Mr. GIBSON. I will now go back to the question. Did you at this hearing permit an examination to be made of the stock of the North American Co. held in these companies? Mr. BRAND. Mr. Wilson Mr. GIBSON. You did or did not, which way was it? Mr. BRAND. Now, I do not think that I can answer your question that way. I would like to explain exactly what happened. Mr. GIBSON. Did you go into it? Mr. BRAND. Mr. Wilson made the statement that the company would be glad to furnish us the information. We wrote to them and they answered and gave us the information. Mr. GIBSON. Without a subpœna? Mr. BRAND. Yes, sir. Mr. GIBSON. Did you get it? Mr. BRAND. Yes, sir. Mr. GIBSON. You have it in the record? Mr. BRAND. Yes, sir. Mr. GIBSON. That is what you have already stated? Mr. BRAND. Yes, sir. Mr. GIBSON. Does that record show the amount of stock owned by the directors of these various companies? Mr. BRAND. It shows the amount that is held by the North American Co. directly or by nominee. Mr. GIBSON. That is under the direct control of the North American Co.? Mr. BRAND. Yes, sir. Mr. GIBSON. I assume that they put it under control, as your answer indicates, so that they would sidestep the provisions in the La Follette Act of 1913. Mr. BRAND. The provisions of the La Follette Act of 1913 do not affect the ownership by the North American Co. of the stocks in these two companies? Mr. GIBSON. Why? Mr. BRAND. Because March 4, 1925, Congress passed a permissive merger act which removed the inhibitions of the La Follette antimerger act in so far as the acquisition of stock of the local street railway companies was concerned. Mr. GIBSON. From one company to another? Mr. BRAND. No, sir; any corporation. Mr. GIBSON. Any corporation? Mr. BRAND. Yes, sir. The law uses the words "any corporation." Mr. GIBSON. I did not have an idea that it was that far-reaching, although I have not examined the act carefully. Mr. BRAND. If you like, I will read that one section. Mr. GIBSON. I think I have read it already, but I have no objection to its being read again. Mr. BRAND. I call attention to the fact that it says "in so far as they affect the acquisition by any corporation of the stocks or bonds of any of the corporations referred to in the foregoing section." Mr. GIBSON. I want to ask you some questions along that same line a little later, Colonel Brand, and maybe you can help Mr. Noonan out here. Before I go on with that I want to take the time 101738-28-15 to read into the record now in reference to the warnings that I mentioned before, this brief statement: Likewise, from the State public utility commissions there are coming warnings against speculation in the utility field. Then it refers to the Oregon commission and the action taken by the Massachusetts department of public utilities and others. Mr. GIBSON. How much stock do the directors of the Washington Railway & Electric Co. hold now? Mr. BRAND. The Washington Railway & Electric Co. in the North American? Mr. GIBSON. Well, yes; including all. Mr. BRAND. I would have to refer to the stockholders' list in order to get it. Mr. GIBSON. You could not look that up directly? It will take some time? Mr. BRAND. Yes. Mr. GIBSON. We will take the time. Mr. BRAND. I can say that Mr. Wilson, who is a director, owns no stock. Mr. GIBSON. He is a director of the North American? Mr. BRAND. Yes, sir. Mr. GIBSON. We have but a minute more, and I do not want to take time now. Mr. BRAND. I can prepare a statement on that for you from the list of the stockholders as of the first of the year. Mr. GIBSON. That will be better. Mr. BRAND. Yes, sir. Mr. GIBSON. Just this point: Mr. Noonan attempted to bring out the point that the North American might profit more than it had already profited through its control of these companies. Now, I assume from his statement that he gets at it in this way that the statement which I have read into the record shows the net operating revenues to be $5,422,465. Mr. BRAND. The net operating revenue of what? Mr. GIBSON. The Potomac Electric Power Co. remains in status quo; that is, is still remains as a power company and, of course, as we understand it, does not go into the merger. Have you looked into the situation and the practices of the North American Co. in regard to pyramiding the stock? Mr. BRAND. No, sir. Mr. GIBSON. Is there anything in this Do Mr. BRAND. I do not exactly know that I get what you mean. you mean, do they buy stock in the market dealings, pyramid the stock, or what? Mr. GIBSON. No. Take this illustration: Suppose the North American says this, "Here we have a property. Our stock represents a property paying an income of, we will assume for the purpose of bringing out the point, $5,000,000 a year." Is there any reason why the North American can not issue stock for $80,000,000 to cover that? Mr. BRAND. Why, the North American Co. can. Mr. BRAND. Of course, we have no control over the North American, but none of these local companies can issue any stock dividends. Mr. GIBSON. I understand that. But I am just touching-not pulling the curtain very far; but touching on the possibility of what the North American may do with its control. It has already appeared they have cleaned up something like $20,000,000. Mr. BRAND. It looks like Mr. Noonan has made his along with it. Mr. GIBSON. Mr. Noonan's point was that they still might find a way of making a profit of $17,000,000 more. He has not made it very clear, but I assume that is what he is driving at. Mr. BRAND. That is based on their average purchase price and the present market value. Mr. GIBSON. That is the $20,000,000? Mr. BRAND. I assume it is; and if you took Mr. Noonan's stock you might find his average purchase price is lower than that of the North American and that his profit is more per share than theirs. Mr. GIBSON. I understand that, of course. But his complaint is that you are taking away the physical property back of his stock and substituting something else. Mr. BRAND. I did not get exactly what Mr. Noonan's complaint was. But I can not see that it makes any difference myself whether it is represented by physical property or stock. Mr. NOONAN. May I say something? Mr. GIBSON. That is all, Colonel, now. I will have to think this out myself. Mr. NOONAN. As I understand it, Mr. Chairman, it is that the new deal or company will be organized under the laws of one of the States, like Delaware, a holding company, and that the District of Columbia Mr. GIBSON. No; it has to be organized under the laws of this District. Mr. NOONAN. I understand there was an amendment he spoke. about; he spoke about an amendment of these power companies. Mr. GIBSON. No. Mr. NOONAN. Which would permit them to go ahead and organize under the laws of Delaware, and if they do there is no comeback at all. It is simply kiss good-by. Mr. BRAND. I do not understand what Mr. Noonan is referring to. Mr. GIBSON. He is assuming this new merged company would organize under the laws of Delaware, but it has to be organized under the laws of the District of Columbia. Mr. NOONAN. He speaks of an amendment which would divorce the power company from the other. Mr. BRAND. I spoke of no such amendment. Mr. NOONAN. I read it awhile ago. Mr. MCLEOD (presiding). Mr. Noonan, did you say there are 65,000 shares of stock issued? Mr. NOONAN. No, sir; there are 150,000, both common and preferred-65,000 common and 85,000 preferred to-day. Mr. MCLEOD. Sixty five common? Mr. NOONAN. Sixty five common and 85,000 preferred. Mr. MCLEOD. That would bring the appraised value of the company up to $500,000,000 instead of $50,000,000? Mr. NOONAN. Yes, sir; I believe it is to-day, if examined-if the President would appoint some one to go down and examine the books and go over it. Mr. MCLEOD. In your opinion the appraised value is low? Mr. NOONAN. I think it is; yes. I have just a word more. I am informed that there has been an effort to make some reflection upon my standing, and I would like to give a few names as reference as to who I am. I know I am a stranger to all you gentlemen. Would it be all right? Mr. MCLEOD. We have to adjourn in just a couple of minutes. Mr. NOONAN. I was born in Xenia, Ohio, and can refer to my school friend William Howard, now an attorney, and to Bob Kingsbury, who is a director in a bank. In Dayton, Ohio, I can refer you to Hon. James M. Cox, my friend from youth. And further I want to give the name of the present Judge E. M. Hurley, who is presiding judge in Cincinnati, and also Charles Boecklet, editor of the Cincinnati Inquirer, and Ed. Steinborn, editor of the Cincinnati Times-Star. And in Covington I give the name of Judge Harbison, former law partner with Governor Goble, and I believe a judge for 20 years; and also John Rich. In this city I would like to give as reference the American Security & Trust Co., the Washington Loan & Trust Co., the Commercial National Bank, the Merchants Trust Co., the Second National Bank, and the Washington Savings Bank as to my character. I would like to just say, gentlemen, one word more: I hope that the committee before they do anything definitely will ask Mr. Humphreys, chairman of the Federal Trade Commission, to come before them; that they will send for Moody's and investigate as to the financial standing and methods of the North American, and that they will have an examination and ask the President to make an examination of the Washington Railway & Electric Co., so that he can definitely determine what it is worth. I do not want a cent more than it is worth, nor anyone else. May I just say one more word? I want to ask you permit me to file this brief, and I will have more printed. Mr. MCLEOD. Do you want to submit it in the record? Mr. NOONAN. Yes, sir. Mr. MCLEOD. Just what is the brief? Mr. NOONAN. It is about some things in the record. if you will Mr. GIBSON. Mr. Chairman, I suggest you look it over. (Thereupon, at 11.58 o'clock a. m., the further hearing of this subject matter adjourned until May 3, 1928.) HOUSE OF REPRESENTATIVES, COMMITTEE ON THE DISTRICT OF COLUMBIA, Thursday, May 3, 1928. The committee met at 10.30 o'clock a. m., Hon. Frederick N. Zihlman (chairman) presiding. The CHAIRMAN. The committee will be in order. Mr. Clayton will be the witness for the committee this morning. Stand up and be sworn. TESTIMONY OF WILLIAM MCK. CLAYTON, CHAIRMAN, PUBLIC UTILITIES COMMITTEE, FEDERATION OF CITIZENS' ASSOCIATIONS (The witness was duly sworn by the chairman.) Mr. REID. I would like to ask, Mr. Chairman, whether or not this hearing can be concluded within the time set in the motion. The CHAIRMAN. I will state, Mr. Reid, that the only requests for hearing the chair has are these: The president and secretary of the chamber of commerce, who state they do not want much time; the chairman of the committee on public utilities of the board of trade, Mr. Jesse C. Adkins, and Mr. Cottrell, the secretary of that organization, wish to make very brief statements; Mr. Dickman, chairman of the legislative committee of the Central Labor Union, desires a hearing, and also the secretary of that organization; the parent-teachers association of the District of Columbia has asked for 10 minutes to speak in behalf of half fares for the school children. Those are the only requests for hearings. Mr. CLAYTON. Mr. Chairman, I have a communication, for what it is worth, from the Federal Employees Union, from Mr. Newman, of their committee, wishing to have at least 5 or 10 minutes. Then there are several other organizations who, I am sure, feel they would like to and expect to be heard, but I do not know just what their request is. Mr. REID. Can we ask the Chair to notify every one interested to send their names in time so that they may be noted. May I also ask when will the committee meet next time? The CHAIRMAN. Well, the Chair is of the opinion that the committee would not meet this afternoon, but meet to-morrow morning. Mr. REED. And, further, is the Chair undertaking to get a legal opinion or somebody's legal idea of what the authority of this committee is beyond the direct wording of the act of 1925, and when we might have the benefit of that opinion? The CHAIRMAN. That has been taken up. I have not received any opinion yet. I will telephone the Corporation Counsel and also the counsel for the Public Utilities Commission and hurry it up, if possible. All right, Mr. Clayton. Mr. CLAYTON. Mr. Chairman and members of the committee, I had prepared a written statement but which, after consideration, I decided not to present as a written statement. I am open to questioning by the members of the committee. However, there is a preliminary statement that I think is proper to be offered at this time, but during the presentation of it I would welcome, along the lines of |