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"From the foregoing account it will be seen that the Electric Bond & Share Co. regards this service staff as an auxiliary organization that does not directly produce for the company more than a nominal profit."

When those statements are compared with the facts disclosed after the Commission obtained the operating expense ledgers we apparently find one compelling reason why the Bond & Share Co. resisted the Commission's examination of those expense ledgers. Instead of making no or only a nominal profit the Commission discovered that over a term of years the Bond & Share Co. collected over $51,000,000 in various fees (Pt. 62, Federal Trade Commission Reports, Ex. 5602, beginning at p. 330).

Senator HASTINGS. But what I want to know is whether that $51,000,000 is up to the date of this investigation, or whether that $51,000,000 was at the time of the making of the report to the Sixtyninth Congress.

The CHAIRMAN. Well, I think it is clear from a reading of the whole letter that it took in the period mentioned previously, because it was in the Sixty-ninth Congress that they made this report they said upon those statements. But when they went into the books of the company they found that for a long period of time they had collected the $51,000,000, and the letter says:

Allocating the expenses as between that applicable to the company's investment holdings and to its service contracts, the Commission found and reported in chapter IX of its report to the Senate that for 1927, against a total servicing income of $9,373,172.07 the total servicing expense was $4,404,722.77.

Senator HASTINGS. That was after the report was made, wasn't it?

The CHAIRMAN. Mr. Chantland is here and perhaps he can answer you.

Colonel CHANTLAND. Yes, Senator Hastings. And we would be very glad to find what Senator Hastings wants.

Senator HASTINGS. Well, don't you know? You have stated in this letter that those representatives of the company deceived the Congress. Now, I should like to know to what extent they deceived the Congress. And it seems to me it is quite important to have the figures as of that date. So far as I know and so far as anything that appears in this letter would show, what they said there might have been true, except that you say it was not true. I should like to know to what extent it was true and to what extent it was not true.

Colonel CHANTLAND. That was going to be my proffer to you, that we find the things for the years prior to the time they made that representation, and put it in exactly for those years.

Senator HASTINGS. You have already stated it was a misrepresentation.

Colonel CHANTLAND. Oh, yes. And I feel that I am warranted in saying now that it was a misrepresentation, because the 51 million dollars collected was for a term of years, and the schedule of fees on which those profits were made were in effect in the matter of the larger sums further back. They have been greatly reduced over a term of years; as a matter of fact, at this particular time Electric Bond & Share charge very much less, and at this time they have almost got down to a cost basis.

Senator HASTINGS. Doesn't the Federal Trade Commission report show year by year that 51 million dollars ?

Colonel ČHANTLAND. Yes; it does show for what years the 51 million dollars was made up but it does not show it separately in a

way we would need it in order for me to answer your question specifically. But I will get that data so that we may have it stated exactly for each year prior to the time of the report. That is what I am trying to show you. Senator HASTINGS. All right.

(Later on during the hearing the following proceedings were had, and the committee reporter was instructed to transcribe them at this place :)

The CHAIRMAN. Senator Hastings, Mr. Chantland has just called my attention to a letter from the chairman of the Federal Trade Commission found in Document 92, parts 23 and 24, filed with the Secretary of the Senate May 15 and June 15, 1930, giving the data that you suggested you wanted. I am going to ask that it be placed in the record.

Senator HASTINGS. Very well. Suppose you have it placed in the record preceding Mr. MacLane's statement. The CHAIRMAX. All right. The committee reporter will do that

130251-35-19

EXHIBIT No. 1

Income, expense, and reconciliation of surplus for the period March 15, 1905, to March 13, 1929

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Supervision, ngi ering,

Dividends and con

received struction

(see Exhibits
fees (see

No. 39)
Exhibit
No. 2)

Interest
earned (see

Exhibit
No. 47)

Period

(2)

(1)

(3)

(4)

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Mar. 15, 1905 to Jan. 31, 1906 $77,810.03 $135, 192. 36 $38, 868. 73 $32, 487.75

$284, 358.87 $48, 232. 46 $236, 126, 41 $87, 500.00 Year endingJan. 31, 1907

60, 888.64 139, 037. 601 108, 611. 20 176, 032. 74 $1,326. 77 483, 243. 41 51, 419. 60 431, 823.81 100,000.00 Jan. 31, 1908

47, 052. 02 151, 357. 41 73, 269.97 43, 155. 88 14, 038. 11 328, 873.39 85, 460.76 243, 412, 63 100,000.00 Jan. 31, 1909.

$29, 279. 10 72, 849. 11 140, 591. 88 137, 632. 18 61, 085. 40 1, 443. 44 442,881. 11 131, 029. 43 311,851. 68 100,000.00
11 months ending Dec. 31,

31, 089.41 70, 221. 95 149, 923.76 167, 202.74 317, 762. 24 1, 559. 22 737, 759. 32 144, 039. 60 593, 719. 72 91, 666. 67 $80,000.00
Year ending-
Dec, 31, 1910.

63, 157. 59 114, 735, 24 159, 601.21 159, 816.54 191, 878. 65 2, 215.08 691, 404.31 183, 985. 93 507, 418. 38 100,000.00 160,000.00
Dec. 31, 1911,
138, 153, 64 319, 290. 88 116, 375. 68 169, 310.18 223, 126. 98

966, 257.36 259, 045. 60 707, 211.76 103, 333. 33 160,000.00 Dec. 31, 1912.

214,785.89 189, 991. 75 215, 522.42 334, 683, 23 579, 966. 79 32, 028.78 1, 566, 978. 86 340, 321. 60 1, 226, 657. 26 160, 932. 36 225, 333. 33 Dec. 31, 1913.

424, 366. 79 408, 348. 68 326, 668. 55 5,899.03 354, 245.07 34, 875.51 1,554, 403. 63 425, 007.98 1, 129, 395. 65 277, 900.41 363,000.00 Dec. 31, 1914. 599, 646. 40 395, 298. 15 396, 475, 23 51, 972. 39 115, 118.83

9. 65 1, 558, 520. 65 421, 478.96 1, 137,041. 69 298, 391. 67 400,000.00 Dec. 31, 1915

591, 473. 04 322, 966.36 497, 624. 51 254, 359.41 147, 702.07 6,211.72 1,820, 337. 11 419, 252.16 1, 401, 084.95 344, 646.77 433, 777, 78 Dec. 31, 1916

612, 740. 49 480, 023. 02 446, 802. 59 396, 684. 56 215, 452. 24 19, 212. 22 2, 170, 915. 120 603, 982.68 1,566, 932, 44 375, 557. 52 458, 222, 22 Dec. 31, 1917

793, 877.63 565, 562. 97 905, 656.88 457, 505.09 168, 410. 19 249, 007.61 3, 140, 020.37| 1,073, 630.56 2,066, 389.81 487, 710, 49 644, 888.89 Dec. 31, 1918

906, 795. 53 680, 554.50 926, 691. 43 22, 897. 50 61, 945. 05 790.01 2, 599, 674. 02 1, 149, 592.34 1, 450, 081.68 511, 773.25 680, 545. 85 Dec. 31, 1919

1, 129, 276, 231 722, 789.21 951, 330. 46 39, 098. 21 226, 611, 23 45, 766.31 3, 114, 871. 68 1, 417, 399.81 1, 697, 471.84 563, 524.99 778, 730. 18 Dec. 31, 1920.

1, 372, 832.87 599, 590.82 1, 248, 871. 59 12, 878. 66 149, 530. 19 6,787.32 3, 564, 734, 13 1, 437, 133. 82 2, 127,600.31 588, 580.00 800,000.00 Dec. 31, 1921.

1,485, 448.77 621, 545. 32 1,372, 821.21 110,286. 28 372, 181.73 6,689.53 3,968, 972. 84 1,591, 459.18 2, 377, 513. 66 606, 666, 67 800,000.00 Dec. 31, 1922.

2, 158, 228. 26 952, 590.20 1,387, 910.63 494,018. 82 876, 621. 18 272, 142. 37 6, 141, 511. 46 2,400, 042.10 3,741, 469.36 676, 666.66 ? 904, 357.78 Dec. 31, 1923.

4, 159, 476.69 1,870, 926.67 2,279, 683. 78 289,624, 69 1,312, 104.94 1, 498, 876.36 11, 410, 693. 13 3,941, 334. 87 7, 469, 358.26 1,123, 191.67 399, 609.47 Dec. 31, 1924.

5, 295, 988. 47] 3, 456, 894. 18] 1, 489,066.261 1,026, 677. 19 1, 262, 586.93 21, 668.24 12, 562,881.27 4,097, 000. 428, 455, 790.85 1,353, 400.00 1,856, 576. 64 Dec. 31, 1925.

5, 905, 112.13 1,544, 542.07 2, 233, 478. 74 6,747, 336.00 1,178, 548. 40 11, 480. 53 17, 620, 497.87 Dec. 31, 1926.

5, 318, 131. 74/12, 302, 366.13 1,500,000.00 2,412, 819. 47 7, 791, 936.60 2,069, 477.85 2,805, 040.89 4, 237, 810. 48 3, 135, 549. 68 16, 879. 44 20,056, 694. 94 5,987, 460.84 14,069, 234. 10 1,500,000.00 2,000,000.00 Dec. 31, 1927.

8,084, 956.065, 407, 553.21 3, 427,015. 60 288, 080.46 1, 288, 216.01 17, 478.51 18,513, 299.85| 6,613, 973.47 11,899, 326.38 2,376,933. 343, 387,500.00 Dec. 31, 1928.

7,891, 031. 01/ 7,978, 561.09 428, 141.64 428, 103.56 1,025, 496. 41 379, 115. 1318, 130, 448. 84
Jan. 1-Mar. 13, 1929

6,032, 288. 18/12,098, 160.66 3,000,000.00 4,533, 333. 33
1, 217, 114. 52 3,477, 410.45 132, 034. 69 374, 903.08 39, 802.36 18, 826.53 5, 260,091, 63 1, 245, 793. 36 4,014, 298. 27 604,838. 71 1,700,000.00
Total.

51,096, 767. 12 32, 607, 47. 437 22, 462, 917.00 16, 401, 772. 86 13,555, 618.94 2,655, 774.85 138, 680, 325. 1445, 418, 587.45 93, 261, 737. 6917, 033, 214.51 24, 178, 694.94

• Profit on services without allocation of any expenses to other business.

The CHAIRMAN. Mr. MacLane.

STATEMENT OF JOHN F. MacLANE, A MEMBER OF THE LAW FIRM OF SIMPSON, THACHER & BARTLETT, NEW YORK CITY, APPEARING ON BEHALF OF THE COMMITTEE OF PUBLICUTILITY EXECUTIVES

а

The CHAIRMAN. Mr. MacLane, I understand that you are general counsel of Electric Bond & Share Co.

Mr. MacLANE. Our firm has been counsel for Electric Bond & Share Co. for a great many years. The CHAIRMAN. I see. Mr. MacLANE. Mr. Chairman and gentlemen of the committee The CHAIRMAN (interposing). One minute. Please give your full name for the benefit of the members of the committee. Mr. MacLANE. My name is John F. MacLane. The CHAIRMAN. And you are a practicing lawyer? Mr. MACLANE. Yes. The CHAIRMAN. Where do you live? Mr. MACLANE. I live in New York, and am a member of the law firm of Simpson, Thacher & Bartlett, 120 Broadway, New York City. Our firm incorporated Electric Bond & Share Co. and incorporated the associated or sometimes called subsidiary corporations of the Electric Bond & Share group.

It has also been counsel for a number of other companies, which are not in the Electric Bond & Share group today. Some of them had some association with Electric Bond & Share at the time of their incorporation but are no longer associated.

I myself was in 1911 or 1912 a poor and comparatively honest lawyer [laughter] in Boise, Idaho. At that time I was counsel for some utility corporations which were struggling along with problems that confronted them, and after various matters I will refer to later, the owners of those properties went to the Electric Bond & Share Co. and asked to be extricated from their difficulties, and the companies came under the supervision of Electric Bond & Share, where they have been since. Since 1911 my personal practice, for something like 15 years after that, was in the West and the balance in New York, and has been very largely as counsel for utility operating companies and holding companies.

The Chairman. As I understand it, you as attorney for the Electric Bond & Share Co. have visited wherever there was a contest over rates and appeared for the operating companies in the various States to defend their rate structure.

Mr. MacLANE. Well, Mr. Chairman, I have tried a great inany rate cases in different parts of the country, but to say that I have handled all the rate controversies that the associate companies had would be an exaggeration, although I have conducted several rate cases myself.

The CHAIRMAN. All right. Mr. MacLANE. Now, I am appearing here today on behalf and at the request of the Committee of Public Utility Executives, which is canalizing their opposition to the passage of this bill in its present form through this voluntary committee which is brought together for

hear you.

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that purpose. However, I am going to express the hope that I may be regarded here as a witness rather than as a lawyer, although what I will say will have its legal implications and connotations. And I shall try to speak of this bill which we are going to discuss, from the standpoint of my observation and my experience in the electric business. During the course of my remarks I shall digress to refer to the matters which were suggested in the letter that has just been read into the record.

I have prepared a memorandumThe CHAIRMAN (interposing). Mr. MacLane, will you speak up a little louder? I am a little hard of hearing myself, and wish to

Mr. MacLANE. I will do my best. I have prepared a memorandum which contains an outline

The CHAIRMAN (interposing). I hope the people in the room will be as quiet as possible and abstain from whispering, back there in the audience, because it disturbs the proceedings of the committee, and it is difficult for me to hear when there is whispering going on back in the room.

Mr. MacLANE. I have prepared a memorandum which contains an outline of the topics I am going to discuss here today, and I believe a copy of this memorandum has been placed before each member of the committee.

There is also before each member of the committee a memorandum entitled "Memorandum on the Economic Effects of Holding Company Dissolution under the Public Utility Holding Company Act of 1935 ”, prepared by David Friday, an economist whom you all know by reputation. I have used in my memorandum some of the general figures or statistics the basis of which is the Friday memorandum.

I think there is also before each member of the committee an analysis of this bill, S. 1725, that we are going to discuss.

Now, this bill as I see it is a proposal to reorganize the publicutility industry of the United States. While it is frequently referred to as the “ holding company bill”, yet by its terms, as I think I can hereafter show, it spreads out to almost every operating utility in the United States, and will vitally and materially affect their operations. It proposes a complete dissolution of the nexus between holding company and operating companies, and it proposes a method of regulation, and I might say of administration, of these operating companies different from the method of operation which exists today.

It has seemed to me that a proposal to reorganize an industry involves as a necessary and basic assumption the predicate that that industry has so far failed to justify itself economically and socially; that it must be, as I believe was suggested either before the House committee or in some statement made publicly, a cancerous growth on the body politic which is just so bad that corrective measures will be of no avail and the industry as it exists must be uprooted and something else substituted in its place.

Now, the truth of that predicate or assumption can only be found. it seems to me, in the history of the industry, and I am not going to burden you or bore you with statistics that have been given time and time again, but as a preface for what I shall say later I should like to refer briefly to a few of the major and controlling statistics

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