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Printed for the use of the Committee on Interstate Commerce

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INVESTIGATION OF PUBLIC UTILITY CORPORATIONS

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MONDAY, JANUARY 16, 1928

UNITED STATES SENATE,

COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C.

The committee met, pursuant to call, in room 212, Senate Office Building, at 10.30 o'clock a. m., Senator James E. Watson presiding. Present: Senators Watson (chairman), Couzens, Fess, Pine, Sackett, Metcalf, Pittman, Bruce, Wheeler, Mayfield, Hawes, and Wagner.

Present also: Senator Walsh of Montana.

The CHAIRMAN. The committee has met this morning for the purpose of hearings on the so-called Walsh resolution, which is as follows:

[S. Res. 831

Resolved, That a committee of five members of the Senate be appointed by the President, thereof, and be hereby empowered and directed to inquire into and report upon (1) the growth of the capital assets and capital liabilities of public utility corporations supplying either electrical energy in the form of power or light or both, however produced, or gas, natural or artificial, of corporations holding the stocks of such public utility corporations, and of nonpublic utility corporations owned or controlled by or affiliated with such holding companies; (2) the method of issuing, the price realized or value received, the commissions or bonuses paid or received, and other pertinent facts with respect to the various security issues of all classes of corporations herein named, including the bonds and other evidences of indebtedness thereof, as well as the stocks of the same; (3) the extent to which holding companies or their stockholders control or are financially interested in financial engineering, construction and/or management corporations, and the relation, one to the other, of the classes of corporations last named, the holding companies, and the public utility corporations; (4) the services furnished to public utility corporations by holding companies and/or their associated, affiliated, and/or subsidiary companies, the fees, commissions, bonuses, or other charges made therefor, and the earnings and expenses of such holding companies and their associated, affiliated, and/or subsidiary companies; and (5) the value or detriment to the public of holding companies owning the stock or otherwise controlling such public utility corporations immediately or remotely, with the extent of such ownership or control, and particularly what legislation, if any, should be enacted by Congress to correct any abuses that may exist in the organization or operation of such holding companies.

The committee is further empowered and directed to inquire and report whether, and to what extent, such corporations or any of the officers thereof or any one in their behalf or in behalf of any organization of which any such corporation may be a member, through the expenditure of money or through the control of the avenues of publicity, have made any and what effort te influence or control public opinion on account of municipal or public ownership of the means by which power is developed and electrical energy is generated and distributed, or to influence or control elections.

That the said committee is hereby authorized to sit and perform its duties at such times and places as it deems necessary or proper, and to require the attendance of witnesses by subpoenas or otherwise; to require the production of books, papers, and documents; and to employ counsel, experts, and other

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assistants, and stenographers, at a cost not exceeding $1.25 per printed page. The chairman of the committee, or any member thereof, may administer oaths to witnesses and sign subpoenas for witnesses; and every person duly summoned before said committee, or any subcommittee thereof, who refuses or fails to obey the process of said committee, or appears and refuses to answer questions pertinent to said investigation, shall be punished as prescribed by law. The expenses of said investigation shall be paid from the contingent fund of the Senate on vouchers of the committee or subcommittee, signed by the chairman and approved by the Committee to Audit and Control the Contingent Expenses of the Senate.

The committee or any subcommittee thereof is authorized to sit during the sessions or the recesses of the Senate, and until otherwise ordered by the Senate. The committee has formulated no program of any kind, nor have I as chairman. I assume that inasmuch as Senator Walsh of Montana is the author of the resolution he will want to be heard.

Senator BRUCE. What we want really is a prima facie case for an investigation.

The CHAIRMAN. Yes. And we have had a little talk about the jurisdiction of the committee, and its authority. We should like to hear Senator Walsh on that. Our idea, so far as we have discussed it, is Senator Walsh, that it is the duty of this committee, inasmuch as the Senate referred the resolution to the committee, to consider the advisability, necessity and expense of such an investigation. We should like to hear you on the whole subject.

STATEMENT OF HON. THOMAS J. WALSH, A SENATOR IN THE CONGRESS OF THE UNITED STATES FROM MONTANA

Senator WALSH of Montana. The chairman has in a general way indicated my own ideas as to the scope of the work of this particular committee. But with respect to the advisability of the conduct of such an investigation, I submitted in connection with the resolution when it was offered in the Senate comments of quite a number of newspapers and journals urging the necessity of the investigation, and likewise an editorial from the Electrical World indicating that an investigation of the whole subject is exceedingly desirable but not a political investigation, an investigation intended to develop the actual condition of affairs, that it would be exceedingly helpful to have that kind of an investigation, but that they did not want a political investigation.

The CHAIRMAN. May I interrupt you long enough to say that we invited nobody to appear here before the committee this morning, neither you nor anybody else. Notice went out to the members of the committee and through the newspapers, and the doors were thrown open so that anybody might come who wants to.

Senator WALSH of Montana. I assumed that that was the situation. Senator BRUCE. But we should particularly like to hear Senator Walsh of Montana. He has made a study of the matter.

The CHAIRMAN. Certainly, and I was assuming that he would be on hand, as he is.

Senator WALSH of Montana. Since then, as theretofore, letters in great number have come to me from people insisting that I urge the passage of the resolution and the entering upon an investigation.

A clipping from the Brooklyn Eagle was sent to me a few days ago containing an interview with Owen Young, of the General Electric Co., advocating the adoption of the resolution, and saying that

so far as his company was concerned it was perfectly satisfactory to them.

The Washington Star a few days ago, Wednesday, January 11, contained extracts from papers throughout the Union in relation to the subject, as they quite frequently do when any particular subject is engaging public attention. The Star itself never has any views of its own about any public question, but it is convenient at times as a means of finding out what is thought about things elsewhere. Its summary of newspaper commendation is headed "Prospect of power probe wins press commendation." I shall not read the entire article, but just a paragraph, as follows:

Indications that one way or another the Senate will authorize an investigation of power production and control as proposed by Senator Walsh of Montana are pleasing to the press, which reflects a public feeling that the Nation should know more about what is going on in the development of the utilities upon which its life has come to depend.

Then it goes on to say:

Of the announcement by utility spokesmen that they will not oppose an inquiry the Buffalo News says:

"The utility companies could not afford to fight against an inquiry without doing injury to themselves-without creating public distrust and so inviting the same regulatory measures that have been adopted with respect to the railroads. If the investigation be restricted to reasonable limits, there can be no possible objection to it."

Then there are other extracts that are of a similar tenor, and I submit them.

The CHAIRMAN. Would you like to have the entire article made a part of the record?

Senator WALSH of Montana. Yes; I should like to have the whole thing copied into the record.

The CHAIRMAN. That will be done.

(The summary referred to as appearing in the Washington Star of January 11, 1928, is here made a part of the record, as follows:)

PROSPECT OF POWER PROBE WINS PRESS COMMENDATION

Indications that one way or another the Senate will authorize an investigation of power production and control as proposed by Senator Walsh of Montana are pleasing to the press, which reflects a public feeling that the Nation should know more about what is going on in the development of the utilities upon which its life has come to depend.

Of the announcement by utility spokesmen that they will not oppose an inquiry, the Buffalo News says: "The utility companies could not afford to fight against an inquiry without doing injury to themselves-without creating public distrust and so inviting the same regulatory measures that have been adopted with respect to the railroads. If the investigation be restricted to reasonable limits, there can be no possible objection to it."

The importance of power to the Nation is emphasized by the Milwaukee Journal, with the statement: "To-day, living nearly everywhere is related to electric energy 24 hours of the day. To-morrow, electric power will dominate the life of the Nation. The units controlling this power have grown bigger and bigger, the concerns more intricate. Congress will be much scolded and derided for even talking of investigating them. But Wall Street itself has given the thing impetus by questioning the structures of securities-questioning whether business in which well over a billion has been invested ought really to be in the control of those who hold much less than a tenth of that amount."

The hope that "Members of Congress are not preparing a smoke screen with their agitation about a trust, to conceal actual and specific steps disposing of the public domain," is expressed by the New York Journal of Commerce. That paper, considering the suggestion that an inquiry might wind up with discovery

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