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Mr. Morgan controlled and upon which he was to give us a mortgage . bond, à that is all there was to it.

Mr. CocKRAN. All there was to it, perhaps, so far as you were concerned, but a little more, I think, so far as the public was concerned. I said, Mr. Schwab, at least I asked you if there had not been an announcement by the Carnegie company that it was going into the making of tubes?

Mr. ScHwab. It was published in the newspapers that it was going into the making of tubes, because we were.

Mr. CockRAN. That is a fact?

Mr. Schwab. Yes.

Mr. CockRAN. And you purchased the property at Conneaut for that purpose?

Mr. SCHwab. It may have been so published.

Mr. CockRAN. Following that, as I understand it, there was a consolidation of the Federal company and the American Steel and Wire Company—

Mr. ScHwab. All these companies; yes.

Mr. CockRAN. And your company?

Mr. SchwAB. Yes.

Mr. CockRAN. Now, could you tell us about what the stocks of these companies were-what the value of their property was, for instance?

Mr. Schwab. I could not give it offhand.

Mr. CockRAN. Well, about.

Mr. Schwab. I placed at that time the actual value of all these companies at approximately somewhat more than their total capitalization.

Mr. CockRAN. Yes; that was the value of the property after consolidation.

Mr. SchwAB. Yes.

Mr. CockRAN. But you would not contend that these properties were worth as much when they were either actually or potentially competitors?

* Schwab. I contend that the actual value of those properties to-day

Mr. CockRAN. I am not asking that.

Mr. Schwab. But at that time, was quite equal to the capitalization of that time, and is worth very much more to-day than its capitalization.

Mr. CockRAN. I am afraid you still have not answered.

Mr. HILL. What do you mean by capitalization—common and preferred stock both?

Mr. Schwab. And bonds, and all that.

Mr. CockrAN. Yes; there is no doubt he believed that after the consolidation. . Mr. SchwAB. I believed it before.

Mr. CockRAN. Wait a minute. Before this consolidation these various companies owned all the property that the consolidated company owns now, or owned after the consolidation?

Mr. SchwAB. Quite true.

Mr. CockRAN. Take, for instance, your own company, you remember that?

Mr. SchwAB. Yes, sir.

Mr. CockRAN. That company was capitalized at how much? Mr. Schwab. We were capitalized at that time, shortly before that, at $320,000,000. Mr. CockRAN. Three hundred and twenty million dollars? Mr. SchwAB. Yes. Mr. CockRAN. When was that capitalization made? Mr. Schwab. I will have to speak from memory. I should say probably two years before the organization of the Steel Corporation. Mr. CockRAN. It was capitalized at $320,000,000? Mr. SchwAB. One hundred and sixty million dollars in bonds and $160,000,000 of stock. Mr. CockRAN. Do you remember at what rate that was put into the steel trust? Mr. ScHwab. I can tell you approximately. Mr. CockRAN. How many bonds? Mr. ScHwab. The bonds were exchanged for bonds at par, bonds for bonds. Mr. CockrAN. Yes— Mr. Schwab. The par value of the stock was $1,000 a share. It was not $100 certificates, but $1,000 certificates; and the stock was bought at $1,500 a share. r. CockRAN. The stock was bought then at $150? Mr. Schwab. At $1,500. Mr. CockRAN. That is $1,500 for $1,000 certificate, but that would be $150? Mr. Schwab. Yes, sir. Mr. CockRAN. But putting it in the company, it was put in then at an increase of $150 for the stock, which would mean about $75,000,000? Mr. Schwab. Quite so. Mr. CockRAN. Now, Mr. Schwab, how much money capital had actually been put into that company which was capitalized at the rate of $150,000,000? Mr. Schwab. I could not tell you from memory; I don't know. Mr. CockrAN. About? Mr. SchwAB. I don't know. Mr. CockRAN. Was there ever $100,000,000 put into it? Mr. Schwab. Oh, yes. I can not give you those figures offhand. I will tell you why I can not. I do not know that any of us know. The Carnegie company was a partnership; it was not a stock comn Po. CockRAN. I understand, but that would make it easier Mr. Schwab. And when you ask how much real money was put in the Carnegie company I can only say that the earnings of the comPo, were put in; none of us had any money to put in. r. CockRAN. That is it, then; now, we have got it. Mr. Schwab. We developed the company Mr. CockRAN. Exactly. So that whatever capital, whatever property, was owned by this company was the result of profits made in the company. Mr. Schwab. Profit and increase in value of their properties. Mr. CockRAN. But that was profit? Mr. SchwAB. Certainly; certainly.

Mr. CockrAN. So that practically the whole of that property was the result—I repeat it again—of profit made in the company over and above the dividends that had been drawn out? Mr. Schwab. Well, they were very small. Mr. CockRAN. I do not think Mr. Carnegie ever suffered for the need of anything during that time. Mr. Schwab. Some of the rest of us, perhaps, did. Mr. CocKRAN. He lived in comfort, and I hope you did also. Now, Mr. Schwab, this entire property at that rate was, as you say, the result of the profits made in the business. Do you remember *Nog about the organization of the Federal Steel Company : r. SchwAB. Very little; but I may point out something else to Oll. y Mr. CockRAN. I would be delighted, Mr. Schwab. Mr. ScHwab. At the time we began leasing and acquiring ore properties, many years before the consolidation of the company, we acquired those ore properties at 10 cents a ton. Mr. CockRAN. ¥. sir. Mr. Schwab. They gradually increased, and very rapidly increased each year, so that the four hundred or five hundred or six hundred million tons of ore we had represented a very large profit as any other mining industry will that turns out well and for which there is a large demand. Do not forget that in reckoning the profits. Mr. CockRAN. Not at all. Let me see if this is a correct statement of the history of the industry at that time: The rails and the products which had been selling at $17 or $18 a ton at a profit, after the consolidation of these several minor companies into the few larger companies about 1899—I think it was in the year 1899—was followed by a jump in price to $28 a ton? Mr. SchwAB. A return in price, if you will permit me to correct Ou. y Mr. CockRAN. I beg your pardon. Mr. ScHwab. A return in price; was followed by a return in price. Mr. CockRAN. Yes; you could say with equal truth a return to a price of $60 or $70 a ton, if such a price had been fixed by the combination. Mr. Schwab. That is right. Mr. CockRAN. So, if you do not mind, I will choose the word Mr. Schwab. I do mind very much. Mr. CockRAN. Let us compromise and put it both ways. The CHAIRMAN. Let us get the facts. Mr. CockRAN. It has remained at $28 a ton since the formation of the United States Steel Corporation all the time, regardless of the cost of production. Am I right about that? Mr. Schwab. Quite correct. Mr. CockRAN. And in 1901, when there was an announcement or threat that there would be some competition through Mr. Carnegie's going into the tubing business, the Carnegie company going into it, there was another consolidation in which they were all merged in one company, and the price continued the same? Mr. Schwab. Quite correct. Mr. CockRAN. Then I understand that in these processes of consolidation your stock was taken in at $150. Now, since the orginization of the steel trust, or the steel company—I beg your pardon, the United States Steel Corporation—with which you are identified, stocks and bonds were issued, were they not, for all this stock and the bonds of your company? Mr. Schwab. And stock of our company. Mr. CockRAN. Yes, that was by preferred stock and bonds both? Mr. Schwab. No, sir. Mr. CockRAN. Correct me, then. Mr. ScHwab. How? Mr. CockRAN. How were you paid for your stock? Mr. Schwab. Mr. Carnegie and most of the partners were paid in bonds for both their bonds and stock. Some of the partners were paid in part bonds and part stock. Mr. CockRAN. ich stock? Mr. SchwAB. Preferred and common. Mr. CockRAN. Well, there was an issue of some $550,000,000 in stock, was there not? Mr. Schwab. Yes, sir. Mr. CockRAN. Will you tell me how much of that— Mr. Schwab. I can not tell you from memory. Mr. CockRAN. I have not finished. Mr. ScHwab. I know what you are going to say. Mr. CockRAN. If you do, let us state it. I was going to ask how much of that was issued for property and how much represented— well, shall we say, confidence in the future? Mr. ScHwab. Of which Ž Mr. CockRAN. The common stock of the United States Steel Company; how much of the common stock was actually issued for property? Mr. SchwAB. It was all issued for property. Mr. CockRAN. All of it? Mr. SchwAB. Yes, that is my recollection of it. It was issued in exchange for other stock which represented property. That is a technical question that you can probably best explain." Mr. CockRAN. What is that? Mr. ScHwab. You can probably best explain that, the technical part of it. The broad statement I made at that time, and I make it now. Technically I do not know how you interpret it, but the broad statement I make is that the physical value of the steel corporation's . rties at the time of its organization was equal to its capital stock. I can not make it any plainer than that. Mr. CockRAN. But the mere consolidation of these companies resulted in a very great increase in the total amount— Mr. SchwAB. Total amount of capital stock. Mr. CockRAN. And securities issued against it. Mr. Schwab. And so with every company that has been in the steel business. Mr. CockRAN. Now, now, that is the point I want to reach. The mere fact of consolidation, then, in itself, is represented by some portion, and a considerable portion, of the stock that was issued; in other words, you have capitalized the mere fact of consolidation? Mr. Schwab. You say that. I do not think so. Mr. CockRAN. I ask you. Mr. ScHwab. I don’t think so.

Mr. CoCKRAN. You say there was a very large increase of the capital on the mere consolidation. Mr. Schwab. You must appreciate that the Carnegie company, with $160,000,000 of stock at the time of the organization of the steel company, was worth a great deal more than $160,000,000, and that is why the stock was increased. Mr. CALDERHEAD. You mean you capitalized the actual property? Mr. Schwab. When we capitalized the Carnegie Steel Company we did; we were a partnership before that. Mr. CockRAN. When you issued the stock of the Carnegie company, two years before di. consolidation, you capitalized it then for all it was worth, did you not? Mr. SchwAB. We did. Mr. CockRAN. And then sold it within two years at an advance of 50 per cent? Mr. Schwab. Oh, no; we did not. We sold the stock at an ad. of 50. That would be an advance of 25 per cent on the winole— Mr. CockRAN. But 50 per cent on the stock? Mr. Schwab. But you asked me how much advance there was on the property? M. cKRAN. No; I did not. Mr. Schwab. I misunderstood you, then. Mr. CockRAN. What I wanted to get at was how much additional securities were issued against the mere fact of consolidation. Now, as far as you are concerned, your stock was increased 50 per cent? Mr. Schwab. No; it was not. Mr. CockRAN. You said so— Mr. Schwab. The stock, but not the value. Mr. FordNEY. May I interrupt for a moment? Will the witness be heard again after we adjourn at 12 o'clock? Mr. Schwab. I hope not. Can you let me off, Mr. Chairman? Mr. FordNEY. I wanted to ask a few questions, and the gentleman had gone pretty thoroughly into it. The CHAIRMAN. There are a number of things that are material that we want to ask before we get through. Mr. CockRAN. Mr. Schwab, #. you this again, now. You were given 50 per cent more stock than you had issued yourselves; that is to say, you took in payment the steel stock and bonds? Mr. Schwab. Quite right. Mr. CockrAN. At 50 per cent more than the stocks you put in. How much common stock was given for all that—how much common stock was there in that? - - Mr. SchwAB. I can not give you that for the reason—it is a matter of record. Mr. CockrAN. It is a matter of record? Mr. SchwAB. I think so. Mr. CockRAN. If it is, it will save time. Mr. Schwab. I think each of the partners in the Carnegie Company had the option to take these different things, but I can not tell you from memory which things they took. Mr. CockRAN. Tell us what the option was; what was the option each partner got?

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