Frank, Jerome

PSF JEROME FRANK Box 149 Subject File "F" PSF JormeN Frank Memo to Senator O'Mahoney From the President May 17, 1939 In re-O'Mahoney's plans on taking of testimony on the Insurance phase of TNEC Memo to Leon Henderson attached--May 19, 1939 Also attached memo to the President--April 12, 1939 From William 0. Douglas Re-Insurance Investigation See:TNEC folder--Drawer 2-1939 for the above correspondence and other correspondence relating to the Temporary Nat'l Economic Committee CONFIDENTIAL 9.2 MEMORANDUM June 13, 1939 PSF: personal Date To: The President From: Chairman Frank, Securities and Exchange Commission Subject: SEC Utilities Division. The problem of the administration of the Holding Company Act seems to me vital not only to the success of the Securities and Exchange Commission, but also to the success of the New Deal. I am, therefore, happy to report that (after many conferences with Tom, Ben, and Bill Douglas, and with their hearty approval) we have just given our Public Utilities Division a kind of blood transfusion which I believe will set things going properly for the first time. Joseph L. Weiner has been appointed Director of the Division, to succeed Roy Smith when he leaves in the near future. Mr. Weiner is a thoroughly experienced attorney with specialized training in the public utilities field. As a matter of fact, Mayor LaGuardia appointed him Assistant Corporation Counsel of New York City in charge of all public utilities litiga- tion. He has also been, during the LaGuardia regime, counsel for the Board of Transportation of New York City. For the past six or eight months he has been Special Counsel of our Reorganization Division, which he has helped to make a great success in a short time. We have created a new position of Associate Director, and put Robert H. O'Brien, a two-fisted former Assistant General Due X Date 2EC APTIIFIED DIATRTON the security DOCUMENTOR WEWOKVNDNW from: 10: No.2 Counsel, in that position. O'Brien is, in a sense, one of the boys we have brought up at the Securities and Exchange Commission. He has been with us since the beginning, in jobs of steadily increasing importance and responsibility. We have also created the position of Counsel to the Public Utilities Division and have put Mr. Roger Foster, formerly Senior Attorney of the Public Utilities Division, in that post. Mr. Abe Fortas, who, as you know, was taken away from us to become General Counsel to the Public Works Administration, regard- ed Mr. Foster as his ablest lieutenant. All these moves, I'm glad to say, had the approval of all five Commissioners. We contemplate creating one or two more key jobs and filling them with men who will complete a real "flying wedge" to clean up the integration and simplification problems of Section 11. PSF Trak June 26, 1939 In re-telephone conversations with Jimmy Roosevelt and President's memo to call Jerome Frank and say that Jimmy will come to Washangton on July 5th end to let the Atty Gen know. Also other letter from Frank to Jimmy dated Jan 24, 1939. See: Jimmy Roosevelt folder-Drawer 3-1939 PSF Thank file SECURITIES AND EXCHANGE COMMISSION WASHINGTON Pari, OFFICE OF THE CHAIRMAN August 31, 1939 CONFIDENTIAL MEMORANDUM TO: THE PRESIDENT FROM: Jerome N. Frank I am somewhat disturbed by recent developments which may seriously affect the adequate handling by the SEC of the matters entrusted to its care, and feel that I ought to call the subject to your attention: 1. You recently appointed an inter-departmental committee, to deal with the war emergency situation, consisting of representatives of the Departments of State, War, Navy, Treasury and Justice. 2. A subcommittee has been appointed with reference to security markets, foreign exchanges, etc., which consists of representatives of Treasury, State, Federal Reserve, Justice and the SEC. At & recent meeting of that subcommittee (the only meeting thus far held) the Federal Reserve was represent- ed by Dr. Parry (whose attitude toward Stock Exchange matters has frequently been at variance with ours) and the State Department was represented by Dr. Feis, (who has sometimes been severely critical of our relation to the securities No.2 markets). At that meeting Dr. Parry disclosed that he had, unbeknownst to the SEC, discussed with Stock Exchange officials steps which the Exchange contemplated taking and of which the SEC had not then been informed. 3. The curious and subordinate position of the SEC, as to matters within its peculiar province, in connection with the workings of the inter-departmental committee, may lead to strange results, as indicated by the following: Several days ago, Governor George Harrison, of the Federal Reserve Bank of New York, appointed B. committee to advise and consult with government officials on foreign exchange matters, a subject which 1s no direct concern of the SEC. However, yesterday, with no knowledge on the part of the SEC until we read of it in the press today, Governor Harrison appointed another (nine man) committee to advise and consult on other problems, including conditions in the securities market. That second committee consists of Henry Morgan of Morgan Stanley and Company, representing the investment bankers, Mr. Martin, President of the New York Stock Exchange, and the presidents of the leading New York banks; it is also to include & representative of the insurance companies. The press accounts state that the committee "will forward its findings and opinions to Washington" and that "it had not been decided whether to 2 No.3 make the committee permanent if future developments give assurance of peaceful settlement of Europe's problems." The appointment of that committee had not been discussed with us. It had been informally and briefly discussed with Under-Secretary Hanes, who knew little about its purposes. I have no criticism whatever of Johnnie; I have no doubt that the failure to advise with us was, at most, a pure oversight. I talked to Johnnie about the matter today. At his suggestion, Governor Harrison phoned me this afternoon. He explained that his new committee was formed merely to give him advice so that he could keep the banks informed of developments, and said that it was not intended that that committee should encroach in any way on our activities. However, regardless of Governor Harrison's intentions, it is well known that several members of that committee ardently desire to procure amendments to the SEC statutes which would emasculate them; and the existence of such a committee may afford an opportunity for certain persons in Wall Street to take advantage of the emergency, in an effort to establish a program of encirclement of the SEC. 4. In the light of the foregoing, I respectfully suggest that the main inter-departmental Committee and the inter- departmental subcommittee and the War Resources Committee be 3 No.4 instructed that, with respect to matters within the province of the SEC#, no steps should be taken, or plans drafted, or tentative or other commitments or public statements made, without the prior concurrence of our Commission. 5. Leon Henderson and Ed Eicher have read this memo and fully approve. 6. I think the subject 18 of such great importance that I would appreciate an opportunity to talk with you about it for a few minutes in the near future. #This includes the stock exchanges, over-the-counter markets, investment banking, capital markets (other than the government bond market), securities flotations, public utilities, investment trusts, and investigation of insurance companies. 4 SECURITIES AND EXCHANGE COMMISSION WASHINGTON FFICE OF THE CHAIRMAN September 9, 1939 CONFIDENTIAL MEMORANDUM TO: The President FROM: Jerome N. Frank, Chairman, Securities and Exchange Commission. Thank you, indeed, for your memo asking me to see Henry Morgenthau about the activities of the committees appointed by Harrison. Henry has arranged a chat in Washington between Harrison, himself, and me, to take place sometime when the government bond market eases off. Because of apprehensions that, in the meanwhile, one of Harrison's committees (which are acting, in effect, as advisors to the Treasury) might sound off to the press with adverse comments on matters within the jurisdiction of the SEC, I sent Harrison today, with the approval of the Commission, a letter in reply to his disturbing letter to me of September 5. LI enclose copies of his letter and my reply, at which you may perhaps care to glance.7 Our apprehensions were augmented by an editorial in the Wall Street Journal for today (a copy of which is attached) which, together with Harrison's letter, set the stage for just that kind of publicity. C o P FEDERAL RESERVE BANK Y OF NEW YORK September 5, 1939 Hon. Jerome N. Frank, Chairman, Securities and Exchange Commission, Washington, D. C. Dear Chairman Frank: I have received your personal letter of September 1 referring to our conversation on the telephone on August 31 concerning the committee recently set up at my suggestion by the various groups included in its membership. You are quite right in assuming that this committee does not intend in any way to trespass upon the jurisdiction of the Securities and Exchange Commission. As I advised you on the telephone, the reason for the organization of the committee is to have available a group, representative of the principal financial interests in this market, through which this bank in its capacity as fiscal agent of the Government or otherwise may promptly obtain information or cooperative consideration in relation to important problems affecting this market as they may arise. Experience has demonstrated the extreme difficulty of doing this without such a representative committee of limited size. While your Commission was not directly informed of the plan to organize this committee in advance, nevertheless, I had assumed that you were aware of the general plan to form such a committee because of advance references to it in the press and because it was discussed in some detail at the series of meetings held in Secretary Morgenthau's office last April when the various departments of the Government, including the Securities and Exchange Commission and the Federal Reserve System, outlined actions to be taken in the event of war. I can assure you and your colleagues that there was no thought that the organization of this committee would in any way conflict with the jurisdiction or functions of the Securities and Exchange Commission, and I am sure that in whatever connection the committee may be called upon it will operate so that there will be no suggestion of any such conflict. I assume, of course, that you would have no objection to receiving suggestions or proposals from this group, as you would from any other group, regarding matters within the jurisdiction of the Commission, in the event that any such suggestions seemed wise or appropriate. Faithfully yours, (Signed) George L. Harrison George L. Harrison, President. COPY September 9, 1939 Governor George Harrison, New York Federal Reserve Bank, New York, New York. Dear Governor Harrison: Thank you for your letter of September 5, I was pleased to learn from Secretary Morgenthau that he has arranged with you that, in the near future, you and he and I will get together for a chat. Meanwhile, the Commission thinks it desirable to make the following comments on your letter: Responsive to the last sentence of that letter, we want to say, most emphatically, that this Commission, composed as it is of public servants, can have and has no possible objection to receiving, for its consideration, from any citizen or group or committee of citizens, suggestions or proposals regarding matters within the jurisdiction of this Commission, and, ordinarily and as a general rule, can have and has no objection to the publication of any such proposals or suggestions. The Commission thinks it appropriate, however, to point out, and doubtless you will agree, that such proposals or suggestions, regarding matters within the jurisdiction of this Commission, if made by the committees recently appointed by you, have a quite different status, because of the circumstances under, and the purposes for, which these committees were appointed; so that proposals or suggestions from them are not within that general rule. We have in mind the following: In your letter you state that the plan of appointing such committees "was discussed in some detail at the series of meetings held in Secretary Morgenthau's office last April when the various departments of the Government, including the Securities and Exchange Commission and the Federal Reserve System, outlined actions to be taken in the event of war. It so happens that there were no representatives of the SEC present at any such discussions concerning the appointment of such committees. Secretary Morgenthau has just sent me a copy of the transcript of the sole conference at his office at which that subject was considered. It occurred on April 13 when there were present only representatives of the Treasury and the Federal Reserve Board. The transcript shows that there was then discussed, to quote the words you then used, "a bankers' committee to which I might go in any hurry, upon any matter dealing with credit, loans, foreign exchange, gold, or anything else that the Treasury might want us to do", and that such a committee should be in the nature of an "advisory committee". And until receipt of your letter of September 5, this Commission had never been informed of that discussion of that subject. It follows that those committees were not appointed with the approval or concurrence of the SEC. Your remarks at the April 13 conference, quoted above, also show that it was not contemplated that there be included in the scope of the activities of any such bankers' committee any suggestions or proposals or other action concerning matters affecting the "securities markets", or any other matters within the jurisdiction of the SEC, excepting insofar as they might come within the clause "anything else that the Treasury might want us to do." Accordingly, it would seem that, when the Treasury and the Federal Reserve Board concurred in the suggestion of the appointment of such a committee they did not contemplate that such committee would make proposals or suggestions with regard to matters within our jurisdiction -- except at the request of the Treasury. Even more to the point is the fact that the discussion at the April 13 conference and your letter of September 5 show that those committees were appointed pursuant to those discussions to act (through your bank, "in its capacity as fiscal agent of the government") in advising the Treasury. It 1s clear, therefore, that the committees are not merely groups of private citizens formed on their own initiative, but, with the concurrence of the Treasury and Federal Reserve Board, are to act in a quasi-governmental capacity as advisers to the Treasury. -3- Now, as you know, it is a well settled and proper practice that, if any department or agency of the federal government, such as the Treasury, at any time has any proposals or suggestions regarding the matters within our jurisdiction, it transmits them to us in confidence and does not give them any publicity. Inasmuch, therefore, as the committees which were appointed by you are to act, through you, as advisers to the Treasury, and as the scope of their advisory activities, as described by you at the April 13 conference, was not to include matters within the jurisdiction of this Commission, except at the request of the Treasury, the Commission assumes that you will promptly make the following clear to the committees: (1) Neither of those committees (nor any subcommittees) should make proposals or suggestions regarding matters within our jurisdiction, except at the express request of the Treasury; (2) if the Treasury should request that either of those committees make suggestions or proposals as to matters within our jurisdiction, then (3) the committees (or subcommittees) will (either directly or through you) transmit those suggestions or proposals to the Treasury, in confidence, and without any publicity, leaving it (4) to the Treasury to transmit those suggestions or proposals to the SEC in confidence, as the Treasury in its discretion may see fit, so that no publicity whatever will ever be given by you or the committees to any such suggestions or proposals as to such matters, except with the prior approval of this Commission. Sincerely yours, Jerome N. Frank JNF:Lmv Chairman MEMO FOR THE PRESIDENT T. G. C. does not know anything about this. G. .alds Juoda your joil goad to :- TREDICINT JH for PSF: Frank CONFIDENTIAL MEMORANDUM September 2, 1939 TO: The President FROM: Jerome N. Frank I want you to know that I had nothing, directly or indirectly, to do with the story by Alsop and Kintner concerning John Hancock, & copy of which is attached hereto. Kintner phoned me, the other day, for information on the subject, and I said I knew nothing whatsoever about it. by bickering and palace and politics Strength to, adderedia surnomal amisble previous appointees to the Wat Resoltions Board was conservative enough PATIS the board: If 1155 not, the while paredness program will be confused to be hoped that the row will will be be started by therether appointments to rows between the right and left to threaten> It is has crystallized Rhis feeling ottrunessiness, so hat yone of !thetregular to cause disquiete amonghthe New Deal group, The reholee of (Hancock recriminations birthe pro: and (inti) Bancockites. The character of the (Therelis, is. however, deeper and more serious tous in the pointment mayancouragelthe may the rebellious element State and VII the theffacts are assiciatmed vundot stedly true that his ap- to BOARD! regulation charged with unge Martintant É Natock exchange preddent, specificioutcry Hanoock Rappointment the form Businessima (before this sally, against Nhe TEXAS was thus con- against him (was especially Virong Figince be had seemeda Hairly friendly B. Cholds Nagamity insider The feeling good New (Dealent) who hold the B. E) The M the denounced by name, thebeupon became% mostrüs of all statements man, everjwritten by a local Hannock whom Douglas the Bupreme Court/Justice William "Douglas," wholenes their chair- dion of (The) mankéts, which are the the (very) palladium atche -E. C. go Their criticient went, chiefly, to the rules apirat insider manipula- present demands for Xar-reaching changes. and - 48 of the exchanges to other cities, vand how Washington to as chairman; how the committee was enlarged to tochide representatives York Exchange named to consider trevision; with Hancock Exchange Commission last winter will be remembered the the New when they made, their Cirst Important assult-on the Securities and drastic trevision of trading regulations. TV - dign of those members of the New York Stock Exchange who want fairly probably did not foresee (The reason's foundation is Hannock's leadership dent, who is probably not very adept in the politics of his own palace, A Stench in the Nestrils was privately passed throughout the -administration President assented promptly, and the word of Hancock's appointment Resources Board, on which seven places then remained to the filled. The the President that be would make and excellent vaddition to the War an> excellent impressioni y Boon after his arrival Johnson suggested to experience "He came down this week, stalked Navy purchasing. and made Secretary of Louts Johnson, who wanted the benefit of his World War relatives Chave strays been fairly the house with which the President's as member office Investment bank 4 partner2 in Lehman Brys, be Franklin Delano Roodevelts Now, as Assistant Becretary for the Navy be made friends with the youthful purchasing agent, th which capacity that time, he served as the Navy's Board in the ferid conflict. Bernard M. Baruch's War Industries young. he was AD Important figure in point respected by both enemies und friends. Although be is comparatively natural. Hancork himself is an able, forthright and experienced man 2m 4 a - 41 the * - 10, rivalry in connection with the current campaign for American prepared- significant. being the first outbreak of the old conservative-left-wing subterranean explosion in the administration. The explosion is unusually Bros. to be a member of the War Resources Board bas touched off a The Capita The Parade being associated with these men, against the pro- slining begunço takesheart heart that the President's ctime Da. run- A large number brokers Whinking acti-6:3 Chioroes to Wall Street. is poomplaint (President - Hancock WM, the acknowledged chieftain- of the revisionists The explosion followed immediately . reason which the Presi- He originally Visviled to bome to Washington by Assistant = At POINTMEN YAU From manageints of view, the President's choice of Hancock is quite News that The President has chosen John Hancock of Lehman By (JOSEPH ALSOP and ROBERT KINTNER. filly a - desuing businessmen whother public -demand forweasier NCOCKI By Hancock's Appointment to War Board Conservative-Left Wing Feud Rekindled hand" of the /thefisharpert public ISSUE 1935 HERALD September 2, 1939 Mr. Martin) speaking for the Ex position of member firms is the mar Martin Asks change, said in his letter that la gin of protection for customers, and now imperative that the Exchange thus If 5a important to customers be allowed Lonerate under the pro- that Stock Exchange firms shall be tection of Federal policing. M citi- earning heir way each year and nos S. C. to End sens do in other walks of 10 with- drawing down their capital. so the out having the policeman constantly financial position of the Exchange suppressing activity. Itself is & part of the problem of customer's safety. Rule Making Test of Letter "I have Indicated the broad prob- The text of Mr. Martin's letter to lem which requires our undiridad the membership follows: efforts at this time, In this general am transmitting herewith & task, WS earnestly turite the co- Public Examining Board copy of the report of the public operation to our listed companies, examining board, which I appointed the DATES of code country, business ApprovesHisStatement, on July 14, 1939, with the approval une RE their who VISE of the board of governors, to study, to ane the nation Mailed With Its Report the suggestions of Jerome N. Prank, market sustained at maximum el- chairman of the Securities and Ex- with - vital Tunctions un- change Commission, relating to the impairer Calls for Action reprotection of customers of The Exchange management In- tends now 4o devote Staelf to the member firms. am surging. the problems which are premium 40ns Market board/of governors and the mem- of the most urgent of these tas to bership toigive immediate and care- do with the preservation of the mar- ful study to these recommendations, ket Haelf, The impact of Suggests PolicingPower in order that such action, based on them, as may be deemed -destrable has already seriously impaired the Stop Its Suppression in the public interest, may be taken vitality or the market. This we may as promptly as practicable. recognize as an inevitable conse- of Legitimate Activity The report I am sending you quence of the experiments) phaics of marks, in a sense, the completion of a broad program which was begun Among other consequences is an It is now high time that the Be- curities and Exchange Commission more than eighteen, months ago agitation based on apprebension of allowed the Stock Exchange and lla with the formation of the Conway change; which has been continually members to get down to the im- committee to outline the reorganiza- disturbing the morale of our com tion of the Exchange. More specif- munity) and which, except for the portant business of making & living solid character of the confidence in before the organized securities mar- ically, this study of customer pro- tection rounds out the particular our member firms M exhibited by ket completely wiecked. William their customers, could have had McC. Martin Jr., Exchange president, program which we announced, in even more distressing results. It said in a letter mailed to the co-operation with the Securities and was our destre to remove our busi-" membership yesterday evening. The Exchange Commission, on Oct. 26, ness, as much as possible; from con- statement from Mr. Martin was 1938. troversy which prompted - to have sent to members accompanying the "The reorganization of an Instito- tion of this size would have been, in an impartial public examining board report of the public examining board and the independent public account- formally received yesterday by the Itself, a major task. But the addition ine firm of Haskins & Sells under- governing committee, which It is un- to this of the special program that take: the recent studies to the field derstood, approved 4he text of the was developed jointly with the Be- of customer protection letter.? curities and Exchange Commission et these studies have the effect, Mr. Martin noted that the Ex- a result of the Whitney failure has as they abould of withine an change has reorganized its admin- made extraordinary demands on the end to the controversy and agitation distration completely and co-operated time and energies- of the manage they will have served elmost usefuls with the commission to every way. mnt and staff of the Exchange More purpose, not only for ATE but for the but that Its Jot has become con- over has also added to already public as well Portunately the eus- stantly worse. He says that the con- burdensome overhead costs, tomers of vour member firms. have tinlious 4. segressive campaign of Federal authorities seriously has Im- Policy Is to Co-operate manifested their in these firma. And = paired the quality of the market AND The policy of the Exchange 1s to disrupted the morale of the bro- co-operate with the Securities and ularly cgratifying to the that Mhe kerage3community, e Exchange Commission to carrying out public examining board has n: sm Júdica the the laws and regulations enacted in Customers Satisfied the public interest. Prom time to time Edence is fully merited one customers of brokerage firms spokesmen for the commission have The Exchange management, has domot sany indication of dis- publicly expressed their appreciation no present Intention of (proposting satisfaction with the quality of serv- NEW rules of an unusual vicharacter. of our co-operation and uotherwise Scell rendered, nor do they in any except las Whey "deemed have Undicated their confidence in way question the stability or honesty inecessary (tinder- the recommenda- usá We have demonstrated our Ye- of-members and allied members; Mr. tions of the public examining board. termination to operate the Exchange Martin says. "And," he continues; We precognize sthat time as deeded efficiently under Federal regulation No is also, particularly gratifying to for adjustment to those rules al- If we are to continue to have an as that the public examining board ready dn force, We expect, further- efficient and serviceable market 31-19 has to indicate 3ta belief more, to devote attention to simpli- imperative for us to give our atten- that youch, confidence the fully fication, wherever possible merited Lion promptly and energetically, to In short, we feel that at da 1m- Mr. Martin emphasizes that the ways and means of maintaining out perative, at this time, that - con- Exchange, lot course, wants to con- operations on & self-sustaining basis centrate our time and our energies The low volume of transactions and tinue co-operating with the com- upon the rebuilding of our busi- reduced listings have resulted In mission as in the past, but indicates new As ne work to this end, we serious loss of income to the Ex- (have the right to regard the polic- that now is the time for such co- change and to Its membre firms. tng power. as citizens dd In other operation to be directed toward Im- "The urgency of this problem is valks of life, feeling that while 11 Is proving the market, removing use- emphasized in the report of the ever present in the background, It less restrictions and simplifying the Public Examining Board which should never be much-to the regulatory procedure. points that: Just M the capital foreirunt that R supprement legin- male THE WHITE HOUSE WASHINGTON September 5, 1939. MEMORANDUM FOR HON. JEROME N. FRANK I wish you would have a con- fidential talk with Henry Morgentham, who is just back, and explain to him the present situation in regard to the Stock Exchange, Mr. Martin's letter, and especially the creation of George Harrison's Committee now headed by Mr. Potter. Tell H. M., Jr., that all of us are distinctly from Missouri and to watch out for a double play or a double cross or something similar. F. D. R. : The / / // THE MHILE HONSE PSF CONFIDENTIAL MEMORANDUM September 2, 1939 TO: The President FROM: Jerome N. Frank Responsive to comments by Bill Douglas and to later comments by me, Mr. Martin, President of the New York Stock Exchange, on July 14, 1939, appointed a so-called "examining board" to study and report on the matter of increased customer protection against brokerage insolvencies. The board published its re- port on August 31. Mr. Martin, on September 2, made public a letter addressed to the members of the Exchange sending them copies of that report. Attached is a clipping from the New York Herald Tribune for today which quotes his letter. In that letter he said that one of the most urgent problems confronting the Exchange was "the preservation of the market itself. The impact of regulation has already seriously impaired the vitality of the market." He referred to "the low volume of transactions and reduced listings" and com- mented that "the policing power ... should never be so much to the forefront that it suppresses - 2 - legitimate activity." In that same letter, he said that, in meeting the broad problems, "we earnestly invite the coopera- tion of our listed companies, the banks of the country, business generally, and all others who wish to see the nation's primary securities market sustained at maxi- mum efficiency, with its vital functions unimpaired." The tone of Mr. Martin's letter was a surprise to many persons, including prominent persons associated with the Exchange who are friendly to us, including Mr. Carle Conway. They interpreted Martin's letter as a result of prodding from the old guard who think that the present political situation makes this a good time to begin another attack on the SEC statutes. I call your attention to the language which I have underscored, taken from Martin's letter of September 2, because it would seem to tie in with the creation, on August 30, of the committee by Governor Harrison, to which I directed your attention in my memo of August 31. Mr. Martin and Mr. Harry Morgan, you will recall, are members of that committee; since my earlier memorandum was written, Mr. Potter, President of the Guaranty Trust Company, has been made Chairman of that committee and Mr. Ecker, Chair- - 3 - man of the Board of the Metropolitan Life Insurance Company (now on hearing before the TNEC), has been made the insurance company representative. There would seem to be some reason to believe that when Mr. Martin appealed to leading corporations and the banks of the country to assist him in resisting regulation which "has already seriously impaired the vitality of the market," he had in mind Harri- son's committee, the composition of which fits Mr. Martin's requirements. № do not intend, for the present, to make any reply to Martin's letter.7 file And PSF markge SECURITIES AND EXCHANGE COMMISSION WASHINGTON OFFICE OF THE CHAIRMAN September 8, 1939 CONFIDENTIAL MEMORANDUM TO: The President FROM: Jerome N. Frank There are rumors that someone is proposing that an inter-departmental committee be formed with respect to the utility industry, in the emergency; that the Federal Power Commission is to be represented; that it is contemplated that certain powers, under the Public Utility Holding Company Act (which is within our jurisdiction) are to be employed; but that the SEC is not to be represented. In view of our statutory duties in that field and our splendid utility staff (as reorganized in recent months), I hope that, if any such committee is formed, we will be given a place at the table. THE WALL STREET JOURNAL September 9, 1939 This departure from the long famil- REVIEW and OUTLOOK iar Administration attitude toward business leadership gains interest-and perhaps also gains importance-from the demand now so frequently heard Reconciliation Begins? in $0 many quarters for "& truce to It should not escape observation politics." A greatudeal depends, of course, upon the definition to be given that several heads of federal govern- to "a truce". in this connection. If any- ment departments have very recently one supposes that E truce here means invited the counsels of non-official ad- a suspension of the critical faculty visory groups and that among the men honestly exercised in Congress or in the selected for these conference activities press or on the public platform, libe is are representatives of the producing imagining a vain thing." Such a truce, industries, the distributive trades and even?if it were possible to bring about, both institutional and investment would do our people no service. No banking en The proportions of sauch more now. than at any other time/can members the composition of the a party in power expect the country advisory committees, moreover, are supinely toliaccept whatever it pro- rather surprisingly large. poses. On the contrary, the idea of This is one phase of the Admin- cooperation for the general welfare istration's reaction to the new cond) which the appointment of these new advisory bodies implies itself means the tions which the country must reckon complete freedom of the counselers to with as & result of war in Europe and bring hopest-that is non-partisan and It would appear to be a decidedly unselfish-criticism to bear upon what important one. If the present selec- government does and proposes to do. tion of non-official advisers contrasts The same freedom, naturally, remains sharply in respect to experience, at- to the rank and file of citizens. tainments and general point of view with the corresponding advisory re- In this sense 4 (truce to polities tean cruits of recent years, the dimerence begrealized and will be cwholesome to tmay be taken to reflect new willing- invigorate our economic and political iness in Administration quartèrs to life Within the limits here ernidely listen toithose ho have had years of drawn a reconciliation between govern daily contact with industrial and trade ment and business Scan X attained process with fluctuating labor rela- without sacrifice tofeany (real reforms tiona, with the needs and, preferences accomplished or attempted under the Nof exacting consumers with all their New Deal: (tricate) elatedifactors that combine tolgovern the joperation of the business machine, Tosay that such a reconciliation be tween "government" and "business" might long since have taken place does anot detract from its present value to the country as a whole -assuming that now this in fact occurred. No doubt that assumption should be made only tentatively, subject to later verification for disproof. But at the momentili ap- pears that real lines of communication have been established between private enterprise on the one hand and Treas ury, Agriculture, War and Navy De- épartments on the other/ PSF Thank Sept 13, 1939 Memo for the President From James Rowe In re-telephone conversation with Jerome Frank who says that there are rumors in Wall Street about Paul Shields who might be appointed to War Resources Board etc. See:James Rowe--Administrative Asst's folder-Drawer 1-1939 TE PSF Franked RECEIVED 10. 15 AM 39 HOUSE CONFIDENTIAL MEMORANDUM September 20, 1939 TO: The President FROM: Jerome N. Frank, Chairman, Securities and Exchange Commission Senator O'Mahoney, when I saw him yesterday, referred to a letter he sent you sometime ago in answer to the open letter you sent him about "idle men and idle machines," saying that you had not replied. You may think it desirable, in view of his comments to me, to answer that letter by a letter not for publication. If so, I should like to supply you with some material showing that his own bill provides for far more in the way of adminis- trative discretion than is now contained in the SEC statutes, although in public utterances and, I believe, in his letter to you, he has asserted that his bill, if enacted, would very substantially reduce adminis- trative discretion. As to the economic arguments advanced in his letter, I think Leon, Currie and I can supply you with considerable data showing the fallacies of his argument. PSF: Jerome Frank October 3, 1939. Dear Miss Thompson:- The enclosed came soon after I saw you and I thought it was only right to send you this copy and Jerry Brank has given me permission to do so. Things still look all right for the embergo change. I hope to ⑉ you one of these days soon. Very sincerely yours, Miss Dorothy Thompson, e/o New York Herald Tribune, 230 West 41st Street, New York, N. Y. (Enelesure) SECURITIES AND EXCHANGE COMMISSION WASHINGTON JEROME N, FRANK file CHAIRMAN September 30, 1939 My dear Mr. President: Thank you very much indeed for your letter of September 29. Of course I have no objection to your sending a copy of my letter to Dorothy Thompson. Faithfully yours, Juone Jerome N. Frank The President The White House HOLD If Mr. Frank agrees to sending the letter to Miss Thompson--the President will want this correspondence. September 29, 1939. Dear Jerry:- Many thanks for that nice note. You did not have to tell no either of your loyalty or of your fine liberal spirit in the best sense of the word. I wish you would let no send a copy of your letter at this time to Dorothy Thompson, who happens to be in a very mellow frame of wind - just for her information and, of course, not for use. As ever yours, Honorable Jerome N. Frank, Chairman, Securities and Exchange Commission, Washington, D. c. SECURITIES AND EXCHANGE COMMISSION WASHINGTON OFFICE OF THE CHAIRMAN September 27, 1939 Confidential Miss Marguerite LeHand, The White House, Washington, D. C. Dear Miss LeHand: I would be greatly obliged if, at some convenient time in the near future, you would hand the President the enclosed letter. Sincerely, June Jerome Frank N. Frank This is the clipping which Miss Thompson enclosed. The one attached is as it appeared in the paper. SECURITIES AND EXCHANGE COMMISSION WASHINGTON FICE OF THE CHAIRMAN September 27, 1939 Confidential The President The White House My dear Mr. President: In Miss Dorothy Thompson's column for today (September 27) she refers to me as one of the "extreme New Dealers" who "believe the future world belongs to vast, continental, self-sufficient, highly regimented and controlled states.' That was, indeed, careless writing. For Miss Thompson knows perfectly well, from my writings and from conversa- tions, that I detest regimentation and totalitarianism, and that that is why I have been delighted to serve under you. Her reference to my attitude probably represents her confused reaction to a book, Save America First, which (as carefully explained in the Preface) I wrote and de- livered to the publisher in 1937 at a time when I was a private citizen, out of government service, but which was published in 1938. In that book, among other things, I proposed the restriction of our foreign trade, in time of, peace as well as war, primarily to this hemisphere, as the best means of making the New Deal work as a preserver of American democracy and of the American profit system.* I Since my return to government service, in December, 1937, I have published nothing on matters concerning our foreign policy or foreign trade. And so much has happened, in that interval, that my present attitude is very substan- tially different from what it was when I wrote that book. It is possible, however, that, in the current discus- sion of the neutrality legislation, someone, in an effort to embarrass you, may refer to my book. Therefore I think # At the time when, in the Fall of 1937, I was being con- sidered for the SEC, I asked Tom Corcoran whether in view of the fact that my book was then forthcoming, I should tell you about it before you appointed me. Although he knew, in a general way, of the point of view expressed in that book, Tom thought that precaution unnecessary. - 2 - my loyalty to you should be made clear. Officially, of course, you are my Commander-in-Chief. Unofficially (as Tom Corcoran, Ben Cohen, Bob Jackson, Bill Douglas, Ed Eicher, Leon Henderson, Lauchlin Currie and others can tell you) I am 100 per cent in sympathy with your present position. I believe that all reflective persons must agree that, on the question of neutrality, you are entirely cor- rect and that your opponents are seeking to use outmoded devices, anachronistic in the present state of world affairs. If I did not think that everyone in the administration other than you should remain silent on that question, I would be glad thus to express myself publicly. Faithfully yours, Jerone Jerome N. Frank Frank NEW YORK Herald Tribune October 18, 1939 Miss Thompson dictated this letter on October thirteenth. She was called out of town unexpectedly and the letter was held for her signa- ture. This accounts for the delay in sending it. DOROTHY THOMPSON 88 CENTRAL PARK WEST NEW YORK CITY October 13, 1939 Dear Mr. President: Thank you for your letter enclosing Jerry Frank's comments on my remarks. I should lay off Jerry Frank. He may believe in American isolation but he certainly does not believe in peace at any price. I insist that the result of Jerry Frank's program--which is nothing except the Haushofer geo-political idea--will mean regimented and controlled economy, and his saying that he doesn't want that doesn't change my opinion about what he is advocating. I never suggested that he wrote what he did while he was in the govern- ment service. No doubt, my perennial fight with Jerry Frank will go on. Our mutual cor- respondence ought to be published in a book called "Our Struggle." I am having the temerity to enclose a copy of my piece for today. I think it is good. If we could only get the issues clear then we could stop talking about war and think- ing about war and could, instead, talk about peace. All sorts of thoughts cross my mind as they must yours. For instance, that we ought to call a peace conference, not of politicians but of scientists and economists, from all over the world to make a scholarly analysis of the problems of Western civilization and sug est proposals for a peace of reasoned realism. With great admiration for the way you are handling this situation, I am Very sincerely yours, BoromyThomy.son The Honorable Franklin D. Roosevelt The White House Washington, D. C. THIS DOCUMENT IS THE BEST AVAILABLE. EVERY TECHNICAL EFFORT HAS BEEN TAKEN TO INSURE LEGIBILITY. ON THE RECORD DOROTHY THOMPSON Europe Cries to German 9CT I 1939 W HEN George Bernard Shawi gument against private property: taunts the British govern- that Western civilization is. always ment for having bein unwill fluid. never static, and in constant tng to-bomb Berlin on behalf of change: and reform is an argument Poland, be presents - dilemma but in its favor and a sign of the or contributes nothing to the solution ganio life that is in it. It is not onlyg the fear of reprisals that restrains the hands of the This trinity of concepta is unique French and the British from a-horror to the West. Russia, Asia and Africa war: The same thing restrains them have never produced a society which that prevented any pact. with Russia ts & synthesis of the Christian ethic, which would give the Russian Army free science and the rule of law. carte blanche to march into Europe, The Mahometan world does not Every militarys consideration know IL China, Japan. and India do vored) acceptances of% their Russian? knów IL Theyrs know) other> terms by the Allies But more than things, but not these things's military considers tions are at stake: The synthesis is thejunique con- Per the object of (this was la not to tribution. of Europe, and only those destroy Germany which, withwiths areas, of the earth settled, colonised. aid of Rossied migh positive been? ruled-and lived in Europeans or difficult-2 Germany for the children - of Európeans the Western civillas against her own Americas, Australian New Zealand the Union of South Africa belong to Western. civilization, CThis war; which Mr. Ford called These countries are ruled by one plans war, that perplexes so many kind of spirit, the Western spirit, secon of them in PMF Congress, by one kind climan the logether If It acut was be would not fight. 12 It is the world's greatest and most Eter knows that this is the great creative civilization, although it has European- civil war, the object of not the most numerous population which ts to determine what sort of by any means.- It has produced al- Europe he is going to live in most the whole of modern science in the was of the European spirit and technology: It has made the against an allen sptrit. And because greatest conquest of nature; it has is is this sort of war, the Allles fight liberated the human mind as it has it with profound inhibitions and never been liberated; is has created fight- is only because all means of the most secure societies in all his- communication between the rest of tory: 18 has produced the highest Europe and Germany have been standard of living material and closed for years by Adolf Hitler: This cultural-that mankind has ever is the tragedy of this most tragic war known. -that communication among peoples It is the only thing worth fight- has been suspended by the leaders Ing for, worth dying for of Germany. This is the reason for the seemingly futile bombing with Against this unity Germany re- pamphlets in: a heartbreaking at- belled-for & thousand reasons, for tempt at communications of Euro- which the whole civilization bears peans, with one another the guilt." But Into that unity Ger- many must return. Inf 1933 Germany seceded! from Form the gifta and power. and Western civilization In 1939, with genius of Germany are 'essential complete consequentiality; Germany to that civilization. The West CAD- opened Europe to Asta not live without her This was is a eivil war to force Ger- many back Into Western civilization Long before the politicians woke and then reorganise and strengthen up to the realization of the tragedy that civilization by co-operative of the German secession-while the effort; letting bygones be bygones politicians were refusing to believe Like our own Civil War, = is & war in the secession-the scholars, scien- to enforce unity: tista, poeta, artists, religious leaders The peace terms cannot be written, and philosophers of law were aware because the peace terms cannot be -aware and dismayed. dictated. They must be created, to- The persecution of the Jews was gether, M 5. pesce- for & new and not a crisis of Jewry. n vas a crists united Europe. In order to make that of Christianity, a declaration of war peace one must have Germany back against the Christian ethic. The in the body of Western civilization. first to see Its profound threat to This war is & fight for the living one of the three pillars of Western body of Germany. civilization were German pastors and priesta. What la Western civilization? It is The universities of the West tonic not: democracy, not parliamentary up arms against Nazism before the government and certainly not capi- states did-by a spontaneous and tallam; An of these are merely mani- immediate realization that another festations of something: elas-tem- pillar. was tottering porary forms to express a more per And the learned journals were manent contents A awake while France.) and Britain Westerns civiliza the Faynthesis of three things:Sthe The Allies did not, bomb German Christian ethic the selentiño- spirite and the rule of cities em civilization. because they This are citles tragic of was West- is wased hr men who love Ger- It with profound Inhibitions and never- been liberated; It has created fight It only because all means of the most secure societies in all his- communication between the rest of tory:-19 has produced the highest Europe and Germany have been standard of and closed for years by Adolf Ritler This cultural that has never is the tragedy of this most tragic war known -that communica among peoples It is the only thing worth might- has been suspended by the leaders ing for, worth dying for. of Germany This is. the reason for the seemingly futtle bombing with Against this unity Germany re- pamphlets in a heartbreaking at- belled a thousand reasons, for tempt at communication of Euro- which the whole civilisation bears peans with one another the guilt. But into that unity Oer- many must return. In: 1933 Germany seceded from For the gifter and power and Western civilization. In 1939, with genius of Germany are essential complete consequentiality, Germany to that civilization. The West can- opened Europe to Asia. not live without her. This war is a civil war to force Ger- many back into Western civilization Long before the politicians woke and then reorganize and strengthen up to the realization of the tragedy that civilization by co-operative of the German secession-whille the effort, letting bygones be bygones. politicians were refusing to believe Like our own Civil War, It is a war in the secession-the scholars, acien- to enforce unity. tists, poeta, artists. religious leaders The peace terms cannot be written, and philosophers of law were aware because the peace terms cannot be -aware and dismayed. dictated. They must be created, to- The persecution of the Jews was gether, as a peace for a new and not a crisis of Jewry. It was A crists united Europe. In order to make that of Christianity a declaration of war peace one must have Germany back against the Christian ethic. The in the body of Western civilization first to see Stat prefound threat to This war, is a fight for the living vone of the three pillars of Western body/of Germany civilization I were German pastors and priests. What's Western civilization? It is of the :West tonk not democracy not parliamentary up arms against Naxism "before, the government and certainly not capi- states (did-by - spontaneous and talism All of these are merely mani immediate crealization that Panother festations something else-tem pillar was tottering porary forms to express a more per And the learned law journals were manent content. tawake while Prance and Britain Western civilization is neverthe Eslept less, definable It is the synthesis of three things: the Christian ethic; The Allies did not bomb German the acientific spirit; and the rule of cities because they are cities of West- law. em civilization. This tragic war Is The essence of the Christian ethic being waged by men who love Ger- Is that the weak have rights as well many. Is it not significant that the as the strong and that the strong French propaganda ministry should must set limitations upon their own be headed by Jean Giraudoux, the power. French writer who has used his pea The essence of the scientific spirit most powerfully in behalf of the is that the search for truth trans- German cause to a moving effort to eends the State and may not be tring about the spiritual unity of limited or suppressed by the State Germany and France? 7.3s It not significant that every. It presumes the separation of state where in the world the enemies of and culture, 1.e., the separation of Nazism are the friends of Germany? culture from force Find the journalista, the writers, the The essence of the rule of law la acientists, the economists who first that contract is superior to arbitrary took up their pens against the Ver- force: it presumes & continuity of vaailles system, and you will find the relationships, constantly being modi- enemies of Nazism fied but of universal application at For these were the men who most each moment, and from whose BOY passionately cared for the junity of erefenty no one is exempt, not the the West, who regarded the postwar King not the President not the situation as an affront against the powerful, not the weak West 4who warned that Arebellion was brewing in Germany against the These are the standards of West ern civilization and is mo answer to say that the Christian ethic is phony pwar. It not practiced, that science and liter terribly real war, dnwhich the ature are corrupted or that the law weapons are taken reluctantly by is made by the powerful in their men in whose hearts arejfury and own Interests and evaded when It is love; a war not to divide but re- not, The perennial struggle of West unite: a war that could better be ern civilisation; the continual revo- waged and better be reettled with lution In Western civilization, is to words, but cannot be because com- achieve a more Christian, more munication is outlawedy.by the se- scientific and juster society ceders. That adultery flourtshes is no The cry of Europe to Germany is, ar- gument for the abolition of mar- Come back to us, be one of us, riage. That capitalism has abused work with us for & new Europe. the institution of property is no ar- Come back, come back, come home! Copyright, 1839, New York Tribune Inc. On The Record WASHINGTON POSTE By Dorothy Thompson OCT 13 1939 Europe Cries To Germany WHEN George Bernard Shaw has mades the greatest bon tragedx of the German secession taunts the British government for quest of nature; It. has liberated whilen the politicians were TOT having been unwilling toj bomb the human mind is It has never fusing to believe in the secession Berlia on- behalf Poland. he presents a dilemma- but egntrib been liberated; it has created the the scholars, scientists. poets; utes nothing to its solution(S mosting secure) societies. in all artists, religious leaders and phile history: it has produced the high- It. is-notvenly the (fear of re- est standards of: living material: osophers of law were aware prásals that restrains the hadde of and (eultural- that mankind has aware and dismayed. the French and the Britfah from ever known Their persecution of the Jews a horrors war.x Theirsame the only) thing (worth was pgt. a crisis of Jewry, " was restrains them-that prevented any fighting for, worth dying for pact withy Russia which) would a crisis of Christianity, a declara () give their Russian) Xarmy carter tion of war against the Christian blanche to/march lata Europeashy Genius Of Germany ethic The first to see its profound Everyth military considerations Essential To IF est threat to one of the three pillare favored acceptance of the Ruistant of western civilization were Ger Date AME ** termst, byrther Alliesing Bup more AGAINST THIS unity Germany man pastors and priesta than military reonsiderationsy are rebelled- for a thousand reasons, Universities? of their west at stake For Use object for which! the whole civilization took up arms against Namisons be war is: not to destroy Germany beard they guilt But Into- thata form the states did-by a spon- which Hwith the aid of Russia taneous and "immediate realize Disityl Germany must return might not have been} difficult For: the gifta and power and tion that another pillar was totter- but tos und Germany western genits of Germany are essential ing égalnit här ownilead Andathe- learned (law) journalst Cthete nivilizations They west erships thout were wake (whilef France and Thistwar Swhich-Mrg Britalor a wast teaths realization the The Allies Cep some offibens because they are citiest Congress perplexi western Reivilization alt toishe average Frest tragiative tabeing godality to English whollover German notice nincante that the Frenc Her tool maintal gandarministry should betheaded) by Jeans their Franch British writer Swhothas used pen most, powerfully? in behalf of the Gee- He known that gree mangcauses in a moving effect to Europeanen into wad the objectivos bring about the spiritual unity of which determine) Satisort Germany) and France of Europe legoing to THE Total Germany Opened Germany Wanted 200 Europe Asia As Europe's Friend IS ANOT valgnificanti IT IS" THE WAR the Eu everywhere in the world the ene- ropeans spirit) against. anti alien mies of Narifam are the friends spirità And because It: is this sorb of Germany? Find the journal- of word the Allies fight It: with total the writers, the scientists, the profound? Inhibitions and fight us economista who first took up their only because all means of com pens against the Versailles system," munication between- the rest of and you. will find the enemies of Zurope/and, Germany have (been) Narilam closed for years by: Addit Hitler. For these were thei men who profound? inhibitions and fight Ut? ists, the writers, the scientists, the only becanse all means of com economists who first took up theiry munication between thes rest of pens against the Versailles system," Europe and Germany have (been and you. will find the enemies of closed for years by Adolf Hitler Nazitsma This is the tragedy: of this) most For these were their men? who tragical war communication most) passionately (cared? for the among? peoples chase been sus- unity of the west: who regarded pended bank then leaders You Ger- the postwar, situations any an? af- many This is! the reason.,for, the front against, the west who seemingly futiled bombing with warned that rebellion was brew pamphlets Im an heartbreaking a Ing inc Germany gainsti the west temptra munications of En No. is is not/aa phony] was It is interribly/real wat? which ropeans one another the weapons area taken up% re- Germany seceded from luciantlyable meni- whose westerni civilization: THE 3371 with areafury and Tower at wary notified completed consequenti Gen divides but reuniter as art that manage opened Europel to Artive This could? better be waged Cand' bet war, acrivil was to force Ger ter be settled with words, but cans many/back intos western civiliza not be because communication a tion Hand/then? reorganized and outlawed: by the seceders: and strengthers that civilization. by co- The cry, of Europe to Germany operative effort) letting bygones is "Come back to us, be one of usa be bygones. Like our owni Civil work with us for a new Europe. War, it is-a war to enforce unity Come back, come) back, come The peace-terms cannot be writ homel: ten, because the peace terms can- not be dictated They must be created, together, as a peace for a new and united Europe In order to make that peace, one must have Germany back in the body of western civilization." This war is at fight for the living body of Germany. What Iss: western N civiliza tion? It is not democracy not parliamen- tary: government and certainly, not capitalism. Alt of these are merel manifestations of something else temporary forms to express a more permanenti conten Western civilization never- thelesa$ definable M the sym- thesis of three things: The Chris- tian ething: the scienting spirit, and the rule of AT Christianity Sayan Weak Have Rights THE ESSENCE of the Christian ethic is that the weak have rights as wells LE the trong Vanda that the", strongs must Section [lholta Conso upon the relenting spirit search transces may noty be United suppressed= the overnment and certainly AU remer manifestations of something tale temporary forms express in permanentycontent, Western civilization nev theless definable. Withsrthe as thesland three things who The reclenting ep! and by of 5 Christianity Says Veak Have Rights MR FTHE ESSENCE ofrthe Christ ethiculs that the weak have Tig as ywell, as 2thet strongwand u the strong thust Eupon' their own: power. DOLL , The vessence Not Withe Pacient spirit is that the search Hor 'tra dranscends: the state land may a be <limited or suppressed. by 1 state. y It presumes the separati of state and culture, And the sej ration of culture from/force. WaThe essense of the*rule of 1: is that-contract is Superior to a (bitrary (dorce) dt presumes a ec plouity of relationships/constan being modifed, butsofruniver application at each impment, a from whose sovereigdlymo one exempt, not the King not the Pro identionot the powerful. mot t weak, yy These are the Standards of we cravivilization and Itdano york to (say that the Christian ethic not practiced, that science and à cerature are-corrupte that e by DO powerful Etheir Carid lievad when at Ne not @perenn struggle %of (twestern) viliza tio orthe continual revolution in we ernscivilization, is (topachieve smore? Christian, (more Discienti land juster society) is ThaThat adultery flourishes is e pargument for the abolition of ma riage, That capitalism has rabus the Institution of property is : argument against private pro erty; that western invilization salways fiuld, and constant change band greform is argument in its favoriand a si of the organic the de in it PROVIDER If Highest Civilization Reached In West WTHIS CTRINITY of Scannepts Annique the lwest "Russia, LAs Sand Africa have never produced society (swhich, is - Vaynthesis hibe Christian gstien send the rulefor law. stansworld does not know() Chin Japancand India doand? know a other/things in there things exTre isynthesis, is the imique CO tribuponof Europe tabd only the pareas in! the Hearth teached polo tred! ruled and (live by (Eur peäns or the childrensot Europea: Americas Australia, Ne Zealand, the Union of South AD (ca-belong to western civilizatio e These countries are ruled by or kindro spirit, the gvestern espir land inhabited by one kind of ma the western man NW eybelong t gether. dew have or science, Lone ethic, Pa recommon 21 Serature and accommon poncept laws € e Plant the world's directest as most creative civiliration/althou as Thas Abot the amostimumero population byyany/meant EST h produced almost Whe whole echnoles PSF yorask October 13, 1939. your Highly Confidential menorandum to the See of the Treasury From the President--asking him to speak to him about the attached Highly Conf memo of October 4, 1939 from Jerome Frank. who states that he thinks it would seem unwise not to be prepared for the consequences to the economy of the U.S. of a peace in Europe in the near future. With that in mind he is having staff prepare a highly conf memo as to the possible effects on the security markets of such B. peace together with suggestions for measures to be adopted insuch circumstances. Will send nemo in next few days. See:Henry Morgenthau folder-Drawer 1-1939 PSF.. Frank October 13, 1939. Memo to Jim Rowe from Jerome Frank re Giannini case--Transamerica Corp-attached is leter report on case-dated June 29, 1940. See:Jerome Frank-Gen corres-Drawer 2-1940(July let memo from J. Howe) PSF girms / Frank November 20, 1939 CONFIDENTIAL MEMORANDUM FOR SUMMER WELLES The enclosed has just come from Jerome Frank. will you be good enough to talk with him about it? I think that on any matters involving new securities or investments in Latin America, SEC ought to be in on it. F. D. R. Copy to Jerome Frank. fd Enclosure you CONFIDENTIAL MEMORANDUM enc - - November 16, 1939 TO: The President FROM: Jerome N. Frank The speech made by Summer Welles yesterday before the Inter-American Financial and Economic Advisory Committee indicates that there may be developments in the near future which will involve investment in Latin America and dealings with Latin American governments that will directly impinge upon the activities of the SEC under the Securities Act. Not only do we have duties in that respect, but we also have considerable data obtained from registration statements and in connection with a study of defaulted foreign debts, a portion of which were published in an elaborate report (of more than 800 printed pages) in 1937. Inasmich as develop- ments may be rapid, it occurs to me that it may not be amiss to suggest that the SFC be represented on inter- governmental committees dealing with the Latin American situation. I have some reason to believe that Secretary Morgenthau would not be at all averse to such participa- tion on our part. ADDRESS OFFICIAL COMMUNICATIONS TO THE SECRETARY OF STATE WASHINGTON, a.e. pillomal DEPARTMENT OF STATE WASHINGTON November 20, 1939 My dear Mr. President: I am somewhat at a loss to know how to interpret the memorandum of November 16 sent you by Jerome Frank and enclosed with your memorandum to me of November 20. As you know, upon the recommendation of Henry Morgenthau, you authorized the creation of a special committee composed of the Secretary of the Treasury, Jesse Jones and myself to determine the policy, sub- ject to your approval, to be adopted with respect to requests received by this Government from the Govern- ments of the other American Republics for credits. As you will also remember, it was determined that one of the most important questions to be dealt with by this committee in this connection was the question of the debt defaults on the part of some of these govern- ments. At the last meeting of the committee the Secre- tary of the Treasury requested Jerome Frank personally to take part in the discussions in connection with the The President, The White House. -2- subject of debt defaults. He was present at the meeting and it was requested by the Committee that the S.E.C. 00- operate closely with the committee in all matters that had to do with that aspect of the financial problems of our neighbors. Mr. Frank expressed his willingness to cooperate in this way and has subsequently sent a memo- randum to the members of the committee with regard to the attitude of the S.E.C. on the general problem. As you will see from the above, insofar as the policy of our own Government with respect to the general question of Latin American financing 18 concerned, the S.E.C. has already been requested to cooperate with the committee. In his memorandum to you, however, Mr. Frank suggests "that the S.E.C. be represented on the intergovernmental committee dealing with the Latin American situation", and adds that he has reason to believe that Secretary Morgenthau would not be at all averse to such participation on the part of the S.E.C. Under the terms of the resolution unanimously adopted at Panama which created the Inter-American Economic and Financial Advisory Committee which 18 now in session in Washington, each government was requested to appoint one member upon the committee. I myself, as you know, am rep- resenting this Government on the committee. The course which I myself will follow with regard to the questions -3- that come up before the committee will be determined by the views of the special subcommittee created by the Executive Committee on Commercial Policy and upon which all of the interested departments and agencies of the Government are represented, namely, the Departments of State, Treasury, Commerce, Agriculture and Labor, the Tariff Commission, Maritime Commission and the Federal Loan Agency. As you know, the questions to be dealt with by the Inter-American Advisory Committee in Washington are gen- eral problems arising from the desire of the American Republics to prevent the war situation from prejudicing normal inter-American trade, as well as those questions which involve the development of trade relations on this continent upon a sound basis. The belief of the Secretary of the Treasury, Jesse Jones and myself has been that the logical interest and jurisdiction of the S.E.C. would be limited to new Latin American financing in the United States, as well as to the plans that might be worked out to deal with the question of debt defaults. With regard to any representation of the S.E.C. on the intergovernmental committee, it would seem to me clear- ly out of the question. This Government 18 entitled to only one representative on the intergovernmental committee and I -4- am at present occupying that position. Moreover, if you were to appoint a representative of the S.E.C. to serve on the Inter-American Committee, all of the other depart- ments and agencies which I have listed above would very naturally and with far greater reason ask for similar representation, and the representation of our Government on the Inter-American Committee would consequently amount to eight members, although the resolution which created the committee, as I have pointed out, only authorized each government to appoint one representative. I shall of course talk with Jerome Frank about this matter personally since I am sure he is laboring under some misapprehension of the facts. I hope you will for- give this long exposition, but I wanted to lay the situ- ation before you in full detail 80 that you would clear- ly see that the Secretary of the Treasury, Jesse Jones and I had already appreciated the need of having the S.E.C. cooperate with us on the question of Latin Amer- 1can debt defaults and that we were fully aware of the desirability of such cooperation, but that this Govern- ment can only legitimately have one representative on the Inter-American Committee, and, finally, that the matters to be taken up by the Inter-American Committee itself are not questions which affect problems under the jurisdiction ⑉5⑉ of the S.E.C. Believe me A Faithfully yours, Halls 1 PSF sen Frank CONFIDENTIAL MEMORANDUM Oh. d EE Nd ee HOUSE 2 RECEIVED P WHITE SWH THE filt March 2, 1940 TO: The President FROM: Jerome N. Frank, Chairman Securities and Exchange Commission Mr. Chester Lane, our General Counsel, tells me that he and the general counsel of several other agencies feel strongly that Bob Jackson ought to be on your Civil Service Committee. As I understand it, you appointed former Attorney General Murphy ex officio as a member, but he is apparently retaining his membership and Bob is a little squeamish about moving forward. PSF Frank March 6, 1940. Dear Jerry :- Thank you for your memoranda. I an, of course, delighted with the excellent way the Associated Gas mtter has worked out. I only hope that Tonsy and Peggy will not have to interrupt their honeywoon to appear before Mr. Justice Leibell. Come and ⑉ no soon. As ever yours, Nonorable Jerone N. Frank, Chairman, Securities and Exchange Commission, Washington, D. 0. CONFIDENTIAL MEMORANDUM March 5, 1940 TO: The President FROM: Jerome N. Frank, Chairman Securities and Exchange Commission As I indicated in a previous memorandum, in your absence there was B. good deal of fuss and feathers about the SEC becoming trustee of Associated Gas. As part of the res gestae, Henry Morgenthau, for divers reasons, wrote and published B. letter to Senator Norris in which he described the situation somewhat inaccurately and gave the impression that we were somewhat derelict in the discharge of our duties to investors and con- sumers in advising Judge Leibell that we were unwill- ing to be named as trustee. My visit to church the other morning helped me to meet the situation: It led to my sending Henry the attached letter which may amuse you. The letter had the intended effect of restoring amity between the Treasury and the SEC. March 4, 1940 Personal The Honorable Henry Morgenthau, Jr. Secretary of the Treasury. Dear Henry: I have written you about four letters, all of which I have subsequently thrown into the waste- paper basket. They had to do with my peeve at the way you publicly panned the SEC in your letter to Senator Norris. However, several things have happened recently: I had a touch of flu and my physiological fever burned off my emotional high temperature. Then the court appointed some bang- up trustees. And finally, this morning at church I was much impressed by the prayer, "Deliver us from fretfulness and self-pity. I took that to heart and therefore am laughing at myself. Per- haps you and I can have lunch together sometime soon and laugh at one another. Sincerely yours, Jerome N. Frank Chairman sile NO GONF IDENTIAL MEMORANDUM March 2, 1940 RECEIVED 32 PM PM, in THE WHITE a 2 HOUSE York TO: The President FROM: Jerome N. Frank, Chairman Securities and Exchange Commission As you probably have noticed from the press, Judge Leibell appointed Driscoll and Thorp 8.8 trus- tees for Associated Gas and Electric Corporation and Walter Pollak as trustee for Associated Gas and Electric Company. Everybody 18 exceedingly pleased at these ap- pointments. There was much travail on the subject while you were gone, but I thought it just a.s well not to bother you by sending any messages. In the course of the activities there was need for much finessing and, as a result, Leon and I were accused, at one time, in effect, of selling out to Wall Street. I trust that you will not take that charge seriously. fries med. gerome Frank concorn AIIE-MEMOIRE The Securities and Exchange Commission has been asked whether it would accept the trusteeship of Associated Gas and Electric Company if such trusteeship were tendered by the Court. The Commission would be immensely aided in making its decision if it could be apprised whether in view of the policies and purposes laid down by Congress in the Public Utility Holding Company Act, the The Court felt as the Commission feels, that in the selection of a trustee of other than the Commission the following principles should be applied. 1.) There should be only one trustee - not multiple trustees. 2.) The trustee's' compensation should be strictly limited and should not in any event exceed twice the amount of the salary of the judge in charge of the case. 3.) Attorneys' fees should be fixed BO that the net income of the counsel retained should be no more than commensurate with the compensa- tion allowed the trustee. 4.) No one who has been a member of the Commission or its staff should be eligible for trustee. -2- 5.) No one who has engaged directly or indirectly in the utility business or in the underwriting or distribution of utility or holding company securities should be eligible as trustee. 6.) No one should be designated as trustee unless he enjoys the confidence of both the Court and the Commission. Comments on more than one trustee The Commission has been femiliarizing itself with the details Company Is of the Associated Gan and Electric System for a number of years and has full information concerning the operation of the System. In the opinion of the Commission there is no need of burdening the estate - and depleting what at the best will be meager returns for holders of securities - through the expenses of more than one trustee. With the consent of the Court a single competent and independent trustee can obtain and coordinate such technical aid as he may require in the performance of his duties. Multiple trusteeships would create a division of responsibility and friction in administration which would be particularly dangerous in -3- matters where there is such sharp division of opinion as there 1a in the relationship of utility corporations to public regulation. A single trustee can serve for both "the Company* and "the Corporation: where there is a conflict in interest special coun- sel can be named to handle any lawsuits between the two. Such a practice is already a matter of precedent in the Southern District of New York - 8 precedent worked out when it was the custom to appoint the Irving Trust Company receiver in nearly all 06888. Comment on the ineligibility for trusteeship As the Commission has already ascertained by its own studies, the difficulties of this System do not lie in the physical operations of its properties, but in financial management. Practically all interests in the utility business can perceive a particular advantage to themselves in the distressed situation of this huge holding company system. The operation of Section 11 of the Holding Company Act may require the System to divest itself of some operating properties, end the properties of the System are so widely scattered that 1/1- every other utility organization in the country could conceive of some part of the Associated System as a possible addition to itself. The possible financial interrelationships are equally involved. Under such circumstances the trustee should have had no connec- tion directly or indirectly with any other utility interest, operating or financial, or with the underwriting or distributing of the securities of any utility operating or holding company. No trustee with such connections - past or present - could be regarded as free from entangling alliances and sufficiently independent to command the confidence of the Court, of the Commission or of security- holders apprehensive that further unnecessary financial operations will add to losses already sustained from excessive financial operations of the past. [Nor is the Commission willing to regard as eligible for the trusteeship one who has been a member of the Commission or its staff. Until the disinterested position of the Commission 18 more securely es- tablished in the public mind, the Commission does not wish to be under the suspicion, however unwarranted, that it has exercised its influence to turn patronage in the direction of its associates.7 -5- The trustee 1a of course administering the estate under the responsible supervision of the Court itself. But it is impossible to overestimate the importance to the Securities and Exchange Commission and to the administration of the Hold- ing Company Act of the precedents established under this trusteeship. The Associated Gas and Electric System is the holding company system which was obviously most in the minds of Congress in giving the Securities and Exchange Commission power to aot as trustee. It is the system which, under the prior management just failed, has come in conflict at probably more points than any other system with the policy of the federal Congress as expressed in the Holding Company Act. It is a situation in which the necessity for reorganization has so long been expected and in which large losses to holders of securities have 80 long been expected that wastage of assets and ad- ministrative friction between the Commission and the trustee will im- mediately drew down watchful oriticism of the most violent kind. There is further significance in the fact that this is the first large holding company system to become subject to the provisions -6- of the Holding Company Act relating to companies in reorganization. The management of the trustee will be a test of the practical feasibility of the plan of cooperation between the courts and administrative bodies provided in the Act for the extensive rearrangement of the financial structures and operating company relationships contemplated under Section 11 and the financial plan under which this System is reorganized will affect the possible form of reorganization of all other holding company systems subject to Section 11. the PSF: Trank, CONFIDENTIAL MEMORANDUM March 7, RESIGNO use 0 VEn 8 THE 57 WHITE AN & HOUSE TO: The President FROM: Jerome N. Frank, Chairman Securities and Exchange Commission At lunch today I told you of a. letter written by Judge Healy to the Wall Street Journal concerning integration of holding companies. Attached is E. copy of that letter. MARCH LETTERS TO THE EDITOR SECTION 11 OF THE UTILITIES ACT The following letter from Robert E. Healy, Commissioner of the Securities and Exchange Commission, was written as 4 personal communication and not for publication. Because it discusses a situation which is very much in the pub- Lic eye and because it is such an excellent statement of the viewpoint it ad- vocates, we sought and obtained from judge Healy permission to publish the letter. aditor, The wall Street Journal: I an expressing disagreement with your editorial in the January 31 issue of The Wall Street Journal concerning Section 11 of the Holding Company Act. According to my dim lights it misconceives the purpose of Section 11 and the nature of the public utility industry. The Public Utility Holding Company Act was adopted as a result of the widespread abuses which were disclosed by the Federal Trade Commission's in- vestigation of utility holding companies. Because of these abuses Congress decided, and correctly so, in by opinion, that large holding systems could not be regulated adequately by the States and subjected them to Federal regulation, So far as the particular provisions of Section 11 are concerned, Congress concluded that far-flung disjointed utility systems could not be efficiently operated in such a way as adequately to serve the public or investors. So far as service is concerned, I can tell you of several operating companies which can not sensibly or fairly issue any nore bonds or preferred stock, which are in dire need of generating facilities, which should and can finance only through common stock, yet the common stock is all held by a holding company which is unable to subscribe for additional common stock. It can't do it and it won't let anyone else do it. This is just playing dog in the manger. This situation is not due to the Act. hany of these companies were developed by unsound and even dishonest means and their present huge arrearages of preferred dividends, which impede their own financing, are the fault of their own con- genital defects. From the investor's point of view practically every company (I except the North American and perhaps one or two others) which indulged in scatteration, has gone through bankruptcy, is going through bankruptcy or will have to go through bankruptcy or some form of reorganization. Congress itself laid down the standards of what constitutes an "integrated public utility system." Such a system, where composed of electric properties, must be one physically interconnected or capable of physical interconnection, and one which, under normal conditions, may be "conomically operated as a single interconnected and coordinated system, confined in its operations to a single area or region, not so large as to impair (considering the state of the art and the area or region affected) the advantages of localized management, efficient operation, and the effectiveness of regulation. Similar criteria are established for gas utility systems. Under certain conditions a holding company is permitted to retain more than one integrated public utility system, The Commission [Securities and Exchange Commission] is obligated to grant such permission where additional systems cannot be economically operated indepen- dently, where they are located in the same state or in adjoining states, and where the continued combination of such systems is not unduly large within the standards of the statute. This is not discretionary with us. It is a rule of law. - 2 - Under the machinery set forth in the statute for enforcing Section 11, holding companies may file simplification plans voluntarily or they may await action by the Commission. Under either procedure, however, the requirements of the law are the same, and whichever procedure is followed the Commission must approve a plan where it conforms to the statutory requirements. Such proceedings, whether initiated by voluntary application pursuant to Section 11 (e) or by the Commission, are not concerned initially with integra- tion plans for the regrouping of public utility properties. The principal ques- tion is how many integrated systems can one holding company own. That issue has to be determined according to standards of law. That is the main purpose of proceedings either under Section 11 (b) or 11 (e). Our decision is subject to review in the Courts, Before compliance may be enforced by court proceed- ings, however, the company is permitted at least one or, if conditions warrant, two years to carry out the requirements of the statute after the Commission has made its order. During that period, or prior to it, the holding company, per- haps along with other companies in the industry, can work out its plans for re- adjusting its system appropriately. when you stop to think of it this national concern as to how many integrated systems one holding company should own is not such different in essence from the concern which caused the Republicans, under Benjamin Harrison, to pass the Sherman Act in 1890, and the Democrats, under Woodrow Wilson, to pass Section 7 of the Clayton Act in 1914. The tests by which it must be decided how many integrated systems one holding company can own are described in the Act much as I have described then here. They seen to be very practical and sensible, and also very fair considering the public interest in these "public service" companies and the injury which many holding companies have inflicted on both the public consumer and investor. I can not agree with you that the entire idea of Section 11 is "fantastic." On the basis of the Federal Trade Commission's thorough investigation of pub- lic utility holding companies, Congress found that the growth and extension of holding companies frequently had no relation to economy of management and operation or the integration and coordination of related operating properties. The investigation also showed that unregulated development of holding companies had resulted in an undue concentration of control in the electric and gas utility industries. In the words of the National Fower Policy Committee, "such intensification of economic power beyond the point of proved economies not only is susceptible of grave abuse but is a form of private socialism inimical to the functioning of democratic institutions and the welfare of a free people." You suggest that Section 11 attempts to interfere with the judgment of corporate management in natters "of private interest." I believe that in this statement you have overlooked the fact that public utilities and the holding companies which control them are clearly affected with a public interest. Cer- tainly the Government should have the right to say something as to the direc- tion of growth of national utility systems made up of corporations which are said to be devoted to the public service, which occupy public streets, high- ways, and dam interstate and international rivers, usually without paying for the privilege, which, through delegation to then of a portion of the state's sovereignty, are permitted to condemn private property, which are generally given by the Government vested monopolies in large areas, and which owe their very existence to the indulgence of the government. For these extraording privileges the companies should have returned the best of service and because of them should have been the most stable of investments. Instead of which they were ande in too many instances the tools of the wildest and most un- reliable financial adventurers. KOBT. E. HEALY, Washington, February 17, 1940. Commissioner. [ PSF many SECURITIES AND EXCHANGE COMMISSION WASHINGTON sile OFFICE OF THE CHAIRMAN March 9, 1940 RECEIVED 1213PM" i/D 10 WHITE THE HOUSE THE Confidential of Quotine The President The White House My dear Mr. President: You may be amused by the attached letter I sent to Peggy and Tommy, par- ticularly the enclosure, and especially the last few paragraphs thereof. Very respectfully yours, Jesune Jerome N. Frank Enclosures 2. donal 10 геслышег YMD EXCHVNCE March 8, 1940 Mr. and Mrs. Thomas G. Corcoran Gray Rocks Inn St. Jovite Province of Quebec Canada Dear Children: of course you know how delighted I am. Yours with love, Jerome N. Frank Chairman P. 8. It occurs to me that you may be interested in the enclosed 0. Henry story. JNFrank:PJD THE ROMANCE OF A BUSY BROKER By O. Henry Pitcher, confidential clerk in the office of Harvey Maxwell, broker, allowed a look of mild interest and surprise to visit his usually expressionless countenance when his employer briskly entered at half-past nine in company with his young lady stenographer. With a snappy "Good-morning, Pitcher,' Maxwell dashed at his desk as though he were intending to leap over it, and then plunged into the great heap of letters and telegrams waiting there for him. The young lady had been Maxwell's stenographer for a year. She was beautiful in a way that was decidely unsteno- graphic. She forewent the pomp of the alluring pompadour. She wore no chains, bracelets, or lockets. She had not the air of being about to accept an invitation to luncheon. Her dress was gray and plain, but it fitted her figure with fidelity and discretion. In her neat black turban hat was the gold-green wing of a macaw. On this morning she was softly and shyly radiant. Her eyes were dreamily bright, her cheeks genuine peach-blow, her expression a happy one, tinged with reminiscence. Pitcher, still mildly curious, noticed a difference in her ways this morning. Instead of going straight into the adjoining room, where her desk was, she lingered, slightly irresolute, in the outer office. Once she moved over by Maxwell's desk, near enough for him to be aware of her presence. The machine sitting at that desk was no longer a man; it was a busy New York broker, moved by buzzing wheels and uncoiling springs. "Well--what is it? Anything?" asked Maxwell, sharply. His opened mail lay like a bank of stage snow on his crowded desk. His keen gray eye, impersonal and brusque, flashed upon her half impatiently. "Nothing," answered the stenographer, moving away with a little smile. "Mr. Pitcher," she said to the confidential clerk, KANON are -2- "did Mr. Maxwell say anything yesterday about engaging another stenographer?" "He did," answered Pitcher. "He told me to get another one. I notified the agency yesterday afternoon to send over a few samples this morning. It's 9.45 o'clock, and not a single picture hat or piece of pineapple chewing gum has showed up yet." "I will do the work as usual, then," said the young lady, "until some one comes to fill the place." And she went to her desk at once and hung the black turban hat with the gold-green macaw wing in its accustomed place. He who has been denied the spectacle of a busy Manhattan broker during a rush of business is handicapped for the profession of anthropology. The poet sings of the "crowded hour of glorious life." The broker's hour is not only crowded, but the minutes and seconds are hanging to all the straps and packing both front and rear platforms. And this day was Harvey Maxwell's busy day. The ticker began to reel out jerkily its fitful coils of tape, the desk telephone had & chronic attack of buzzing. Men began to throng into the office and call at him over the railing, jovially, sharply, viciously, excitedly. Messenger boys ran in and out with messages and telegrams. The clerks in the office jumped about like sailors during a storm. Even Pitcher's face relaxed into something resembling ani- mation. On the Exchange there were hurricanes and land- slides and snowstorms and glaciers and volcanoes, and those elemental disturbances were reproduced in miniature in the broker's offices. Maxwell shoved his chair against the wall and transacted business after the manner of a toe dancer. He jumped from ticker to 'phone, from desk to door with the trained agility of a harlequin. In the midst of this growing and important stress the broker became suddenly aware of a high-rolled fringe of golden hair under a nodding canopy of velvet and ostrich tips, an imitation sealskin sacque and a string of beads as large as hickory nuts, ending near the floor with a silver heart. There was a. self-possessed young lady connected with these accessories; and Pitcher was there to construe her. -3- "Lady from the Stenographer's Agency to see about the position," said Pitcher. Maxwell turned half around, with his hands full. of papers and ticker tape. "What position?" he asked, with a frown. "Position of stenographer," said Pitcher. "You told me yesterday to call them up and have one sent over this morning." "You are losing your mind, Pitcher," said Maxwell. "Why should I have given you any such instructions? Miss Leslie has given perfect satisfaction during the year she has been here. The place is hers as long as she chooses to retain it. There's no place open here, madam. Countermand that order with the agency, Pitcher, and don't bring any more of 'em in here." The silver heart left the office, swinging and banging itself independently against the office furniture as it indignantly departed. Pitcher seized a moment to remark to the bookkeeper that the "old man" seemed to get more absent-minded and forgetful every day of the world. The rush and pace of business grew fiercer and faster. On the floor they were pounding helf a dozen stocks in which Maxwell's customers were heavy investors. Orders to buy and sell were coming and going as swift as the flight of swallows. Some of his own holdings were imperilled, and the man was working like some high-geared, delicate, strong machine--strung to full tension, going at full speed, accurate, never hesitating, with the proper word and decision and act ready and prompt as clockwork. Stocks and bonds, loans and mortgages, margins and securities--here was B. world of finance, and there was no room in it for the human world or the world of nature. When the luncheon hour drew near there came a slight lull in the uproar. Maxwell stood by his desk with his hands full of telegrams and memoranda, with a fountain pen over his right ear and his hair hanging in disorderly strings over his fore- head. His window was open, for the beloved janitress Spring was STRAPORT nroga Two one -4- had turned on a little warmth through the waking registers of the earth. And through the window came a wandering--perhaps a lost--odor--a delicate, sweet odor of lilac that fixed the broker for a moment immovable. For this odor belonged to Miss Leslie; it was her own, and hers only. The odor brought her vividly, almost tangibly before him. The world of finance dwindled suddenly to a speck. And she was in the next room--twenty steps away. "By George, I'll do it now," said Maxwell, half aloud. "I'll ask her now. I wonder I didn't do it long ago." He dashed into the inner office with the haste of a short trying to cover. He charged upon the desk of the stenographer. She looked up at him with a smile. A soft pink crept over her cheek, and her eyes were kind and frank. Maxwell leaned one elbow on her desk. He still clutched fluttering papers with both hands and the pen was above his ear. "Miss Leslie, he began, hurriedly, "I have but a moment to spare. I want to say something in that moment. Will you be-my wife? I haven't had time to make love to you in the ordinary way, but I really do love you. Talk quick, please--those fellows are clubbing the stuffing out of Union Pacific." "Oh, what are you talking about?" exclaimed the young lady. She rose to her feet and gazed upon him, round- eyed. C "Don't you understand?" said Maxwell, restively. "I want you to marry me. I love you, Miss Leslie. I wanted to tell you, and I snatched a minute when things had slackened up a bit. They're calling me for the 'phone now. Tell 'em to wait a minute, Pitcher. Won't you, Miss Leslie?" The stenographer acted very queerly. At first she seemed overcome with amazement; then tears flowed from her wondering eyes; and then she smiled sunnily through them, and ottao add 02 :po GRAPP* use cablico op If JICCIO sermin emaile -5- one of her arms slid tenderly about the broker's neck. "I know now," she said, softly. "It's this old business that has driven everything else out of your head for the time. I was frightened at first. Don't you re- member, Harvey? We were married last evening at 8 o'clock in the Little Church around the Corner." the CONFIDENTIAL MEMORANDUM PSF: Frank gen 2 May 6, 1940 TO: The President FROM: Jerome N. Frank, Chairman Securities and Exchange Commission In the light of comments in the press that the Republican platform may imply that the New Deal has condoned political corruption, I call your attention to the fact that today we issued orders relating to the North American Company and its subsidiary, Union Electric Company of Missouri. There, on the basis of data collected in an investigation, we order public hearings to be held to determine, inter alia, whether or not that subsidiary has been expending funds in connection with the candidacy, nomination or election of various persons in public office and in support of political parties, etc. in Missouri. The dominant political party in Missouri has, of course, been the Democratic Party. This doesn't look as if the Democratic members of the SEC were trying to cover up dirty politics in their own party. Attached are copies of our orders. For IMMEDIATE Release Monday, May 6, 1940 SECURITIES AND EXCHANGE COMMISSION Washington SECURITIES ACT OF 1933 Release No. 2252 UNITED STATES OF AMERICA BEFORE THE SECURITIES AND EXCHANGE COMMISSION At a regular session of the Securities and Exchange Commission, held at its office in the City of Washington, D. C., on the 8th day of May, A.D., 1940. : In the Matter of : : THE NORTH AMERICAN COMPANY and : ORDER INSTITUTING UNION ELECTRIC COMPANY OF MISSQURI : PROCEEDING AND : DESIGNATING OFFICER Proceeding pursuant to Sections A(e) : TO TAKE TESTIMOUY and 20(a) of the Securities Act of : 1933, as amended. : : I The Commission's public official files disclose that: (a) The North American Company, at various times, filed with the Commission, pursuant to the Securities Act of 1933, as amended, regis- tration statements and ahendments thereto, with respect to the securities hereinafter enumerated: Title of Issue and Effective Registration Date Amount Common Stock, $10 par value (November 30, 1938) 375,000 shs. Preferred Stock, 5 3/4% Series, 850 par value, entitled to cumulative dividends (January 20, 1939) 496,580 shs. 3 1/2% Debentures, Series due 1949 - due February 1, 1949 (January 20, 1939) $20,000,000 3 3/45 Debentures, Series due 1954 - due February 1, 1954 (January 20, 1939) 025,000.000 4% Debentures, Series due 1959 - due February 1, 1059 (January 20, 1939) $25,000,000 - 2 - (Release No. 2252) (b) Union Electric Company of Missouri, at various times, filed with the Commission, pursuant to the Securities Act.of 1933, as amended, registration statements and amendments thereto, with respect to the securities hereinafter enumerated: Title of Issue and Effective Registration Date Amount 85 Preferred Stock, without par value, entitled to cumulative dividends (November 27, 1938) 130,000 she. 3% Notes due 1942, due July 1, 1942 (June 28, 1937) $15,000,000 First Mortgage and Collateral Trust Bonds, 3 3/4% Series due 1962 - due July 1, 1962 (June 28, 1937) $80,000,000 II It appears that: (a) Said registration statements and amendments thereto filed with the Commission by The North American Company contain information as to the history, business, capital structure, management, operations, and financial condition of said company and its subsidiary companies, including St. Louis County Gas Company and Union Electric Company of Missouri and its subsidiary companies, which information is based, in part, upon books, rec- ords and accounts made and kept by St. Louis County Gas Company and by Union Electric Company of Missouri and by its subsidiary companies; and (b) Said registration statements and anendments thereto filed with the Commission by Union Electric Company of Missouri contain information as to the history, business, capital struc- ture, management, operations, and financial condition of said company and its subsidiary companies, which information is based, in part, upon books, records and accounts made and kept by Union Electric Company of Missouri and by its subsidiary companies: and III The Commission obtained information from various sources as to the existence of certain conditions and practices with respect to St. Louis County Gas Company and Union Electric Company of Missouri and its sub- sidiary companies, and on the basis thereof issued an order on November 9, 1938, instituting an investigation into such conditions and practices, which investigation has been conducted under said order and succeeding orders issued by the Commission, including en order for investigation issued June 7, 1939, pursuant to the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Public Utility Holding Company Act of 1935; and IV Herbert S. French, Paul J. Cotter, and Harry C. Coles, Jr., have re- ported to the Commission evidence obtained in said investigation tending - 3 - (Release No. 2252) to show that for a long period of time conditions and practices of the char- acter below enumerated may have existed with respect to St. Louis County Gas Company, Union Electric Company of Missouri, its subsidiary companies and their predecessor companies, and in view of said report it appears to the Com- mission to be necessary and appropriate in the public interest to determine whether: (a) Substantial suns have been disbursed by said companies to cer- tain of the officers, attorneys and employees thereof, purportedly for designated expenses incurred by such persons, when in fact such alleged expenses vere not incurred by such persons and the sums received by such persons were used for other purposes: such transactions are not properly reflected on the books, records and accounts of said companies: and (b) Substantial sums have been disbursed by said companies to cer- tain attorneys, insurance agencies, contractors, supply houses and others, purportedly in payment for designated goods, materials or services sup- plied, when in fact said suns were not disbursed in payment of the goods, materials and services designated, and the sums received by such persons were used for other purposes; such transactions are not properly reflected on the books, records and accounts of said companies: and (c) Substantial suns have been received by said companies from officers, attorneys, and employees thereof, and from insurance agencies, contractors, supply houses and others, the receipts of which are not properly reflected on the books, records and accounts of said companies; and (d) Substantial contributions have been nade, directly and indi- rectly, by and on behalf of sold companies in connection with the candi- dacy, nomination, election and appointment of various persons to public office, and in support of political parties, and of committees and agen- cies thereof; such contributions are not properly reflected on the books, records and accounts of said companies: and (e) Substantial payments have been made, directly and indirectly, by and on behalf of sold companies, for the purpose of influencing the opinions and conduct of persons holding public office: such payments are not properly reflected on the books, records and accounts of said companies: and (f) Substantial suns have been disbursed by said companies, not in the ordinary course of business, for the personal uses of certain officers and employees thereof, for gifts to and entertainment of per- sons holding public office and others, and for the employment of de- tective agencies, so-called inspection services, audit companies, en- gineering companies and others; such disbursements are not properly reflected on the books, records and accounts of seld companies: - 4 - (Release No. 2252) V IT IS ORDERED, pursuant to Sections B (e) and 20 (a) of the Securities Act of 1933, as amended, that a proceeding be conducted to ascertain whether the conditions and practices above referred to exist or have existed, for the following purposes: (a) To determine whether said registration statements, or any of them, include untrue statements of material facts or omit to state any material facts required to be stated therein or necessary to nake the statements therein not misleading: and (b) To determine whether any provisions of said Act, or of any rule or regulation prescribed under authority thereof, have been or are about to be violated; and IT IS FURTHER ORDERED that for the purpose of said proceeding Edward c. Johnson, an officer of the Commission, is hereby designated to administer oaths and affirmations, subpena witnesses, take evidence, require the pro- duction of any books, papers, or other documents deemed relevant or material to the inquiry, and to perform all other duties in connection therewith authorized by law; and IT IS FURTHER ORDERED that in conducting said proceeding said Edward c. Johnson shall afford The North American Company and Union Electric Company of Missouri and any other persons showing a legitimate interest in this pro- ceeding the right to cross-examine witnesses summoned by counsel for the Commission and to produce evidence relevant or material to the inquiry, and for this purpose paragraphs (f), (g), and (h) of Rule V of the Commission's Rules of Practice shall be applicable to the proceeding: and IT IS FURTHER ORDERED that said proceeding for the taking of testimony and the production of evidence begin at the office of the Securities and Exchange Commission, 1779 Pennsylvania Avenue, N.W., Washington, D. C., at such time, not less than twenty days after the date hereof, as said Edward c. Johnson shall designate by not less than ten days' notice by confirmed telegram to The North American Company and Union Electric Company of Missouri, and shall continue thereafter at such times and places in Washington, D. C., or elsewhere as said Edward c. Johnson may determine; and IT IS FURTHER ORDERED that a copy of this order be served on The North American Company and Union Electric Company of Missouri, personally or by registered mail. By the Commission. Francis P. Brassor, (SEAL) Secretary. oOo For IMMEDIATE Release Monday, May 8, 1940 SECURITIES AND EXCHANGE COMMISSION Washington SECURITIES EXCHANGE ACT OF 1934 Release No. 2505 UNITED STATES OF AMERICA BEFORE THE SECURITIES AND EXCHANGE COMMISSION At a regular session of the Securities and Exchange Commission, held at its office in the City of Washington, D. C., on the 8th day of May, A.D., 1940. In the Matter of : : ORDER INSTITUTING THE NORTH AMERICAN COMPANY and : PROCEEDING AND UNION ELECTRIC COMPANY OF MISSOURI : DESIGNATING OFFI- : CER TO TAKE Proceeding pursuant to Section 21 (a) : TESTIMONY of the Securities Exchange Act of : 1934, as amended. : I The Commission's public official files disclose that: (a) The North American Company, at various times, issued the securities hereinafter enunerated, and registered such securities on the New York Stock Exchange, a national securities exchange, pursuant to the provisions of the Securities Exchange Act of 1934, as amended: Common Stock, $10 par value 8,602,897 shs. Preferred Stock, 5-3/49 Series, 850 par value 696,580 shs. Preferred Stock, 0% Series, 850 par value 606,678 she. 3-1/2% Debentures, Series Due 1949 - due February 1, 1949 $20,000,000 3-3/4% Debentures, Series Due 1954 - due February 1, 1954 825,000,000 4% Debentures, Series Due 1959 - due February 1, 1959 $25,000,000 5% Debentures due 1961 - due February 1, 1961 (removed from registration and redeemed) $25,000,000 - 2 - Release No. 2505 Said company filed with the Commission in registering the foregoing securities on said exchange various applications for registration and amendments thereto, supplemental reports and other documents, pursuant to the provisions of Sections 12 (b), 12 (c), and 13 of said Act, as amended, and the rules and regulations prescribed by the Commission thereunder: and (b) Union Electric Company of Missouri, at various times, issued the securities hereinafter enumerated, and registered such securities on the New York Stock Exchange, a national securities exchange, pur- suant to the provisions of the Securities Exchange Act of 1934, as amended: 85 Preferred Stock, without par value 130,000 shs. First Mortgage and Collateral Trust Bonds, 3-3/45 Series due 1962 - due July 1, 1992 $80,000,000 General Mortgage Bonds, 5% Series due 1957 - due April 1, 1957 (removed from registration and redeemed) $22,500,000 Said company filed with the Commission in registering the foregoing securities on said exchange various applications for registration and amendments thereto, supplemental reports and other documents, pursuant to the provisions of Sections 12 (b), 12 (c), and 13 of said Act, as amended, and the rules and regulations prescribed by the Commission thereunder: and II It appears that: (a) Sald applications for registration and amendments thereto, and anid supplemental reports and documents filed with the Commission by The North American Company contain information as to the history, business, capital structure, management, operations, and financial condition of said company and its subsidiary companies, including St. Louis County Gas Company and Union Electric Company of Missouri and its subsidiary companies, which information is based, in part, upon books, records and accounts made and kept by St. Louis County Gas Company and by Union Elec- tric Company of Missouri and its subsidiary companies; and (b) Said applications for registration and amendments thereto, and said supplemental reports and documents, filed with the Commission by Union Electric Company of Missouri contain information as to the history, business, capital structure, management, operations, and financial condition of said company and its subsidiary companies, which informa- tion is based, in part, upon books, records and accounts made and kept by Union Electric Company of Missouri and by its subsidiary companies: and - 3 - Release No. 2505 III The Commission obtained information from various sources as to the ex- istence of certain conditions and practices with respect to St. Louis County Gas Company and Union Electric Company of Missouri and its subsidiary compan- ies, and on the basis thereof issued an order on November 9, 1938, instituting an investigation into such conditions and practices, which investigation has been conducted under said order and succeeding orders issued by the Commis- sion, including an order for investigation issued June 7, 1939, pursuant to the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Public Utility Holding Company Act of 1935; and IV Herbert 8. French, Paul J. Cotter, and Harry c. Coles, Jr., have reported to the Commission evidence obtained in said investigation tending to show that for a long period of time conditions and practices of the character below enumerated may have existed with respect to St. Louis County Gas Company, Union Electric Company of Missouri, its subsidiary companies and their prede- cessor companies, and in view of said report it appears to the Commission to be necessary and appropriate in the public interest to determine whether: (a) Substantial suns have been disbursed by said companies to certain of the officers, attorneys and employees thereof, purportedly for designated expenses incurred by such persons, when in fact such alleged expenses were not incurred by such persons and the sums re- ceived by such persons were used for other purposes: such transactions are not properly reflected on the books, records and accounts of said companies: and (b) Substantial suns have been disbursed by said companies to cer- tain attorneys, insurance agencies, contractors, supply houses and others, purportedly in payment for designated goods, materials or ser- vices supplied, when in fact said suns were not disbursed in payment of the goods, materials and services designated, and the sums received by such persons were used for other purposes: such transactions are not properly reflected on the books, records and accounts of said com- panies; and (c) Substantial sume have been received by said companies from officers, attorneys, and employees thereof, and from insurance agencies, contractors, supply houses and others, the receipts of which are not properly reflected on the books, records and accounts of said compan- les; and (d) Substantial contributions have been made, directly and Indi- rectly, by and on behalf of said companies in connection with the candidacy, nomination, election and appointment of various persons to public office, and in support of political parties, and of committees and agencies thereof; such contributions are not properly reflected on the books, records and accounts of said companies; and - 4 - Release No 2505 (e) Substantial payments have been made, directly and indirectly, by and on behalf of said companies, for the purpose of influencing the opinions and conduct of persons holding public office: such payments are not properly reflected on the books, records and accounts of said companies; and (f) Substantial sums have been disbursed by said companies, not in the ordinary course of business, for the personal uses of certain officers and employees thereof, for gifts to and entertainment of per- sons holding public office and others, and for the employment of de- tective agencies, so-called inspection services, audit companies, engineering companies and others; such disbursements are not properly reflected on the books, records and accounts of said companies. V IT IS ORDERED, pursuant to Section 21(a) of the Securities Exchange Act of 1934, as amended, that a proceeding be conducted to ascertain whether the conditions and practices above referred to exist or have existed, for the following purposes: (a) To determine whether any person has violated or is about to violate any provision of said Act or any rule or regulation thereunder; and (b) To aid in the enforcement of the provisions of said Act, in the prescribing of rules and regulations thereunder, and in securing information to serve as a basis for recommending further legislation concerning the matters to which said Act relates; and IT IS PURTHER ORDERED, pursuant to Section 21(b) of the Securities Exchange Act of 1934, as amended that for the purpose of said proceeding Edward c. Johnson, an officer of the Commission, is hereby designated to administer oaths and affirmations, subpena witnesses, compel their attendance, take evidence, require the production of any books, papers, correspondence, memoranda, or other records deened relevant or material to the inquiry, and to perform all other duties in connection therewith authorized by law; and IT IS FURTHER ORDERED that in conducting said proceeding said Edward C. Johnson shall afford The North American Company and Union Electric Company of Missouri and any other persons showing a legitimate interest in this proceed- ing the right to cross-examine witnesses summoned by counsel for the Commission and to produce evidence relevant or material to the inquiry, and for this purpose paragraphs (f), (g), and (h) of Rule V of the Commission's Rules of Practice shall be applicable to the proceeding: and - 5 - Release No 2505 IT IS FURTHER ORDERED that said proceeding for the taking of testimony and the production of evidence begin at the office of the Securities and Exchange Commission, 1778 Pennsylvania Avenue, N.W., Washington, D.C., at such time, not less than twenty days after the date hereof, as said Edward c. Johnson shall designate by not less than ten days' notice by confirmed telegram to The North American Company and Union Electric Company of Missouri, and shall continue thereafter at such times and places in Washington, D.C., or elsewhere as said Edward c. Johnson may determine; and IT IS FURTHER ORDERED that a copy of this order be served on The North American Company and Union Electric Company of Missouri, personally or by registered mail. By the Commission. Francis P. Brassor, Secretary. (SEAL) oOo For IMMEDIATE Release Monday, May 6, 1940 SECURITIES AND EXCHANGE COMMISSION Washinjton HOLDING COMPANY ACT Release No. 2045 UNITED STATES OF AMERICA BEFORE THE SECURITIES AND EXCHANGE COMMISSION At a regular session of the Securities and Exchange Commission, held at its office in the City of Washington, D. C., on the 6th day of May, A. D., 1940. : In the Matter of : ORDER INSTITUTING THE NORTH AMERICAN COMPANY and : PROCEEDING AND UNION ELECTRIC COMPANY OF MISSOURI : DESIGNATING OFFI- CER TO TAKE Proceeding pursuant to Section 18 (a) : TESTIMONY of the Public Utility Holding Company : Act of 1935 : : I The Commission's public official files disclose that: (a) Within the meaning of the Public Utility Holding Company Act of 1935: The North American Company is a holding company: North American Edison Company was, until dissolved on February 8, 1939, a holding company and a subsidiary company of The North American Company: Union Electric Company of Missouri is a holding company and is itself a subsidiary company of The North American Company, and was, until February e, 1939, a subsidiary company of North American Edison Company: St. Louis County Gas Company is a subsidiary company of The North American Company and an associate company of Union Electric Company of Missouri: and (b) The North American Company, North American Edison Company and Union Electric Company of Missouri registered as holding com- panjes and filed registration statements, pursuant to Section 5 of the Public Utility Holding Company Act of 1933 and the rules and regulations prescribed by the Commission thereunder: The North American Company and North American Edison Company filed supplements to their registration statements, pursuant to Section 14 of said Act and the rules and regulations prescribed by the Commission there- under; and all of said companies, at various times, filed with the Commission applications, declarations, reports and other documents pursuent to various sections of said Act and the rules and regula- tions prescribed by the Commission thereunder; and - 2 - Release No. 2045 II It appears that: (a) Said registration statements and supplements thereto and said applications, declarations, reports and documents filed with the Commission by The North American Company and by North American Edison Company contain information as to the history, business, capital structure, management, operations, and financial condition of said companies and their subsidiary companies, including St. Louis County Gas Company and Union Electric Company of Missouri and its subsidiary companies, which information is based, in part, upon books, records and accounts nade and kept by St. Louis County Gas Company and by Union Electric Company of Missouri and by its subsid- lary companies: and (b) Said registration statement and said applications, declar- ations, reports and documents filed with the Commission by Union Electric Company of Missouri contain information as to the history, business, capital structure, management, operations, and financial condition of said company and its subsidiary companies, which infor- mation is based, in part, upon books, records and accounts made and kept by Union Electric Company of Missouri and by its subsidiary com- panies; and III The Commission obtained information from various sources as to the exis- tence of certain conditions and practices with respect to St. Louis County Gas Company and Union Electric Company of Missouri and its subsidiary com- panies, and on the basis thereof Issued an order on November 9, 1938, insti- tuting an investigation into such conditions and practices, which investiga- tion has been conducted under said order and succeeding orders Issued by the Commission, including an order for investigation issued June 7. 1939, pursu- ant to the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Public Utility Holding Company Act of 1935; and IV Herbert S. French, Paul J. Cotter, and Harry C. Coles, Jr., have report- ed to the Commission evidence obtained in said investigation tending to show that for a long period of time conditions and practices of the character be- low enumerated may have existed with respect to St. Louis County Gas Company, Union Electric Company of Missouri, its subsidiary companies and their pre- decessor companies, and in view of said report it appears to the Commission to be necessary and appropriate in the public interest to determine whether: (a) Substantial sums have been disbursed by said companies to certain of the officers, attorneys and employees thereof, purportedly for designated expenses incurred by such persons, when in fact such alleged expenses were not Incurred by such persons and the suns re- ceived by such persons were used for other purposes; such transactions are not properly reflected on the books, records and accounts of said companies; and - 3 - Release No. 2045 (b) Substantial suns have been disbursed by said companies to certain attorneys, insurance agencies, contractors, supply houses and others, purportedly in payment for designated goods, materials or services supplied, when in fact said suns were not disbursed in pay- ment of the goods, materials and services designated, and the sums re- ceived by such persons were used for other purposes; such transactions are not properly reflected on the books, records and accounts of said companies: and (c) Substantial sums have been received by said companies from officers, attorneys, and employees thereof, and from insurance agencies, contractors, supply houses and others, the receipts of which are not properly reflected on the books, records and accounts of said companies: and (d) Substantial contributions have been made, directly and in- directly, by and on behalf of said companies in connection with the candidacy, nomination, election and appointment of various persons to public office, and in support of political parties, and of committees and agencies thereof; such contributions are not properly reflected on the books, records and accounts of said companies; and (e) Substantial payments have been made, directly and indirectly, by and on behalf of said companies, for the purpose of influencing the opinions and conduct of persons holding public office; such pay- ments are not properly reflected on the books, records and accounts of said companies: and (f) Substantial suns have been disbursed by said companies, not in the ordinary course of business, for the personal uses of certain officers and employees thereof, for gifts to and entertainment of per- sons holding public office and others, and for the employment of de- tective agencies, so-called inspection services, audit companies, engineering companies and others; such disbursements are not properly reflected on the books, records and accounts of said companies. V IT IS ORDERED, pursuant to Section 18 (a) of the Public Utility Holding Company Act of 1935, that a proceeding be conducted to ascertain whether the conditions and practices above referred to exist or have existed, for the following purposes: (a) To determine whether any person has violated or is about to violate any provision of said Act or any rule or regulation there- under: and (b) To aid in the enforcement of the provisions of said Act, in the prescribing of rules and regulations thereunder, and in ob- taining information to serve as a basis for recommending further legislation concerning the matters to which said Act relates: IT IS PURTHER ORDERED, pursuant to Section 18 (c) of the Public Utility Holding Company Act of 1935, that for the purpose of said proceeding Edward C, Johnson, an officer of the Commission, is hereby designated to administer - 4 - Release No. 2045 oaths and affirmations, subpena witnesses, compel their attendance, take evi- dence, require the production of any books, papers, correspondence, memoranda, contracts, agreements, or other records, deemed relevant or material to the inquiry, and to perform all other duties in connection therewith authorized by law; IT IS FURTHER ORDERED that in conducting said proceeding said Edward C. Johnson shall afford The North American Company and Union Electric Company of Missouri and any other persons showing a legitimate interest in this proceed- ing the right to cross-examine witnesses summoned by counsel for the Commis- sion and to produce evidence relevant or material to the inquiry, and for this purpose paragraphs (f), (g), and (h) of Rule V of the Commission's Rules of Practice shall be applicable to the proceeding; IT IS FURTHER ORDERED that said proceeding for the taking of testimony and the production of evidence begin at the office of the Securities and Ex- change Commission, 1778 Pennsylvania Avenue, N.W., Washington, D.C., at such time, not less than twenty days after the date hereof, as said Edward C. Johnson shall designate by not less than ten days' notice by confirmed tele- gram to The North American Company and Union Electric Company of Missouri, and shall continue thereafter at such times and places in Washington, D. C., or elsewhere as said Edward C. Johnson may determine: and IT IS FURTHER ORDERED that a copy of this order be served on The North American Company and Union Electric Company of Missouri, personally or by registered mail. By the Commission. Francis P. Brassor, Secretary. (SEAL) oOo For IMMEDIATE Release Monday, May 6, 1940 SECURITIES AND EXCHANGE COMMISSION Washington SECURITIES ACT OF 1933 Release No. 2253 SECURITIES EXCHANGE ACT OF 1934 Release Ho. 2506 HOLDING COMPANY ACP Release Fo. 2045 UNITED STATES OF AMERICA REFORE THE SECURITIES AI-D EXCHANGE CORRISSION At a regular session of the Securities and Exchange Commission, held at its office in the City of washington, D.C., on the 6th day of Kay, A.D., 1940. In the Matter of : : THE NORTH AMERICAN COMPANY and : UNION ELECTRIC COMPANY OF MISSOURI : : Proceeding pursuant to Sections e (e) : and 20 (a) of the Securities Act of : 1933, as amended. : : : : In the Matter of : ORDER POR : CONSOLIDATION THE NORTH AMERICAN COMPANY and : OF PROCEEDINGS UNION ELECTRIC COMPANY OF MISSOURI : FOR STATED : PURPOSES Proceeding pursuant to Section 21 (a) : of the Securities Exchange Act of : 1934, as amended. : : In the Matter. of : : THE NORTH AMERICAN COMPANY and : UNION ELECTRIC COMPANY OF MISSOURI : : Proceeding pursuant to Section 18 (a) : of the Public Utility holding Company : Act of 1935. : The Commission now having pending before it the following related proceedings: (1) Proceeding in the matter of The North American Company and Union Electric Company of Missouri, instituted by order dated May 6th, 1940, pursuant to Sections B (e) and 20 (a) of the Securities of 1933, as amended; - 2 - (Helease No. 2253) (2) Proceeding in the matter of The North American Company and Union Electric Company of Missouri, instituted by order dated May 8th, 1940, pursuant to Section 21 (a) of the Securities Exchange Act of 1934, as amended; (3) Proceeding in the matter of The North American Company and Union Electric Company of Missouri, instituted by order dated May 6th, 1940, -pursuant to Section 18 (a) of the Public Utility Holding Company Act of 1935; and It appearing that said proceedings involve common questions of fact and that testimony and other evidence adduced in each proceeding may have a bear- ing on the matters involved in each of the other proceedings; that the persons substantially interested in each of said proceedings are the same; and that substantial saving in time and expense will result If said proceedings are consolidated for the purpose of the taking of testimony and the production of evi- dence, and are conducted as one proceeding, so that the testimony and other evidence adduced in each proceeding may stand as evidence, insofar as relevant and naterial, in each of the other proceedings; IT IS ORDERED that the three proceedings referred to above be and they hereby are consolidated for the purpose of the taking of testimony and the production of evidence. By the Commission. Francis P. Brassor, Secretary. (SEAL) oOo Frank MEMORANDUM Lile May 20, 1940 To: The President THE WHITE THE Mar 21 WHITE 855 8 REIVED HOUSE AM "40 From: Jerome N. Frank, Chairman Securities & Exchange Commission Subjects The Action of Securities Markets May 20, 1940. Stocks improved from the opening until noon in fairly active dealings. Particularly in demand were the steel and air- craft issues. Thereafter, moderate but persistent selling can- celled the price advances and industrials closed about unchanged while railroad and utility stocks were slightly improved on the day. Trading was at a reduced rate and the total reported vol- ume on the New York Stock Exchange was 1,240,000 shares. U. 8. Government bonds were firm at improved prices. Several large sales were reported from out-of-town savings banks which were well taken. It was also reported that a large insur- ance company is selling short notes and buying bonds but that the offerings of the latter being scarce make this operation difficult. High grade corporate bonds were also firm and bids improved. The medium and lower grade bonds, however, were lower and irregular. All the commodity markets improved. Wheat, corn and other grains advanced substantially; cotton was strong as well as rubber, hides and sugar. Higher quotations were recorded for the Pound Sterling, Franch Frano and particularly the Canadian dollar. In London, how- ever, securities were very weak in spite of early precautionary measures by the jobbers in widening quotations. Industrial and rail issues declined to new low levels for the year. TO: - 2 - There was a sharp decline on the Tokyo Stock Exchange. Several large sales of our securities from the Far East in recent . sessions have been reported. PSF: Frank / Filmed RECEIVED MAY ID 8 57 WHITE AM, in HOUSE CONFIDENTIAL MEMORANDUM May 9, 1940 TO: The President FROM: Jerome N. Frank, Chairman Securities and Exchange Commission Mr. Lauchlin Currie tells me that he has dis- cussed with you the idea of regional finance corpora- tions somewhat along the line suggested in the speech I made in Cleveland last month. I think you will be interested to know that I received 8. letter from Mr. Justice Brandeis today, reading as follows: "My thanks for the Cleveland address. I hope it will help in developing Regional and Equity financing." è PSF shrank it THE WHITE HOUSE Resp'y forcerded WASHINGTON CONFIDENTIAL June 13, 1940. MEMORANDUM FOR HON. SAM RAYBURN I enclose a confidential memorandum to me from Jerome Frank. I do hope that things like this can be permanently pigeonholed for this session. F. D. R.