First Year

Next week the Securities Act of 1933 celebrates its first year on the Federal statute books.* Last week Congress made its first serious move to soften the provisions of a law which has been more hotly debated and disputed by the financial community than any other New Deal measure. But a full year's loud talk has left unanswered the old question: Did the Securities Act dry up the capital market or would new investments by the public have been just as scanty regardless of the law? Most notable fact about the Securities Act's first year was that the total amount of issues registered with the Federal Trade Commission was about five times as large as the total of registered stocks & bonds actually offered to the public. During April, the Commission announced last week, registrations becoming effective under the law reached a monthly peak of $156,000,000. Yet only $11,000,000 of these registered issues were offered for public sale. In ten months (July to May) more than $1,000,000,000 worth of securities of all kinds have been registered with the Commission in some 900 statements. In ten months of 1926 the U. S. absorbed a total of $4,275,000,000 in new capital. Since October when the Federal Trade Commission began to segregate reorganization from new issues, registration of new securities amounted to $460,000,000, of which less than $80,000,000 was actually passed on to the public. Of the other $380,000,000, some were shoe string promotions which never got beyond the Commission files, some were privately sold, some will take years to peddle. The rest gathers dust in corporation vaults. The three most notable cases of new industrial financing under the Securities Act were: American Water Works & Electric for $15,000,000; Mathieson Alkali for $6,232,000; Glenn L. Martin Co. for $3,250,000. Investment trust stock accounts for more than half the registrations to date. The liquor industry is in second place, with mining third. The Commission has held up 43 issues offered for registration, due to their promoters' failure to supply all the facts & figures. Of these 34 are still held up. Until this spring Wall Street's unqualified statement that the Securities Act stifled the capital market was wide open to question. Act or no Act, neither stocks nor bonds could be sold. In 1933 corporate security offerings amounted to $381,000,000--lowest level on record. Of this $220,000,000 was for refunding old issues, leaving $160,000,000 for U. S. Industry to grow on. In no single month from 1924 through 1929 did the volume of new securities ever sink so low as for the full twelve months of 1933. But since the year end a roaring bond market has shown that the public will buy sound securities if corporations will issue them. Yet the total volume of corporate flotations in the first four months of this year, excluding refunding issues, was a paltry $61,000,000 against $148,000,000 in 1932 and $1,010,000,000 in 1931.

Estimates of the accumulated net deficit in U. S. capital requirements run as high as $4,500,000,000--approximately what governmental borrowing has syphoned out of the market since the Depression. Thoughtful bankers smile at any such figure but many a big corporation would go to the underwriters at a hat's drop if its officers were not so scared of the Securities Act's liabilities. Last week a man who resorts to the capital markets more often than anyone in the U. S. except the Secretary of Treasury and the Mayor of New York City declared that heavy industry, toughest jig in the Recovery puzzle, would be revived by a release of credit and that reasonable modification of the Securities Act would release the credit. Many another potent voice has cried the same theme but Comptroller Morris S. Tremaine of New York State has no ax to grind. His securities are exempt from the Act and his credit triple A plus. He has served four consecutive terms, one under Alfred E. Smith, two under Franklin D. Roosevelt and one under Herbert H. Lehman. A Kansan from Fort Dodge, Comptroller Tremaine got his start as a tally boy on the Buffalo docks at 17, built up an insurance business, a lumber business and a steel door company before he entered politics as a dark horse in 1926. Last autumn he suggested that people who attacked public credit should be criminally prosecuted. Asked if he was taking a dig at Harvard's Professor Oliver Mitchell Wentworth Sprague, onetime adviser to the Bank of England and later to the U. S. Treasury, he admitted: "Yes, I did have that chap Sprague in mind."

*Registration of securities, however, did not begin until July 7.

This file is automatically generated by a robot program, so reader's discretion is required.