INVESTMENT BANKERS ARE FLAYED BY THE SECURITIES COMMISSION
Investment Bankers Are Flayed By The Securities Commission SEC Answers Attack From Banker Group Wall St. On Defensive; Propaganda Fills Magazines By LABOR RESEARCH ASSOCIATION BIG guns of the...
...however, that the main investment bankers are closely connected through interlocking directorates strategically-placed investments, family relationship, formal and informal agreements and understandings, with all the largest financial and industrial interests...
...Like their associates in the National Assoc!, tion of Manufacturers, the bankers bewail any interference with the profits they derive from "our system of free enterprise," which is the favoriie way they refer to the present system of monopoly capitalism which throttles the productive forces in this country...
...attacks the New Deal financial legislation head-on and pictures various SEC measures as a sort of "socialistic" strangulation of what it terms "the agencies of the market place.'' By this innocent phrase, "agencies of the market place...
...is meant the investment bankers, for example, such millionaire concerns as Kuhn, Loeb & Co., Morgan, Stanley & Co., Dillon, Read & Co...
...Furthermore, most new capital is now raised by big companies out of their own reserve funds and w'ithout any public borrowing, through underwriting houses...
...It contends that were it not for these private profit agencies the "savings of the nation" could not be converted into investment, and therefore the nation's productive operations could not be carried on...
...Also large corporate borrowers, when they need funds, tend to negotiate directly with the large institutional "savers" such as insurance companies...
...Propaganda Fills Magazines By LABOR RESEARCH ASSOCIATION BIG guns of the Investment Bankers association of America were leveled once more against "government interference" in a long statement recently issued attacking the powers exercised by the Securities and Exchange commission...
...Another of their important functions is the separation of the middle classes from their savings...
...WASHINGTON, D. C—Opposition to the proposed Smith amendments to the Wagner act was voiced by AFL Pres...
...Robert F. Wagner (D, N. Y.), author of the law...
...decline...
...If the confidence of these classes in stock gambling could be re-established, big security owners could more easily get rid of large holdings (purchased during the depression at bargain prices) at a handsome profit...
...The investment bankers are nowadays mainly concerned with refundings and reorganizations but not with the raising of new capital...
...The Nation's Business article, entitled "'The Case for Investment Banking...
...Thus in 1938 the five largest insurance companies bought nearly two-thirds of their securities directly from the issuing corporations, thus cutting out completely the investment bankers and securities exchanges on a major fraction of their security dealings...
...statement had been preceded by a blast in Nation's Business, official organ of the Chamber of Commerce of the United States, which was apparently prepared by the public relations experts of the banking fraternity...
...This fact shows further the minor part played by investment bankers and security dealers in providing really needed new productive capital...
...They are part of the highly integrated monopolistic groups which we usually refer to as "finance capital...
...However, the outlook is not too bright for the stock exchange fraternity, in spite of the feature articles "defending" them in business maga zines...
...Do Own Financing In the 1920s, American business'financed 75 per cent of capital investment from its own savings and in the three years, 1935 to 1937, more than 90 per cent of investment in new plants came from the Internal sources of corporations...
...and Lehman brothers, whose business it is to purchase stocks and bonds from borrowing corporations for later resale to individuals and institutions...
...The article wouid have us believe that these are independent "handmaidens" of industry without important economic connections with commercial banks and the big corporations that issue bonds and stocks through investment bankers...
...Relation to new capital investment: In describing the functions of investment bankers and the security exchanges the Nation's Business article gives a very distorted picture...
...Finance Capital The fact is...
...The I.B.A...
...On the other hand, the main function of these institutions is to further the concentration of control and ownership of the existing fund of capital In the hands of an ever-narrowing oligarchy of finance capitalists...
...William Green, CIO General Counsel Lee Pressman and Sen...
...They continue to fight back fiercely against effective regulation of their financial domains...
...Attack Reforms Big investment bankers, as as other agencies of Wall St., are obviously out to destroy reforms of the New Deal in the banking and investment field...
...But this description applies to the more progressive days of capitalism rather than to the present period of genera...
...Investment bankers are also specialists in the art of giving relatively small but strategically-placed investments the control over a mucli larger aggregate investment in corporations...
...with "ill-tempered obstructionism and government-baiting" and with opposition "to all statutes which congress has adopted for the protection of investors r.nd consumers...
...SEC observed that "the I.B.A.'s interest is not in investors and consumers, not in the capital markets, but In regaining, by any subterfuge, its outlawed privilege of operating Ihe financial markets without responsibility to anybody but its own little group...
...It is true also that small and middle-sized businesses are not in a position to use investment bankers in raising new capital...
...It charged the I.B.A...
...For today, the demand for new capital on the part of big corporations is not nearly as great as In the past...
...In reply...
...The Investment Bankers association attacked also the recent hearings on investment banking held before the Temporary National Economic committee...
Vol. 10 • April 1940 • No. 14
