End of the Holding Companies

Great fleas have little fleas upon their

backs to bite 'em, And little fleas have lesser fleas, and so

ad infinitum. And the great fleas themselves, in turn,

have greater fleas to go on; While these again have greater still, and

greater still, and so on.

In the financial flea circus of the '20s, the giant holding companies, Electric Bond & Share and North American, were star performers. Bond & Share, run by Sidney Zollicoffer Mitchell, controlled five intermediary holding companies, and through them sat on the backs of 231 subsidiaries. Its $3 1/2 billion empire supplied power in 34 states from Florida to Oregon, from Texas to Pennsylvania. North American, the pyramid erected by luxury-loving Harrison Williams (TIME, Jan. 21), at one time supplied 13% of all U.S. electric power. It had 59 other companies beneath it, some of them stacked five deep. And on its back, North American had such other Williams-controlled companies as Central States Electric Corp. and the New Empire Corp.

In the 17 years since passage of the Public Utility Holding Company Act, which handed down a death sentence on such entangled utility systems, SEC has been trying to break up North American and Bond & Share. Because the job is so complicated, it has not succeeded. Recently, SEC tried a new method: it sat down with the two companies to work out "package" plans that would satisfy everybody. This week Bond & Share filed its plan for SEC approval, following filing by North American. It looked as if the new plans would put an end at last to the wrangling. The plans:

P: North American would be completely liquidated. Union Electric Co. of Missouri, a wholly owned subsidiary which now comprises 90% of North American's holdings, would exchange 1 1/5 shares of its common stock for each share of North American stock outstanding. During the two years needed to complete this stock swap, North American would attempt to sell its other holdings, e.g., North American Utility Securities Corp., Hevi Duty Electric Co.; Union Electric would take over any of these holdings that North American failed to sell.

P: Bond & Share would be transformed into an investment company. It would 1) reduce its holdings in United Gas Corp. (now 27%) to less than 10%; 2) dissolve American Power & Light, another holding company (TIME, March 31); and 3) distribute its 2.3% interest in the Southern Co. Bond & Share would like to keep its 54.6% control of American & Foreign Power Co., which has outlets in eleven South American countries, and retain its Ebasco Services, Inc., an engineering and research organization.

Once the North American and Bond & Share plans are approved, SEC hopes that similar package deals can. be speedily drawn up for ten other holding companies awaiting death. Said Chairman Donald Cook, the man who pushed SEC and the two giant holding companies into final action: "The package deals will end the era of the holding company. Today the utilities that have gone through the wringer are depression-proof."

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