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Confessions of the Power Trust
By
Carl D. Thompson
Secretary–The Public Ownership League of America & Associates
A Summary of the Testimony given in the Hearings of the Federal Trade Commission on
Utility Corporations Pursuant to Resolution No. 83 of the United States Senate.
Approved February 15, 1928
New York: E. P. Dutton & Co. Inc.
1932
Table of Contents
Foreword—The Monopoly Mystery Solved
Introduction—Is There a Power Trust?
Part 1—The Hearings
Chapter 1—The Investigations
Chapter 2—Confessions
Chapter 3—The Ultimate Purpose
Part 2—The Organization
Chapter 4—The Parent Structure
Chapter 5—Non-Utility Organizations
Chapter 6—Membership and Financial Support
Chapter 7—The Concentration of Control
Part 3—Financial Structure and Methods
Chapter 8—The Fight to Get the Facts
Chapter 9—Corporation Finance
Chapter 10—Intercorporate Relations
Chapter 11—Mergers
Chapter 12—The Holding Company
Chapter 13—The Holding Company
Chapter 14—Subsidiaries of the Holding Companies
Part 4—Financial Methods
Chapter 15—Overcapitalization
Chapter 16—Watered Stock
Chapter 17—Other Instances of Watered Stock
Chapter 18—The Defense of Inflations
Chapter 19—Inflations Challenged
Chapter 20—Do Inflations Affect Rates?
Chapter 21—Rates
Chapter 22—Prodigious Earnings
Chapter 23—Holding Company Earnings
Chapter 24—Utilities and the Banks
Chapter 25—Utilities and Insurance Companies
Chapter 26—Customer Ownership
Part 5—Some Typical Companies
Chapter 27—The Alabama Power Company
Chapter 28—Muscle Shoals
Chapter 29—The Insull Utilities
Chapter 30—The Foshay Company
Part 6—Propaganda Methods
Chapter 31—The Propaganda Forces
Chapter 32—Utilities and the Press
Chapter 33—The Present Trend in American Journalism
Chapter 34—Control Through Ownership
Chapter 35—Control Through Advertising
Chapter 36—Propaganda Follows the Advertising
Chapter 37—Our New Education
Chapter 38—Utilities and the Teachers
Chapter 39—Revising the Textbooks
Chapter 40—Our New School Books
Chapter 41—The Platform
Chapter 42—The Radio and Screen
Chapter 43—Civic Organizations and the Church
Chapter 44—Labor and Labor Organizations
Chapter 45—Farm and Farm Organizations
Chapter 46—Women’s Clubs and Organizations
Chapter 47—The League of Women Voters
Chapter 48—Municipal Leagues
Chapter 49—Evangelists of Power
Chapter 50—False and Misleading Statements
Part 7—The War on Public Ownership
Chapter 51—War On Municipal Ownership
Chapter 52—Municipal Ownership Cities
Chapter 53—The War on State Ownership
Chapter 54—War on the West Coast 2
Chapter 55—Washington and Oregon
Chapter 56—In Other States
Chapter 57—War on Federal Ownership
Chapter 58—The Boulder Canyon Project
Chapter 59—The Menace of the Diesel Engine
Chapter 60—The Menace of the Income Warrant
Chapter 61—The Public Ownership League of America
Chapter 62—The Appeal to Prejudice
Chapter 63—The Bolshevik Idea
Chapter 64—Power Company Socialists
Part 8—Regulation
Chapter 65—Regulatory Commissions
Chapter 66—Pinchot’s Plan for Pennsylvania
Chapter 67—The Breakdown of Regulation
Part 9—Political Activities
Chapter 68—Who Rules American and How?
Foreword—The Monopoly Mystery Solved
Till now the realm of private monopoly has been one of mystery. We have been told that it is a sort of enchanted land, shut away from the common public by barriers of necessary trade secrets, jealously guarded, and by complexities and problems beyond the ken of the ordinary citizen. But now this realm has been invaded, explored, and chartered. It stands revealed.
The Federal Trade Commission, acting under authority of a resolution of the United States Senate approved February 15, 1928, has been at work now for four years in the investigation of this subject. So far—up to August, 1932—44 volumes of this report have been published, containing over 20,000 pages and 4,972 exhibits. And more are coming, for the hearings are still going on.
The revelations brought out regarding the utility corporations in these hearings constitute, we believe, one of the most important public documents ever published by a commission of the American Government. They deal with one of the most vital and fundamental problems of our modern life. The testimony reveals facts and information, tendencies and trends regarding the most basic industries of the country little known or understood by the public, and so amazing to the ordinary citizen as to be almost unbelievable.
We have been told by the utility interests that there is no such thing as a power trust; that utility rates are reasonable and fair"a fair return upon a fair valuation"; that there is no such thing as "watered stock," "write ups," or inflation of capital stock; that earnings are moderate and modest. And in support of these contentions the courts, the press, university professors, economists, and publicists have all joined in a chorus of approval and substantiation. Only the most daring would have the temerity to question or challenge such a generally accepted view of the matter.
But the Federal Trade Commission has penetrated this jungle of mystery, this labyrinth of darkness and secrecy. Armed with the authority of the Federal Government to compel the attendance and testimony of witnesses and to subpoena important and telltale documents and records, the Commission has hewn its way through the maze and intricacies of designed confusion and the bewildering mass of material to the very heart of our modern monopoly system and laid it bare. Step by step, and piece by piece, through four years of patient, persistent, and painstaking investigation, the Commission has ferreted out the facts and made them public; so that we now have the most complete, the most illuminating, and the most authoritative picture of the whole monopoly system, its innermost methods, and its modus operandi that has ever been published. Now we know, or may know if we will but read the record, just what is going on in the utility field; just how the system works; and just what it is doing. The mystery is solved. The trade secrets of extortion are revealed. The seals of the book are broken, and the whole subject lies open before us.
However, the material in this voluminous report is a bewildering mass. It is wholly unorganized, wholly unclassified and without an index; so that in its present form it is so formidable and involved as to be quite beyond the reach of the ordinary individual and its essential facts almost inaccessible. The reading, analyzing, classifying, and indexing of this great mass of vitally important material has been a tremendous task. In this work the author has had the assistance of a number of associates who have helped in various ways, especially in reading, marking, and indexing the various volumes, so that attention could be drawn directly to the more essential facts and evidence. Among those who have assisted in this matter especial mention should be made of the following: Charles Edward Russell, noted publicist and author, has read the manuscript and has given many helpful suggestions in the preparation of the material. Rev. Dr. John A. Ryan, Director of the Department of Social Action of the National Catholic Welfare Conference; Donald Richberg, attorney, of Chicago; William H. Holly, attorney, of Chicago; Honorable S. A. Stockwell of Minneapolis, Minnesota, and Miss Grace Peter, attorney, of Chicago, have all assisted in reading and marking the various volumes. R. E. McDonnell and C. F. Lambert of the engineering firm of Burns and McDonnell of Kansas City, Missouri, have been especially helpful in reviewing the technical and engineering phases dealt with in the report, and Mr. Lambert has assisted in checking up on the various financial features, accounting, etc. Lloyd Bemis, certified public accountant of Chicago, has also checked over important financial features of the report. Many others have assisted in the detail work of indexing and otherwise preparing the material for publication.
William H. Holly, attorney, of Chicago, Chairman of the Executive Committee of The Public Ownership League of America, has read the entire manuscript and offered many helpful suggestions and criticisms which have been incorporated in the text.
But most important of all has been the help and co-operation of W. T. Rawleigh of The Rawleigh Foundation of Freeport, Illinois. The work of the preparation of the manuscript of this volume would not have been possible except for his generous contribution and public-spirited co-operation. Mr. Rawleigh has financed the many months of work required in making the careful and exhaustive study of these findings and the preparation of the manuscript. It is fitting, we believe, that we should dedicate this volume to Mr. Rawleigh in appreciation, not only of this particular contribution to the public service in America, but also in appreciation of his many other similar contributions in the field of economic research and of progressive civic action.
It is understood, of course, that although the many associates above mentioned have assisted in the preparation of this volume, the author assumes all responsibility for the work of final reading of the volumes and the selection of the material that has gone into the summary; also for the form in which the material is presented , and the comments and explanations that appear.
Other pamphlets and books have been written and published on the findings of the Federal Trade Commission. But we have felt that the facts here presented and the revelations here made are of such vital importance to the American people that a more or less complete review should be made of these proceedings than has heretofore appeared. It is important, we feel, that the publication should present as complete a picture of the methods, operations, and activities of the utility companies as possible. Moreover, the most important and significant revelations in the whole proceedings have to do with the financial methods, structure, and operations of these companies. This particular phase of the subject is at the very heart of the whole problem. It is in the financial methods and structure of the utility corporations that the interests and the destinies of our people are more vitally and powerfully affected than in any other. And, strangely enough, upon this particular phase of the subject neither the press nor the volumes so far published have given any adequate presentation or review. And so for these various reasons we have felt impelled to go forward with the publication of this volume.
We have tried to review the hearings o£ the Federal Trade Commission in an impartial manner and without bias. So far as practical we have reviewed the testimony in the very words of the witnesses themselves, using our' own words and statements only so far as seemed necessary to make the connections clear and the testimony understandable. Every important fact presented in this summary and every statement made, if not directly quoted, is based upon statements of the witnesses or records presented and, so far as practical or where deemed important, reference is made to the volume and page of the hearings where the original testimony may be found.
Thus with this great mass of bewildering testimony sifted until the essential matter stands out; with the material organized and classified under chapter heads; with every important statement based upon actual testimony given, and references to all important statements made; and, finally, with a carefully prepared index covering the entire subject matter, we have endeavored to make this volume an essentially complete and an especially usable summary and review of these amazing revelations.
The hearings are still going on. Other volumes and possibly other investigations will appear. It is the intention of those of us who have worked in the preparation of this volume to follow up these further reports as they appear, and should additional facts and information of an essential nature be developed by these later and further hearings, we shall undertake to publish a supplemental volume to cover these reports. Whether this is done or not will depend upon what the later investigations develop.
All italics used in quoting from the text of the hearings are our own, and are used freely in order to bring out more clearly the important points presented.
Introduction—Is There a Power Trust?
Senator George W. Norris of Nebraska, Senator Thomas J. Walsh of Montana, Governor Gifford Pinchot of Pennsylvania, and others say there is. The representatives of the utility corporations say that there is not and that the power trust is a myth.
In an address to the United States Senate on January 2, 1925, Senator Norris had this to say:
“I have been dumbfounded and amazed, and the country will be dumbfounded and amazed when it learns that practically. everything in the electrical world is controlled either directly or indirectly by some part of this gigantic trust. It controls from one end of the country to the other the generation and distribution of electricity by water power and by other means, and the manufacture and sale of electrical appliances, running all the way from a little electric bulb in the house lamp to the gigantic generator that will handle without trembling from 30,000 to 60,000 horse power. A gigantic trust that has fastened its fangs upon the people of the United States from the Atlantic to the Pacific and from the Great Lakes to the Gulf.” [Congressional Record, January 2, 1925, 68th Congress, 2nd Session, pp. 1101-1107. See also same record for February 9, 1925, p. 3382.]
About the same time Governor Gifford Pinchot submitted his report to the State Legislature of Pennsylvania on "Giant Power," in which he said:
“Nothing like this gigantic monopoly has ever appeared in the history of the world. Nothing has ever been imagined before that even remotely approaches it in the thorough-going, intimate, unceasing control it may exercise over the daily life of every human being within the web if its wires. It is immeasurably the greatest industrial fact of our time. If uncontrolled, it will be a plague without previous example. If effectively controlled in the public interest, it can be made incomparably the greatest material blessing in human history?” [“Giant Power Survey” report to State Legislature of Pennsylvania, February, 1925, pp. X-XII, Harrisburg, Pa.]
On the other hand, representatives of the utility corporations insist that there is no power trust and that the investigations that have been made prove their contentions. According to the witnesses, speakers, and writers of the utility corporations, there is no such thing as a power trust. The power trust is a myth. [Exh. Pt. 3, p. 290.] A typical example of the position taken by the utilities on this point is an address delivered by Martin J. Insull, President of the Middle West Utilities Company. [An address delivered as guest speaker of Halsey, Stuart and Company over the coast-to-coast network of the National Broadcasting Company and associated stations February 11, 1931, and printed and widely distributed by Halsey, Stuart and Company and others.] Mr. Insull says:
“Our government spent several years and much of our money in arriving at the same conclusion”—
namely, that there is no trust.”
“The power trust must, therefore, remain a myth until the politicians, professors, and editors who talk about it so glibly condescend to give us more definite information about it.”
This controversy went on in Congress and out until finally a joint resolution was passed and approved on February 9, 1925, providing for an investigation of the utility corporations by the Federal Trade Commission. [Joint Resolution No. 329, of the 68th Congress, 2nd Session, 1925.] The Commission submitted its report on February 21, 1927, as Senate Document No. 213. This report preceded the publication of the present investigation, with which we are chiefly concerned in this book, by over a year and we refer to it frequently as "the earlier report of the Federal Trade Commission."
Senator Walsh’s Resolution
Senator Thomas J. Walsh of Montana, Senator George W. Norris of Nebraska, and other senators were not altogether satisfied with the findings of this earlier report of the Federal Trade Commission and pressed for an independent investigation by a committee of the United States Senate.
In an address in the Senate in 1927, 69th Session, on the "Capitalization of Public Utilities," Senator Walsh discussed the growth of the numerous utility companies, and the development of the holding companies, together with the issuing of various kinds of securities "offered to the investing public in sums staggering in amount." The experience of the long-suffering public, he said, had led the people to surmise that these securities were often "acquired at inflated values, affording an unsafe basis for the securities issued against them, or that the rates exacted of consumers from which interest and dividends must be met are unwarrantedly high." [Quoted from The public Pays, by Ernest Gruening, pp. 3-4, Vanguard Press, New York, 1931.]
Pursuant to this line of thought, Senator Walsh introduced a resolution providing for an investigation to be made by a committee of five senators. The resolution was not acted upon at that session and he introduced a similar resolution in the first session of the following Congress.
Stubborn Resistance
When this resolution by Senator Walsh was introduced providing for an independent investigation by a Senate committee, a very determined opposition up at once. Open opposition to defeat it entirely was obviously impolitic, so efforts were made to sidetrack it. Senator George H. Moses of New Hampshire moved to refer the matter to the Senate Committee on Interstate Commerce and the motion carried by a narrow margin. Friend and foe alike assumed that there the matter would be buried. But very much to the surprise of both, the committee reported on the resolution recommending unanimously that it pass.
Failing in the effort to bury the resolution in committee, the next move of the opposition was to try to amend it so that the investigation should not be made by a Senate committee but by the Federal Trade Commission, which it was believed would be more friendly. An amendment to this effect was introduced by Senator Walter F. George of Georgia who later admitted that he believed that no investigation whatever was needed. [The Public Pays, By Gruening, p. 7.]
And then the battle began. There was a hurried call to the utility forces in every direction and a hurrying and scurrying of their representatives to Washington to appear in opposition to the Walsh resolution and in favor of the George amendment to have the investigation shifted to the Federal Trade Commission. What Senator Walsh described as "the most formidable lobby ever brought together, in my time at least, for fifteen years, representing capital to the amount of nearly $10,000,000,000, and representing what? The general public, the consumers of electric energy, and the purchasers of securities that are put out by these companies? Not at all; but representing the companies to be investigated." [The Public Pays, Gruening, p. 7.]
And the utilities won. At least, they got what they were contending for. The investigation went to the Federal Trade Commission.
It is the findings of this Commission and a summary of the evidence there presented that we review in the subsequent chapters of this volume.
Confessions of the Power Trust
Part 1—The Hearings
Chapter 1—The Investigations
What the Senate and the Country Wanted to Know
For ten years or more the thoughtful people in this country have been watching with growing concern developments in the utility field-especially in the electric power part of the field. For most of that time such men in the United States Congress as Senators George W. Norris, Thomas J. Walsh, Clarence C. Dill, R. B. Howell, Robert M. LaFollette, Burton K. Wheeler, have been demanding and insisting on finding out the facts in regard to this matter. And what they wanted to know and what they insisted that the country wanted to know was the basic, essential facts and especially the facts regarding the economic and financial operations of the utility companies.
Financial Structure and Methods Fundamental
Senator Walsh opened the long fight for the investigation with a discussion of "The Capitalization of Public Utilities." To him this was the heart of the whole question. Later, he said:
“The purpose of the proposed investigation is to protect two classes of our citizens: First, the 17,000,000 of householders who pay for electric lighting; and, second, the great body of our people who are now putting their savings into the securities of these corporations.” [The Public Pays, p. 5, Gruening.]
And Senator David I. Walsh of Massachusetts, emphasizing the same thought, declared:
“The underlying question here is the financial structure of these utility corporations,
and that he considered it
“A public and political question of the highest, if not of supreme, importance in America today.” [The Public Pays, Gruening, p. 8.]
They wanted to know, of course, to what extent the control of electric power utilities had been concentrated or was being concentrated into the hands of a few-but they knew that the question of the financial structure and methods of the utility corporations would reveal that. They wanted to know, of course, the extent to which these utilities had exercised their force and influence in molding public opinion in the press and in the schools, universities, and otherwise; and to what extent they had used their influence and power in affecting the political affairs of the country. But, above all, they wanted to know the financial structure, methods, and operations of these companies. And these facts, as we shall see, have been the most obscured, the most closely guarded, and the most difficult to obtain.
What the Earlier Investigation Revealed
As stated above, the utilities contend that the earlier investigation made by the Federal Trade Commission showed that there was no power trust and they felt that this report gave them, more or less, a clean bill of health. On the other side those who were pressing for an independent investigation also felt that the report was not entirely satisfactory. But let us see what this earlier report reveals.
This first report of the Federal Trade Commission was submitted to the president of the Senate under date of February 21, 1927, and covered the situation as it existed prior to December 30, 1924. The present investigation of the Federal Trade Commission, which is our chief concern in this volume, is quite a different matter. It takes up the subject much more exhaustively, and while it covers to some extent the earlier period, it deals more particularly with the situation following the year 1924 and follows the development during five or six years following the period covered by the previous report. Even so, it may be well to recall the exact words of the earlier report of the Federal Trade Commission.
In the conclusion of the earlier report covering the period previous to 1924 the Commission says: [Electric Power Industry, Control of Power Companies, Document No. 213, 69th Congress, 2nd Session, p. 50.]
“From the facts presented above regarding the electric power industry, it is obvious that in 1924, neither the General Electric Company nor any other single power interest, or group of clearly allied power interests, substantially monopolized or controlled the generation, transmission, and sale of electricity in the United States. In 1924, about one-eighth of the country's total generating capacity and about one-ninth of the electric energy generated was within the sphere of influence of the General Electric Company and its subsidiary, the Electric Bond and Share Company.”
Especial attention is called to the fact that in this earlier investigation the Federal Trade Commission was instructed by the resolution passed by Congress in that connection to inquire particularly into the extent of the control of the industry by the General Electric Company. For at the time this resolution was approved, it was charged in the Senate that the General Electric Company had acquired and was exercising a very extensive control over the entire power industry, either directly or indirectly through stockholders or interlocking directorates, or otherwise. And while it was true that the investigation was made somewhat more general, the main point at that time was to determine. whether this particular company or some other single power interest or group had secured or was securing a substantial monopoly in the electric industry. This, as stated above, the Federal Trade Commission found to be not the case at that time. Furthermore, the Commission went on to say that "no other single interest in 1924 dominated or controlled as large a portion of the total as the General Electric interests."
Moreover, this earlier report goes on to say that "since 1924 the General Electric Company has disposed of its direct control of the Electric Bond and Share Company and their present managements have no obvious or necessary community of interest nor the support of any known dominant group of stockholders." [Electric Power Industry, Control of Power Companies, Document No. 213, 69th Congress, 2nd Session, p. 51.]'
It is upon the above statements of the earlier report of the Federal Trade Commission, no doubt, that the representatives of the utility corporations base their claim that the Commission has found that there is no trust.
Even so, in this earlier report of the Commission a statement is made regarding the tendency that was already under way and which has moved very swiftly during the year's following 1924. In this same report, and immediately following the quotation made above, the Commission said:
“On the other hand, both the Insull and North American companies have increased their control in a marked degree over operating properties, and this is also true of several other groups. As a result of these developments. the proportion of the industry controlled by independent operating units appears to be declining in spite of the rapid growth of the industry.
“Although no substantial monopolization exists of the entire electric power industry of the country by any single interest, such monopolization within certain states and lesser territorial areas is already a fact, growing out of the increase in size of the groups of operating units, and modern operating systems now tend to transcend state boundaries, thereby creating larger and larger areas in which there is a substantial monopoly in the furnishing of the service.” [Electric Power Industry, Control of Power Companies, Document No. 213, 69th Congress, 2nd Session, p. 51.]
Moreover, this earlier report, as we shall see in subsequent chapters, develops some very interesting and significant information regarding the financial structure and methods of these utility corporations which, as all agree, constitutes the very heart of the whole subject. We shall not attempt to review this phase of the findings of this earlier report, as it will be dealt with in subsequent chapters.
From the above it will appear that even this earlier report of the Federal Trade Commission brought out many vital and important matters regarding this utility question. We shall now turn to the volumes of the present report of the Federal Trade Commission which covers the period subsequent to 1924 and in the following chapters will present the findings of this more recent investigation.
Chapter 2—Confessions
The System Reveals Itself
The evidence submitted in this volume regarding the private utility companies is made up almost exclusively from the testimony of the representatives, officials, and employees of the utility companies themselves. In this sense the whole volume constitutes in a very real sense the confessions of the utility companies. But of all of the confessions made by these various representatives throughout the hearings, there is probably none more sweeping, more significant, or more astonishing than that of J. B. Sheridan, who was for many years the director of the Missouri Committee on Public Utility Information. [Exh. Pts. 5 and 6 pp. 99-634.]
Mr. Sheridan, according to the evidence submitted, was one of the most aggressive, one of the most effective, and altogether faithful of the men in the active work of the utility companies. It would seem from the evidence that at times he was over-zealous in his work and his devotion to the tasks that he had undertaken in behalf of the companies. He was evidently thoroughly informed upon every phase of the subject and familiar with the inside workings of the whole organization. A more competent witness, therefore, could hardly have been called to the stand. We shall have occasion to refer to his work incidentally in other chapters, but here we shall present some of his intimate personal and confidential communications that will bare not only the innermost soul of the man, but the innermost workings of the private utility companies.
J. B. Sheridan, the Star Confessor
In Exhibit 2968 of the Commission's reports [Exh. Pts. 5 & 6, pp. 306-7.] will be found a letter of this Mr. J. B. Sheridan which was taken from the files of the Missouri Committee on Public Utility Information. It was marked "Personal and Confidential," dated August 12, 1927, and addressed to Mr. Thorne Browne of the Middle West Division of the National Electric Light Association at Lincoln, Nebraska. This astonishing letter reads as follows:
“What can we do when the financiers will inflate, overcapitalize, sell securities based on blue sky or hot air, and rates must be kept up to pay returns on said blue sky and hot air?
“The best public-relations stuff in the world is a nice little reduction of rates. Do we get it? We do not. I know places where I believe a 13-cent top rate should be 8 cents.
Municipal Plant Does Better
“A municipally owned plant, city of 8,000, pays all indebtedness on plant without recourse to tax fund, lights white way, streets. etc., without getting money therefor, but it is charged on the books, and has a top rate of 8 cents per kilowatt hour, 4 cents power; B, 50 miles away from A, 8,000 population, better industrial town than A, better power load, exacts a top rate of 15 cents per kilowatt hour, 8 cents for power.
“Reconcile these, if you can. I can't. I don't pretend to. There are no holes to be found in the municipal plant at A. As I see it there is nothing inherently sacred in private or public ownership. It all depends on which works out the best for the public. We talk a lot about what private ownership has done. Yet many municipal plants were built because no private parties would build them.
“If cities and states own and operate highways, schools, streets, sewers, water supply, why not electric and gas plants?
“To be logical, private ownership should at least have designed means to supply water.
“I know places where public schools are anathema to the people, holding with private schools.
“I believe in private initiative, but I don't believe in subsidizing it 3 to 6 cents per kilowatt hour. The privately owned industry should be ashamed of itself to permit a municipally owned plant, operated on the square, to undersell it 4 to 6 to 7 cents per kilowatt hour. Don't say taxes? Taxes are less than $0.0023 per kilowatt hour in this state.”
Huge Profits for Bankers—Increased Rates for Customers
“Mr. Browne, the bankers in the electrical industry, do not appreciate what a fat thing they have had in the past seven years. They do not appreciate the enormous value of the monopoly feature. They do not appreciate that electric light and power properties are not loaded dice to be employed in a craps game in which investors and the public are injured. Until they appreciate and practice these things, I greatly fear that neither you nor I nor anyone else can help them very much.
“Things were lively in this state until February, 1927. Then an unpopular railway company demands a huge valuation and increase of rates. Another company gets $13,000,000 added to its value and publicly promises not to ask for increase of rates. Three months later this company petitions for a "readjustment of rates" which in effect increases slightly the rates of 155,000 of 200,000 customers, then the controlling group sells out with a profit of from $12,000,000 to $14,000,000 on 60 per cent of the small issue of common stock.
“Huge profits for the bankers, increase in rates for customers.
“This was an ideal state for public utilities. What it will be in the future, I do not assume to forecast. No doubt 90-per cent of the business in the state is honest and rates correct. But the 10 per cent smears the 90 per cent.
“Two years ago in Chicago, Davis and I asked that the industry declare itself on speculation. The hired publicity men had a fit. They'd lose their precious jobs. A year later Jim Davidson did say something against speculation before the electrical board of trade, St. Louis, but when I asked him to repeat for publication he declined. Aylesworth said something. Sam Insull said something about it. But no one drove it home.
“Unless the industry is honest and on the level, it will kill itself. . Ninety per cent of it is honest enough. It must be 100 per cent honest. And it must come to recognize that public utilities are not private dice, or playing cards, or chips in a poker game, but public trusts to be administered carefully, cautiously, economically, with the interests of investors in fixed securities and public, which are identical, coming before profits on common stock or upon inflation of securities.
“What's the remedy? Why, hang the offenders high as Haman upon the gibbet of publicity. Tell the world what they are doing. Admit your own sins and repent.
“Most people will say that I am a damn fool for this, but I don't believe that you will.”
Sheridan’s Change of Heart
The letter quoted above is not the only indication of a realization of the nature of the work that the private utility companies were doing, nor the only confession that Mr. Sheridan is found to have made in his personal and confidential correspondence. Exhibit No. 2721 of the Commission's hearings [Exh. Pts. 5 & 6, p. 156.] is a letter by Mr. Sheridan to John W. Colton, Editor Aera, American Electric Railway Association, New York City, under date of June 14, 1927, which reads as follows
“As far west as St. Louis the fame of a protest made by a certain remote employee of large corporations against a certain proposed plan to offset certain political movements affecting private ownership of public utilities has penetrated. May I modestly claim blood brothership with a little hammered-down Yankee who has the intestines, the intelligence, and the native honesty to make the protest as related to me?
“You are a man, John Colton, and I am glad that there is one like you left _____ _____ _____ feller; “What profiteth it for a man to gain the whole world if he loses his own soul?” “From your action, as reported to me, I take renewed courage and renewed faith that the ‘Government of the people, by the people, and for the people shall not perish from the earth:' Gratefully yours,
John Colton’s Confession
In reply to this letter Mr. Colton wrote to Mr. Sheridan under date of June 16, 1927, a reply that was a very interesting sidelight on what was going on in the hearts of these men relative to the nature of the work they were doing. Mr. Colton's letter reads as follows:
“It may be needless for me to say that I deeply appreciate your letter of June 14, but I want to say it just the same.
“They say that fools rush in where angels fear to tread. If that is true, I am probably one of the biggest fools on earth. But I can not help being what I am. If people ask me for my opinion, and I believe that it is worth while to give an opinion, I mean to give my honest one. A hypocrite is one of the poorest works of the Almighty; it isn't fair to the Almighty to ascribe to Him the creation of a hypocrite. Perhaps fear makes more hypocrites than any other cause. If that is so, pray God there will be an improvement in the process of evolution.
“Just at present I feel very much disillusioned. I am one of those simple-minded creatures who believe all men to be honest and sincere until I find them otherwise, and even then I doubt the justice of my own conclusions. When I am forced to acknowledge that men whom I believed were earnest and sincere are only cheap, lying politicians, I have a feeling of sadness that is depressing to me. I do not resent this condition so much as I deplore it.
“You are absolutely right when you ask the-question, as it was asked 2,000 years ago, "What profiteth it for a man to gain the whole world if he loses his own soul?" The man who can not look himself in the eye when he shaves himself in the morning, or who hangs his head in the solitude of his bedroom when attempting to address himself to God, is one of the poorest and most miserable creatures, though he have wealth incalculable.
“I know that all things work for good, and that seeming defeats may be merely heralds of victory—and I do not mean this in any materialistic sense.
“Here's wishing you the best of all good things and assuring you of my sincere friendship, Sincerely, [Exh. Pts. 5 & 6, p. 156.]
Free Speech the Greatest of Human Rights
Another and still deeper look into the nature of the utility situation is presented by Mr. Sheridan in his letter to Mr. Colton under date of June 24, 1927. [Idem.] He says:
“A brave man is never foolish. If a man has not courage, what has he?
“Yea-up men are a little breed. Possession of property breeds liars and cowards. The man who invented private ownership was a mortal enemy of the human race.
“Hot dog! Boy, I am strong for you. For 30 years I spoke as I felt. For 5 years I held my tongue. Now I mean to resume the greatest of human rights—that of free speech.
“Damn it all, John, they never can make hypocrites and cowards of all the people. T’ell mit 'em.
“Sincerely your friend,
“Lying, Trimming, Faking, Flag-Waving”
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