xt7wwp9t2q46_18 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/mets.xml https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61.dao.xml American Liberty League 37 linear feet archival material English University of Kentucky This digital resource may be freely searched and displayed.  Permission must be received for subsequent distribution in print or electronically.  Physical rights are retained by the owning repository.  Copyright is retained in accordance with U. S. copyright laws.  For information about permissions to reproduce or publish, contact the Special Collections Research Center. Jouett Shouse Collection (American Liberty League Pamphlets), No. 21 "The Holding Company Bill: An Analysis of a Bill Which if Adopted in Its Present Form Would Compel the Liquidation of Utility Holding Companies, with Serious Loss to Investors, and Would Place Such Restrictions upon Operating Companies as to Cause Probable Eventual Government Ownership and Operation of Utilities," March 18, 1935 text No. 21 "The Holding Company Bill: An Analysis of a Bill Which if Adopted in Its Present Form Would Compel the Liquidation of Utility Holding Companies, with Serious Loss to Investors, and Would Place Such Restrictions upon Operating Companies as to Cause Probable Eventual Government Ownership and Operation of Utilities," March 18, 1935 2013 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61/59m61_21/Am_Lib_Lg_21_001/Am_Lib_Lg_21_001.pdf section false xt7wwp9t2q46_18 xt7wwp9t2q46 Pamphlets Available * *
  H
Co ies of the followin am hlets ma
ge dbtained upogi Cepyiigatioiii to thie    
eague’s nationa ea quar ers:
American Liberty League-Speech by    
Jouett Shouse ‘
The Tenth Commandment I
Why, The American Liberty League? I
Statement of Principles and Purposes
Progressevs. Change——Speech by Jouett * * *
Shouse
Recovery, Relief and the Constitution-
Speech by Jouett Shouse
American Liberty League-] ts Platform  
An Analysis of the President’s Budget I An Analysis Ofe Bi11WhiChifAdOPt,
Message ed in Its Present Form Would Compel
N. _R. A.—Its Past, and Recoinirnenda- th L. .d t. f Uflit Homin
tions for the Future ° lqlu a Kin 0 _ 1 Y g
Analysis of the $4,880,000,000 Emergency C°mPam°S’ Wlth Scmous LOSS to In,
Relief Appropriation Act I vestors, and Would Place Such Re-
Eeenemie Seem.ity__A Study ef p,.e_ p strictions upon Operating Companies
posed Legislation .- as to Cause Probable Eventual
Democracy or Bureaucracy`?—Speech by ‘ G0V¢1°¤m¢¤t 0W¤€1”ShiP and
Jouett Shouse I Operation of Utilities
Thle Bonu?———An Analysis of Legislative ,
roposa s
The Constitution Still Stands--Speech
by Jouett Shouse
Inflation—Possibilities Involved in Exist- QE  C44,
ing and Proposed Legislation I  
The Thirty Hour Week—Dangers In- EZ   '·*
herent in Proposed Legislation  
The Pending Banking Bill-A Proposal rv lj
to Subject the Nation’s Monetary
Structure to the Exigencies of Politics
The Legislative Situation--Speech by
Jouett Shoruse .
* AMERICAN LIBERTY LEAGUE
atiornal Headquarters
I NATIONAL PRESS BUILDING
Write to I WASHINGTON,D. C.
AMERICAN LIBERTY LEAGUE _,
NATIONAL PRESS BUILDING V i * * I
WASHINGTON, D. C. I
  Document No. 21
’ March, 1935

 The Publ1c Ut1l11:y Holding
Company B111
ir
Outstanding among measures receiving serious
consideration in the present Congress, the public
utility holding company bill, in the form intro-
duced, embodies the most disturbing threat to
recovery.
Like the Securities Act of 1933, which was so
severe as to hold back the flow of capital neces-
sary to the revival of industry, the pending bill
would tend to nullify beneficial effects of activi-
ties under other laws.
I Regardless of how desirable or even necessary ·
some form of regulation of utility holding com-
panies may be, the bill as presently drafted goes
far beyond any reasonable requirement and falls
definitely within the danger zone. If enacted in
. its present form, it would impair the savings of
a multitude of investors, throttle individual initi-
ative and add to the powers of a Federal bu-
reaucracy. It would threaten losses running into
  the billions and involving millions of investors.
In part, at least, it typifies misguided zeal for
reform of practices already outlawed. It would
deal a crushing blow to confidence without which
the Nation can not hope for restoration of sound
economic conditions. It appears to be designed
to bring about government ownership and opera-
tion of utilities.
The probable effects of the bill may be sum-
marized as follows:
1. Investments amounting to $2,000,000,000 in
securities of public utility holding companies,
_ already seriously affected, would suffer immedi-
ate further depreciation, and, upon the compul-
_ sory liquidation of these companies within five
years, a shocking loss.
2. A considerable part of investments aggre-
gating $10,000,000,000 in securities of public
· utility operating companies would be jeopardized
by their separation from holding companies and
by the new and arbitrary methods of regulation
imposed by the bill.
3. Values of many additional billions in securi-
_ ties of holding companies in other and varied I
industries would be menaced by the possibility
of a broadening of the ban on this type of cor- .
porate structure. -
4. Capital, now available to utility operating
companies through holding companies, would be
3 .
J [

 difneult te ebtain in the light ef eueh new I`egu‘ tribution and sale of natural gas by the Federal
latory proposals as the fixing of rates on a basis Trade (joinniieeion
of rprudent eeetn rather than on the basis nxed The validity of Title I is based on incidental
by the United States Supreme Court, which is l use of the mails and instrumentalities of inter-
"fair present value." state commerce. Privately owned electric and
5. If the bill should pass as drawn, the utilities gas holding ooinpanies are alleged to be affected
would be forced to secure governmental aid or l with a national publio interest,
else to curtail service to consumers and suspend The bill defines a "ho1ding company" as "(A)
improvements which create employment. any company which, either alone or in conjunc-
6. Besides being oppressed by government tion and pursuant to an arrangement or under-
regulation the utilities would be at the mercy of standing with one or more other persons, directly
government competition, Federal, state and mu- or indirectly, controls a public utility company,
nicipal agencies engaged in the production and . whether such control is exercised through one or
distribution of electricity and gas being exempt more intermediary persons or by any means or
from the provisions of the bill. - device whatsoever; (B) any intermediary com-
7. Restrictions upon individual initiative, 5 pany through which such control is exercised;
financial handicaps, a new rate-making theory and (C) any person or persons which the Com-
and government competition would tend inevi- ’ mission determines, after notice and opportunity
tatbly toward nationalization of the utility indus- for hearing, to exercise such a material influence
ries. ' over the mana ement or olicies of an ublic
8. Encroachment upon the authority of the utility or holdiiig company}? as to make   heces-
states over purely intrastate business would ap- sary or appropriate in the public interest or for
pear unavoidable through greatly increased Fed- the protection of investors or consumers that
erial control doyete cctincpanies engaging in both such person or persons shouldfbe dleemed a hold-
mers a e an in ras a e commerce. in com an or com anies or t e ur ose of
9. Federal jurisdiction over holding companies thrirs titlerr Y P p P
is assumed regardless of a lack of court decisions Public utility holding companies are required
assuring the constitutionality of such a step. to register with the Federal Securities and Ex-
1Q. Taxpayers would bear the cost of an ex- change Commission by October 1, 1935. Their
tensive addition to the Federal bureaucracy ne- operations and financial affairs come under its
cessitated by increased powers vested in three control pending the gradual dismemberment
government agencies, the Securities and Exchange which commences under elaborate rules laid
Comm1ss1on,the Federal Power Commission and down in the bill. Dissolution may be required
the Federal Trade Commission. , at lany time a?er January 1, 1938, and is com-
‘ r u sor a ter anuar 1 1940, with the xc -
Terms of Bill tion tlirat the Securitgzs and Exchange Coirririirire-
The bill, designated ofiicially as the Public ` sion may grant. a reprieve from the death Stu`
ouiroy Act of noo, is o voluminous document or   eeeee eeee eeeeeeeeee tem eee Feeeeel Peeee
173 printed pag€S_ It Woo introduced by RepI.e_ l Commisston that continuance 1S necessary for a
sentative Sam Rayburn of Texas, chairman or g"°graPhr.°artY and €°°rt°m‘.°drlY rnttgrdttd ?’yS‘
the House Committee on Interstate and Foreign ‘ t€m’ Servmg ee elltmcmlc dlemee eeeeeeeeee mm
Commerce, as H. R. 5423, and by Senator Burton . tW° ee mtrt t°“tled°“S Sttttti and that merger
K. Wheeler, chairman of the Senate Committee ee cdnsdhdatlon It tmpqsslble mldgr eeeee law'
on Interstate Commerce, as S. 1725. It contains The PONY eeeeeeeee m. the blt .d€°t3r€S fOr
three titles. Title I relates to the control and Stmptrrrtttmn ef Puttlt utthty hdtdmg °°mp”‘?‘Y
eventual abolition of public utility holding oem- Systtma tht? drmrtttttr thtrtrrtm ef prdptrtrts
Panl€S· Title II consists of amendments to the not eennenneally and ge0g1‘aDh}Gally related in `
Federal Water power Act, which extend the &u_ operations and abolition of holding companies at
thority of the Federal Power Commission to in- thd rnd ef dve yeeee- . . . »
elude almost all Operating cOmpani€S’ the jm_iS_ ~ Violation of any provision of Title I or of any
diction being based on the transmission and sale rutth rdgdrdtrdn dr Order thereunder: rrnpesee a
of electric energy 1n_ interstate commerce. Title rrne of net mere than $10,000 OY lnalnrleenlnent
lll p1‘0V1deS for a similar regulation gf the djs- of not more than Eve years, or both, except that
4 5

 · ‘ ‘ ' h ld` . . .
elguellgngre? nge cgllsggll ejrzlfellfnlg gglleellolls   which are ontstanding in the hands of very large
be inn Deed E° een Severe neneltlee ere ern_ numbers of investors. In many cases the invest-
bodledpln Tileleeqll and III. ments represent the savings of citizens with small
Title II greatly broadens the powers of the mee·ne· _ _ _
Federal Power Commission over electric utility ln me lwe Weeks lellewlng the lnll`edneelen.el
com enlee While the exletlne. Ferlerel Power the bill the market value of stocks of utility
Acepeppllee chiefly to eornnenlee rlevelonlne holding companies suffered a decline of nearly
power under license along navigable streams, the slereleee>eee‘ r r. .d . h r .
amendments to that Act comprising Title II of . e cempn sely lqul eden el c dlng cem'
the pending bill make subject to control all elec- lceme> even cveli e Pencil ef eee gem`e» Weuld
trio utility companies which engage in 1nter- fcneen enclmens esses· ke Wsad enecessely
state commerce or which are part of a power c cenvele cemmen slcc equities c Operating
transmission system crossing state lines. rn sn- <=<>mpa¤i¤S».¤¤¤St1t¤¤1¤s assets of .’¤h<= halelmg
pears probable that most of the important trans- cempsnles> mee cash ee psy em senlel seenlleles
mleelen eompeniee would be bronelre under e V of the latter. Such a conversion could not be
broad regulation applying to rates, issuance of   ecccmpnsned Wlenene denlesslng market Venles
securities and facilities of production and whole- j cl the seeens el. me epeleelng eempenlesx The
sale distribution Eighty-four per cent of all ¤ $1°»0°Q»°°°»°°° lnvesemene by the pnbllc ln the
companies are said to be engaged in interstate i secnlleles cl ene cpelsllng cempsnles thus Wenld
commerce. All transmission lines, any partrof be enleeeed errshwell ef lnveegmrenere ln rnelnlllm
which cross state boundaries, would be desig- cempenles: e llesn s wen e arms e
Hated ee common eerrlere Snell llnee nreenrn_ d1rectly_to investors and the companies involved
ably might be required to transmit power for end lndlleelly le meny elnel Segments af me
governmental plants as well as for private com- eclglcmle enl`nerl§r.nl`e0· r h b.n n. h 1 .
panics. Rates of companies subject to the Com- as c .e e GG s c e .e .l W 19 elepell X ls
mission may be fixed on a basis of "prudent eenslng selllens eeneeln .ls les epplleeelen le ln'
cost" rather than inn- pre-sent value or original dustml *201dms <>¤¤2p¤¤1ssWh1<=h my 1¤¤1d·=¤*¤-
eoen ally are interested 1n utility properties. These
The Federal Power Commission is given au- eempenles ered denied as Penne rnelleell nelrdrlng
thority to require utility companies to establish cemllglnesrnn ell .l e lglmsr e ere   *13 hey
interconnections of facilities for the purpose of Wen heldelee nmmce leee Y le lqdl e.e l ell
creating regional districts for the control of pro- “l°‘.*'°Y e lngs ln er er le eseepe dleslle lege'
elnetlon end transmission of eleetrle enerey_ lation and eventual extermination. Such liquida-
Title III is similar to many of the provisions elerlls meld rneeéeke pleee Wlenelnl neeilly lesrees
of Title II except that it applies to natural gas · . llllng e. e Ve yeees er less. Wnle Pd lle
instead of electricity and its administration is umliy neldlng eempenles are nelng lqnldeeed
in the nende of the Federal Trade Cornrnleelon r the restrictions imposed upon them could not fail
instead of the Federal Power Commission. Pro- . le e‘dle.ee edvellsely elle market Valdes el lnelll
visions apply to the transmission and sale of Se°“‘“mee· It ls mede ¤¤1aWf¤1aft¤f.J¤¤¤¤rr 1*
natural gas in interstate commerce, except that 1937*. fel leglsleleed neldlng eemleenles ee neve
retail sale of natural gas in local distribution any lnlelese el enln eny seelllnllee ln enslness
is exernnn other than operating gas or electric companies,
business in which under express state approval
Destruction of Values an operating _utility _may engage, or bnsiness
nn., I nnsnnnn in ns nnnnnn nn ns nn mgmbly Hgcidaigal ;$,*~;*i,*ya01¤g· ll .13 mg
r of individuals, institutions and trust funds that l  (1?ng1I;O p‘§nyaOr€;Sugsidigrgf V€nlr?°nl§%rs;ee.Iesll_ .
have investments in securities of public utility l lng an eleetrie company to have any interest in
eelnlpenles Tleles Ig and IH dlepley me seme a company producing or transporting natural gas
enrreney ent; arise; Te,§ll`ee‘ rd t f .1 ,0 in interstate commerce, or to have any interest in
duce lineaeteriallsyn tllile nnnfn nl’°tlns §§’,nt3Znn8,6`§6 M arming company doing b¤Si¤$=SS ¤¤t¤i&¤*s the
of securities of public utility holding companies Unleed elelles. except under speelel eendlllene
6 These restrictions for the most part seem un-

 reasonable and arbitrary. They would necessi- agement, subject, of course, to a reasonable de-
tate extensive liquidations which would have gree of supervision. The bill so restricts the
deflationary effects reaching related industries utilities as eventually to create an impossible sit-
such as street railways, coal production and uation. The security owners would be helpless,
water works. and government ownership and operation would
. be the only outcome.
Investments Muse Safrer The abolition of_ holding companies would in-
It is idle for the proponents of the bill to assert crease llnanolng dlllloultloa- A Small olloratlng
that in the wholesale liquidation attending the oomloany Would have muon greater troublo ln
dissolution of holding companies all legitimate finding a market for securities than under present
Values Weujd bo prosoi-Vod_ conditions where the capital is obtained through
Representative Clarence F. Lea of California, a llolollng oompany Wltll dfrect access tc the
a member of the House Committee on Interstate nnanolal markets- If the government were to
and Foreign Commerce, commented on this phase reduce r atee and enforce many r ogulatlono tend-
during hearings on the bill on February 28. He , lng_to doPrlYo_ tno managomont of the rlgnt of
defended investors who have written to members I mdrvrdual lnltlatlyo and lndooondonom lt _lS ob·
of the Congross in opposition to tho   1 VIOUS   ]?l`1V&t€ Caplliall WOI.llCl not be 3V&ll3·bl€.
"Here is a proposal to terminate the holding The olloratlng oompanloa would be forced tc cur-
oonipany   five yoai·s"’ said My_ Loa_ "NoW, S ball €Xp€1'1il1l3ll1`€S- for 1II1pI`OY€Cl I8·O1lll}l€S. Th€Y€
would not the faot   Wo are proposing to ond l WOl.1l(l be 1I1CI`€&S1I'lg COIIlpl&1Ill`»S from COIISUIDCTS.
the company largely destroy the market value, LOSS of revenue by reason of lower rates would
even the legitimate market value of that stock? contribute to the iinanciahdistress of the com-
Nobody would bo attraotod to buy stock in a n p&Il1€S. Th€ Cl.lI`t3l1l€d 3»(?lilVltl€S WOl.1lCl 3(ld to
company that is facing the end of its life. If we unomloloymont All of tnlo would mean at dooP·
force the liquidation of these companies at a onlng ofthe doProSSlon· _ _
time when economic conditions are not favorable, - ln tho face of Suoll a Sltuatlon tllo goyornmont
we force liquidation on a vast scale. It is not a mlgllt be lorood to tako cyer tno utllltloo to pre-
case where the company’s securities can be vent wholesale bankruptcies. Nationalization of
readily disposed of, because we would throw so lnfluotry ln Suoll olroumotanoos Would mean a
many on the market at the same time that we Wldooproad destructfcc cf property Valuoa
would over-supply the market and, I fear, to the Is the Unltod Statoo ready tc embark ullon a
injury of the holders of the securities. Program of government oWnorSnll?l cf utllltloa?
cse 1 think the stockholders who analyze the The problem should be faced frankly, Wltlf full
situation   havo a yoa] approhonsion about I'B&l1Z8.l`»lOI1 of Bill l`»l1€ I3.ChOI'S 1IIVOlV€Cl. Govern-
protecting the real values in their stocks." mont cperatrca mecca l_noll`lolonoy· It moans
Titles II and III might lead to a destruction of Waste- lt moano _Polltloal mana·gomont· _lt
property Vaiuos through the now rogulatoyy II1€&l'l§ t»l1€ SOC13llZ&l`»1OI1 of OIIB of OU.I' l3.I'g€S}D 11]-
methods imposed upon electric and gas utilities. duotrloo- _ _ _ _
The government would be in a position to force _ Tho present admlnlotratlon llao ac autllorlty
down the rate structure to a level comparable m rts party platform for the attempted abclftlon
with that of such a "yard stick" as the Tennessee of hcldms ccmpamec- That platform declared
Valley Authority, which, because of capital on for their regulation, not their destruction,
which no interest need be paid, exemption from . . .
taxes and other special favors, is able to charge Fnnetlens of Holding COmPanles
lower rates than those of private poWer com- · It is not here contended that grave abuses have
l>9»moS· By uomg tho lndonnlto "prudent cost" . not characterized some public utility holding
formula, iuetificatrcc _mlgllt be offered €Vo¤ companies both as to organization and manage-
though it meant a sacrifice of actual investment. _ niont_ On tho ether hand, they have ooytain
· definite and useful functions just as do holding
Government Owncrshlp companies in many other lines of industry. The
The bill raises the issue of nationalization of holding companies make available to operating
public utilities. Industry, to survive in private companies technical skill superior to that which
hands, must be free and unhampered as to man- they could otherwise command. They are able
8 9

 to purchase equipment at lower cost. They aid Qjejyyfbggier ingQmۤl?S 3 result ef the enact`
in financing, either through loans or the market- O B pen mg 1 ' . .
. . . . . Many of the other charges, even 1f pertinent a
ing of securities. Investments 1n holding compa- few ears a O ml ,6 b t . d e th ,0
nies have the advantage of a diversity of risk. timeyin th gif ii E) the Sus mm af sgrsssn
Without them and their organized coordination tices and tie gublgft B exposum O pasd pri'}?
and direction of scattered operating units there two recent mgmt gnrgsnovgx mccssiiy un Er G
could have been no such development in the util- are that Securie m he .mOn§ Esau;] Bergss
is teen ss has takes elses is eemesestiveir re- tt tttttittt ttttisflitgt Z’i§StSEStt“EéZtI€ttttitt“§5E
cen years. . . . . 2 .
Holding companies of various kinds have been agi? §§;?gi;?,ig; &°1t1·?n Oflsxiiisslvelgegenges
known in the United States for many years. One consumers and th tc lchrea 1Z€.t.W°u h ur. es
back more than a century. Three of the existing $0 the burréen Of Su guiensu Sl wry comgjiipleg
gas and electric holding companies were in opera- Structure The n pg. dl % Ein 0V€r`c?‘§1 B' as
tion prior to 1900 as were a large number of ' ew 6 srs ·a’WS WGH appsar
. . . . . . adequate to protect the public against the 1m-
holding companies in other lines of mdustry. The F 1,0 el, issuance Of S Cmnt-
ehigf digvgclssmest fst hegdisa eemsesies is the · p Ap ttgtiy tigtitttit ttiiizty tttit putt att
uti ity e came a ter 1 10. · - . '
While the agitation responsible for the pending A iggsgstirglhgg %·i;;§€;hgOg?g1S§ eemtgltgee es gg
legislation has centered on public utility holding Robert E Heal iow a ming; es fihmgry .‘
companies, their structure and functions are not ties and Exchanye Com · · cr fi fi 8 efmib
essentially different from those in other indus- cha, 6 Of the F€§€m, T1.m§S}§“ sn. .°"‘3“"" shin
tries. Hence, if the Congress decrees the aboli- uhm? investi ation Whzll E eommlssloln S pu lf
tion of public utility holding companies, the in- was gr Wimessg Re reselitgtl S gang? §°uVI€,Si>
ference is natural that the ban will be extended Verhhh Of Neve, Jer; he Wet dggps ‘ O `
_ultimately to all holding companies. Whether Y 1 ermga G 1m'
there is such an immediate intention is imma-
terial. Anticipation of action of this character Former Abuscs Cured
would affect adversely market values of all hold- _ _
ing company securities. With a graphic demon-   rrsnssrlllll cf rne`tesli1m0¤Y Sh0‘WS the fol-
stration before them of the disregard of the Con- lcwine exchange bctwccn M1`- Wolverton and the
gress for the rights of holders of securities of Witncssr
public utility holding ccmpeniest investors would Mr. Wolverton: Judge, the thing that it dis-
be reluctant to place their money 1n holding couraging to me is this: When you appeared before
companies of any kind. this Committee when we were considering the stock
The degationalry effects might be Very greet on exchange bill of last year, and we were benefited
a vast and varied assortment of industries, in- y y°ur rggigggg r§,f3;‘;i0;*“;c you hrslstsfr $6
volving investments of many billions of dollars. hearinglwith refereiilce to this grolirosedolggisllatioi
This would seriously retard recovery and have you again refer to the ........ Company situation.
the effect of keeping the country in its present   ;r;°1€eié1h£;e·h- gemnaay tc eeese tte be
depressed state- s tt t ptttt Wtttt WS st pt`; lliitilfétgttitt tts.;
. · . OU ° `
Charges Against Hcldmg Comparucs thdus{li1i?Yi»i?l§:d (girizevgslonlgagvavglillin btlioingegtilliiilfthtl
As part of the attempt to provide a legal basis N 0t1]§&;_tIv-;ga};;{1SW€11 I think they were Ve hel fuh
for control of public utility holding companies but you have come to a special field noviyof piiblic
the bill reiterates charges made against them. It · etility holding companies in the electric and gas
is declared that investors cannot obtain neces- ‘“%‘,§t"%h 1 t _ Wh I _ ’
sttryjnformation as to thc financial position and .~ is this: Ovtriii Oiiie setiittitiegmniirltlfdtitgnlstgtiii
earnings of most holding companies and their Exchange Act be effective in stopping these prac-
subsidiaries. The fact is that the Securities Act tiees iu the future? All you say relates to what
of 1933 and the Securities and Exchange Act of heiiggrsshiseferergéeheg elfughcse acts were passed.
1934 require disclosure of full information. There ' ‘ . ‘ . .
is no reason to believe that an investor could MI" Wolvertom N0; can these clmdmom °°°`
10

 iégilgleunniier the laws we have passed, and do they . State Regulation
git; §Ve§$;it¥)nee1ie,`éetf1t;‘;,tQ °a‘n‘ It is not true that public utility holding com-
Mr. Healy: I do not know, p3·I1l€S 31“€ €Dt1I’€ly unregulated at present. Many
Mr. Wolverton: Do you know of any single situa- states have laWS dealing with Va1‘iOLlS phases of
tion similar to what you have related in connection the relationship between holding Companies and
with the .......... Company_ which has occurred O eratin com Miles
since we have passed the Securities Act or the stock p M g P ‘ .
exeheuge bill? any states have laws applying to manage-
  Healy: Well, offhand, I say I admit I cannot nient or (lseivngie contracts betweeierhgperlelting ngtili
reca one. _ n 1BS an 0 lng COInpan1eS. e ew Ol"
r. ol erton: If th s ractlces have sto ed, _ · -
wit`}/ioumhefse provisions tligvieng been effective,p§vhy St&t'ut€’ for €Xa“mpl€’ iieqmms. thc. Hlmg Ot atl
is it necessary to pass such drastic legislation now me»¤eeeme¤t» etmettuetttmi engineering and Sum"
to pievent something that does not continue to I3? 00di1t1`&<1?'»S made Wlth an leilglgtedfflnterest and
exist provi es t at no contract s a e e ective until
so filed. After a hearin h i `
In view of the eefesuerde provided by the very - hold the contract net to bi ian Ethiaoiliiltdlidlfriteixeztl
fer-reaching Securities Act and the Seeuritiee L" Other states with similar laws include Illinois
and Exchange Act the insistence upon the enaCt— Indiana, Kansas, Oregon, Virginia North Caro;
ment of the pending legislation leads to the c   lina, New Jersey, Maine and New Hampshire.
conclusion that its sponsors deS1re_goV_e1‘nment ill;. Some of the states, like Wisconsin, have even
control and ownership of the utility industry broader pmvisione
rather than additional protection against alleged In a number of states there are laws to aid
abuses. puhclic sfervice concimissions in obtaining infor-
, _ _ ma ion rom outsi e corporations. Some of the
C0USt1tut1¤ueu1tY Doubtful laws relate to loans between operating utilities
Precedents which indicate clearly the right of ind hlitdmg eemeemee; feeme lewe gtve etmtmt
the Congress to assume jurisdiction over holding O   tetiefvtee eimmteetene ever eeqteettten ef
companies elile lacking. This ie eemieiee by *°“n»}§ Sttilt Stiftfi£i'e?§§"50§§$5§titt’itStt¤i
s o r il ` n. . . '
pdf? $§ttt§1§?i—iL°i§ I hinges in itigt part lee mnheee   eeeee. eeiiieiee eeeee eeeeie-
upon whether the use of the mails to market um' t t ef}? Staite reguytllen te tees extenetve m
securities of holding companies brings them un- img is e Q I tmhni amt er> that te e matter ef
der Federal control. Section 1 of Title I attempts Om popu ee C Owe
to furnish a legal basis under the commerce . . . , ,
clause of the Constitution. It is set forth that Stmtlemty te Secumtlcs Acts
public utility holding companies and their sub- The present situation with respect to the pend-
sidiaries are affected with a national public in- ing bill has elements of similarity to conditions
terest by reason of the fact that their securities surrounding the enactment of the Securities Act
are widely marketed and distributed by means of 1933 and the Securities and Exchange Act of
of the mails and instrumentalities of interstate 1934 (for the regulation of stock exchanges) It
commerce; that their service, sales, construc- is not without significance that the two techni-
tion and other contracts and arrangements are cians who drafted Title I of this bill also were
made and performed similarly; that their sub- _ chiefly responsible for the language in the Securi-
sidiary companies sell and transport gas and A ties Act and in the original draft of the Securi-
electric energy by use of instrumentalities of .», ties and Exchange Act.
interstate commerce; that their practices and if The Securities Act was enacted without suffi-
control over subsidiary companies materially af- E cient consideration. Its harsh terms handicapped ·
fect the interstate commerce in which those com-   the efforts of the administration to revive in-
panies engage, and that their activities, extend- it dustry. A year later it was necessary to relax
ing over many states, are not susceptible to ef- some of its needlessly severe provisions
fective control by any state and make difficult, When the Securities and Exchange Act was
if inet imlpossible, effective state regulation of fiI`S;l?_iHl31”0dll0€Cl, the President disavowed respon-
pu 10 Htl 1ty companies. Slblllty for 1tS SPBCIHG provisions and encouraged
12 13

 a revision by congressional committees. As a re- ‘
sult the bill was entirely rewritten. In the form I
in which it passed the Congress it was a workable  
statute and contained few of the severe restric- l
tions that attached to its original provisions. .
Thus its highly deflationary effect was mini- é
mized. It became a law to regulate rather than §
a law to destroy as would have been the case if  
passed in the form originally presented. g _
In his annual message to the Congress on 5
January 4, 1935, the President urged "the restor- l
ation of sound conditions in the public utilities §
field through abolition of evil features of holding  
companies." He did not then recommend aboli- g
tion of holding companies. In his special mes- ¢
sage on March 12 he said that "except where it li
is absolutely necessary to the continued func- A
tioning of a geographically integrated operating ,
utility system, the utility holding company with <
its present powers must go." Even if certain 1
companies were allowed to continue, the threat of T
abolition which would be hanging over all under j
the declared policy of the bill would make for
uncertainty and would depress values of securi- I
ties. The President asserts that the holding ·
company is "a device which does not belong to l
our American traditions of law and business." .
Earlier in this summary attention has been called
to the fact that some holding companies have
been in existence for more than a third of a cen- L
tury. I `
With entire sympathy for the desire of the
~ President to abolish "evil features of holding I
companies" it is submitted that this bill if passed
as presently drawn would constitute unwise and .
destructive legislation. Also it would result ulti— l
mately in government operation of utilities. The   .
congressional committees in charge should Q ·
modify its provisions so as to protect investors  
from an unwarranted raid upon the value of their ·
securities and so as not to discourage the country ;
generally in its efforts toward further recovery. §
Proper regulation within constitutional limits is l
a theory which will evoke general agreement. l
Wanton destruction of these instrumentalities of ·‘
modern business will serve no good purpose and -
should be militantly opposed.   »
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