Evening Star Newspaper, May 23, 1933, Page 4

DISSENSION ENDS INQURY SESSION. Glass Protests Questioning of Banker on Income Tax Return. ¢ (Continued From First Page) keep minutes when the partners began their daily meetings about “20 years! ago.” | At the opening of testimony, in a/ prepared statement, Tead by him with | a clear precision, Morgan defended the | practice of his firm in permitting its | partners to serve as directors of other | companies in whose securities the bank is interested, saying such an arrange- ment was valuable to all concerned. He criticized the present trend of | legislation toward prohibiting such di- | rectorships. It adds to the strength of private banks to accept deposits, he said, aware that the practice has recently been mych criticized. | substance, he defended private | banking as “a national asset and Dot s national danger.” i 7 Huge Crowd Present. i The biggest crowd in the history of Senate investigations jammed the huge | committee Toom in the Senate Office Building, and overflowed into surround- | corridors. i ’n‘A hum of surpressed conversation | ed the vicinity, adding to_the atmosphere of tenseness that had been | nt since arrivals first started taking seats long before the scheduled | starting time of 10 8m. Semators wives and social leaders oc- i ats. mgku:t ?r‘geielomn partners to arrive was George ‘Whitney, who will follow organ the s L, “Hz loofinn seat in the front row with. Russell Lefingwell, another partner. “The erowd around: the door was 0| dense that even the witnesses had to| i be pushed through the crowd. | Occupy Five Floors. | F9UP PP | t at s local hotel where ad | :rxl‘gl:ge; almost five full floors for the | the inquiry. d“lrl.ot!‘::nol‘elntd back in his chair with trunk full of records ‘pushed past him. ;le was dressed in a dark blue suit with » thin white stripe. ‘The Morgan of the him. Senator Fletcher, chairman commmee,nonwnkhhmtbyhcm:m at the head of the table. Morgan Takes Stand. , milling excited thron The pushing, door almost out of con - efforts of committee aides He then swore Morgan. “Would you like to e 8 prelim- nary statement?” asked Fietcher, while E should Nke to, Mr. Chairman, if I might,” Morgan sald quietly. 20 Members of Firm. Answering the first questions from Pecora, Morgan gave his residence and business addresses and said he was a Grenfell & Co. ‘The business of J. P. Morgan & Oo. was founded in 1894. “We conduct & general banking busi- ness such as is conducted under the laws of New York for a private bank,” the witness said. ¢ “We take deposits when they are offered; we take orders, which we have executed on the Stock Exchange.” But he added, “The investment busi- ness is not the largest part of our business.” “How many members has your firm?"” he was asked. “I think it's 20.” “Were they always that many?” “Oh, no; we added them as we needed “How long has the firm been consti- $uted as now exists?” “Since January 2, 1932," Morgan said, on & prompting from Davis. Pecora asked for & copy of the articles of tnership. y are not here,” Morgan replied. All Partners Liable. There was a negative answer when | the counsel asked whether there was & | copy available. | Pecora said he thought a copy of the articles was essential to the hearing. Davis objected, “the partners are all | bonded.” “It is a purely private matter and | :l;’ no relevancy to this hearing,” Davis There was an exchange, with com- | mittee members participating, and Pe- | cora said the articles of partnership | would show, he felt, such things as the | “question of the relationship of the partners to the profits, losses and capital invested in this firm.” Davis insisted all the partners were g‘q.blt for liabilities under the New York | ws. Pecora contended the articles of co- thership were essential to the hear- Ing, but Senator Couzens asked that | this matter be settled in ‘“executive | session” and the question was dropped | for the time. Senator Stelwer, Republican, Oregon, asked Pecora what phase of the inquiry would be pertinent to the partnership Information. “It is a question of lability of this firm which accepts deposits from the public,” Pecora replied, but he did not Ppress the matter. Asked if his formal statement repre- sented his own views, Morgan replied | X did, but had been read by his part- ners and none ‘dissented | “Does it express the views of all pri- vate bankers?” asked Couzens. | “I can only speak for myself,” Mor- | gan said. | Has General Supervision. “I wanted to make ‘clear that it | doesn't stand as & statement for all pri- | vate banks,” Couzens commented. “Is the business departmentalized | among the members?” Pecora asked. “Not in any formal way,” Morgan re- plied, amplifying -in reply ‘to further questions that “if a subject comes up | and we have somebody who knows more about it, he handles it.” “What is assigned to you?” “Nothing. I used to be very sctive, but I found I had some very good part- ners and I leave more and more to my pertners. I have a general supervision and accept full responsibility.” “Do you want the committee to un- that you have retired?” “Oh, no,’ The largest crowd attracted by a Senate inquiry in recent years attempted to get into the Banking | room this morning when J. P. Morgan took the stand to be questioned in the stock market inquiry. | of the crowded corridor of the Senate Office Building was made while the Capitol police were struggli mn check. Committee This photograph | ing to keep the crowd | —Star Staff Photo. | the amount of deposits of Morgan Co “In the two houses, $250,000,000,” Morgan replied. He sald Lamont handled most of the firm's foreign security issues. l:ccarl asked how often the partners met. " ° “Every weekday except Saturday.” “Is there any written record or min- utes?” “‘Only the names of those who at- tended.” “There is no record of the delibera- tions or conclusions?" “None.” Don’t Have to Vote. Morgen said it was decided not to keep minutes when the partners, about “20 years ago,” began their daily meetings. + “It is not the same as the board of | & corporation,” Morgan explained in| answer to & question by Pecora. “They | | have to vote. We don't.” “Is that the only reason you keep | no minutes?” Pecora inquired. “So far as I know.” Pecora then wanted to know how | they decided what had happened at| meetings “months back in the event | you want to know.” “We just depend upon our recollec- | ' Morgan said. “You find the memories of the part- | ners uniformly good?” ‘“Yes,” the banker said with a smile. ‘Then followed questions about the par- ent firm affiliate, Drexel & Co., in Phil- adelphia. . Morgan was answering a series of questions along this line, asserting that the two were really “one business oper- ated in different places,” when Sena- tor Glass, Democrat, of Virginia in- terrupted. “I want to know,” he asked sharply, “whether the committee counsel has | told the members of the subcommittee what he intends to bring out by this type of question. What does he intend to_prove?” Pecora answered that the questions about the Philadelphia firm were for the record and that he had told Chair- man Fletcher in a general way what hé intended to do. A number of questions were asked regarding the relationship of the Mor- gan House in New York and Drexel & Co. in Philadelphia: Whitney answered | these. “There are 20 partners of Morgan & | Co. and Drexel Co.,” he said. Explains Drexel Relation. “Their labilities are complete and vided. undi § “In Philadelphia there are four part- mers, who are liable for Drexel & Co., but h,‘ve no connection with Morgan “It J. P. Morgan were sued,” asked Gore, “would Drexel & Co. be liable?” “The five resident partners of Mor- gan & Co. would be liable but the four | Drexel partners would not,” Whitney Eald. “they are liable only for Drexel & 0. “Is there a separate capitalization for | Drexel & Co?” asked Adams, Demo- crat, of Colorado. “It is separate on the books,” Whit- ney said. “What were the aggregate amount of deposit accounts at the end of your last fiscal year?” asked Pecora. “On December 31, 1932, they were $340,000,000,” Morgan said, giving & figure nearly $100,000,000 above his first reply to this question. “What was the capital?” “The net worth of the company an- swers for capital,” Morgan said. “That was $53,194,000. That means the as- sets to partners accounts beyond lia- bilities.” “You count your deposits as liabil- ities?” asked Barkley, Democrat, of Kentucky. “We do,” Morgan said, laughing. “I don’t think that was very necessary Senator.” Senator Gore then asked the reserve the firm carried against deposits. “We don't carry any legal reserve” Morgan reminded. He then said the | reserve was $33,800,000 in cash, some | $7,300,000 in call loans and $224,000,- 000 in Government securities. Have Always Paid Interest. Couzens inquired whether the Glass | | banking bill now pending would Not | asked, “Is he related to you?” cause deposits to be put in private banks by prohibiting commercial banks Cu | ances, $11,397,271. to pay interest on demand deposits. “I think so,” Morgan replied. | Glass interrupted to say that a pro- | banks could not receive deposits unless they separated investment and com- | mercial banking. E | At this point there was a discussion of the balance sheet of the Morgan | house from January, 1927. to Decem- | ber 31. 1932, which Morgan put into | the record. “Have you always pald interest on demand deposits?” the counsel asked. “As far.as I know,” Morgan an- swered, “for 40 years at least.” Bulkley asked how the interest rate paid by the Morgan firm compared with that of other banks. Morgan said the rate had been the uniform one of thé New York Clearing House Association, since it existed. “I think the average rate of interest on the deposits by our bank is about 2 per cent,” he answered McAdoo. Morgan remained at ease. Questions were many and fast from the Senators and counsel, but he leaned back in his chair and replied affably. He read a list of the co-partners, also directors or members of the board of other banking institutions. “Has it ever been in the power of the New York banking authorities to inspect your bank?” Pecora asked. “I don't know tne exact legal status,” Morgan said. “I think the authorities have the right to look far enough into our affairs to see that we keep the 'MORGAN’S HAS $250,000,000 CASH AND U. S. BONDS IN ITS COFFERS Statement Submitted at Inquiry Shows Huge Sum in Private By the Associated Press. More than a quarter of a billion dol- lars in cash and Government securities alone is in the coffers of J. P. Morgan & Co., according to a statement sub- mited to the Senate committee today by J. P. Morgan. The assets were listed as follows: Cash, $33,800,000; Government securi- tles, $224,000,000; call loans, $7,325- 000; acceptances of other banks, noth ing; State and municipal bonds, $6. 745,209; corporate bonds and corporate stocks, $13,875,028; other investments, $810,925; loans, $34,836,442; de- mand loans, $47,869,164; banking houses, $9,691.304. Acceptances held under guarantee— Nothing. 8. istomer, liability account accept- Bank. Foreign exchange, $10,645,958. In addition to the $250,000,000 de- | posits, liabilities were listed as follows: | New worth, $53,194,076. Bills payable—None. Accrued interest payable—None. Acceptances sold under guarantee, $12,820,358. Foreign exchange, $18,645,958. ‘The statement, a consolidated bal- | ance sheet for both of New York and | Philadelphia houses, showed deposits | lllgl;i reached a peak of $562,406,896 in | 7. Other years were: 1928—$481,188,646. 1929—$492,292,666. 1930—$503,898,014. 1931—$319,403,848. On last December 31, deposits were listed at $340,000,000. “private banks are not subject to ex- amination but the superintendent of banks of New York is empowered to make an examination to ascertain if | the nature of the business makes it eligible for examination. “They are constantly under an invi- tation to make such an examination, but the practices of our firm are such as scarcely to arouse any question in the mind of the examiner.” “Is there any minimum sum that J. P. Morgan & Co. will receive as a de- mand deposit?” Pecora asked Morgan. “We don't like to take little de] > Morgan said, “a couple of tho dollars roughly, but it scarcely goes that low.” “Do you report your condition every year in great detail to the Federal Re- serve Bank of New York?” asked Pecora. “It is done because the bank felt it should be in a position to buy our bills,” Morgan said. “We have reported in great detail for the last five years.” “You know that report is in strict confidence?” “I know it” | “Does the Reserve bank make any investigation of its own?” asked Bulkley. “No “Have the New York authorities ever investigated the company?” Reynolds asked. “Not that I know of.” Never Checked Statement. “Does the Federal Reserve Babk check your statement?” asked Couzens. “No,” ‘Morgan replied. “They have never asked.” “They are very meticulous about ex- | amining statements of incorporated banks; 1 was wondering why they are | 50 lenient with Morgan & Co.,” Couzens | rejoined.: Morgan leaned forward to answer this question, but Glass broke in to say the Reserve bank had no legal right to_examine. McAdoo commented that such exami- nations rarely are made. “They examine the bills rather than the bank,” Glass said. Morgan never did get in his answer, but Jeaned back smiling while the Sen- ators discussed it for him. In response to Pecora, Morgan read the long list of directorships that the rtners in the great financial house | old. It took at least 10 minutes and the committee members relaxed during the reading. Morgan put on pince-nez glasses and held the bulky list close to his eyes. Pecora, meantime, checked with a similar list of his own. The head of the House of Morgan detailed firm after firm. It read like a list of the industrial corporations of America. | Lists of the depositors are public in- | formation and Pecora mierely asked to have them read to get them into the record. Morgan read the name of Henry §. Morgan from the list, and Pecor “My son,” smiled the witness. There were many utilities concerns | in_the long list. Pecora questioned about members of | the London branch who Were not| Philadelphia affiliate. | Morgan named several, among them, . C. QGrenfell, “member of Parlia- ment.” | “How does he get elected?” queried Senator Gore. | “From London,” laughed the witness director of the Bank of England. | “Is it desired to have these direc- | tors—men who are members of your | firm—on these various boards hecnu.le‘ | you transact business with them and| | make loans?” Glass inquired. | “1 think the real reason,” Mol’Yln said, “is that we feel a responsibility for them, or toward them. In other | words, ‘e feel obligated to give them | financial advice and counsel if they want it.” | “Do you dominate policies of the con- | cern on which you have directors?” | McAdoo wanted to know. | “We have no more domination than | one vote gives us,” Morgan told him. The witness then detailed Paris part- ners in the New York and Philadel- | phia firms. He named among them | J. R. Carter and B, 8. Carter. | Pecora asked sbout deposits of the Morgan Co. with Morgan & Grenfell in London. Morgan said they kept de- ' posits there, but was unable to give any amounts. Whitney said they were just working balances. “When you make returns, does the Internal venue Bureau come down . that exempt us from examina- tion.” Morgan said, but when & comr mittee suggested he nearly had age; he re- Qfll‘!. “Almost.” | bank by Leffingwell stood up to answer questions ~examination of the ital “suthorities, the statute,” he said, and audit your books?” Couzens asked. es” “Who determines the policiéh of your London office?” Pecora asked. gan said. “You see I lived over there and worked over there for eight years, so I know those men. There's not much room for misunderstandings.” “You are liable for their losses?” “I suppose so. The same is true of Drexel & Co. and ourselves.” Morgan said in reply to questions that the balance sheet given the com- mittee listed market values of securi- ties, not purchase values. “Was a statement of your financial | condition made up for the calendar year | 1930?" asked. ““There wasn't one,” Morgan replied. | As the question of the “lcss” came | up, Glass interposed again to say that| Morgan had said he knew “nothing about this.” “Does the witness havé some knowl- edge of a revaluation of securities on January 2, 1931?"” asked Pecora. “I have no knowledge” Morgan re- plied; “I don't know,” “‘Were the assets of the firm valued at the end of 1930 at market price or at | cost?” “They were not valued as of that, date Supposes He Signed. “Was there a write-off of securities &t the end of the calendar year 1930?" “I don't know,” Morgan said, his volce rising. “Who signed the 1930 tax return?” “I have no doubt I did.” “Did you sign for January 1 and| January 27" don’t know. I don't know.” idn’t examiners go over them?” | asked Glass. “Yes,” Morgan said. “I believe 1931 now is being ex- amined.” “They also examined Charles E. Mitchell,” put in Couzens. “That is an implication,” Glass in- terjected. “I don’t mean any implication,” Cou- zens said, “but I don’t want to ¢! this examination.” “The witness has answered ‘no’ over and over!” Glass shouted, pounding the table. “I want to know the direction of this examination. As & member of this committee I have the right to ask ques- tions and make observations, and I in- tend to exercise that right.” “So do I,” Couzens said quietly. “You might as well indict me,” Glass | persisted. “I don’'t know any more about my income tax than the man in the moon. I guess I'm guilty.” “I'm not implying any guilt, but I don't see why this witness should be | treated differently from any other just because he’s Mr. Morgan,” Couzens said. Glass Protesis Questioning. Pecora had asked if the Morgan firm | filed an income tax statement for the part of the calendar year from Janu- | ary 1 to June 30 and a separate return | from July 1 to December 31. | “I den’'t know anything about the income tax personally,” Morgan replied. “You stated a balance sheet was not taken as of the end of the calendar year 1930 because a new partner came in on January 2, 1931,” Pecora said. “Yes,” Morgan said. “Do you know your firm made & Te- turn for the two-day period betwe!n; | vision in the bill stipulated that private | partners in the parent firm and the January 1 and January 2, 1931?" | “Probably, but I don't know it,” Mor- gan replied. Pecora then was told by Morgan that he did not know that his firm had made a deduction of $21,071,000 on a return covering the January 1 and 2 period of | | heartily. adding that Grenfell was also| This line of questioning was then protested by Davis and Senator Glass. oring this, Pecora asked: “Did the firm do business for January 1 and January 2 which resulted in con- siderable losses?” “There was no loss at that time, but “;‘ii'dlm was taken then,” Morgan re- plied. “Have you no knowledge of this mat- again interposed to object to the “badgering of this witness.” “I have no desire to badger,” Pecora answered. “I think I have right to de- velop information.” BN EMPLOYMENT GAINS CHICAGO, May 23 (#).—During the first 18 days of May, heads of 11,614 familles were transferred to g employment from the direct relief list, the State Emergency Rellef Commis- sion_announced Sunday. “The workers are paid through relief funds but they are being used on public or philant! ic projects which could not otherwise be undertaken, said N. H. Bickham, director of the work. Much of the work was the city for the World's m starts next Saturday. < MORGAN'S FINANCE AGENCY OF NATIONS Government Has 'Turne& to Firm in Past Years for Assistance. BY G. GOULD LINCOLN. ‘The “House of Morgan,” the rock of Wall Street, today came under the mi- croscopic investigation into the Ameri- can financial system conducted by th: Senate Banking and Currency Commit- tee. J. Pierpont Morgan, head of J. P. Morgan & Co. since the death of his father in 1913, was the first representa- tive of this famous banking house to be | called before the committee. For the better part of two years the Senate committee has been hammering away at the banking doors of New York, to learn what was wrong with the sys- tem, & system under which between four and five thousand banks have fail- ed throughout the country in the last three or four years. Today it storm- ed the very citadel. Mr. Morgan, who represents the greatest private banking institution in the l‘DflJ’ today, incidentally was call- ed before the committee at the very time when the House was akout to pass the Steagall banking bill containing a provision denying to private banks, along with others, the right to be banks of deposit and 21so investment banks, banks engaged in the business of float- ing huge security issues, and at & time when the Glass bank reform bill is the unfinished business of the Senate, the bill on which the Steagall bill has been patterned. Mr. Morgan, the senior partner of the great firm which bears his name, when he first took the stand made to the committee a statement giving his views of the duties and uses of private bankers. It was, in effect, the Morgan code, a code which has carried his firm to its present high position. Mr. Mor- gan summed up that code, at the con: clusion of his statement, as follows: “I state without hesitation that I con- sider the private banker a national asset and not a national danger. As to the theory that he may become too powerful, it must be remembered that any power which he has comes not from the possession of large means, but from the confidence of people in his character and credit, and that that pow- er, having no force back of it, would dis- appear at once if people thought that the character had changed or the credit had diminished—not financial credit, but that which comes from the respect and esteem of the community.” Mr. Morgan reminded the committee that the private banker is a member of a profession which has been practiced since the Middle Ages. He said that in the process of time there has grown up a code of professional ethics and cus- toms, on the observance of which de- pends his reputation, his fortune and his usefulness to the community in which he works. Mr. Morgan said that some private bankers are not as observant of this code as they should be. If any private banker disregards this code, he sacri- fices his credit, which is his most valu= able possession, Mr. Morgan said. He told the committee that the M firm's idea was to do only first-cl business in a first-class way. The head of the Morgan Co., & big man physically, carries his 66 years well. His hair is thinning out, He wears a thick, close-cropped, gray mustache and a healthy tan, eviderice of outdoor life, give token of good health. When Mr. Morgan’s examination was begun by members of the Senate com- mittee and by its counsel, Ferdinand Pecora. Mr. Morgan answered the questions frankly and readily. He fre- quently turned to some of his partners for information, among them George ‘Whitney of Philadelphia, a partner in Drexel & Co., which is a Morgan firm, and to his counsel, John W. Davis, the Democratic presidential candidate in 1924. Occasionally a quick smile spread over Mr. Morgan's face as an- swered questions propounded to him by the Senators, and he seemed cer- tainly at this first session, to be en- Joying himself. The committee room in the Senate jammed with spectators almost to the point of suffocation. In the corridors outside several hundred men and wom- en waited patiently through the morn- ing in hope they would have an op- portunity to get into the committee room to hear the financier testify. Mr. Morgan warned the committee that they must not lose sight of the fact that the steady supply of capital for industry is an essential for the in- dustrial system, and that an attack on the private banks at this time might needlessly hinder the flow of such sup- ply. At the present time, he said, there is no demand for capital for industry. This_condition, he predicted, will pass, and he added: “We should not, by any means, force the organization for dis- tribution of securities out of business, lest, when there is again a legitimate demand for capital, it be found that the machinery of distribution has disap- peared. No private banker, whether he is (as we are) a wholesale merchant of se- clrities, or whether he deals directly with the ultimate investor, could con- tinue in the business if he had no other sort of business to fall back on in such times as the present.” 8o Mr. Morgan answered the pro- posal in the Glass bank reform bill to compel private bankers who do a de- posit business to give up the investment banking business, or vice versa. Mr. Morgan in his statement and testimony before the committee sought to convey the idea that in private bank- ing, as in other business, honesty is the best policy. And certainly the Morgan firm, as shown by Mr. Morgan himself, has made that policy pay by their mil- lions of dollars. It was very clear from Mr. Morgan's statement that were it not for the faith which the Morgan clients have in that firm it would not haye been possible to build up a private banking business with deposits running into the hundreds of millions of dollars. The head of the house of Morgan was treated politely, if not deferentially, by the members of the committee. They fired questions at him, however, calcu- lated to bring out the detalls of his business and the manner in which it is transacted. Occasionally, Mr. Pecora, counsel for the committee, was extremely per- sistent in his questions. This, however, did not ruffie Mr. Morgan, Who was overheard to remark to his eounsel, Mr. Davis, that he “rather liked that fellow.” Senator Carter Glass, author of the bank reform bill, became more restive under the reiteration of questions by Mr. Pecora than did Mr. Morgan and at one point took the committee coun- sel to task for repeating his questions. In the past the house of Morgan, as 23 Wall Street, New York, has been known to Ammmmmlnd to the world Office Building was | iry Head of Famous Firm By the Associated Press. HE text of J. P. Morgan's pre- pared statement, voluntarily read to the Senate Banking Com- | mittee today before was questioned about his banking operations, follows: | “Our desire being to be of use to the | committee, I have ventured toframe a | | brief statement of my views on the| | subject of the duties and uses of pri- vate bankers, which I hope the com- mittee will receive as an outline and, | if it s0 desires, discuss with me or with | some of my partners. “In the first place, what the the dif- | ferences between the rights and privi- | leges of a private banker and an in- | corporated bank? “As I see it, they consist chiefly in the fact that an incorporated bank receives from the Government, Federal or State, from which its charter comes, | certain g:mlexea. and for those privi- | leges it has to conform to certain laws | and regulations of the Government, | ' applying only to the incorporated bank’s | | business, private banker has none of | these privileges, but as he does not | have to conform to any special Govern- ment lation, he has a somewhat | greater lom of action. Bound by Ethics. “The private banker is a member of | & profession which has been practiced | since the Middle Ages. | “In the process of time there has grown up & code of professional ethics and , on the observance of which depend his reputation, his for- tune and his usefulness to the com- munity in which he works. | “Some private bankers, as indeed is the case in some of the other profes- sions, are not as observant of this code as they should be, but if, in the exercise | |of his profession, the private banker disregards this code, which could never be expressed in legislation, but has a force far greater than any law, he will | sacrifice his credit. | “This credit is his most valuable pos- session, it is the result of years of fair and honorable dealing and, while it | may be quickly lost, once lost cannot | be restored for a long time, if ever. “The banker must at all times so | conduct himself as to justify the confi- | dence of his clients in him and thus preserve it for his successors. “If T may be permitted to speak of the firm, of which I have the honor to be the senior er, I should state that at all times the idea of doing only first-class business, and that in a first- | class way, has been before our minds. Errors of Judgment. “We have never been satisfled with | | simply keeping within the law, but have | constantly sought so to act that we | might fully observe the professional | code, and so maintain the credit and reputation which has been handed down | to us from our predecessors in the firm. | “Since we have no more power of knowing the future than any other men, we have made many mistakes (who has | not during the past five years?), but | our mistakes have been errors of judg- | ment and not of principle. “Another most important duty of the private banker is to take special care that his banking position in regard to | his deposits’is at all times fently | | strong, knowing as he does that none | of the aids provided by the Govern- | ment for incorporated banks, such as v.he:bdfl;tl Reserve System oru'.hn Re- construction PFinance Corporation, are at his disposal. “The private banker has at least one other duty: He must be ready and willing at all tfmes to give disinterested advice to his clients to the best of his | ability. If he feels unable to give this advice without reference to own .interests he must frankly say so. The belief in the integrity of his ad- vice is a great part of the credit of which I have spoken above, as | the best possession of any firm. Uses of Private Bankers. “So far as to the duties. I will now | pass on to the uses of private bankers. | “These secem to me to be closely re- lated to the fact that, as they are risk- ing their own money and doing their own work, they may properly under- take responsibilities and busi- nesses which the management-of an corporated bank might not be justi- fled in dealing with. “Subject to the paramount need of xeepu? their banking position toward their depositors sound and liquid, they can in & very prompt and effective way assist in the development of the indus- tries and productions of this largely industrialized world. “They can also come to the aid of & general situation, or of their friends and clients, in times of panic and distress, to an extent that an incorporated bank might well feel it had no right to do with its stockholders’ money. “Another very important use of the private banker is to serve as a channel whereby industry may be provided with capital to meet its needs for expansion and development. “To this end the private banker can serve well, since, as he has at stake not only his clients’ interests but his own reputation, he is likely to be | specially careful “If he makes public sate and puts ernment’s war loan, when the British were waging war in South Africa. The Morgan firm became the financial agent for the British Government in the United States in 1915 during the early days of the World War. There- after it conducted the purchase of all supplies for the entente in the United States. Three generations of Morgans have been engaged in the upbuilding of the famous banking house. The grand- father of the present J. P. Morgan was # member of the firm of Drexel, Morgan & Co., the forerunner of J. P. Morgan & Co. It was the present Morgan's father, J. P. Morgan, sr., who formed | the Morgan company and who extended its operations until they became of tre- mendous importance in this country | and abroad. The Government of the United States | has sought the advice and the aid of the Morgan firm in the past. How close to the Government the firm has | been may be revealed at length in| the testimony given at the hearing opening today. Not since the late J. P. | Morgan in 1912 came before the Pujo | “Money Trust” Investigating Commit- tee has the head of this firm been put in the limelight by a congressional committee. It was the late President | Coolidge who went to the Morgan firm, however, for a representative of this Government to send to Mexico, picking the late Dwight W. Morrow, a vice president of J. P. Morgan & Co., for the post. Mr. Morrow did a masterful job in Mexico and returned to this country later to be elected United States Senator a patron of the arts. The older Morgan was an enthusiastic yachtsman, and built the Columbia which successfully defended the most famous yachting prize in the world against the late Sir Thomas Lipton's Shamrock. In 1915 the present heai of the Morgan firm was shot by a fanatic at Glen |and as the depression, for the first being | which we have rendered in the past. Ponubulxedlhndn'n today | and Colorado Rivers in 1871, here yesterday. ARTICLES | < ’s Statement || J. P. Morgan Tells Senate Committee Private Banks Are a National Asset and Not a Danger. his own name at the foot of the, prospectus he has a continuing obliga- | tion of the str t kind to see, so0 | far as he can, that nothing is done which will interfere with the carry- ing out by the obligor of the contrac with the holders of the security. To accomplish this it is frequently desir- able that the private banker should be a director of the company, the securities of which he has sold. | “As to the charge that is frequently | and, as I believe, carelessly made that ' bankers force their way into boards of | directors, I can only say that, in my experience of over 40 years, I cannot remember any partner of the house taking a directorship except at the | sarnest request of the board of directors of the company in question. It is often useful for the directors of a company who are not financial experts to have an expert of that sort, in whom they have confidence, at hand for consulta- tion. This is why I regret the tend- | ency of so much present-day legisia- tion which endeavors to prevent bank- ers from being directors of one thing or another, or which throws on_directors such liabilities for errors for which they | could not be responsible as to make it too dangerous for any man of experi- ence or means to assume such respon- | sibilities. | “We must not lose sight of the fact | that the steady supply of capital for | industry is an essential of our system and that anything which may hinder the flow of such a supply, or needlessly diminish the confidence of the investor | in the safety of his investment, is un- desirable. “At the present moment, owing to the destruction of confidence in this time of depression, there is no flow of cap- ital to industries and consequent- ly no investment possible for the sav- ings of the people which are turned over daily to savings banks and insur- ance companies to be invested. Conditions Will Pass. | “Just at present these are the only | sources from which industry can ob- tain its needed capital, as the saving: | of the incomes of private persons have | been so greatly reduced by the de- pression and by the extreme weight of taxation on incomes and estates. time as far as I know in the of the world, is so widespread, no coun- try can lend money in any other. “Though, at the present time, there is no demand for capital for industry, this condition will pass, and we should not by any means force the organiza- tion for distribution of securities out of business, lest, when there is again a legitimate demand for capital, it be found that the machinery of distribu- tion has disappeared. ¥ | “No private banker where he is (as| we are) a wholesale merchant of se- | curities, or whether he deals directly with the ultimate investor, could con- tinue in the business if he had no other sort of business to fall back on in such times as the present. “The question has been rTaised whether a private banker should be permitted to accept deposits. The laws of the State of New York very wisely. as I think, and under careful restric- tions, have sanctioned the practice. Those _ restrictions prevent, amon other things, our holding ourselves out as depositaries for the public and from paying interest on deposits of less than $7,500. Would Curtail Service. “The bulk of our deposits has come from our having done work for some client, or because we are agents for coupons, or the custodians of funds. If we, for instance, should be deprived of the right to re- ceive d ts which clients wish to leave with us, we should very probably have to disband a large part of our orvm-tlun, and thus should be less able to render in the future that im- portant service in the supply of capital for the development of the country “In regard to the presence of private bankers on the boards of directors of other banking institutions, I believe it to be true that none of the director- ships held by any private banker in other banking institutions is held at his request, but because of the strong desire of those in charge of the insti- tution of which he becomes a director. This certainly is the case in our own office and I believe in other cases, too, although, of course, I cannot speak for anybody but our own firm. Person- ing directorships for, my partners, but I felt constrained reluctantly to consent, because of my belief that it is one of the duties of a private banker to be of use in the general affairs of the community, and that the only way peo- ple can be helped is in the way they wish to be helped. “Therefore, if friends in whom we have confidence ask us to serve them by advising with them, we are bound to give them the best advice we can. A National Asset. “No law could prevent any one from discussing problems with, and seeking advice from, friencs in whose judgment he has a confidence which is the re- sult of years of experience and co- operation, and I do not see any need for legislation which makes such con. sultation more difficult. “The private banker is also useful in offering a sort of neutral territory where, at time, the management of the incorporated banks may meet and dis- cuss the general problems without riv- alry or competition. “L believe if you were to ask the heads of all the great banks in New York who have had experience of both good and bad times, you would be as- sured that the private bankers, by offering that neutral ground, have served a very useful purpose, and would have been much missed had they been forced out of business by law, either State or Federal. “To sum up, I state without hesita- tion that I consider the private banker 2 national asset and not & national danger. g “As to the theory that he may be- come too' powerful, it must be remem- bered that any power which he has comes, not from the possession of large means, but from the confidence of people in his character and credit, and that that power, having no force to back it, would disappear at once if people thought that the character had changed or the credit had diminished- not financial credit, but that which | comes the respect and estcem of | the communit; MEMBER OF COLORADO RIVER PARTY IS DEAD BY the Associated Press. SALT LAKE CITY, May 23.—Capt. Francls Marion Bishop, 89, Civil wp:r Veteran and chief her for the the Green died at his home Capt. Bishop wrote an extensive diary of the trip, which was embodied in the official POLICE AND CUARDS SUBDUE STRIKERS Amoskeag Textile Mills Cleared to Allow Entry of Pay Roll Clerks. By the Associated Press. MANCHESTER, N, H, May 23.— Police and National Guardsmen in a brief skirmish today succeeded in clearing the vicinity of the Amoskeag textile mills of strikers and enabled a large number of pay roll clerks to enter the offices unmolested. The Guardsmen were called out last night at the request of Mayor Damase Caron after 5,000 workers had stormed the gates of the Amoskeag mills and committed excesses. Approximately 10,000 employes of textile mills and shoe shops are on strike, affecting 29 mills and 8 shoe shops. The strikers, driven from the vicinity of the mills, marched down the city's nain thoroughfare to City Hall, where they undertook a demonstration con- sisting for the most part of cheerin and yelling. Police again dflpme: them. There were several arrests on minor charges. Quiet prevailed in the vicinity of the ;hoe shops in the early hours of the lay. Called by Mayor. There are 29 mills and 8 shoe shops to be protected, and the decision to call the Guardsmen resulted from a confer- ence of Mayor Caron and the Police Commission. ‘The conference followed upon the crush at the gates, during which several clerks at the mills engaged in making up pay rolls were chased. One clerk was assaulted and one striker arrested before the disturbance was brought to an end. Maj. George Morrill, acting adjutant general, issued the formal order for the Guardsmen to report here, in the ab- sence of the Governor in Washington. The Guardsmen will co-operate with police on strike duty. ‘Workers in two mills walked out Fri- day after reading posted notices to the effect that the plants would be shut down later in the .month until July, when it was planned to resume opera- tions with a 15 per cent wage increase. ‘When the walkout occurred the re~ mainder of the mills were closed by the company. The Guardsmen, 250 in number, will be flrwed in the State Armory, half & block away from the West Central street gate of the mills. Strikers Questioned. Several strikers, alleged to have taken part in last night's disturbance, were questioned at police headquarters. Police later said two persons were be- ing held on charges of assault. Louis Joy, mill foreman, was beaten and knocked unconscious by five men ‘who followed him to his home from the mill, police reported. Miss Yyonre Nolete of Pinardsville was attacked as she was leaving a mill. A police ambulance was stoned, but none of the officers with it was injured. SOVIET PAPER DECLARES RECOGNITION NEEDED Says’ Question Has Become Acid Test of American Political and Business Wisdom. By the Associated Press. MOSCOW, May 23.—Diplomat ognition of Soviet Russia must precede any hopes for better trade relations on the part of the United States, de- clared the publication “For Industriale ization,” in launching an editorial cam= Daign for establishment of normal rela- tions between the two countries. The journal, organ of the commis- sariat of heavy industry, said, * time has come when the question relations toward the Soviet Union become-the acid test of the wisdom t.hl; American political and business cles” “We are for normal diplomatic tions with the United States, as with other countries,” the publ “but such relations do ally, I have always been averse to bank- 3 FOREIGN DEBT REFORMED El Salvador Reaches Agreement ‘With U. 8. Bondholders. SAN SALVADOR, El1 Salvador, May 23 (P).—Fred G. Lavis, representative of Americanholders of bonds of El Sal~ vador, approved yesterday the governe ment’s arrangement for reforming the foreign debt. The measure was by the Legislative Assembly recently. The reforms were legally accepted in an agreement signed for the bond- holders by J. P. Armstrong, representing Lavis, and the minister of finance, Dr. enendez Castro, BIRRELL WILL RUN Alexandrian Announces He Will Seek Nomination as Delegate. By a Staff Correspondent of The Star. ALEXANDRIA, Va., May 23.—J. Fred Birrell, former member of the Virginia House of Delegates, today announced his candidacy for re-election from this city subject to the Democratic primary on August 1. Mr. Birrell stated that he favors fur- ther economies in the State government, legislation to permit the sale of 3.2 per cent beer in Virginia and legislation for repeal of the eighteenth amendment. _ He will be o] in the local pri- mary by the following candidates who have ‘already announced that they will run: Clyde B. Lanham, Thomas Priest, Paul L. Delaney and Joseph H. Kretchner, Byrnes Questioned Elder Morgan in Probe 20 Years Ago- By the Associated Press. y. Representative Doughton, Dem- ocrat, of North Carolina, Cove, Long Island, but he escaped with