Powermen to Arms

Not long after Samuel Insull fled Chicago for Greece, the power industry in a fine show of hindsight set out to reform its trade associations. In the public's mind the old National Electric Light Association was linked with unconscionable private propaganda and the name of the domineering Midwest utilitarian. Invoking the shade of their more saintly patron, the powermen reconstituted their body as the Edison Electric Institute. Leadership passed to the great power companies of the so-called Morgan-Drexel-Bonbright group--a shift calculated in those days to inspire nothing if not complete public confidence.

Speaking for operating companies rather than holding companies, the Edison Electric Institute remained discreetly inconspicuous long after President Roosevelt opened his frontal attack on the power industry. Not until last winter, after the President had rebuffed a "friendly" proffer of cooperation, did the Institute unmask its batteries. Last week before 1,200 powermen assembled at Atlantic City for the Institute's third annual meeting, President Thomas Nesbitt McCarter uprose to keynote: "If the Government persists in its attitude, it is up to the industry to fight for its life. The kid-glove stage has passed."

Wanted: Roses. Terming the Tennessee Valley Authority a "monstrous" project and President Roosevelt's utility ideas "an obsession," the hulking head of Public Service of New Jersey continued: "Since the present national Administration was inducted . . . there has been launched by it against this industry the most devastating and destructive attack, having for its object the end of private operation of the electric industry and its nationalization under Federal direction and ultimate ownership.

"If the Administration would announce that this kind of thing was to cease and that the Government would henceforth attend to its own proper activities and give business a chance to come back," cried the powerman, "recovery would blossom as do the roses at this time of year."

Frock-Coated Communism? Socialistic implications of the New Deal power program so alarmed Editor Merle Thorpe of Nation's Business that he was moved to ask: "Are we guarding the back door against bewhiskered aliens with bombs and torches and at the same time inviting Communism in the front door dressed up in top hat and frock coat?" When the editor of the Chamber of Commerce's houseorgan demanded the return of the "old order," powermen leaped cheering to their feet.

264 Releases. Bitterest spleen was reserved for the Administration's principal pressagent in its fight against power companies--the Federal Trade Commission. Declaring that he was still searching for stronger words, the Institute's Managing Director Bernard Francis Weadock accused the Commission of "fraud, deceit, misrepresentation, dishonesty, downright maliciousness, breach of trust" in its eight-year power probe (TIME, Feb. 27, 1928, et seq.). Director Weadock is supposed to be the only person who has ploughed through every page of the 73 volumes of the Commission's findings. The five Commissioners he exonerates on the ground that they had not read "the record made by their subordinates." Last week he set the assembled powermen to tingling with delight when he blasted away at the Trade Commission investigation as follows:

"When the examiners returned to Washington we were shocked to find in their reports distorted facts, false theories, innuendoes, insinuations, academic theories and bitter tirades. The opinion of an examiner, no matter how inexperienced or unqualified, was accepted by the Commission with a finality that made State and U. S. Supreme Court rulings, or decisions of the Internal Revenue department, or State utility commissions, mere scraps of paper. . . .

"Mere assertions, unsigned and unidentified letters, selected excerpts, individual opinions, were elevated to the dignity of best evidence. . . . After each hearing a newspaper summary was released. There have been 264 releases to date. . . .

"The companies examined were hand-picked and represent about 41% of the holding companies and 5 1/2% of the operating companies. Particular companies so selected were generally known to the industry as examples of what a public utility holding company should not be. This is best attested by the great number of them now bivouacked in bankruptcy and receivership. In fact, as soon as the Commission heard of any company going into bankruptcy or receivership it hustled its examiner to the scene. The Commission has attempted to create the impression that abuses and unsound business practices of a few . . . well-publicized companies were typical of the industry."

Puzzle. While the Commission's horrendous ammunition was being freely fired on the Senate floor in defense of the Wheeler Bill to abolish holding companies last week (see p. 11), the powermen puzzled over what made their industry such a hot political issue. They listened to papers citing a 16% reduction in domestic rates, a 31% increase in domestic consumption in the last five Depression years. They pondered the fact that in 70% of the nation's 20,000,000 wired homes, the power bill is less than 7-c- per day. They were reminded that total revenues from domestic power sales amounted to less than all State and Federal gasoline taxes combined. And home they went, resolved to use every channel of publicity to get what they considered a very good case before the voters.

Coffin Award. Before they went, however, they watched President Josephus ("Jo") Conn Guild Jr. of Tennessee Electric Power receive in his company's behalf the Charles A. Coffin award for distinguished service to the public and the industry--Nobel prize of the power business. Serving Nashville, Chattanooga and 400 other Tennessee communities, the big Commonwealth & Southern subsidiary felt the full impact of TVA power. Practically at pistol point it was forced to slash rates 22% below the national average and then, in a desperate struggle to survive, turn around and boost power sales by one-third. Though the Coffin award--a medal, a certificate and a $1,000 check for employe welfare--is distinctly a private honor, it could well have come from TVA itself as a better vindication of its theories than anything in the public power field.

Tennessee Electric's Jo Conn Guild Jr. could not afford to wait for sales to pick up on a rate cut alone. A towering, ponderous man of 47 who sometimes tends his own chickens at his summer home on Lookout Mountain outside Chattanooga, he is a dynamo for work. His father was Tennessee Electric's founder and his great-great-grandfather bred horses to race against Andrew Jackson on that President's Clover Bottom track at Nashville.

To increase sales President Guild impressed all his employes in a sustained high-pressure campaign to sell electric appliances. In 18 months 12,000 refrigerators, 6,000 ranges and 3,000 water heaters were added to the company's load. And today nearly every other customer cools his water with ice cubes, one in every five cooks with electricity and one in every 20 can thank an electric heater for his hot bath.

Jones on Jam

Just before he left the White House in 1933 Herbert Hoover signed an amendment to the Bankruptcy Act designed to make railroad reorganization cheap & easy.* As the nation's largest railroad investor, RFChairman Jesse Jones is quite familiar with that amendment, and he has been at no pains to conceal his ire over the fact that not one mile of bankrupt U. S. track has yet emerged from the courts. However, the 42,000 mi. of line actually in court hands is not Mr. Jones's only railroad worry. In addition to carriers whose solvency is purely a matter of opinion, there are several debt-ridden systems that have agreed to reform their capitalization more or less voluntarily. Last week with more than 25 bankruptcy reorganizations smothered in legal confusion Mr. Jones twisted the screws on two of his "voluntary" readjustments.

"I appreciate that it is not easy to get a meeting of minds on any reorganization plan for a railroad," wrote Mr. Jones to Thomas Milton Schumacher of Western Pacific. But: "We have had a number of meetings with you and others interested in Western Pacific and I feel that the time is at hand when a plan of reorganization and capital readjustment should be submitted. I arn therefore writing to advise you that unless a plan is filed at an early date the RFC will feel constrained to prepare and file one."

Altering a few names, Mr. Jones dispatched the same note to Denver & Rio Grande. Mr. Jones was plainly threatening to throw the two lines into bankruptcy unless they humped themselves.

But if Mr. Jones let the railroads see his big stick last week he also dangled sugar plums. As a reward for promptness in outlining a plan for scaling down the fixed charges of Chicago, Milwaukee, St. Paul & Pacific, RFC agreed to advance the road $24,000,000, provided among other things that the plan was executed before the year end.

With 11,000 miles of track and the longest stretch of electrification in the U. S., Milwaukee came out of receivership only eight years ago. Its failure in 1925 was the biggest in U. S. history up to that time. Its costly reorganization set new records for fancy fees and drew a scathing dissenting opinion from three U. S. Supreme Court Justices. With Milwaukee's unsavory record fresh in mind, Author John T. Flynn (Graft in Business, Investment Trusts Gone Wrong) caustically observed last week in the New York World-Telegram:

"This is a proposal to use $24,000,000 of the people's money to perpetuate in control of one of our railroads a group of executives who have wrecked that road twice. . . . The Interstate Commerce Commission, in a blistering report, denounced the directors as the wreckers of the property, but the road was reorganized with these same men in control. Now the insiders--the same men who piloted it through two failures--are trying to reorganize it."

*Testifying in the SEC's investigation of protective committees in Washington last week, Lawyer Robert Taylor Swaine of the famed Manhattan firm of Cravath, de Gersdorff, Swaine & Wood revealed himself as one of the two real authors of that bankruptcy legislation. Other was prodigious Adolf Augustus Berle Jr. Lawyer Swaine, who hardly saw eye to eye with the young Braintruster, suavely declared that the final draft represented "blending" and '-'compromises" of their two views.

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