contract, Laclede entered into a contract with its affiliate, the Missouri Co., for the purchase of natural gas for mixing purposes.

During all this time the Missouri Co. was holding itself out as a nonutility, and competing with Laclede, which was serving only mixed gas.

It appearing to the Public Service Commission of Missouri that this family arrangement should be looked into, the commission issued an order on it own motion for an investigation to determine whether the Missouri Industrial Gas Co. was a public utility, and could be made to serve the public generally with natural gas.

Before a hearing could be had on this matter, Laclede acquired the Missouri Co.'s property, at a price, according to an audit of the public service cominission's accountants, of $148,679.18 in excess of the recorded book figure, in addition to $44,295.56 for management and engineering services which the accountants recommended be disallowed. Laclede now distributes natural gas through this Missouri system, but to industries only. The general public are still pressing their demands for straight natural gas.

From exhaustive investigations we have made, it is apparent that one of the principal reasons for Laclede's refusal to distribute natural gas generally is the loss its holding company would sustain on its interfamily transactions, such as the purchase and sale of coal and coke.

It might also be noted, in connection with the so-called "financial advantages" of holding companies, that, contrary to the prevailing theory, Laclede is its parent's creditor, and not debtor. At the present time, and for quite some time in the past, Utilities Power & Light Corporation has been making monthly time payments to Laclede for arrears on the coke transactions, the balance due at one time (1932) being $1,175,647.

From this review it is clear, I submit, that holding company management and manipulation, insofar as the operation of our local gas utility is concerned, has meant, as suggested, the bleeding of the operating company by affiliate companies-all for the profit of the holding company.

The holding company has been of no help to Laclede on the financial side; $10,000,000 of Laclede's bonds were defaulted last year, and with them another $10,000,000 of collateral. In addition, $3,000,000 of notes came due this April. In the face of this the holding company, instead of coming to the rescue of Laclede in its financial distress, has, from year to year, been drawing down dividends on the common stock and exacting enormous holding-company fees. The combined record of common- and preferred-stock dividends and holding-company fees under the Harley Clarke management, most of which went to the holding company, is the grand and rather staggering total of $8,888,145. Meanwhile the holding company is unable to meet a $2,000,000 note due the Reconstruction Finance Corporation.

A further result of the purchase of Laclede by the Utilities Power & Light Corporation, at a profit to Munroe and associates of $14,000,000, was the natural attempt to increase Laclede's valuation and rates. In this the holding company was temporarily successful, obtaining an increase in rates in 1929 of about $700,000, and retaining practically the same value. This case was reversed and remanded by our supreme court; the State public service commission revalued the property at $39,000,000 (a reduction of about $7,000,000) and decreased the rates $350,000 a year; and the case is now again on its way through the courts.

Interspersed here and there have been many controversies and constant turmoil under Laclede's present holding-company management, including a pending proceeding in the Federal court to restrain a rate reduction, ordered by the State public service commission in 1933, of $250,000 a year; a penalty and discount case; billing on the therm basis; charging for heretofore free service on consumers' premises; failure to serve straight natural gas instead of 800 British thermal unit mixed gas; and financial and management matters involving contracts and securities.

From all this, it appears clear to me that Laclede's holding company has been but a millstone about its neck, and that the most fortunate thing that could happen to this operating company is for the holding company to be forced to relinquish its hold.

ST. LOUIS PUBLIC SERVICE CO.

From 1919 to 1927 the predecessor of the St. Louis Public Service Co., the United Railways Co. of St. Louis, was in receivership. The St. Louis Public Service Co. was organized and took it over on December 1, 1927.

On December 22, 1927, City Utilities Co., the holding company, filed application with the State Public Service Commission to hold legally a controlling block of stock.

Representations were made in the application that "petitioner is in position to and will extend, from time to time, such financial and other aid to Public Service Co. as may seem necessary and advisable; and such stock acquisition will, therefore, inure to the advantage of the public, in that Public Service Co. will have the benefit of the financial resources of petitioner and the aid of its competent official staff."

Under the guidance of the City Utilities Co., the business has gradually gone from bad to worse, the operating company's combined bus and street railway revenue passengers and passenger revenues having declined from 257,064,588 and $19,542,077, respectively, in 1928, to 136,046,821 and $11,459,047 in 1934.

The range of sales of the St. Louis Public Service Co.'s common and preferred stock, and the United Railways Co.'s 4-percent bonds, for 1928 and 1934, is:

On April 15, 1933, the St. Louis Public Service Co. went into receivership, and more recently, on June 15, 1934, became a debtor in reorganization proceedings under the amended bankruptcy law, notwithstanding the promised financial aid of its holding company.

The real cause of the St. Louis Public Service Co. receivership was the failure of City Utilities Co., with realizable assets of perhaps $1,000,000, to prevent the default on a collateral 6-percent loan (from local bankers) of approximately $10,000,000, called April 12, 1933, and secured by $16,000,000 (par) of United Railways 4-percent bonds.

SOUTHWESTERN BELL TELEPHONE CO.

The control exerted by the American Telephone & Telegraph Co. over its operating Bell companies is notorious, and needs no elaboration. The exaction of arbitrary percentages of gross revenues (without regard to the cost of the service rendered, or whether the operating company made any net return at all), was the father of the holding company fee for so-called "managerial services." Also, the American Co. is perhaps the pioneer of the device of purchasing from and selling equipment to itself, the use of the Western Electric in this connection dating back many years. At this moment there is a Federal investigation of all the ramifications of its business.

Perhaps the outstanding activity of this holding company was the elimination in 1922, through the Southwestern Bell, of the Kinloch Telephone Co., an active independent, a consequent increase in rates in 1924 of approximately $900,000, and the maintenance substantially of the then high schedule of rates throughout the whole period of this depression. We can recall no instance, through this long period of economic stress, when the Southwestern_Bell has made any reduction in its basic rates applicable to its local business in St. Louis.

UNION ELECTRIC LIGHT AND POWER CO.

Here is a case where the holding company, although perhaps not subject to some of the criticism common to others, is wholly superfluous, and, to the extent that it influences local management, is, for this reason alone, undesirable.

Union Electric is a large and prosperous company, entirely capable of conducting its own affairs. In fact, it is itself a super holding company, controlling some twenty-five subsidiaries, including coal mines, street railways, electric plants, gas plants, a steam heating system, and other activities.

Illustrative of the practices of its holding company is the fact, recently brought out by the Senate Interstate Commerce Committee, that the holding company borrowed from Union at 3.9 percent interest while Union borrowed from the holding company at 6 percent.

Like other foreign-controlled but prosperous utilities in these times of depression, Union did not reduce its rates without a struggle; and while it did recently reduce them about $1,000,000 in St. Louis (and about $600,000 elsewhere), this reduction came only after 4 years of litigation instituted by the city of St. Louis before the State Public Service Commission, and only after a new Public Service Commission and a new city administration had publicly announced plans to press the rate hearings to a more speedy conclusion.

The situation of Union Electric with respect to rates and service is somewhat unique, in that it has active and effective competition from the Lacelede Power & Light Co., and this, in large measure, circumscribes the extent to which the holding company can ply its trade.

LACELEDE POWER & LIGHT CO.

This company was acquired by Munroe, and later by the Utilities Power & Light Corporation, in connection with the acquisition of Laclede Gas Light Co. Like Laclede Gas, it is subject to the same manipulations and intercorproate transactions, such as the purchase of coal, power, and noncompetitive construetion.

NATURAL GAS PIPE LINES

As heretofore noted, the Mississippi River Fuel Corporation's pipe line, which originates in the Munroe-Richland field in Louisiana, was extended to St. Louis in 1929.

This company not only sells natural gas to the Laclede Gas Light Co. for mixing purposes in connection with the 800 British thermal unit gas distributed generally by Laclede, but also sells natural gas to it for direct distribution to industries.

Certain industries have been reserved by this pipe-line company and through it are also receiving straight natural gas.

So far as Mississippi and Laclede are concerned, straight natural gas has been withheld from the general consumer. This has been accomplished through a series of contracts designed for this very purpose.

Another pipe line, that of the Panhandle-Eastern Pipe Line Co., extends from the Panhandle in Texas to within about 70 miles of St. Louis, at Bowling Green, and thence on to the Illinois-Indiana State line.

Realizing the great advantages of natural gas, both from the standpoint of low rates and as a material factor in abating our smoke nuisance, a special committee of our board of aldermen has been conducting an exhaustive investigation to determine why this gas has not been made available to St. Louis, as it has to some one hundred other communities of our State, many of which are served by the Mississippi and Panhandle.

The evidence thus far adduced by our committee clearly shows that these companies have both an adequate supply and line capacity to meet all of the city's requirements. So far, however, neither has seen fit to serve us.

This natural-gas problem is of such moment to St. Louis that our State public service commission recently undertook a similar inquiry on its own initiative, and hearings before it are still pending.

The outcome of the commission's investigation is a matter of doubt, as both pipe-line companies have denied its jurisdiction on the ground that they are engaged in interstate commerce.

In fact, these companies have consistently denied state authority.

On December 6, 1933, the commission, on its own motion, cited the Mississippi River Fuel Corporation to show cause why it should not subject itself to State regulation. This order was vigorously resisted, and the case is still pending.

On September 14, 1931, the city of Fulton filed a complaint with the commission to compel the Panhandle-Eastern Pipe Line Co. to serve it. It seems that the city of Fulton, also appreciating the advantages of natural gas, voted bond for the construction of a municipal distribution system, the gas to be obtained from the Panhandle line, which actually extended to the city limits. The commission ordered the service, but the Panhandle appealed the case to our supreme court, where it is now pending.

It would appear from the above recitals that these pipe-line companies will not serve St. Louis unless compelled to.

If, in fact, our State commission has no power to compel this service, then the city of St. Louis will be at the mercy of these companies, unless Federal regulation is provided.

It is readily apparent that H. R. 5423 will be of invaluable assistance to us in solving our natural-gas problem

In conclusion, may I say that the purpose of the bill fills a crying need. Its spirit is the protection of the public. Its provisions are well designed to accomplish the ends in view. It has my endorsement as a representative of the public. CHAS. M. HAY, City Counselor, City of St. Louis, Mo.

APRIL 29, 1935.

STATEMENT OF C. C. MAYE, WASHINGTON, D. C.

Unconstitutional control, usurpation, and exploitation of our

commerce

Mr. Chairman, by holding company and allied schemers, plotters, pool operators, compel Congress to establish constitutional regulation in order to save our form of Government.

There is no other choice. Congress must control, constitutionally.

Criminal conspiracies, covered by court action United States v. Brown (5 F. Supp. 81) are apparent in practically all holding company and Wall Street manipulations.

Toleration of private control of interstate commerce is as complete and fundamental a negation of our Constitution as is the failure to "coin money, regulate the value thereof" under direct control of Congress.

These two powers, control of commerce and regulation of money with an adequate supply to meet the needs of every State and every community that has been compelled to resort to barter and scrip, are the foundation basis of our Government, unquestionably.

Supreme Court Justice William Harman Black, State of New York, in his lucid book on Our Unknown Constitution, establishes the fundamental facts that prove our Constitution is founded on the necessity for "duties and regulations, as well as a standard currency" (p. 46). He credits George Washington with inspiring this basis for our Union of States in 1785, offering it as the basis for getting Maryland, Virginia, and Pennsylvania to act collectively in advancing trade to connect the headwaters of the Ohio and Potomac Rivers.

Failure to regulate holding companies as well as "a standard currency" and Wall Street's coinage, has almost wrecked our Constitution and Government. Regarding both holding company and banking usurpations of commerce and money, control was fearfully abrogated until the Seventy-third Congress. Communism had taken a stranglehold on the United States.

Communism (community of interest) of bankers and holding companies ruled.
An oligarchic autocracy, centered in Wall Street, gripped America.
President Roosevelt has called these deadly conditions "socialism in business."
Communistic financial tyrants spurn the benevolence of socialism.

Senator Wheeler's radio talk on April 8 revealed a few corporation master tyrants virtually own America, while 120,000,000 citizens (96 percent) own next to nothing (15 percent).

Tragic conditions today are unquestionably due to surrender of the Constitution's control over commerce and money for many years-a wholesale begation of government.

Abortionate controls of money (gold, metal) "render ineffective the power of government", said the Seventy-third Congress, "interfered with the exertion of the power granted to the Congress." The Supreme Court concurred February 18, 1935.

A start to restore money controls to Congress has been made.
Failure to restore commerce controls might be fatal.

Our Unknown Constitution (p. 47) submits official evidence that undoubtedly proves the Constitution was formulated in response to the vital needs of harmonious trade and commercial regulations, 1 year following George Washington's proposal for joint trade relationships.

According to a Virginia State document the Virginia House of Delegates named eight commissioners to meet with "such commissioners as may be appointed by the other States * * * to take into consideration the trade of the United States; to examine the relative situation and trade of the said States; to consider how far a uniform system in their commercial regulations may be necessary to their common interest and their permanent harmony. * * *

"This was the beginning of the Constitution of the United States", says Justice Black.

These two incidents instituted the conferences that gave birth to our compact of government, when, after the lapse of another year, the Seventh Congress recommended a general convention primarily to enable the Congress to perfect effective revenue bills and to regulate commerce. In spite of great opposition the Constitution was framed, adopted, and ratified by narrow margins in all States except Rhode Island, which acceded under threat of loss of its commerce. The Wheeler-Rayburn bill points the way for the necessary unavoidable control of electrically generated commercial activities and allied monetary measures. In order to minimize the communism (community of interest) of banker stockmarket manipulators, whose policies have been to divide up the country electric

ally into regional holding-company groups, in order to help nationalize the general use of electricity on a liberal scale, looking toward an abundant or superabundant national wealth that must necessarily mean a minimum of poverty, the WheelerRayburn bill, improved and amplified to meet the demands of humanity, is

necessary.

Fundamental purposes that underlie the adoption of our Constitution are, after a long breach in their observance, embraced in this bill. The same resentment that once developed against the restrictive financial-commerical policies of England now stirs the American people to regulate electrically generated energy and commerce and their financial implications in all 48 States. Regulation on s States' rights and equal rights basis for all citizens with nationally controlled, uniform rates as nearly as possible, is vitally necessary to keep Government from being subservient and the people subjugated.

Criminal implications, aspects, and practices inherent in the unconstitutional control of commerce and currency, and the manipulation and exploitation of these vital factors of human welfare, have escaped notice and correction, Mr. Chairman.

Nearly 200 billions of bankers' Wall Street and holding company inflated fraud, as outlined comprehensively, pages 789-790, H. R. Hearings 5357, Bank Act of 1935, were possible only through criminal pool operations and stock-market rigging.

In United States v. Brown (5 F. Supp. 81), Judge Woolsey, Southern District of New York, November 23, 1933, dealt with holding company and similar operations in his exhaustive search of legal records back to a British case 120 years before. Artificial manipulations were decreed to be criminal beyond the pale of the law. The indictment charged:

"Artificial manipulation of listed stock on the exchange by means of pool and fictitious sales to raise the price thereof, with active propaganda to induce the public to purchase at such higher price, constitutes fraud."

In holding that the indictment states a crime to meet the requirements of the criminal law, these points were stressed by Judge Woolsey:

"Caveat emptor applies properly only to free and open markets.

"When an outsider, a member of the public, reads the price quotations of a stock listed on an exchange, he is justified in supposing that the quoted price is an appraisal of the value of that stock due to a series of actual sales between the various persons dealing at arm's length in a free and open market on the exchange and so represents a true charcering of the market value of that stock thereon, under the process of attrition due to supply operating against demand.

* *

"If, * * * a group of insiders, to profitably dispose of their holdings, are artifically raising quoted prices on the only market a man to buy resorts then [he] hence is a victim of unfair dealing by the insiders. But he is entitled to fair dealing and should get it.

66* * * Even a speculator is entitled not to have any present fact misrepresented by word or act.

"Judges have properly set their faces sternly against any practices by which the right of fair dealing between man and man is in any way infringed, and whenever there is any false representation it is held to be a fraud, contracts illegal and against public policy.

*

*

2. "The doctrine stems back to the case of Rex v. De Berenger, decided in 1814, before the Court of the King's Bench en banc., and the judges were unanimous in holding the defendants were guilty of a conspiracy to defraud." Seven full pages of quotations of this and allied cases are given. The court in the De Berenger case were unanimous in finding artificial pools "sham, deceit, fraud from beginning to end for the purpose of cheating the public." Judge Woolsey's remarks under section 3 are omitted.

they

4. "It is only by scrupulously maintained honesty of dealing, may escape condemnation as a fraudulent conspiracy. The slightest step over the line of absolute fair dealing takes them into a zone of condemnation by the courts and the doctrine applicable to each member of the pool is the maximcaveat venditor.

"It is obvious when two or more persons, by a joint effort, raise the price of s listed stock artificially, they are creating a kind of price mirage which may lure an outsider into the market to his damage. In my opinion, such a procedure would of itself constitute a fraud on the public. A fortiori, when such a procedure is accompanied by active propaganda seeking to interest the public in the shares thus artificially raised in price, it becomes the grossest kind of fraud."