Terminated Truce

About three weeks ago, the ears of SEC Chairman William Orville Douglas tingled with pleasure when he received a telephone call from Partner George Whitney of J. P. Morgan & Co. Mr. Whitney informed him that vast ($236,000,000) United Corp. was finally willing to discuss registering with SEC under the utility holding company act.

Bill Douglas had reason to be pleased, for United has been almost as big a stumbling block in hi's program of utility simplification as Electric Bond & Share. United not only is one of the biggest utility holding companies but it is the utility operator's conception of a beneficent holding company. It exercises no control over the operations of its subsidiaries, its function is wholly financial. In an industry where it is necessary to invest about $6 to do $1 worth of business (U. S. utilities last year had total gross sales of $2,200,000,000 from a fixed capital of $14,370,000,000) financing is vital. Therefore top utility men must be financiers primarily and Wall Street has logically become their headquarters.

The New Deal disapproves of this on the ground that the system of subsidiary operating companies, pyramided to a peak in Wall Street, provides an irresistible chance to overcapitalize at the expense of stockholder and consumer. Hence, while Electric Bond & Share"undertook a major court battle against the holding company "death sentence," United presented seven successive plans to SEC, all designed to enable it to continue to exist in the form of an investment trust. Having turned all the plans down, SEC anticipated few friendly overtures. When these suddenly came from Mr. Whitney about the time that Franklin Roosevelt declared a truce between the New Deal and the utility industry (TIME, Nov. 22), SEC was delighted.

The President's truce has since gone down the drain in a barrage of New Deal attacks on Big Business. Last week Partner Whitney marched in to see Chairman Douglas in the flesh, told him that, after all, United would not register until the Supreme Court validates the Holding Company Act. What is more, said Mr. Whitney, United had never intended to do otherwise.

In Wall Street word promptly went the rounds that Mr. Whitney's retreat came after a bitter squabble in the utility family in which members of the industry brought pressure to bear on United Corp. to maintain the united front. Telling the story last week, Commissioner Douglas heaved a long sigh of discouragement. "What can you do?" he asked.

This file is automatically generated by a robot program, so reader's discretion is required.