Business & Finance: Sweet Cider

Truces between the New Deal and the public utility industry have been about as frequent and as transient as European war scares. But last week came a truce which really seemed to amount to something. Columnist Arthur Krock enthused:

“A whole barrel of the apples of discord is thus thrown overboard.”

Biggest crab apple in the barrel of discord has long been Electric Bond & Share Co., which led the fight against the Public Utility Holding Company Act (“death sentence”) requiring that utility empires be reorganized into geographically integrated systems with no more than one intermediary holding company between the operating companies and the top. But last spring the Supreme Court ended a long SEC-E.B. & S. court fight by deciding that the clause of the act requiring all the holding companies to register with SEC was constitutional.

As soon as all were registered, SEC Chairman William O. Douglas ordered them to file tentative plans for integration by December 1. The bulk of the industry then sat back to see what E.B. & S. would do. Last week E.B. & S. gave in and announced it would file on December 1 an integration plan, declaring—in direct antithesis to previous statements—that filing was the “realistic approach to a difficult and highly controversial problem.”

Though the E.B. & S. action by no means insures that it or some other company may not otherwise fight the Holding Company Act, President Roosevelt and Chairman Douglas at once issued huzzas. The President said that E.B. & S.’s action was a fine example of the cooperation the White House “spokesman” requested in his “sabre-rattling” discourse fortnight ago and would certainly ‘help business generally. What was more, said Mr. Roosevelt, the utility industry would discover that the so-called “death sentence” was really a health sentence and would revitalize the industry (see p. 9). Said Mr. Douglas: “When the legal, business, banking and operating brains of the utility industry decide to act, it really moves.”

That the New Deal was eager to turn the apples of discord into sweet cider further appeared when Assistant Secretary of War Louis Johnson summoned four utility bigwigs to Washington to discuss the Administration’s long-bruited plan to foster a billion dollars worth of utility expansion for purposes of national defence. Taking the hint, utility stocks soared to new highs for the year on the New York Exchange, led the industrial and railroad averages also to new high ground.

Last week the U.S. Government also did the following for and to U.S. Business :

> Extended its easy credit policy to railroad equipment trust certificates. Heretofore, with the exception of the World War period, the Interstate Commerce Commission has always required a 25% down payment by railroads on equipment purchases financed by equipment trust certificates. Last August ICC allowed Seaboard Air Line Ry., which is in reorganization, to finance 90% of a $1,671,000 equipment trust issue. Last week in a supplementary decision ICC let the Seaboard finance the other 10%. ICCommissioner Claude R. Porter dissented on the grounds that such a policy would impair the market for equipment trusts.

> Sold 3,000,000 bushels of wheat to Mexico under the export subsidy plan, Mexico will pay for the wheat with proceeds of its export tax on the silver its mines sell to the U.S. The U.S. Government thus pays the Mexican piper both ways—taking one loss by selling the wheat at less than the market price, taking another by buying the silver at an artificially pegged price.