Competition Contemplated

Economists are virtually agreed that a major cause of Depression II was the failure of private industry to undertake pump-priming when the Government cut down. Certainly no private industry primed the pump less than the utilities; they had held up capital expenditures since the start of the New Deal's public-ownership and "death-sentence" deals (see below). Utility officers, in turn, explain the estimated dam of $3,000,000,000 in such expenditures on grounds that they and the investing public are too scared by the Government's power policy to put more money into the business.

Efforts to end this stalemate reached a peak last month just before Congress passed the Lend-Spend bill. A provision in this bill forbidding PWA to build any more power plants in competition with private companies was removed by White House request, but Senate Majority Leader Barkley announced that "the President does not contemplate" any further such competition "unless and until such municipality as may apply for such allocation has in good faith made an offer to purchase the existing private plant. . . ."

Just what this broad promise meant became apparent last week as PWA Administrator Harold L. Ickes offered 21 municipalities a total of $9,527,995 to build plants of their own though they are already served by private utilities.* To receive these beneficences, the 21 municipalities, said Mr. Ickes. must "make 'reasonable efforts in good faith' to purchase the facilities with which the applicants would be in competition. . . ." Asked who would be the judge of such efforts, Public Works Administrator Ickes declared: "I don't know anyone better qualified to judge what is fair and reasonable than the Administrator of Public Works." Asked if he anticipated trouble from the private utilities, Mr. Ickes said: "I never anticipate trouble, especially when I know it is coming."

Last week the U. S. Government also did the following for and to U. S. Business:

P: Announced wheat loans for the 1938 crop and the acreage allotment for 1939 (see col. 3).

P: Proposed fair trade practice rules for the silk industry. As it has already done with the rayon industry, FTC at the request of certain members of the silk business drew up a proposed set of rules which will not go into effect until after a public hearing August 2. Points which upset the industry last week were that the label on silk state the exact proportion of metallic weighting and finishing materials in the goods, if any, and that the word "silk" may not be used in a firm's name unless a "substantial part" of its business is devoted to silk.

P: Began an investigation of the investment policies of insurance companies. By the Securities Act of 1933, new security issues must be registered with SEC before sale unless the entire issue is to be sold to one buyer. With their huge cash resources, insurance companies habitually buy entire issues. Investment bankers estimate the total of such purchases as high as $1,500,000,000 a year. SEC Chairman William O. Douglas last week commented that this gave "insurance companies a preferred status over other investors." As a part of the current Monopoly Investigation, SEC will study the subject.

P: Exempted small utility holding companies from the Public Utility Act of 1935 ("death sentence"). Promulgated by SEC was the new rule exempting from all provisions of this law utility holding companies and subsidiaries whose entire system gross revenues derived from the utility business did not exceed $150,000 in the last fiscal year. Utility men estimated the number of such companies at about 15.

* The 21 with their grants, in each case 45% of the cost of the proposed new plants: Saranac Lake, N. Y., $225,000; Mount Pleasant, Mich., $218,000; Covington, Va., $181,636: Galax, Va., $129,000; Caruthersville, Mo., $79,000; Cleveland, Okla., $63,000; Okmulgee, Okla., $406,800; Columbus, Miss., $126,000 plus a loan of $155,000; Meridian, Miss., $638,182 plus a loan of $780,000; Cuero, Tex., $101,000: Gonzales, Tex., $78,000; San Antonio, Tex., $2,770,000; Texarkana, Tex., $245,000 plus a loan of $300,000; Weslaco, Tex., $94,500; Wharton, Tex., $90,000; Wichita Falls, Tex., $787,000 plus a loan of $963,000; El Dorado, Ark., $298,000 plus a loan of $365,000; Fairport Harbor, Ohio, $66,000; Murfreesboro, Tenn., $110,455 plus a loan of $135,000; Westbrook, Minn., $30,272; Xewton Falls, Ohio, $92,250.

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