Insull Inquest

The U. S. Senate, through a subcommittee of its Banking & Currency Committee, last week got around to investigating the Insull crash, as part of a general inquiry into the stockmarket aspect of the Depression. So slow had the Senators been that the Press had jibed about investigating the investigators. Lawyer Ferdinand Pecora, longtime assistant New York District Attorney, was the Senators' counsel. Prize exhibit of the week's hearings was Samuel Insull Jr., whose father and uncle fled the country when their towers toppled. Short, spectacled, with a smile and spirit markedly like his cockney-born father's, Insull Jr. made a polite but far from abject witness. He testified that the Insull family once had paper profits of $25,000,000 on an original investment of $8,500,000 in Insull Utility Investments, Inc. Most of their stock was subscribed at $7.50 a share and they were given options on other big blocks at $12 to $15 a share. Insull Utility Investments opened on the Chicago Stock Exchange at $30 a share, hit $149 before the crash. But Insull Jr. stuck to his story that all this stock was still aboard when the Insull ship went down. Insull Jr. was not asked how much they had salted away against disaster. He strengthened the impression that they lost all. Asked how many of the Insull companies paid him salaries, he said:

"My aggregate salary in 1930 was $106,000. It reached a peak of $113,000 in 1931 and my present salary is $50,000 a year. Not that my personal troubles are of any interest to this Senate but because the Press is here I would like the privilege of stating that my debts are over $800,000."

Senator Watson: Your salary is $50,000? Do you get it?

Insull Jr.: I get a look at it.*

Lacking information on several points, Witness Insull offered to write his father in Athens.

Owen D. Young retold the story of General Electric's Insull loans, of his efforts to bring about a standstill agreement among banks that were owed $80,000,000 by the Insull companies (TIME, April 18). Mused he: "I think Samuel Insull was very largely the victim of the complicated structure that he created. Capable though he was, he was unable to comprehend all the ramifications of that complicated structure. I think it is impossible for any one to get an accurate picture of the Insull setup, and I remember the feeling of helplessness that came over me when I began in February, 1931, to examine the structure."

Charles Gates Dawes, pounding the table and smacking his fists together, confessed that while he was Vice President and later Ambassador to Britain his old Central Republic Bank & Trust Co. had loaned nearly $12,000,000 to Insull concerns. Because the loans were made to different units in the system, they were not in violation of the Illinois law forbidding loans to one company in excess of 15% of capital funds. But that his bank had violated the spirit of the law Banker Dawes did admit. The collateral securing the loans was put up by Central Republic for its $90,000,000 R. F. C. loan last summer. Banker Dawes concluded: "I think a feeling of sadness should come over any banker who had a part in the negotiation of loans to the Insuil utility companies."

Melvin Alvah Traylor, president of Chicago's First National Bank, on the stand only six minutes, testified that his bank, too, had defeated the intent of the Illinois law. but he said that the loans were amply secured.

Harold Leonard Stuart, white-haired president of Halsey, Stuart & Co., Insuil bankers, insisted that most of his firm's profits from Insuil deals were on paper, that the final collapse had washed most of them away. The Senators were curious about Halsey. Stuart's former radio program, "The Old Counselor." Inaugurated with an address by Pennsylvania's obstreperous Congressman McFadden, it was a weekly investment talk prepared by Halsey, Stuart and read by Professor Bertram Griffith Nelson of the University of Chicago because he had a "mellow voice." Banker Stuart protested that the "Old Counselor" had never recommended specific securities, had several times warned against inflated stock prices.

Inquisitor Pecora read into the record a Halsey, Stuart letter to one Evelyn McNeil recommending that she sell her government bonds in order to buy debentures in an Insull holding company, then a letter to Halsey, Stuart asking: "For God's sake, is there any issue that Halsey, Stuart sold me that is not going into default?" Snapped Banker Stuart: "You are creating the impression that we sold nothing but worthless securities. We did sell some bad ones, like every other company, but the percentage was small. We are very proud of our record." Banker Stuart suggested that complete financial details should be given in offering circulars, and that utility commissions should sell utility securities at public auction. Remarked worldly-wise Senator Couzens: "You better stay a long way from Wall Street for a long time after that."

P: Chicago's Samuel A. Ettelson won his long fight to have Calvin Fentress ousted as trustee of bankrupt Insull Utility Investments, Inc. Because Trustee Fentress accepted the appointment at the invitation of bankers who hold $40,000,000 of collateral (for the return of which Insuil Utility Investments creditors are suing), Federal Judge Wilkerson said it was "difficult to see how he could be completely disinterested."

P: This week the Senators began investigating Manhattan banks, turning first to big National City, with special interest in its investment affiliate. National City Co. Charles Edwin Mitchell, board chairman of both, testified that 20 billions in securities had been floated in ten years, of which something under one billion have been in "difficulties." Banker Mitchell's salary is $35,000 a year. In 1927-29 he made nearly $3,500,000 extra, fact which led rich Senator Couzens to exclaim that "unreasonable salaries and bonuses led to unsound banking and unsound securities sales."

*Last week Insull Jr. was dropped as vice chairman of Commonwealth Edison Co. and of Peoples Gas Light & Coke Co. Similar action is expected from the third big Insull operating company, Public Service Co. of Northern Illinois. Because Insull Jr. knows the companies in & out, James Simpson who succeeded Insull Sr. as chairman of the three concerns, will retain him as his assistant.

This file is automatically generated by a robot program, so reader's discretion is required.