Douglas on Art

To the University of Chicago last October went SECommissioner William Orville ("Bill") Douglas to deliver one of an annual series of lectures honoring Poet William Vaughn Moody. Unlike other Moody lecturers, such as Philosopher Alfred North Whitehead and Poet Archibald MacLeish, Bill Douglas talked not of the arts & sciences but of the "art of predatory or high finance." Mr. Douglas spoke from two years' experience studying so-called protective and reorganization committees--"a vantage point from which the whole problem [of capital exploitation and dissipation] can be viewed advantageously." Last week the fourth and fifth reports on this subject prepared by Lawyer Douglas and his SEC co-workers were sent to Congress. Three had been submitted late last spring (TIME, May 18, June 29, 1936). Latest were an 833-page analysis of agencies for holders of defaulted foreign governmental bonds and a 916-page fact laden study of the strategy and technique of protective and reorganization committees.

On the basis of material gathered at such hearings as those of Paramount Publix, Celotex Co., Kreuger & Toll, the SEC wants to extend its power to: 1) assure selection of independent trustees in reorganizations; 2) vest in the SEC extraordinary authority over solicitations of proxies and over deposits and assets of protective committees; 3) allow the SEC to intervene in an advisory capacity when reorganizations are under the jurisdiction of the courts as in 776 cases. Some of the powers asked by the Commission are incorporated in bills introduced by Kentucky's Senator Alben William Barkley and Tennessee's Representative Walter Chandler now before Congress.

Lawyer Douglas' report dealt extensively without mincing words on lawyers' parts in corporate reorganizations: "The size of the lawyers' bill must frequently be astounding to security holders and others. This cannot be taken to mean that their compensation is always excessive. . . . The vice of the situation remains despite persuasive arguments that particular jobs are well done. The vice is that the bar has been charging all that the traffic will bear. It has forsaken the tradition that its members are officers of the court. .. . Organization for the practice of law on the large scale of mass production has contributed to the alleged necessity of computing legal fees on an overhead rather than on a service basis. . . . Modest professional standards have been discarded."

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