely event that the 1,000 would get together and unite their wees. Shocly before World Wat Il a government agency, the Securities and Exchange Commision, studied the shareholdings inthe 20 largest ‘on inancal corporations in the United State, ‘The resus were published ina monograph of the Temporary National Eeonomie Commitee (TNEC). ‘The TNEC monograph showed a total of 7 million common stock shareholdings in these 00 corporations, or an average of 35,00 share- holdings per corporation. But fewer than 39% of the stockholdings ‘accounted for more than half the stock. That is fewer than 1,000 large and substantial shareholders in the average corporation could win any vote against the remaining 34,00, But even ths tells the least are of the sory. The 20 largest sockholders in each corporation, om the average, The 20 tens seconnes the esis as ole “arom rice han ‘ta ot “tania ldo, Cant fy ws ge ates as Saige feeb ce lings Oo ay ee ‘ial in serene tay se or wert and vee me Indias orm cling oneal prratag oh eck (ea inet = ‘hee rnigh cooled inratns), my be more o ewe a 10, dendig8 {THE RAGPINE OF HIKGH FINANCE owned 329% of the common stock® These 20 large stockholders, in practic, easily contol the afaits of the coxporation. To see this more Cleary, Tee us summarize the situation in the average corporation 28 revealed by the TNEC monograph: 20 lage holders have 3295 of the votes 990 substantial holders have 1896 of the votes ‘HKD smal holders have 509% of the votes “The 34000 small holders rarely take an active interest in the cot poratia's affairs. Their stake in iis to0 small co justify any significant Expenditure of time or money to leok after their investment, nor do they have the resources do so if they wished. When there is a ‘meeting of the corporation's stockholders (usually held once a yea), they cannot atend. They send “proxies” to a commitee representing ‘very large stockholders, authorizing them to dispose of their vore 38 the proxy committe sce ft. A few hundred ofthe substantial holders ft mont, wil attend the meeting. But with their 18%, they canact soccesully challenge che 20 large holders, who noe only contol their ‘own 32%, but ali & goed part of the 509% of the total vote belonging to the small holders, which these have seat the committee of large holders 28 “proxies” ‘When fights take place for control of a corporation, and they do Iainly often, these fights are among the 20 lorge holders. Diflerent groupe among these large holders engage in a struggle for control, In many such eases, each group requests the small and substantial stockholders to yield voting “proses” co it rather than to the rival ‘group. Sometimes millions of dollars are spent in these proxy Aights, in the last analysis atthe expense of the stockholders—or, when the ‘company is able to past on the cost, at che expense of the wers ofits product "Actually, not all the 20 largest sharcholders, buc a till smaller clique among the 20, are able quite easily to contol the affairs of tot corporations, The New York Times wrote on the Ford Founda- tion sale of stock that reduced the Ford family’s share of voting stock to 40%: "Wall Sercet experts noted that effective control ofthe com pany was virtually certain to remain with the family, even after the transfer of 60 per cent of the vouing rights to outsiders. In practice, ‘the holders of 5010 per cent of the tock seually are able 10 exert ‘controling voce in the afsire of corporation that has large numbers of stockholder" (emphasis added.) In realty, therefore, not 20 sharcholders with onethi of the stock, OWNERSIIIE AND CONTROL OF CORPORATIONS 39, bt usually one to five shareholders with 5.1096 of the stock, exercise fective contol. Typicilly, an alliance ofa handful of giant stockhold. Gis more or les akin to'a partnership, has control. The members of this control group divide the profes of control in an agreed fashion, Ueeide corporate policies among themselves, and select managers and eetincans to handle corporate operations. Even within this grouping the power is not equally distributed, and there is often a single dom- nant individual or group. "The main mechanism for the exercise of contol is the corporation's board of directors. The board of directors usually numbers 9 t0 15 individuals. Formally, they are elected by the stockholders. In practice they ace selected by the small group which exercises contol. When 2 magoate purchases 4 large block of shares ia 2 coeporation with which he was not previously connected, he demands a place on the board of ‘rectors, and will usually be granted such a place unless he is garded Sr hostle to the existing center of control. When the block is sufi- ‘Gently large to cause a switch inthe cener of contol, the newcomers ‘Semand majority representation on the board of directors. They may ‘achieve this peacefully, by buying out the holdings of the previous foatrl group at a favorable price, or by granting various ether con- festions such a8 continuation of high-salaried jabs or profitable con- tracts. Or the issue may be sted only after a struggle involving a “prony fight” for the votes of the small and medium-sized shareholders, coure suits, competitive buying up of available shares on the stock. exchange, and other techniques. ‘Represcatation on the board of directors may be held personally by the large shareholder; it may be held by one of his employees a8 2 representative of his interes; or ic may be held by the bunk through ‘which he operates and i which he usually als has a financial imerest. ‘An example of the frst type of sepresentation is provided by the Crown Zelesbach Corp, now the second largest paper manufacturer ‘The Zelerbach family i the largest sharcholder and has three mem- bere on the board of directors. In this ease, but not always, members of the owning family occupy the leading executive postions also? “The Rockelelers provide examples of the second kind of representa. tion, chrough personal employees or nominees, Harper Wodward and Randolph B. Marston, among others, serve as Rockefeller represen- tatives oa che boards of various companies, although they do.noe have 2 abs aniline in hr own igh te tied typeof representation, throughs a bank, is seen in che case ‘of Union Carbide & Carbon, second largest chemical corporation. Thee MME RMPIRE OF HICH FINANCE largest black of shares inthis corporation, as of 193, was eld through the Hanover Bank. Then, and now, the chairman of the Bank is a director of Union Carbide, and the chief exeeusive ofcer ofthe chem- ‘eal company holds a place on the Hanover Bank board "This typeof representation lads to dscusion of a most vital element in the structure of corporate control. BANKERS’ ROLE IN CORPORATE CONTROL So far we have examined the basis of control of the individual corporation. Although the forms have changed, che principle is the same today a8 a century ago. One new feature, typical of the present cantury, isthe size of the individual corporation, reaching the point ‘where one or a few compsnies dominate «given industry. Still more significant isthe exercise of simultancous contol over the afairs of @ whole series of thee giants by a single power center. Super-orporate empires running iato the tens of billions of dollars have arisen in this way, their spheres covering a wide range of finance, industry and trade within the country and overseas, The giant banks are the centers of these empires, ‘Their position arises along to related lines. One line and the original source of banking postr, is the viewally limitless need for financing of the great corporation, both in thei organization and in their ubequent expansion. ‘The baaks which can supply this financing obrain a great, and sometime paramount, influence in the affairs of the corporation, They ‘often become the very core of the control group; they obtain repre- seotation on the board of directors; they exercise 2 veto power on all major policy questions; they can direct orders for materials to allied firms and transport tolled railroads, This influence may exceed by ‘a wide margia that indicated by the actual stockholdinge ofthe banks. ‘Most outside funds for expansion supplied through the banking houses and inrurance companies are raised through boods, which in theory have no votes but infact involve an imporeant degree of power, ‘expresed formally in various financial and operating restrictions on the borrower. In a minority of cases the lending bankers ae granted decisive legal conical over operations, Thus, a small group of Texas families own almost all the stock of Anderton, Clayton & Co, the largest cation ‘merchandising company. But ite capital for postwar expansion was supplied through the Morgan banking interes. Ax one condition, 909% of the coatelling shares in the subsidiaries which compress and ware- house the cotion are held ia a voting truse agreement by a committee OWNERSHIE AND CONTROL OF CORFORATIONS = 4t controlled by the Guaranty Trust and the Morgan law firm, Davis, Polk, Wardwell, Sunderland & Kiendl* ‘More typically, however, the power position of the lending bank js bated lest om formal agreements than on its role asthe supplier of funds, connecting link with other industrial irs, negotiator of mer- "ource of all kinds of economic information, and contact point for allmportant political influence. "The second line of banking powcr isthe ownership of coatrl blocks ‘of stock by and through the big banks. This is often overlooked, and the illusion crested thereby that banking power in industry is quite divorced from stock ovenership. Goldsmith cstimated that the share of financial institutions in oration stock increased from 7.996 in 1900 to 14296 in 1929 and 286% in 1998? Our estimate for 1954, which may not be wholly com- parable with Goldsmith's, is onechird (Chapter IV). "The government fudy of large stockholdinge in the 200 giants of industry showed that in 1938 financial insicuions held about one-half of these controling blocks? By 1954 this proportion reached about two-thirds. Indicative ofthe accelerated concentration of corporation stock in financial hands during the “Eisenhower boom,” 779% of the net purchases of stock ‘during 1954 went to thee insitutional investors? ‘Bank stockholdings arose historically and continue to grow through «varity of ways: bankerpromoters reesve large blocks of shares as part oftheir price for organizing mergers and new corporations; they teccive “proxies” for the voting of blocks of shares they place with ‘certain customers, especially foreign stockholders; they handle the catates of wealthy cients, voting their stock in the big corporations. For example, a number of families ofthe steel barons whose prop- certies were put together into. United States Steel by the House of ‘Morgan became cients and associates of the Morgan banking interests, snot only in steel, but in other industries as wel ‘The large banking houses contol additional blocks of shares accumu- lated by affliated financial instivtions, such as insurance companies, invesement trusts, and brokerage houses. Steccholding by financial institutions is impersonal in frm, but not in submance. The exeence of the power of che leading bankers is their ‘ownership of the mott vital coatol blocks ofall, the shares of the ‘great banks, These stocks are very closely held. They are not waded fn the stock exchanges. The “floating supply,” that anybody with the funds may buy, is small, Maximum secrecy surrounds the identity of ‘As the greatest monopulies expand through wars and mergers,e THE Bere oF MoH FiNANCE contol is increasingly exercised through a combination of these two lines of power—use ofthe financial ceourees of the banks and of the largest blocks of stocks, aio carsied by the financial iasitaions, ‘The report ofthe Pujo Committee in 1913 recogeized the importance of both of these as means for establishment of banker control over indusry* But subsequent literature hae largely lst sight of the second, which resulted in a seeming narrowing ofthe basis of fnsace capital, and opened the door to the apologists who “abolished” finance apical, Both lines of power are sill vital, and banker stockholdings are ia face larger than ever. ‘THE OUGARCHY Anna Rochester cites the Morgan isterens at the bet known example of the power derived fm the complex Sone rear of the banks, and refers ois: "the mut adtened age af pci development. «Indra companies dav im ergeally desl Morgan invesncat banking are Bld in line through Morgan dose Jnaoc in the banking word bt at the same sme he Moran Sank dng power is now supponed by the gene Morgan indoseal on teratons-™ “This ost advanced form of contol dos treet an between banking and indy, nor the king one of the banks in any crude seme fs gencral bas charactetined By eke “community of interes” principle advocate by the Testing Boner in the erly decdes of the monoplics,. Perport Morgaa. Under this principle 2 group of the wealthiest moguls i indosny ad at Seance combine tee holdings oexsblnh conl ever a whe wee af corprations, The banks are key to hia sacra, bu he ene induial magnates Bee prt ofthe baking erp. The upshot, then is ot the conga of one bythe other, but the merging oh intussial and financial magnates into an ll pemeatd financial lgerchy. Ths oligarchy it aon, by any means whelly ned Is divided into groupy wth diferent spheres of cone, khough various of thee join thes interes fn parr eosponncny ‘The developmest of the nancial cliguchy wih ts tamiicd conse inceses many times the efecve cmcentraion of cone per For while 20 large corporations amine the economic Hie of the ountry, eight centrs f igh fence contol mort of these 20 operations OWNERSHIP AND CONTROL OF CORPORATIONS —— 4g ‘The individuals exercising control are msialy the multimilionaires descended from the tycoons involved in the original formation of the tuuas over filly years ago, Some new interes have risen to the ranks of the mightys some old families have become bankrupt or have died out, Outstanding is the entrenched aristocracy of American wealth, the socalled “60 families” who pile up added billions of dolls each yest. The classic book about the vich American families is Gustavus Myers History of the Great American Fortunes, Most of the fortonct described by Myers, some stretching back over 150 years afe sl prominently represented in the cirles of the financial oligarchy tolay Axor, Goelet, Field, Vanderbilt, du Pont, Gould, Crocker, Morgat, Rockefeller, Havemeyer, Duke, Guggenheim, Melion, and Ford are ‘examples. ‘The public is told by pres and television, by learned professors and skilled advertisers that these great fortunes have been shrunken ot dosipated through charities, high eaxes, and egalitarian legislation. This is another leading theme in the People's Capitalism lullaby. . Wright Mill, in The Power Elite, shater it, and conclades: “The fabulously rich, a6 well as the mere millionaires, are all very much among us «the coeporate rch of America, whose wealth and power is today comparable with chose of any sratum, anywhere or anytime in world history. Mills relying’ on income tax data, shows that these fortunes are ‘unimpaired as compared with the 120%, More precise measures show ‘that actually they have been mukiplied many times. (See Chart 1.) The TNEC computed the 1937 fortunes of such families 36 the Fords, du Ponts, Melions, and Rockefellers as of 1957 It measured the ‘market value of their eported shareholdings in the 200 largest aon nancial corporations. It excluded holdings in banks and in smaller industrial corporations, hidden holdings in che 200 giants holdings in unincorporated ventures, and personal properties. Despite these limitations, the TNEC report embraced the major components of family wealth ‘These key sockholdings have not been disperied. Thie is known specially Irom certain coeporate report, 28 of the du Poat holdings jn E. 1. du Pont de Nemours; and from semi-ofical biographical secounis, as in the ease of the Rockefeller Standard Oil holdings Indeed, the fact of multiplied stack prices since 1937 would make any major sale of stck by one ofthese families too cosly taxwise, even With the mere 25% capital gains tax, to be considered except in an ‘emergency."GROWTH OF GREAT TAMILY TORTUNES 1aa7 carey ry Caner? Bie The boi ba hn Me pnt be Hat A Fue enh a Nas Bet ety en OWNERSHIP AND CONTROL OF CORPORATIONS 45 ‘Combining TNEC data with other sources, itis possible 0 estimate the 1955 du Pont, Mellon, and Rockefeller fortunes on a bass roughly fomparable with that of the TNEC study: “ans 1 TE DUFONT, MELLON AND ROCKEFELLER FORTUNES, si Eine of Yao of “Cau ray. mon) Fenly Dens 156 Date sr 60 xe et o. Recker ior sas 16,1986 Ge Arent 1). 1997, TNC Monagrph No. 25, Tbe 6, Each of these family fortunes has multiplied between $ and 10 times during the past two decades This multiplication factor may be exaggerate for statistical reasons but the actual amounts shown for 1556, though not precise, are incomplete and certainly minimum ‘eimates ofthese families fortunes. "Thus today, for the fst time, itis posible to speak of 2 number of mulei-billionare families in America. ‘These statistics of persooal wealth, impresive as they ate, do not doquitely convey ether the full power of thee families, nor their comparative standings, The power of each of these major families arises from the vast corporate empires controlled through ther share holdings. In the case of the Rockefellers this embraces asets of over $60 Bilion, soventeen times the family fortune, and several times larger than the empires controlled by the du Pants or Mellons (see Chapter VI). Moreover, there are properted men, no one of them in the family wealth east of the du Ponts, Mellons, or Rockefellers, who, by thei Iistorcally developed functioning as a unified group, are comparable in weal wealth and power. In this way, the Morgans and the various farnilies associated with them compare with the Rockefellers; the Chicago or Cleveland groups with the du Ponts or Mellons "To present the eal picture, therefore, our concern here will nt be mainly with tracing the particular holdings and degree of activity in financial affairs of individuals or fails, no mater how wealthy. We will concentrate instead on the financial institutions through which The vou of de sock marta ow se a Deter 1937 ad 2 at Sg 1956 ao tee wie! ere bling in 156 crim exrine oF HICH FINANCE their holdings and activities ae centralized. Ar the same time, it must be remembered that the great banks, like other corporations, are not really anonymous institutions, but are controlled by 2 narzow clique of the very wealthy, the “Power Elite" who exert enormous power fand derive great profits from the whole ange of American economy by vie ofthat control. ‘With the development of monopoly capitalism, this most advanced and complex form of indusval contzol becomes more general. At the Same time the distineion between che banker and che industrialist becomes more vague—as the banker and the industrialist merge into the unified banker industilis. The identity of the individual with 4 particular company of line of industry also becomes more vague, as hae joins with 2 geoup of tycoons, and spreads his intress over a ‘wider and wider range. ‘To illustrate this molding of economic power into a common basic form, consider the evolution of the Rockefeller and Morgan power. ‘The Rockefellers began ae oil magnates, with no interest in financial insiutions, doing their own banking through the Standard Oil Co, ‘The Standard Oil companies have grown hundreds of times and sil provide the largest part of the Rockefeller profs. But the power of the Rockefeller empire is no longer centered in the Standard Oil Corp» but rather in the Chase Manhattan Bank, nd its asocated insurance companies and investment banking agencies. Moreover, the industrial interests ofthe Rockefellers largely through thir banking connection, how extend to aircraft, lie, and a wide range of other industries besides oil. The Morgane began as bankers, and until as recently as 1940 remained a closed partnership. But today J. P. Morgan & Co, the key bank of the Morgan group, ix a “public” corporation like the ‘other baaks, with “ouside” directors from the industrial corporations in which the Morgans have an interest a well as “inside” directors ‘consisting of fllsime bankers. ‘Unuilreccatly one giant of industry retained a semblance of isolation from bankers and the network of interlocking directorates and mixed stock ownership. However, in 1956 Ford Motors authorized sale of sock to the “public” through a Wall Steet investment banking syndicate, and hereafter will be increasingly asocated with the finan- ial oligarchy. In 1954 Carupbell Soup, the larges “private” food com- pany, made a similar stock distibusion. Large private industrial Companies are now limited manly to che textile industry. Te wn shat oC Wight Mila who ity sare thes erween (6 iv Ele ad hata a Poet OWNERSILIP AND CONTROL OF CORPORATIONS 47 ‘THE “MANAGERIAL REVOLUTION” ‘As the contol of industry bas grown more complex in character, and increasingly centered in a ncowork of financial institutions, it has become easier to conceal, When the giant corporations were first organized, the contelling banking interests openly laid out their fempires and faunted their power. But at opposition o this power fncreated, as ite harmful effects on the people were exposed, the tendency grew to obscure and disguise its very existence "The dominant financial interests hide behind he legal fcion ofthe anonymous “corporate person”® as a law unto itll. As the great majority of industrial property-owners, the small shareholders, lst all, influence over corporate activity, the corporation appeared to them to become something apart from private property rights. ‘Encouraging this ilsion, Berle writers “The capital is there; and 10 is capitalism, The waning factor isthe capitalist. He has somehow ‘vanished in great measure from the picture, and with him has vanished sch of the controlling force of his markecplace judgment” "The concept arose of the separation of ownership from control in the large corporation. te estetial falsity was expressed very clearly by weezy: ‘Tn recent yar we Have read much oat seperation of nership fom cxotrl in the loge covporton, Tht sa caret deverpicn actual wends fies ken {9 mean tat concen of ean ove capil fut ied by the encena Sion af macs however, i nerd st meling tt coool poses tuto the hands ofthe wert altogether and becomes the prerogative of ome er group in sckty. i's corey erence, What seal happens i ht {he gene mary of ornare ipa of cota afer o «sll init of ‘ene The lege copa tnt, ths nether the demeraaton or the ‘Slogan ef te conolfancone of peop, but eather their eoocente stan $5 mal group of large property nness* Sweeay refers to “some other group in seiay” to which contol sepporeily pases, Whats this ther geop? Tein he bred managers, aod executives of lange conporations. As the financial oerods Beare involved in Inger nctwork, they inressingly separated thems from sctive management of paiculsrenerprisk They concentated tonal score avy within the Enancil owes or family halding companies from which the manifold iaveseents wer han- dled "The diy supervision of ass inthe Indust corporation, le same cua caput Anon "Si any”8 rite EMPIRE OF 1GH FINANCE and even in many banking corporations, was more and more turned lover to hired executives, ‘Formal responsibility wat shifted from those actally in control to the hired managers and “front mea.” This tendency became particu laa prominent with the outbreak of the great economic criss of the 1930, the utr falure of the tycoons of Wall Stree to ward off its calamitous effets on the people, and the development of popular stcoggle against big busines. When Republic Stel gunmen shot down striking steel workers in 1937, the responsibilty was assigned to the txecutive, Tom Girdler, and’ not to the Cleveland financiers who completely controlled the corporation, and who had hired Girdler and made the major policy deciions. ‘Various profesors and siriters, from outright apologists for big business to wellmeaning liberals, acepted at face value the facade of hired managers concealing the trae character of control. They Seveloped the theory that the managers aow controlled the large corporations, and that these managers were a new and distinct lass in sociery. ‘The concept of “management control frst appeared prominently jn a book by Berle and Means, published in 1933, The Modera Corporation and Private Property. ‘Tese authors filed to trace the connections of large corporations with Foancial institutions. Instead, where there was act an ebvious bass for conteol in well-publicized centers of sock ownership, they usually classified a company as under “management contro” They found that as of 1930, 4496 of the largest campanies, with 5896 of the assets, were “management controlled.” "The later studies of the 1930, bated on more adequate information, largely overcame the weakness of the work by Berle and Meas, and established ouside centers of coateol for mest ofthe corporations that these authors had clasified ax “management controlled.” The TTINEC study found that concentrated stockholdings constituted an adequate bass for control of mos giant corporations: "About 60, or less than onethird of the 200 corporations, were without a visible center of ownership coatrol. This does not mean, however, char an cru center of contol wae lacking, but only indicates that a study of the 20 largest reeord holdings failed to disclose such a ceter2™* ‘The National Resources Committee study, depending mainly on Financial connections and interlocking directorates filled in many of the gaps. In later chapters of the present volume, by combining informition oa sockholdings with analysis of financial connections OWNERSHIP AND CONTROL OF CORPORATIONS 49 and interlocking diectorats, definite centers of contol are exablished for alenont all large corporations analyzed” ‘At any rate, even the prewar studies disposed factually of the “management contol” theory. Bue shortly after they appeaced, the theory was formalized and buile into a system by the writer James Burnham in his book The Managerial Revolution. He claimed that capitalism was being supplanted by 2 new “managerial” society, whereby a bureaucracy of indusral managers would rn the country. According to Burnham, the “managerial revolution” had been sub- ‘zituted for the socialist revolution, and Marsism was thoroughly discredited. Moreover, he argued that the “managedal revolution” wat ‘4 world-wide phenomenon commen to various socal formations, of Thich the faecix type in Germany wat mos eficient. In the United States also, he argued, “managerial society” muse ultimately develop along the political lines of Hider Germany. ‘Thus Burnham sepplied 2 rationale for the continuation in disguised form of capitalism. He endeavored to win acquiescence in fscsurype rule by big business as an “inevitable” ourgrowth of the supposed ‘wend towards conto bythe “managers” Burnham was in no sense an economist, nor did he present any supporting data. Buc his theory was so valuable for big business that i could not be permited to die a natural death. Instead it was widely popularized, made into part of the economic folklore of our times, presented a¢ dogma to college students and the general public. "The “manager” are depicted a+ men risen from the ranks “workers” who made good. Their supposed rule fs projected as proof ‘of the democratic of at least benevolent character of American eapitalism. Professor Samuclon of MALT. writes in his betacller textbook: 1 not he wetholde, who do make corporste deion? Primarily, the Incresingly inporant lo profesional manager. = “Thr uggs that she fur problem may tobe oe of choning Becween large imanpolate cnpratins sed salle corey, bat shee tat of ring waye to improve the seal and senor performance of Lege carport ewreeses ‘ee and Mean ci 36 ge inlay at “mangement cn see nell To fr eto Te TN {iy ete cel ane or Il af he 2 resi The poe ele Wah ‘occ neo wees, Sins dente wot cents Pa he 10 eo ‘apr med ie Wor War To gs So te Be and Mea a» rite EMPIRE OF HIGH FINANCE [No longs moaopy to be fae, fort snot eum by epi, tan by anager, wh fay be converted ito public servants The ae awapen vein cat of Be who clams that management trl ba incite wh "npr ou which be BEE Uhames caplon tothe advance ofl wel. Bee's Ae oundly deneuncel bythe antimonoply economist Adan Te set wet of his din ofthe sororate el “This is ioe Siete colic o€ monopoly, the pele wo final gtini- ionic te gol fll pat or monopoly powes Wim of ino sew cee way af the anager seve” Theory, they are not wholy a6 3 Rt ucmabiy. A against ks avec Saucon, proesors Purdy, nda aa Canc chrge thatthe sanagers at themselves p38 3 *eiptel xara buses ci. ratber tana groupe stewards Seng forthe interests of ocd, employees and the general Fabien Only a Rockler can wage a sucefulsrugle agin oeitieay management fotfed witha rong corporate teas.” ‘of noo of these argent ae ser nonsense. As any big copiaie afer anybody walle cry his ow or Ac 38 ESRD or emety cif he Jos ote profi it] Obvious, he deanna be dived on tar ced ort, hich sige cue of thoe authors glories the Rockets and oher vst Gries, and stacks the “eels” Cinders, Wibons and cher ied Cjecuiver and in the case of thr autor lorie the hited ae Sikes sealop ast and government cnuacrgeces a6 agin the “enpeclppen hind the snes ‘Deals the pepugandis purpre of the “managerial revlon” theory i mesa fo examine some of the evidence ced by Hi sce Prominent isthe argument tit aid fil or "isie™ dre ton cnuitte a majority on the boards of mow Tage corporations hd “oucide™drccuvs primarily repreeting financial interes ae Saint Ths tum snply deg oe dor thefts Th veveh cf the ten lage non financial corporations, a of ely 193, wall “ousde” dco ere major, wal an ove slong Maoiy 4 of ssc he So ene by Tar Mab 0 daca of ge xpos in 10, ely 373% Neat et nat dretne Ths wa an team hom 208 i OH Io Toe 'Bo Tahoe fae carport brocy me win ny ge SEG Reece Pe my Vo soo 3 ey ss dict ety wean fs cnten aten ih TOE occas lent hed ies sed te tains wate OWNERSHIP AND CONTROL OF CoNFoRATIONS ——5¢ conan amber of Diets Armen Teens & Teearoh Co rn 2 SEE ol Chew Jone) ° & Seren an oe 2 a aed el % 5 ow Fort Cnt Raed Eten Oca Sontnd Ox Co en) ‘Scien Pc Rend a al Ol or ‘ i Sen os pit of ir nd Being, nie eet a oe {age cate inl focal tro le “The dice exetons, with mejor of “nie dirctors ar all standard Ou cant Ae shen Chops Ufa rm exiting Stamper cath th ery rc the tins of te Rok {ar gp on the ol compan wich peo hem to pu he fis tf thet rg inde corporation rally the bands of ed tatapers ho roking I of tal cto. in mall comping tse fen» enjoy of nde dcons” chs ir orally becuse the lange octelding fares moe fen apes pray, ter than sgh red ployer sang th eluted managers And ia some compares oe decors ae ited fr lel tesvny a wih the etre power helng sem The sguence of thw Umino fa or ntl nel By Seal iene ctr win Cher ges pant of them all, Ameran Telephone & Telegraph head ihe io the sald “mangement conelle” corersion Bar woe he cual suaon® OF the 8 tecors ony 2 at sae "The oie tankers nto donate the Ds conse the msn ofthe execute comme “The natement that “oly a Recker” can chalenge a gop of imagers nal ot in second withthe eine Reset Je hve ‘en merous examples of dominant acelin anal ros Bing the tp exces of large eorguacons Lever Brothers he Uritveomtled aap manutscrr, Hed the we toon Charles Lisknan av chef sett The Mel Lych meres eoeling SKieway Stes fed Lingon A Waren, dete the fc hat he ad2 sue eerinn oF ston 1 acquired a prominent positon inthe etail word. Finally, the epitome tf the dicatorial manager, Sewell Avery, was dropped by the Chicago Financiers who really dominate the “management controlled” Mont igomery Ward. When Robert R. Young and his associates defeated the Morgan interests for contro of New York Central, they replaced the president, Wiliam White, and a number of other top executives. ‘The Wall Street forces “took care of" theie loyal servant, White, however, and promptly made him president of another railroad under ther conta, the Delaware & Huson, "This is nce to say that corporate managers are mere “hired hands.” ‘The executives of Standard Oil, somewhat like the permanent Civil Servants of the Brith Foreign Office, have lifetime tenure in postions of great responsibilty, often international in scope. But the tenure is fecire, and the responsibility exercised, only 90 long as it conforms with the general policy lines Ind down by the controlling outside “OF cours, conflicts arise. Corporation cffcials and executives “bar- ‘gain withthe contzlling stockholders over the division of the spoils, and sometimes fairly sharp difernces arise. Moreover, occasionally heed executives rise to postions of considerable influence, and may participate in contol, by virtue of exceptional ability or where an tineasy balance of power exists among owning groups. For example, Charles E_ Mitchell became 2 dominant figure in the National City Bank during the 1921s because of his skill in the aggresive sale of stock, and because of personal dfcuties which impeded active exer- ise of coatrol by the largest stockowning family. In the case of Bethlehem Steel, the managing group, consisting of large stackholders from the time of establishment of the corporation, probably exert effective contol, although in close concert with leading Wall Steet Financial interests, Frequently business managers become prominent in polities, a representatives of dominane financial interest rather than controllers of corporate policies. "Regardless ofthe exact dstbation of power in any given cae, the ‘most vital point is the identity of class interests as between managers ‘and controlling sockholders, Burabam’s attempt to draw a cass dis tinction isin complete disregard of the facts. Contraty to the Horatio Alger mythology of "People's Capitalism,” corporate executives are drawn overwhelmingly from the propetied ‘dares. Nepotism is normal in filing top jobs throughout the network fof industry and finance. When 2 man of lesser propery rises 0 2 high place often as not he gets there by “marrying the bos's daughtes”” OWNERSHIP AND CONTHOL OF CORPORATIONS 53 Bren in the absene of such personal te the poor man rss to the recite op onl by dic of he mt senso seripuow cons {Sitrve bis maters atthe expen of the company’ worker, cu toners and tle “Ther concliioas may be gleaned from recent academic static, sock a that of proeons Warner and Abcgpen. They found that tronics ofall op buunes excuves were the ons of owners or jets of busine fire of of profesional ren, and concluded: atv our naoal pe the busines leaden of Ameria a 4 tse group, drawn for he mon pat fen the upper rank Only to ‘imited extent may it be sid that every man's chance reat good tthe nxt man's fr bi inthe Bier couptonal levee inpeoee Ses life chances considera (eel Neweer i ete ih ud ht he hn 1 ines the chan of aside uled worker? son fod that corporate chairmen and. predents were nerve irom toneyed families of Angle Sexon Protestant ein "The cosportebareucray, ike che govenmenebarsiray, Bas incre in ze wih he grow of got corporations, But even ore than goverment buena the cesporte managers ze pat ob 2 rll at agents of ung group, the nancial gary THE FRUITS OF CONTROL Cepitalsm his grown far more complex than i was in the days when the capitalist personally supervied the labor of worker and fetived his profs dicey ftom the exploitation of that labor. The tence ofthat relationship remains a the amount of profs derived fam explitation of labor has multiplied. ‘The particule characte ‘of nop capital in th een the momopolzaton of dros, ging far beyond the centealzation of capital in afew sen ros, going fr bey spit in afew srong ‘The contol group in a corporation, which, a has been shown, may ‘mpply a small proportion of the total capital invested, appropriates {puch ger she ofthe ttl profs fen amounting wo the on’ Traditional cconomie theory recognizes tit the rte of seurn on “td capt” is normaly several tines a age asthe rte of ner, i forthe mere ue of toncy “without Hk” onthe pat of the Ender. Now, to be resi conomins must deine an additonalPy {HME ERGPIRE OF LICH. FINANCE category the profits of control. Thete profits ate realized in a varity fof forms. Their exience is often hidden, appearing nsither in the books of corporations nor in the tax returns of individuals. Ia my catliee work, The Income "Revolution i is estimated that the op fone percent of the population had effective income of more than $16 billion in 19%, over and shove the $19 billion reported on their tax returns A major portion of the $16 billion, in addition wo a full part of the $19 billion, consisted of the profits of contol Because of the lack of precise stasties on the subject, Table 3 is presented only as 4 rough approximation of what the actual situation ‘may be in the United States tay. ‘roe 3, RETURN ON DIFFERENT CAPITALS ind of Copia Comet ed Sapa (iar sare cit) Here the whole concepe of profs as the “reward for risk-taking,” 1s taught in the schools of the land, is turned upside down, 'A small savings bank depositor can obtain interest of two or three percent with litle formal risk. However, because of the tendency to Inflation which has persisted over mos ofthe hall century of monopoly capitalism, the entire interes return often. merely compensates for the decline in the purchasing power of the saver’ capital, and some- times falls short ofthe loss in real vals ‘A small investor may purchase stocks and rectve four to sx percent annually in dividends, I he is reaznably lucky in his selection of securities and timing, he wil average as much again in the apprecia- tion ia the value of his shares, dor a total return of eight to 12 percent, But he risks losing out akogether through the vagaries ofthe Mock market and his unavoidable ignorance of the full situation in particular conporations. The cards are stacked against his buying and felling the “right” stocks 3¢ the “right” times. Often, he will be urged by promoters to buy particular securities after they have been marked up in price chrough advance purchases by “inciders” who knew that profits would increase. Ae he is buying, the “insides” may well be Unloading, to anticipate the next downturn in profits. ‘The small Jnvestor is apt to have moncy for investment only in good times when stock prices are high, and is often forced to sll in bad times, ‘when stock prices ae low. ‘OWNERSHIP AND coNTROL OF CoRFORATIONS 55 ‘he men with the rely Big money, pts nor coy con eaed withthe highs aan snd pal cence weap holo ato of rode om the sca coma of corporate a, fd without sional rs hoy avoid tk bese they hese Sin aange co actu thes prs of contol they know belo the Great thse happenings which dice the edly of purchases af Sle, aod have eney when he test parties We are tl, fr example that Laurance Rockscler mulled porte of is pal fre Gin a many yess troagh vee RSG sees of crepes in which he fok cond Thar the curse of 39 compunded aaualy The eight ten tine isthe ves of he “le chip” inesment ofthe Rockets Mel tes and Pont is pany tate to cool 2 higher ee the lt to eaablh Federal goverment poles designed to ealance the profit of thas far cand eporatons “his idetence tween an ednay ret bot with ck, anda tlle Kingz rate of profs what inspire the mucous bedee fx congo cond n Atm. K expan why coprte decor ip cron ns eompany wou book poh weed pes Seve wil yr ds aan an take 39 ech eas tai he Arner vay, tat athe reward for competitive erp, and tore cei othe wincr One may have whatever snr! ude te wits bute shuld be aware of the cicumstaees and ome sence of the 3896 prot. Uns its posible mt bens of any Pareaar abil onthe prt of the benches tex bese of he freh sieady ia thie pes, minly though nesta The Sian of the poi of cnr alteagh ive wher tpoups of powetl me, futher the pects of mondpaizaton of ce come. Ie seine maly sree prof ee ‘xpene ofthe aor of the working popunso, in ary of ways ‘ich enone th es eos for thereunto, Sea pea fen comida tan ad pee ‘et plies wich rnc new depo esponsiiy to the ene oe eof icon tte earl “Te fllowing ia paral ing of he waysin which convo wed ® garner ena pros Acquistion, ihn invetmen, of age nial Bock of shares se" romorrt ck Tis deve in ebay evened colege profes, was stopped by Secures ind Exchange Commis Sin vegeltinn Ac i be fete los importa ely cue fewer enteric ermal ate aed tough ew6 ‘rite EMPIRE OF LOM FINANCE cree dang recat yeat—og vraium, atta gar~prometert eile promot of Wesco Tapio, La aml ree and then procteded to rl mock to the public st 5 dolls ele a ene i Se oe emia natin ier dony aoa rte me orate al te es rei eee Seeatantteats eee peak epiaeder iy eye me loner cept ere Sion mira as Ss a onic ea octane ma Te toe ate Sane by he corporation's contol group (Obn family, Thomas S. Nichols Soe eee mates CG) Channeling of legal, engincering, accounting, and advertising OWNERSILIF AND COWFROL OF CORPORATIONS 57, ees to related firms, \ recent example, unusval only in the publicity surrounding it, was the action of Thomas I. Parkinson of the Equitable Life Assurance Aswciation in paying out multimillion dollar adver- tising fees to his son's frm. Because of an internal squabble, a scandal war made of this and Parkinson was foreed eo resign. But obviously his big business associates dil noe regard this pesiectly “normal” way of acting a in any way reprehensible. Parkinson was retained a5 a ‘cestor of such corporate giants as American Tel, & Tely Chase National Bank, and Westinghouse, and as an overscer of the proper upbringing of the young~a trustee of Columbia University (@) Use of inside information. Dollarwise, this isthe ost important of all. The service fees collected by bankers and lawyers the salaries and bonuses collected by directors and offials of corporations large a these are—are small in comparison with the dollar value of the information sour basics aars cine by thse “nde” ofthe ccnrolling circles. ‘A frequent situation is for the contol group to decide to build ‘corporate properties in a certain area, and in advance, through dummy ‘companies buy up land cheaply there so as to realize the profit fom its sle to the controlled corporation. Similarly, the control group of a ‘most powerful corporation, deciding to offer to buy out weaker im, will purchase shares of the weaker company and reap a pretty profi ‘when the main corporation makes a favorable offer for purchase of the sts ofthe smaller concern. The Eanern Ait Liner Colona lines case (see Chapter VI) is an example, Often, when 2 corporation announces an increased dividend, prices of its shares on the stock exchange decline instead of rise. This is because the price has already “discounted” the increased dividend. ‘The “insiders” who decided on the dividend bought up shares some time ago, at much lower prices, before they voted the higher dividend st the Board of Directors meeting, and then sold the extra shares and took their profits just before or immeditely afer announcing their exon, ‘STOCK MARKET PROFITS Only inxignifcant and incidenal stock market profits are made by ety speculators, whether they be “hunch gamblers" or “kudente of Wend.” The real profits are made by the “speculators” who take 00 tik. They bet on a “sure thing,” because they control the situation ‘nd decide the event which will determine the tend of market picsa fc suns oF wow iene the ack maces general men of scan ae neve een rec ce Ibe Dn ot cono oN nd ie nr ed och nt snd rl eae dbo the ier 2 pst mes or exeacing he pote a te pnd of te clase” of te 1 te en Garon) chon om te wx etre aed So Sen yen BS De ening fe a on oF I ser pet ge "epored on Bi se win ee of he toa aided “he gr ed al fr shor of poring the all een of hi ao jee fem de expat of labo buted by conta Fr ie gt ie rh Pep ee atthe capital gins are reali by small speculators aaa ee Pitts each year fom the oder forms, and only one st PB yy hgh nit “Hcl ctr i et OWNERSILIP AND CONTROL OF CORPORATIONS 59 (1) A rapid inereate in the concentration of ownership and contra cof corporations; (@) A sharp intensifcation of struggles for corporate control among, sasious groups. [STANDARD POWER & LIGHT ‘The 193940 hearings of the Temporary National Economic Com- smitce brought out a number of eases where financial giants batled to win contol of great corporations, and to capture the profits derived from thote controls. As a illustration, consider the Standard Power Light Corp, one of the large utility holding company setups of the 1920s, From 1925 through 1929 this was jointly controlled by two banking groups, the Byllesby interests of Chicago and Ladenburg, ‘Thalmann & Co, of New York. ‘These two interes had a writen agreement for the division of the profits of conto. A stockholders suit led in 1929 idencified $5 million in profits which the Byllsby inereas had already obtained, in athree- year period. However, chit stockholder’ suit was no complaint of defrauded small nockholdere of overcharged electric power customers, It wat a device of another group of financiers who used the exposé to wrest ‘ontrl from the Byllesby interes. ‘The rival syndicate, which was successful, consisted of che American branch of the Schroder banking inerests and the Financier Viet Emanvel. Behind this syndicate stood the Rockefellers and Dulleses, the Anglo-German Schroder interests, and the succesors to the Belgian munitions king, Alfred Lowenstein, "The previous group were pikers compared with the objectives of the new and more powerful syndicate which succeeded in winning control of Standard Power & Light ‘The president of Schroder Trust, 2 key firm in the new syndicate, exphiined how most of the $157 million required for buying contr ‘old be raised from outsiders, the inner clique needing only $20 nillion: “For the $20 milion stil to be raised, we would have 2vail- able earnings of $15,250000, which would represent a return of 76/456 ‘er annuns on the money to be raised (emphasis in the orginal)" ‘Thar phrase, undevlined in the memorandum—7614% profi—was the real abject of the fight for contol. The $15 million wae explained in detail, onethird to come from videndls on socks of subsidiary companies to be stzed by the control ‘yadicate the remainder from “management earnings.” “engineering ‘Srnings,” and “financing charges.” Nor was the $15,250000 the whole© te EMPIRE OF HIGH FINANCE sony, for: “Nowhere in his memorandum have I Jscused the many SieZvagcs that woud inure to he bankers in his tation. T have Seena so apparent to make any comment itis suet rae poverer tat they would be aired ofan immense amount ee uly scues cach yar that would be puchsed Bor cely ands, and that tei psn i the stvaton would fothen more ateacve than that ofthe operators “fee nmerandum eapaned ow the pais ofthe conte group would be hep fom pale knowledge rough the manipulations of cereus teen done in may of the large and tom ant companies inthis county” Pesta imewed was Allen Du ter Diet of Cental Intl seme the Eneahower Admiisraon, andthe Dales aw fem, Eikat e Cromwell which exe co the sade that: “he 190 aunanetsapeemente ae at legally nding, a we already unde Ber tht they have worked precy and wil eine odo © seis thy are beawecn people who have eonidenc in each ther Sn tho with t play bal “Thor ie alas of great corporations are run by banking roar under extraleyaagycements forthe vison of the supecprofte SERA Tos the conuol poston. The great upholes of “aw Say Suke and our way of ern thee tas by secret agreemens, se seoconge andthe. advie of inwjers who help them cook Tsai da while spouting the hight mor principles im publi "of ura the dablom care ofthese provedings acenust ae fossil of ay. praia cotrol aangement increas the oe ene tor the gene to cee “plying ball” for & sepia of faces anda renewed bate for contol. But thee TERI iaole only the ident ofthe paicular beneficiary, nat SOSEEAST GE he amucl or he extsedinuy profs derive CHAPTER IV The Spider Web Higats Seay o” Mors, Staley & Cop wrote the TNEC in 132: What may Bee ten ro ado aot he extn we “tae dnt he pt eh sap des nxn le Aegan o€ asks Stone tae oe “yer we day ifs antec pee cn ad sry ads aly a Se the te ing ca ear quess oy Clie nines Se Ren pri haber nce ec ine po pal egress banking ri ny sd OY yeas ew oe ing eminent for hess eens ‘hist deni ha been bulk wp raed and “dace ee 0 my pi oo ig igen ew’ then i byte argument te bates ‘heir covert spokesmen. . oe ‘esa tm "ides we" chosen fr tak by : ei chown fos tack by MS se xt cost davai he pce nw of aed ‘tions Gough whith he cgay vont the temo eat Ace siping he tm inde, Tae way nt 9 Apes satire sd dee Infancia Ofen ein tsps ‘Se here ho ut anny Sow aig ni hing mora oe ee cones ee He tts athe "ier wet rh ae of ws Kind ‘nnn capeniey esta yang cope sad cn An mo cant wold be ep wit andeing ‘pes le ofthe grt comport law Hy ein ha ee een fis eee ea er eee ‘meaip cemented with interlocking icons lak fiance@ {we EaQPIRE OF HIGIE FINANCE ‘stations of diferent kinds in an inner circle of coordinated power Similar strands extend from the inner circle to the great corporations sr andustey, transport and utilities, through which billions of profits Gxrated from the population of this and cher countries are funneled to the central oligarchy. "All weaker economic units, in greater or lesser degree, ae entangled vitimne of the web, including aller business and agriculture, and the individual citizens as workers, householders, and. personal bor. Towers They may be ensnared by direct exploitation, by the manifold ‘Jesces of monopoly domination, by indebtedness, or by 2 combination GFthere: All pay higher taxes to compensate for those avoided by the Shean available to high finance, described in this and later chapters. ‘Properly spcaking, there ie not one such spider web, bur» aumber, cach ruled by diferent intrest, rival in certain areas, pariners i Scheme Rivalries als exit between the different types of institution, ach seiving for a stonger position. During the past ewenty years haze have been important changes inthe balance of power. The overulslming postion ofthe financial core of the “spider web” in the control of corporation shares and in the supply of capital is asrated in Tablet “The $88 billion of corporate stocks held through these nancial insttaions comprised 33% of the $245 billion in stocks oustanding. ‘Another 359% was owned by the onecenth of one percent of the ‘opultion with incomes of over $50000 (besides the holdings in Eee funds) Much of this 3595 was earried through investment banking and brokerage firms, and personal holding companies. Mors- ver, included among these individuals with incomes of $50,000 ot more are the much smaller number who control the network of financial institutions. ‘Obsiounly, this oligatehy has slid stock control of the major cor porations of America. "The $807 billion of corporate credits oustanding shown in the table exceeds 60% of the total, and the $103 billion of new longterm money arranged by financial insiations is almost all of that category. “There follows a discusion of each of the major types of financial insitution, explaining the particular role of each in the control net- york and in the exration of tribute from the population, and ident= fying the leading companies, 073556 o an ahr ciate of te ttl $250 flan, sows ia he sane THE sriDeR wan 6 ine of dtr Siok Coponte New Lane Typot tain Gnritct oxacsing “arognd amet bas 9 Sra, alc and mt ompnie SE Soon aces to bere Se ! ee ten ree ad Bra sie 38 Povat ang Se emdnns 20! viet ado 16 Ere tome : : : Keown tl mM * ter exist na ow at $505. Tat soa i fm he ae ch pcs Seon ay ican sl be is be worsen 1 Re le Teak hin fermen tes ee hoes nd et ‘ur uc ny. Pure sed on eae ca a fal pte cements ‘> teoshinvenment Ene he ser Bl rage lly ye orc Mn are el ae dl te tet it, Some Speen Stn hema wah ll Bailes, Feb, 1956, * es ‘COMMERCIAL BANKS 1s form, bank i a miee imma which emery which cle the svn ef many depositors for he wae of ceed cuter who nec thee fs a wit rt hese nara se werd ower, ce banks have acquired a powers ha oF "Tir Tone the buses rn ofthe corny ie them comple $206 infematon of te afi of tie cop oda he ks have Becme the ner centers ofthe sony, the aan ore: of commen eligence Moreover, the banks ae the manufacurers of the bulk of the% cris murine of HIGIE FINANCE, country's money supply. Coins and pager currency are of minor im forts in bungee main tmoey conse of bookkeeping nics of depot inthe banks out of which mow esines payments Ste mae by check, Today inthe Unite States abou 80% ofthe Toney supply coms of thse demand. deposit, only 29 of Coreccy* Whenerer 2 bask laos mney, cues the eration of Gi'umoat equivalent amount of dept 0 thatthe lending activities a the banks ase the main effective meas of money cretion —esaly tore parent than the hsuancr of currency by the Federal Teeasury- By repubting depot money, the banks scongly iafuence interes fate ad community pices Credit inflation hae Rese te PRE Jpcor country than cureney infation. Borme ae permed —and fended to great heghts—trough credit infation. Cis ae often preiptted by the colle ofthe rei yea, and deeply involve Seti halkng ens : me ‘Occupying a cen place in the county’ finances gesclly he comme bake play's more led tein the mee ei of Snancag indosry, as can be sen fom Table 4, These Banks eon- enue on short and mediumterm fasts rather than longterm Sted They supply manly working capa, and comparatively ie fed capital for the expansion of cacy “Phe lng commercl hanks alo feance be speculative actives of tie novel acount and the underering and trading aces Of invent banker and tock brokers. These loans are ofen for Gy afew days ata time involving an exteemely rapid turnover of funda ‘Thus in 1956 che Fist National Cay Bank war making leas to brokers and dears in securiey stan annual rate of $2 lion, Ss amounc equal to many tines is teal vlame of loans oustanding any one tne? “The ery rap growh of concentration in banking fous con- entation Ya dary and trade. Lol eserprins, acitomed 10 teerowing from lea banks where dey ae known fen are et off from fans the banks are evallowed up By large banking chains tnd bank holding compaic. "Thee at very marked in times of bor and "ight money” Lange companies ale to et ample bak fond an expand perasons tothe um Seal companie can racely get onal fund, and tometimes have thie outing crit lines cara. ‘They mus psy ger mere ras for what they cn boca. They anno ake nan wy me uy, hem rer ei HE srIDER WER 6 fall advantage of “good times” Many fll iim to the ered squeeze, citer bring forced to sell ur wo one ofthe giants or Becoming business failuwes inthe midst of che boom, ‘Cred discrimination teaches its climax in time of financial crisis ‘The largest Iesteonected corporations ae, permite to masta their credit ins unimpaired. Butte smaller, “independent” busines ave their notes called when dve. Now they no longe have the opsion of sling out The many that fail simply go on the auton block, where they ace pcked up for a song by the bankassociated giants Until recent decades the commercial banks serviced mainly business fms, andthe large ans limited thee accounts tothe most aluest ‘erporations. However, in the ited hune for greater supplies of exptal and larger profs, the commercial banks have increasingly Mel che servicing of middle las individuals and workers. Most large banks have raced to establh branches in residenal aren in order to collet the depoite of the maximum aumber of individuals They have entered scsvely into the busines of granting small consumer loans and home mortgege lons—Lnes of endeavor ‘which ave mulipied many times. The small pawn shop has given vray tothe stanined branch ofthe mulblion dla bank. “These “retail” services othe aml consumer are the more profitable ‘of commercial banking operations. On consumer ans the rate of ier is usualy 129 of more an compared with 39-49% on loans to the Larges corporations. Small checking acount depois, far from receiving interest, pay monthly sevice charges to the bank for the privilege of wring checks ‘AE the same Gime, the expansion of this Geld of acvity permits the rapid growth of bank resources and capital, and hence an enlarged seae of operations inthe Bed of induszy. Legal roquiremens init 2 bank's lun wo single casomer to 10% of the bas capital. But loans running int the tens of milion are cade for the operations of the industrial Ievnthane. The banks which come t the tp in the sccuulaion of depose and capitil ae able wo monopolize this business, to intensify their contacte and power potion in industry, ite hw St dr fos na sone the on Tres 7" Cae ene cupeot a doeyy Se maha Te Sieg ye grote cn) The my cnolin of mai 1p aml coertane owed a hs we focal count othr eee6 ‘THE EMPIRE OF HIGH FINANCE and at the same time to subordinate weaker banks which must depend fon them for participations in loans THE TWENTY GIANT BANKS ‘The Bank of America, National Trust and Savings Aswocation, ‘which pioneered in “retail” banking, emerged at the end of World War Itas the largest commercial bank in the country. The Guaranty ‘Trust, which 25 Years earlier was on an approximate par with the two other very large banks in New York City, remained a “wholesale” bank, and declined relatively to less than half the size of the Chase Manian and First National City Banks. ‘Table 5 shows the twenty largest banks inthe country at the end of 1955, Their combined resources amounted to 64 billion, approximately 30% of the total resources of all of the 14,000 commercial banks in the United States. Moreover, through their potion of leadership in the placement of credits and determination of banking policies, these towenty banks, together with certain smaller banks under identical control dominate the commercial banking business of the United Seats. ‘Their financial influence is measured more accurately by loan statistics. Just I? of these 20 banks, in October 1955, accounted for 52196 ofall member bank loans to manufacturing and miniog com. panies; 61.29% of Teans to transportation companies, and 70.9% of loans to all lage corporations having assets of over $100 million.** ‘Nine ofthe 20 are in New York City: Eight of these nine accounted for 6396 of all business loans of the Billionaire banks, and 269% of all busines bans ofall Federal Reserve member banks ia the United States” Qualttvely, their leadership extends to determination of rational banking policies in addition to allocation of business and ‘control of many smaller banks. "The listings of the largest owning groups in the table are derived from a variety of sources including the unpublished manuscrips of am outstanding student of American finance capital, the late Benjamin Allen. In genera, where a family name is shown, this represeats the largest known holder. Usually, however, contol ofthe bank does not reside in that family exclusively, but in'a grouping of interests, + usc of Fal Rove Ba cern aks wih pnts of oe 1 ilon “Tsp to ede wi ean ney xcept re ein aking own eo run svipen wen % “Tus. TWENTY LARGEST COMMERCIAL BANKS, DEC. 3, 1955 Heaton gee Owning ‘Gy vedo Se Nevtork ‘Soke 7 Novtere be Gham Gan Hediage Never ae For Neat Cee ‘Contactos Rank & Tost Chae ‘Toman Cop! ake oay) Sinn sonia Ni Us Anrae Male SoFaewe isa Strmadao Goeked 17 Sree ace wha ord is ie, wir pl roca: Reus om ft ent ‘TRUST COMPANIES AND TRUST DEPARTMENTS. ‘Ten Wall iret banks hold in trust some $50 billion ofthe personal asses ofthe wealthiest families in America, about double the amount of ordinary atsecs shown in their published reports. Through the $50 billion the big ten wield a special power, for this sum includes the largest and most intense concentration of corporation shares in the world. ‘These funds are held in special trust departments, orginally separate ‘eompanies, for managing rich peoples investments and supervising their businewes. Litle known to the general public, and largely jgnored by academic economists, these are peculiarly instruments of the financial oligarchy in the era of monopoly. ‘The US. Trust Company of New York, organized in 1853, dims 1 be the oldest in exitence. It writes: "Foe 50 long years the Trust ‘Companys trust business was neatly nil... In retrospect we can ‘only marvel at the patience that need this infant activity to fulla on EMPIRE OF GH FINANCE from this source mulipied twenty times in the next Béty years (and the value of crust ats increased even more rapidly) ‘The currently sypical joint organization of commercial banking and trust functions provides dininct advantages to the owners, "Through the trus department of the bank they coordinate their in vyestments, potting together concentrated blocks of shares, suficiene for contrl ot a share in control of selected corporations. These cor- pporations then have access to the resources collected from many individuals and enterprises, and are thereby able to expand more rapidly and inerease the profits of the contcol group. Often the trust department diccly runs or participates in supervising industrial “Poe Naa City Dank sid of the operations of ts Tras Ai: ‘The principal busi of the Ciny Haak Farmers Trast Company & the ere ani management o eter people's many, The etext out basins messed ‘ot by out tla thet pres, but by the ean typ ofthe fonds under out onucl er supevsion, The stnaons involved run itn the billeny, spd ou Snvesent snes range frm the management of fubls for indies eo forts td erable rigs and tonal erosions to te pean ‘pirat busine fe hich we are resonable uader wills or st” Personal rast scouts gina inthe handing of wile ats wet inthe “tat ofthe bunk tat company forthe bene the hei. While this continues ete aor form of penal ut tect dves have seen arp Goveshing of Iving tro, where People of weah wanes & pron of thie ucts to the management ff te rot compan “The ust depres ar more than an agent. Takes on all she scribes of eenenip expe fr the sppropton of eo 3 sete! by he econ, by she Conenal in Ba ad “Trae Coy of pal acon of 3. wl tue: 1, Tes pial pomenion fase aes td 0 pope : 2 Consider semen cob of Deedes and seanges to pay income i newer. 5, Reviews se, bye and sell ass fonds 4 Cet income aes payments a roid 5. Hane ton says, ake fe tx ands, diet asses 2 oie. ‘During the past decade the trust departments have gathered more billions of astets, nominally belonging to workers—the corporate ‘rae sere wen 6 jon trust funds. By September 1955 banks held over $125 billion Fr erst for such funds amos $75 billion held by 13 large New York burke, The employers select associated banks as trustees. These banks tue the funds as they see fit, rendering accounts to employers, rarely to the workers"* ‘Thereby the trust department bankers obeain still more funds co merge with the billions of the wealthy in buying up control blocks ff company shares. The security of the workers is limited by the Tiability of these investments to depreciation in time of criss, and by the abiliy of the banks to use the funds as a dub agaist labor in time of acue clas confi. ‘By 1954, total personal trust assets exceeded $100 billion, five or six times as much as in 1931. This heightened centralization rule partly from the increased shave of the national wealth in the hands ‘of 2 tiny group of millionaires. Abo, the growing complexity and scope of operations of American capitalism increases the incentive for fich families to pool cheir resources and information through banks as 42 means of establishing coateol over sill more profits. Compelled by popular pressure o acept higher income tax rates, these interests Were able to frame the law to leave loopholes through the vse of trust accounts. Many of the directors of trust companies ae lawyers, with a primary function of manipulating accounts so as to minimize the taxes paid. "The rapid increase in personal true significe a further increase ia the concentration of control over American industry. As chown by Table 4 by the end of 1954 the personal trate departments were far and away the most important control center for huge blocks of sock, having almost one-fourth of all the shares in the county ‘The handling of trast accounts is much more concentrated than commercial banking. Only oneilth ofall banks ace licensed todo tt busines. And with most of these the business is nominal. Table 6 shows the geogcaphical distribution of personal tse astets The ten Wall Strece banks previously mentioned (including one Private bank) handle the bulk of the city’s dominant share in the ‘country’s trust business Each (ith one possible exception) had ‘more than $2 billion in personal cust assets in 1954, They are listed in approximate order of trus assets in Table 7. ‘Chase Manhattan handled some $14 billion of personal seust assets {i 195455. These represented the holdings ofa few thousand families, Sveraging several millions each. For these families, Chase Manhattan ‘perhaps a half billion yearly in interests and dividends. Takenp ‘Tue naCPiKE OF HIGH FINANCE together, the big ten concentrate a large part of the properties of ‘America’s economic royalty, perhaps 20,000 farilics. ‘tee 6 PRINCIPAL CENTERS OF FERSONAL TRUST ASSETS, 1958 ant “bin ‘Now York Feu Reare Dist ‘60 ar York Gy (aon) wo ec es Sie a Mosinee 33 Toul of shove 0 tect Toe soo pe acs Nw Yk iret on oti een ors tak Neo TE MT a elon Conan foe 1%. Or ak NMS Trot Se Compare e Caen, ans ak sade EAtEedrence repr or aes its magsitude, the personal tit business cotributs bit all prion ofthe profs of the grest downtown banks Fes full Inve serge ethan eset of ne percent of he as SOUS. Hosa tis because the tr comes are the elect foe who own the banks or ate oly sexi with the owners. ‘Fy re nines inking profs out of thems Bony uc of the anal depositors and compass Sie e Nev Yet te hating Ch aha probly have one Bion eck in prea tt sus. The Tis Nason CY on cpr caf ill a do the de dng Pladipia bank Pee ena by connate avesat of tat fn in inde cfostons i asinted int inal and poinble ‘nosis wt tse copra. “The cuporte ust or diary active of the barks area case sn pin Phe ba ang 8 ont res represent all he catered et elders of» parsar company, and execs their ight and Privleges The atek manfer agent psf teil functions Ehihghe fa cmplec kaowkedge the corporation’ owners and Gal ssn ownership Te hsey ein a setgie poston to fore Sil stempa by el fnnclproupet gin cond through sok urchin The sock epi has scnaday teal responses St the eine general caret. THE ripen wea n ‘Tous 7. TEN LARGEST WALL STREET TRUST DEPARTMENTS (Geant atti bio) Che Manhatan Bank 14) Ertl Gy Sak (nh hy Back Fan Tas) nicl Sister trot Co. (55) re Sonn Go (2) enc Tasks ei am infrmton oie in anal er ain prs ‘alte over eancnin cl fled Te cr be ‘mrtoo The $10 loa fr Chae Mactan Hak war eel when tema ifm uta ose ae 193 caine te fo he New Yok Sat wa frst bas (Compose of the Comey. Te 8 lua fr seal ie i Tad te oe When an industrial company is controlled by a single group, these functions will be shared by banks of that group. When two groups share control, they will divide these Educiary asigaments and the fees that go with them. ‘Large New York banks perform at leat one (and usally all) of these three functions for 99 of the 100 largest nonfnancil corporations in the United States. Many of the 99 also have these functions performed by banks in other cies, notably in are where they operate, or where there are large stockholdings. Buc the predominance of the large New York bunks in this busines is overwhelming. ‘An authoritative text by four professors states: “The financial aspect, ‘of corporate fiducaryship is indeed an amazing one. The figure of over fity billions of personal trust aswts is practically beyond com- Prchension. Yet ths is merely one phase of their activities. The volume Of corporate wusts adminisered’ is two or three times as large Although the economic, social, and politcal aspects of such financial magnitudes will not be dicussed here, these points should not be ‘verlooked—in fact, they can hardly be overemphasized." ‘The good profesiors may be pardoned for their timidity in dis. ‘using the “economic, socal, and political” significance of this eate of alfeirs. The main point is clear enough—through trust activites few New York banks and the influential famalies behind themp rue EMPIRE OF HIGH FINANCE cnercive a vital, and often decisive lever of control over all of the Key points of the economy. Moreover, tbrough the rapid expansion Of te form of activity, the concentated power tha it represents has become still more marked in recent decades. INVESTMENT BANKERS Investment banking is the mobilization of the basic capital of industry, a8 ditinet from the shortterm working capital supplied by ‘Comimercal banks. Investment bankers convert the money capital of any people into huge unified blocks of productive industrial capital ‘They sell the stocks and bonds which represent ownership of that capa. They play the key role in the organization of new companies, {arranging mergers, in decisive expansions of capacity. “The leaders in invesement banking, therefore, have been historically, ‘a che summit of the indusrialfinancial empires of the oligarchy. ‘The House of Morgan, which evolved che investment banking function most succesflly, was the leading financial power of United States inperaism during most of its development. “The investment banking houses have done more business in recent years dollar wise, than in any previous period of comparable length. ‘Bur their proportionate share of financial business has been reduces tnd their Functional role is less decisive. Fewer wholly new major Corporations ate established, and the life insurance companies have taken over pat ofthe function of mobilizing longer capil. elicvers in the reformation of American capitalism cite this trend as evidence of the supposed demise of the power of high finance, But Ail thar is realy involved is a change in the relative importance of ‘iflerent types of institutions used by the same moneyed interests {cis tre the some very prominent investment bankers who did ot suceced in creating a rounded financial apparatus have lost ground in fgeneral influence, But their loss is the gain of others, a mere shift ih power within the oligarchy. The general rule in the top cices js the common ownership or contol of Varied institutions ofthe financial fheqwork, to provide maximum functional lexily "This all the more necesary because daytoday investment banking operations, to be effective, must be in the closest conjunction with bother typeof Financial instictions, Commercial banks supply inves iment bankers with vast shortterm credits while the later are disp Ing of securiies purchased from industéal corporations. Intimate ‘THE SPIDER WER B rns engi uk ge dn ns oe Sa tnd lave wars tresed thea 8s cos weer a by the investment bankers. ns eee ne ieee ce ee coed with coomercal tanks and tt companis, OX! ivesert [Gy |tour dn oedce onriia Sekiog st eae Siri aya pp man ard Pec e yfaayen iri yoaetemreror renter banking subsidiaries. anaes The fi New De ai te ented mong pore i Bl wae meant fear foto pre, of lnvetment banking fom commerce banking. The GlasrStagll Me pelied cmd bake fon aaa a races Se fe Game eaeeles Gace a pe (hg desu bets icone being at i pus Tn my me wag I A wd he a tapegnits of cial ede age ba aed Sh ed the timate baste contd of Indu bythe Hoan liga Wt one he mee am eeding Se el beer consces btwn inlay ted aac f acl ps re ey ee egies ‘te tn fc ced tnd ell may ai ee ‘plang mee oy vee ea oes enamel sete rue oe mew bth a sy te nake Unmet hog Semple iad eras? box peel roulad int hae cena of he teases Sng lace The Hc of Merges mang So ied iy manpower wal cs ote mas mtn Mop wcate ermal ee aa one Suk Soa reo takng pesca ead Mees pacar (ecuig varias mene Of be Noga tan) tee op ie lee], Mogent torte ee Tern Sky Co tng rts Sng we hei Sagi Bl 5). Tatas ang ts ofthe Chae Non Bk he ise Nose a Koso sa It te Melon ieee was te nt “su he Fe Ds Ep" Nae Ba ed i epeemes tee ces at bs” THE EMPIRE OF asiman in the new fm of Harrinaa, Ripe & Cos while merging TERE Pare of tienen basking Busines wih Calloria ince ia Blyth Co. Seal GIS form of big busin invenmene banking i chi acral by inceasing mongpoly, the formation of carly, andthe Sei sed domino. The four lage favestnent banking ems SEERA a6 ok the wal busines in 15035 ay compared wth Span 1272, and vitally al ofthe mammoth tranactons'* The iene fms pert a a coued lb which lcs teriry and eet to prec formula, divides among several honed sale Bee Slodary busines of gathering together cpt fm all ar of the cunt tcc an iweament banker organizes a new of merged combine, cc punts pie Bnancng ofa former failyeonery e resi we ete beaker inde i understnd that mo one che thal “puch onthe teri The nda rpraton which weks SPMependene™ and “shops around” for esi terme on which © re cade col renin hom the cael meer ‘Tha are the oy one ho an mbes Nk of ai TR Gacy they rope the “iaionl banker” pon, Te r- Sigetason of invstnec banking fms fllowing the 159 leg sets spied the ters With loving ete banker acl Ter Siena ato ofeach newly crgnized invesment booking ‘im, is "tccenrahip” to busines prvouly managed by commer Banking uiidren ek Sod tock ae sold through iveument banking sats she iene tanker cece hte fe ida Tebpuny the syne “manage” le cont the entire operon SEPT ese overidng management fe} and bane the ge TEEN bck of the bonds or socks. Normaly, most cer leading SEES cies parte in the aynict. Each wells portion of Sues cal istons and pts wii pair Shue Ta thas way, the synate spt preserves a etengns Be Spemonay of Ture ofl ing scons ofthe lgrhy it SHE canes branches of the nom, abd a the sume time ee ice he dominane psn of paar gro in thea of cermin indies and companies “The invenmene barking, carl aytem does not tring, pect tarmony” song the finances Changer inthe eae power of ‘Hen farms lad to seule between them. "Thes in tun oceason “iy cad wo changes in te banking coanecons of indus cor ‘rue soipex wen S porations. There is nothing suprising in such battles, no in deviations from previous carel arrangements. Ths is “normal” for monopoly capitalism, which combines to extract the greatest profits and 10 squelch weaker capital, while fighting most intensely within itself for supremacy. What is Surpriing isthe comparatively few changes in banking connections which have occurred. During the past three decades including the shatering experiences of the 1930S, the ex: pansion of the second World War andthe subsequent trnsformations in the economy, almost all of the major industil corporations have ‘maintained thet “traditional” connections. “Those changes which have oecurzed in investment banking power have reece changes in the sltive importance of indies and of paticular companies within an indestry. Particularly keen har been the scramble t9obain laderhip in new industries, sich ax natural ‘sand new corporations entering the field of public financing, such 1 Ford Motors. ‘Other changes have taken place asa result of goverament regula tions In 1941 and 1984 goverament agencies ordered “cmmpstive Bidding” for the sale of bonds of railrads and power companies. ‘These new regulations, unlike earlier New Deal legislation, were not mainly responscs to the general public pressre against monopolies. ‘There were elements of this, but perhaps moce important was the presue of midwestern banking groups largely excladed fom the inveament banking business after the collapse of the Tnsul utlities empire. The eomptitve bidding regulations broke the cartel monopoly for these types of secures. I parciulrly affected the house of Kun, Loeb (railroads), and to a leser extent Morgan Staley. The main beneficiaries were the Chicago howe, Haley, Stuart & Coy and ceria Wall Steet firms, including First Baton and Blyth & Co. However, while the compeive bidding requiements reduced che Profs of the “traditional” bankers on new security isues, they did ‘ot seriously afec the retention of general financial contal over the tailoads and power companies. Competitive bidding was not required for stck isses, in which voting power resides. And in the cise of ond, the issuing corporation etmtinued to name the bood trustee, the bank which retains the key poston among the bondholders, To keep the winning competitive bidder in his place, he is requized to ‘ay, ou of his commissions, legal fees to the law frm designated by the borrower. This is usually the law firm of the “wadtional banker” ‘hat handled che business Before competitive bidding was required! ‘Thus, aside from the gaining of commissions by certain howes,6 Ti EMPIRE OF HICH FINANCE nothing is changed. Midwestern baaks and insurance companies are permitted to buy moce bond from Halsey, Stuart & Co, with which they ate connected, But they have no more power than formerly ia the affairs of the particular valroads and wiles. Tvesment banking is a bighly profitable busines. The syndicate selling Ford stock in eiely 1956 charged a commission of $1.50, of 2306 of the seling price of $6450 per share. Despite the fact thatthe issue was “over subscribed” long before the commission sas set the ‘syndicate collected $15,30000 for an operation that required no tie-up ‘of capital and no risk whatsoever. “Typical commissions charged for the common stocks of the very largest companies are 396-496, and for preferred stocks and bonds 106.3%. For medium sized, bat wel established companies, the com- missions for common stocks are in the range 596-1096. A similar fange of commissions applied to recent boad issues of weaker foreign Countries such ae Tarael and Cuba. For the speculative issues such as the uranium mining companies, the investment bankers charge 159%- 2D commissions ‘Only. in the case of competitive bidding have commissions been reduced, usally to lest than one percent. Halsey, Stuare & Co. avo. ‘ated competitive bidding’ on the grounds that it would save corpocs tions encesive commission charges. But in those few places where it has industial connections, not requiring competitive bidding, its concern for inexpensive service vanishes. In 1955 Halsey, Stuart isswed 90000000 of bends for Detzot Stel, 2 smaller company with excel Tent markets in the automobile industry. Bur the company was forced tw pay the then high rate of 5% interest on the bonds, and a com- ‘mission of over 4% for their sale* "Yer commissions area comparatively small part of the profits acera- ing to the investment banking cartel. Its main role isin the network. of financial arrangements through which control over giant corporar tions is esabllshed, with the eesultene acess to hundreds of millions in the profits of contol. And a corollary isthe access to enormous profits from personal investments. The capital of the investment Bankers companies is but a small (action of their personal funds and those of their asociates. Theie operations, perhaps more than any, ther type provide the information required for the realization of rapid proBite through rock marker transactions "The TNEC hearings thoroughly exposed the cartel arrangements cof the invesiment bankers, and the interlocking of financial and industrial monopoles through thei Firms. As an aftermath of these us sre wen 7 teavngs the government Icke an anarst suit again seentcen Iealig hoes charging among other thingy they Src Sia sin ying wl he seal net alas of ch inatn by cong. pace or oc ok Attendants to beled othe bs of cers of sch ier by ttlaing eledaa¢yinSteace with commer banks. eth hare Sch ars do Bane ad by conellng te ergeian Sm fies of iets» by eung thie col ver ies to incense Sein vmeof bas y poms somsatitons snd merger" "Ate thee years of epntons and tah he judge tre tthe ca, dete mounts of daumnary viene ge Harel R Malina could find no conspiracy. Whi be was pressing tis csc foe wink be prided ofr the til of I lealers of te Communit Pay foe enpeacy uncer the Sih Ac ‘Toy Were cone sod Sec asim stones Fore a fh te ees Metin tec a hero of ih sci, and rected major pemrtion in ada nk. Clr fancier Rober R. Young charged thatthe judges bios Eaveriam inthe inven banking rial involved te than gnc sis: eye rns tnt ny : a gs Sag otise Overt wens arty siers tas Getic Scariest eee ee som ia the Morgan law firm and ancsher sou in the Kubm-Loeb law frm. The So Sees ccna se eee ae Ge ie aan datums Mente roto: Broun nirvana meee The gorramet stems did cect to hi rage eo ain fad he heal o he Anno ron teenie fr Se dee in otc etn fer ne ea Bh ‘was defending the banks.** ae During the period of the ng the pet antitrust suit and after its dismissal ia 1953, the leding houses continued to carry out all of the “overt aes” {The ese atee wet Ika © Koo, ds {ee conn oi Hai Li Rows Stay a a Se a ‘ime Svs Bank, N.Y. The jge woe Hard R Med, poe ote Cota Som Maia at ep by Mos Pals Wada, sit’ nh ecetg Son Sky rit iy. ee tS om ef of CC, Hcy Rea neB ‘THe EMPInE OF MHCH FINANCE mein seri, Ty cine 0 mig the oo sak cctpania wy ommrts enon al ee cee wer ae oe i a ee dE feces Tbe 8 shown he a ee ee 2 bape inven tatkng ar i et ag The in ee 1 a erie ronment ou Sree Te wil cian Now Yo “Tus &, LEADING INVESTMENT BANKING HOUSES, 15041955 Mtge o ange core ck, Bl Mate Sat Ca (Cogs) 12 ihre ; ate a Sn ees Pen en Be Dim, Re Co ie bly On Soon Sours Cpt ‘Seno Wser Scie Cp ridman, Sachs Co. nwt Ikon & Co Bato) [gue Swain Corp. (Mahi) Dye Go (has) Taal, 2 adios ais Ia eher (beat 30) oad Meg in 1856 Nore Whee two o€ meeps comanage a ont te a he te i ie "Gea nal Lone te meme Ter ned $50000000 of el Gove sane Cait om Tansoment Deer Dge nail Care Fiesing Dice ‘A number of the companies are pars of centrally contelled groups. Morya Stanley & Coy Smith, Barney & Co. and Drexel & Coy are All part of the Morgan financial empire Blyth & Co, and Harriman, THE sr1DER Wee 7 Ripley & Co are both related tothe First National City Ban. White Weld & Coy Kidder, Peabody & Co, Stone & Webster Seurites Corp, and Paine, Webber, Jackson & Curtis consitte am integrated group of companies based on related New York and Boson interes, This troup of companies also has important ies withthe Fist Botton Corp. ind fe asociated banks notably the Rockefellers. Lehman Brothers and Goldman, Sachs & Co. have worked as «vital joint partnership for many deciles “The dollar figures are not the sole mean of slative importance, AE atenton is rested wo the very lage Her ofthe dc nde tial corporations, the lead of Morgan Stanley & Co, more pro- ounced: During the si-year pera covered by th abl here were 20 eck and bond imucs each ivolng $10 millon or more, Morgan Sankey & Co. managed eleven of them, First Boston Corp. managed three and comanaged one, Haliy, Start f Co, comanaged thre, ‘Morgan houses are investment bankers for the largest companies in each of the main Amerian manufactring indusresoly sel autos chemical and clerical equipment (the last shared with Galan, Sachs), in addition o many companies owe tothe top in these inde, and leaders im other industries, ‘Nevertheless, a comparison of figures over the past thre decades ‘ings out certain shifts in celative positon among dhe leading banking ‘groups insofar as their strength is teflcced in this type of atv. Daring the depresion, when weaker concerns could sere function, Morgan dominance increased shaeply. But the Morgan povion rla- tively declined. during and after World War M, and in the act sicyear period the hate of the Morgan companies was les than in the late 1900s. The investment banking busines ofthe Reckfcle Jtrexs and chee alles almost dobled. That ofthe Nitional City Bank declined during the 193 but regined the lox ground during the 1950s. The postion of Habey, Stuart & Co. and hr midwestern alls, slmos lininated during the depreson, was more than reaored by vite of competitive bidding LUFE INSURANCE COMPANIES 4, The life insurance companies have became much more important 4 the chain of Wall Stree financial contol. Today four-fthe of the Bopulation buy life insurance and half the net savings of individuals flow into the hands of the life insurance companies, a much larger Proportion than during the 1920s.os ‘rin BMPIRE OF HICK FINANCE “The reson forthe almost universal purchase of lie insurance is not hard to see, Workers and small businessmen, well aware of theie economic insecurity, sek thereby to provide a minimum of sfety to their survivors. ‘This protection is often thwarted by the general ‘economie environment. Periods of unemployment, business loses, of Illness, force. discontinuation of premium payments. Even in recent “good times” many more policies have been dosed out because of Lipses or surrenders than because of the death of the policyholder for the maturing of his endowment. Less than half of the premiums paid in are returned as benefits, In the ease of the small industrial policies sold to wage-carers, roughly two thirds never get the benef they have partly paid for. And infation has slashed the real value of Ienefits received by the others “Thus the insurance companies accumulate huge sums of money, Which yield mote billions ia interest a they are invested, In. 1955, §125 billion in premiume and $40 billion in investment and other income were collected. After payment of benefics, taxes, commisions tnd expenses of all kinds, f well t dividends, the companies had Jefe & net gain in assets of $6 billion, and total assets reached 6904 billion" “Those in control of these vast billions use theie power agninst the interests of the overwhelming majority of the policyholders. "The premiums charged have aways been far higher than necessary to cover the actual risk of death. And during recent decades, while mortality rates were declining, the insurance companies sharply in- Ceased their rates. Between 1937 and 1952 the Metropolitan Life raised by 2596 the set premium for a 35-year old man purchasing a fiven amount of ordinary life insurance, Ruthless cancellation of police and expensive suits w contest claims are other forms of ata fn policyholders. “the le insurance companies spend millions of che policyholders ‘money to advertise their concern with the people's health. Buc they themselves are the leaders in the big business lobby which fights against every extension of socal insurance benefits, thereby opposing practical meatures to improve pubic wellbeing and health During the great depression, the insurance companies foreclosed on aout 200,00 farmers. The Metropolitan became the largest owner of farm land in the country and sold it at a handsome profit during the ‘Workd War Il inflation. In recent years the life insurance companies have again become heavy farm mortgagees, and in addition have taken, mortgages on some two million small householders, who in event of ‘rue sere wen & depression o individu fanciful wil fe meinem danger ofeton bythe ann cron cme the largest nsranc corpses have bul huge aprement developments with wefre concons from sate and iy govern iments Most ofthese have been stonghols of rail dirtnaton, fds by tenants of Metoolitan to break down exlsion of Negroes met with arogant company reprialsinudingevicion of ‘Ar employers of 400000 worker, the le insurance companies ae actor in thee refualto recognize unions and inthe gros ail ‘crimination. “The prisons of the tx laws virally exempt them fom payment of income tas: Premium income ctl exept, ad the eft fn of ox on investment iacome has ben about 67, easing the insurance compenies to expand ther ats more rapidly than other compass ‘nly for the sal minority of large policyholders ithe purchase of ie insiances reilly ound insestren. Tey are wllely to ser Sancltion through snailty to make payments they can ard 0 prchase Larger plies at reduced premurn rates practice inte fed by lading companies in 1954. Much more important the ine ‘ance companies cooperte with high income paphlders in plated targinmsick wranpenests involving los on inure polices and recipes of Seduble ineest on the, whereby the Eeruace ‘nes compel the goverment—that isthe general public © pay he bu he om hr ora, 3 actual profs ef the Ie insurance companies run into many Silions cach sear. Yet the lege have no tockholdersthey are “muna compan while thre which remain sek compan pay enly nominal dividend In these compat the, Midas nen have Silo th te he pon of sing fr hel stnowgh contol of the corporation, rater tan dividing them ‘With smaller stockholders. : ’As ely asthe 1890s the insurance companies became inmportant 4 source of funds forthe francng ofthe grest rst The Mom Recketls, Kun Lod and ether ners engaged in biter avugpes oneal ver thee reser of ilion. Contig shares were Sought up at prices 10 times the dividend yi. By the Fit docade 3c presen century the lage insrance companies were Sey in hands of a few money lords. : Seon the vigil payment of direct dividends was abandoned by