Jasper County Democrat, Volume 14, Number 22, Rensselaer, Jasper County, 5 July 1911 — SMITH REPORTS ON STEEL TRUST [ARTICLE]

SMITH REPORTS ON STEEL TRUST

' J j Primarily for Restricting or Preventing Competition. STOCK WAS MUCH WATERED Prosecution Under Sherman Law Would Probably Be on Score of Controlling Mines and Shipping Facilities.

Washington, July 1. The reason advanced by officers of the United States Steel corporation for its crea. tion are swept aside by Herbert Knox Smith, commissioner of corporations, who holds that it was called into being primarily for the purpose of restricting or preventing competition. In his long-heralded report on the so-called steel trust, the commissioner charges further that the opportunity for reaping a huge promoter's profit was another consideration that led .to the launching of this giant corporation. Commissioner Smith finds, after aa investigation that has extended over several years, that the steel corporation when it was organized in 1901 was “heavily overcapitalized.”' The entire Issue of £508,000,000 of the common stcck, the commissioner declares, ,had no personal property hack of it and from cne-fifth to twofifths of preferred stock was likewise unprotected by tangible assets “Even granting,” says the commissioner, “that there may have been a considerable value in the intangible consideration it is reasonably clhar that at least the entire issue of common stock, except in so far as what may be termeff merger value may be considered, represented nothing but ‘water.’ ” The commissioner finds that in the years that have elapsed since the steel porporalion came into existence considerable of the “water” hr*- been squeezed out through additional investments, made partly from earnings. The pxcess of capitalization over investment at the end of last year as figured by Commissioner Smith was £281.051,222, as compared with $720,846.817” of “water” in 1901. T he report is unsparing in its condemnation of the commission paid to the syndicate which underwrote United States steel. This syndicate, he charges, got £62,500,000, of which onefifth, $12,500,000, went to J. P. Morgan & Co , as syndicate managers. The commissioner makes the statement that at least $150,000,000 of the steel Corporation’s stock, including £40,000,000 of the preferred stock In 1901 Went directly or indirectly, for promotion or underwriting servies The enormous amount includes, of course, the old commissions allowed promoters of earlier combinations which were finally embraced within the United Slates Steel corporation. The bureau of corporations’ report clearly indicates that if there is trouble ahead for United States steel because of the Sherman anti-trust law complications, it is likely to be on the score of the corporation’s control of ore deposits and the transportation facilities leading from the ore fields. The commissioner charges that the steel corporation controls 75 per cent of the “lake ores” on which the present steel industry of the country is based and that this advantage is materially enhanced by the corporation’s grip upon the railroad situation. He looks askance at the Great Northern ore lease, apparently viewing it as a move to prevent independent operators from reaching this supply. As regards the production of steel, the commissioner finds that the relative proportion of the business controlled by the trust has been gradually diminishing since Its organization The corporation, according to the government figures, now controls a little more than 50 per cent of the crude and finished steel production as against 60 per cent in 1901.