Utilities to the Mat

On behalf of the U. S. utility industry, Electric Bond & Share, largest utility holding company, last week presented a brief to the U. S. Supreme Court attacking the Utility Holding Company Act of 1935. On behalf of the U. S. Government, Messrs. Homer Cummings, Robert Jackson, Thomas Corcoran and Ben Cohen simultaneously filed a brief which asserted, among other things, that if Congress has the right to curb white slavery and bootleg liquor it "certainly is not without power to curb financial chicanery and abuses which have brought ruin to millions." Thus, after over two years of catch-as-catch-can in the lower courts, did the utility industry and the Government finally come to the mat before the nation's top tribunal on the major question of the constitutionality of the utility "death sentence."

The Utility Holding Company Act of 1935 provided that all utility holding companies must register with SEC under the penalty of being forbidden to use the mails and the facilities of interstate commerce if they did not. SEC would then have the power to control their financial and security transactions and, under the "death sentence" clause, to force simplification of any utility pyramid into a single geographically integrated system. Many utility holding companies not only refused to register but declared they would get injunctions against the whole Act. SEC then agreed to hold the Act in abeyance while it brought a test case against Electric Bond & Share. When it got to court, however, SEC attempted to limit the test only to the necessity for registration. E. B. & S. lost twice in lower courts. Said its brief last week: "The Government is seeking to avoid and the defendant holding companies to secure, a test of the substantive provisions of the Act."

This week the case began to be argued in the Court by onetime Solicitor General Thomas D. Thacher and John F. MacLane (both of Simpson, Thacher & Bartlett) for the utilities, Solicitor General-nominee Robert Jackson and Ben Cohen for the Government. Meanwhile, in Chicago, SEC Chairman William 0. Douglas argued the case before the Commonwealth Club: "I am shocked at the far-flung cry of 'Wolf, wolf' from the mouths of management over the grave dangers of the misnamed 'death sentence,' for I know the fears which that spectre generates in investors. And I know how unfounded that fear is, because I know that its basic threat is not to investors but to certain types of management, essentially concerned with retaining economic power. . . .

"The once united front against the Act no longer exists. Many realists in the field have taken a full measure of the Act and have concluded that they can and will live and prosper under it.... Yet I see these men under the whiphand of New York finance, paralyzed into inaction. I see realists chafing under the domination of these bankers who are forestalling them from moving forward to obtain equity money which the companies sorely need.... These are grave disappointments."

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