best interests of the holders of the preferred participations, and in order to enable the company to progress by the acquisition of additional properties, we are making the foregoing offer to the company, to be accepted upon the terms set forth herein.'

"The foregoing is an inaccurate statement of fact:

"(i) Because there was no financial detriment suffered by the common-stock holders since no cash dividends had been declared or paid to them;

"(ii) Because upon acceptance of the offer and the reclassification of the stock the common stockholders were entitled to any cash dividend over the requirement of payment of dividends to any preferred shares still outstanding and not converted and

"(iii) Further because the concluding portion of such paragraph commencing 'In spite of * * * ' while purporting to be factual is not factual but argumentative. "The references in exhibits I-1, I-4, and I-5 filed with the registration statement to the valuation of $250,000 as representing the consideration for the rights surrendered by the then common stockholders omit to state that such valuation was imposed upon the company by the then dominant common stockholder (name omitted), and was fixed by the board of directors arbitrarily and without reference to any consideration other than (name omitted) proposal-exhibit I-2." Senator O'MAHONEY. You were also asked to furnish material with respect to the disparity in the voting power of stock of the type to which you referred yesterday, where one corporation had 200,000 shares of stock, 100,000 of which were sold for one cent a share and the other 100,000, without voting power, were sold for a much larger sum?

Mr. O'BRIEN. $250,000 to the public. We are now compiling statistics of that sort from our public records and further memoranda will be delivered to the committee covering that point.

Senator O'MAHONEY. Thank you. When you have it ready, we will put it in the record.

The committee will stand in recess until tomorrow morning at 10:30 o'clock.

(Whereupon, at 12:15 p. m., a recess was taken until the following day, Friday, March 4, 1938, at 10:30 a. m.)

FEDERAL LICENSING OF CORPORATIONS

FRIDAY, MARCH 4, 1938

UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C., March 4, 1938.

The committee met, pursuant to recess, in room 212, Senate Office Building, at 10:30 a. m., Senator Joseph C. O'Mahoney presiding. Present: Senators O'Mahoney (chairman), King, Borah, and Austin. STATEMENT OF BENJAMIN C. MARSH, EXECUTIVE SECRETARY OF THE PEOPLES' LOBBY, WASHINGTON, D. C.

Senator O'MAHONEY. Mr. Marsh, you may proceed, if you are ready.

Mr. MARSH. My name is Benjamin C. Marsh. I appear here as executive secretary of the People's Lobby, with headquarters in Washington, in the Burchell Building.

Senator O'MAHONEY. You have appeared before this committee at other times, I presume?

Mr. MARSH. Mr. Chairman, it is 20 years ago this week that I came to Washington.

Senator BORAH. And you have been running things ever since?

Mr. MARSH. I am beginning to have more and more respect for facts instead of theories than I think some of the members of the Senate and House of Representatives have, because you can work theories until election comes. Then you get down to facts, and you cannot, by referendum vote or judicial ukase, change economic laws. I have been in most of the big dictatorships, except Japan, and I do not want to go there. I would like first to read a brief statement, if I may, and then go into some detail and make some suggestions.

I will say first that the principle of this bill was very carefully discussed by the board of the People's Lobby, which includes Bishop Francis J. McConnell, president, Dr. John H. Gray, former president of the National Economic Association, Dr. Harry W. Laidler, former director of the Bureau of Economic Research, and others; and they approved the principle.

I think in 1918, when I was with the Farmers' National Council, of which Senator Borah will no doubt recall the late George P. Hampton, was director, Mr. Steele of Pennsylvania introduced a bill incorporating the same principle of regulation of corporations.

To fulfill the declared purposes of this bill it must be amended to cover all corporations. as it was when it was originally introduced. With that, it is valuable chiefly as a means to prove the necessity for repealing those laws which have made large corporations a menace,

and to enact legislation which will retain the efficiencies of large-scale control and production and make them inure largely to the benefit of producers and consumers, which, of course, is the purpose of this bill.

The proposed bill applies only to corporations having gross assets of over $100,000. In 1934, over two-thirds of all corporations-280,913 out of 410,626-had total assets under $100,000.

I do not want to criticize previous witnesses, but I will call attention to the inaccuracy of the statement of Mr. Cunningham, if I understood him correctly-and if not, the minutes will correct my misunderstanding that this bill applies only to corporations having over $100,000 gross assets and would permit the Federal Trade Commission, or whatever agency is created, to supervise the accounts of 300,000 corporations. There was some discussion over whether it would apply to gross or net assets. I want to call your attention to some figures in the report on corporation incomes for 1934.

Senator AUSTIN. Who is that by?

Mr. MARSH. That is the report of the Commissioner of Internal Revenue for 1934, just out within the last few days. I have not read it completely, but have tried to go over it as carefully as I had the time. It divides all corporations into total asset classes.

Senator AUSTIN. What page?

Mr. MARSH. Page 72, table 5.

This report shows that this bill applies only to about 130,000 corporations at most. I will say very frankly that, if it is necessary just to try this out, I would have it even apply only to corporations with assets of over $50,000,000. I will give you some striking figures relative to these big corporations, which will indicate why as Senator Borah pointed out yesterday in certain lines a few large corporations were able to dominate the situation. This is the basis of our figures as to how many corporations would be covered by this bill.

Senator BORAH. How many did you say would be covered by the bill?

Mr. MARSH. About 130,000. Out of 410,626 corporations, 280,913 have total assets under $100,000. Of course, that is for 1934. There may have been some change since then.

I would like to read some of the figures given by Mr. Robert H. Jackson recently in an address published in the New York Times, showing what has happened to some of these big corporations, I think approximately 22 of them being listed, giving the profits and deficits in 1932 and 1936, I might say, before and after New Deal treatment.

The United States Steel Corporation in 1932 had a deficit of something like $71,000,000. Then in 1936 it had a profit of $50,583,000. I saw the figures for last year, 1937, and they amounted to almost exactly $100,000,000.

Senator AUSTIN. Where did you get those figures you are giving us? Mr. MARSH. I saw them in the New York Times, taken from the report of the United States Steel Corporation.

Senator AUSTIN. Did you check up on the figures in that list you are now referring to?

Mr. MARSH. No. It was in the New York Times.

Senator AUSTIN. That list was first used by Senator Robinson on the floor of the Senate, and afterward used by Mr. Jackson in the address you speak of. Did you take the same corporations in that list, about 20 of them, and see what profit they earned last year, 1937?

Mr. MARSH. No; I did not. Some of them, I imagine, earned less in 1937 than in 1936. That is the year for the figures I am presenting, and I think they are probably correct. I think Mr. Jackson may be more accurate in his figures than in his theories. I am not sure. One is easier to get at than the other.

These smaller corporations, with total assets of $100,000 or less, had only about one-fourth of the total assets, but close to one-sixth of the total gross sales, and one-seventh of the total compiled receipts. I am again summarizing the Government's figures. The cost of goods sold by these smaller corporations, including wages, was almost one-sixth of the total, and as many of them were too poor to install expensive machinery, they were, of course, large employers of labor, in the aggregate.

The information required and conditions prescribed as a basis for a Federal license are admirable. Before I finish I would like to suggest some additions for your consideration.

After watching legislative procedure in Washington for 20 years, and 11 years before that in Albany, I recognize you really do not achieve perfection, except in political platforms, without a long effort. I think this is one of the most vital bills, after studying legislative procedure pretty carefully, that has ever been before Congress. Whether you are going to have socialization of industry, or whether you are going to make the present system evolve a social service, it is of vital importance that you do not try to pay returns on a fictitious capital or false value. If you are going to have public ownership, it is important that you do not pay champagne prices, as Uncle Sam is inclined to do, under any administration, for watered stock.

This bill if of the utmost importance, because we have got to decide whether we are going to continue to encourage private initiative, or whether we are going to have some kind of regulated monopoly, or whether we are going to have public ownership. I am not sure which we are going to have. I am sure we are not going to continue the way we have been going.

The bill should be passed, in my judgment, though, if limited to corporations with gross assets over $100,000, it should be supplemented by Federal wages and hours legislation I was most keenly interested in the dinner last night on the twenty-fifth anniversary of the Departmet of Labor to hear a former president of the Chamber of Commerce, Mr. Henry Harriman, say he hoped child labor was a thing of the past.

Because the bill is an essential preliminary to end the conditions leading to private monopoly, it is important to record that it cannot end, but merely curb, such monopoly. To end the dangers of private concentration, high tariffs, monopoly of natural resources, private credit, and patent excesses must be ended.

Senator AUSTIN. Will you permit an interruption at this point? Mr. MARSH. Yes.

Senator AUSTIN. I am wondering about the use of the term "private credit." What do you mean when you speak of eliminating private credit?

Mr. MARSH. I put a dollar in the savings bank, and that bank can theoretically issue credit up to nine times that dollar, and charge interest on it. It may not be exactly nine times, but it is several times. I think that is wrong. I think we have got to have socialized

banking and credit. I think the President made a great mistake in not doing that when he came in. I think that is one of the basic things he should deal with.

Private monopoly is indefensible, but many undertakings must be monopolistic to be efficient, and these must be publicly owned. I say again that whether you believe you are going to have public ownership or private ownership, this bill is of vital importance, because it will affect whatever the future of industry is going to be.

I have compiled from the report of incomes for 1929, 1932, and 1934, comparative figures of the various classes of corporations. I do not want to take the time to read all of it, but I would like to have it incorporated in the record.

Senator O'MAHONEY. We will be very glad to have that in the record.

(The document referred to is here set forth in full, as follows:)

Comparative statement of corporations submitting balance sheets to Bureau of Internal Revenue for 1929, 1982, and 1934

Mr. MARSH. As will be noted from this statement that is in the record, the number of corporations reporting in 1929 was 398,815. The total assets of those corporations, in round figures, in 1929, was $335,777,000. About 1933 or early 1934 I was talking to the late Senator Couzens, and I said: "Are you doing anything to meet the situation?" He was an experienced businessman, and I was not. I made money running a boarding club at $2 a week, in college, and that might indicate I had some business capacity, but not any large amount of business experience.

Senator O'MAHONEY. You might have become a monopolist if you had kept on.