or since 1923 to influence or control elections: Provided, That the elections herein referred to shall be limited to the elections of President, Vice President, and Members of the United States Senate.

The Commission is hereby further directed to report particularly whether any of the practices heretofore in this resolution stated tend to create a monopoly, or constitute violation of the Federal antitrust laws.

Colonel CHANTLAND. Senate Joint Resolution 115, of May 28, 1934, extended the investigation through the present calendar year, and I take it the members of this committee are familiar with that resolution.

In the light of events, of events afterwards, of course, it seems too bad that a resolution offered by Senator Norris 2 years earlier could not have been favorably acted upon. If the investigation had then been begun it seeins likely some of the worst results leading up to and following the crash of 1929 might have been forestalled and avoided. I say this because as the disclosures were made bad practices were amended, and obviously the speculators and the innocents both would have been less free to buy securities with no sound foundation, and some of which, even at reasonable prices, could not be expected to earn over 2 or 3 percent.

The Senate resolution consisted, broadly speaking, of two parts: One part directed an investigation into the propaganda of the utilities. As I have already said, I use the word "propaganda " because, as shown in the record of the investigation, those in the utility industry who were conducting it, realized pretty well what they were doing and they used the term.

The other part of the investigation, and that which required the most time, the largest staff, and involved the most expense, was the investigation into the financial structure and the practices of utility holding companies, with the direction to the Commission at the end of the investigation to weigh and report on the disadvantages and advantages of holding companies, and to recommend remedial legislation if that was deemed necessary. I take it that what the Senate really wanted from that part of the resolution was to find out about the soundness of the financial structure of these holding companies superimposed upon chartered operating companies that rendered service, and to find what of their practices bore down upon those operating companies, and thus upon the consumer-and, of course, the investor, for both the consumer and the investor would be affected.

While the accountants and examiners of the Economic Division were delving into the records, including accounts and minutes, contracts, and so forth, of holding companies, and preparing to write their reports, the Legal Division proceeded promptly with the propaganda phase as it was carried on by various associations and committees of the electrical and gas industries.

The first hearing was held on March 8. 1928, within a month of the passage of the resolution. Before adjourninent for the summer vacation of 1928 the entire general plan, exhibiting the machinery, the method, and the objectives, was spread upon the record.

Thereafter the hearings continued to fill in the facts so as to meet the early contention of the utilities that our disclosures were mere sporadic acts of overzealous underlings.

The CHAIRMAN. Senator Moore and Senator Donahey, this is Mr. Chantland of the Federal Trade Commission.

Senator MOORE. Thank you, Mr. Chairman.

Senator DONAHEY. Thank you.

The CHAIRMAN. Mr. Chantland, I did not catch your last state

ment.

Colonel CHANTLAND. I stated that we spread the entire picture of the propaganda machinery, with its objectives and methods, on our record before the summer vacation of 1928 so rapidly did we work on that end of it, while they were getting their economic studies prepared, and thereafter we kept filling in the record, country-wide, you understand, so as to meet the charge early made by them and repeatedly made by them, that what we were putting in the record was not a concerted campaign but merely the overzealous acts of a few underlings.

Of course, that charge was not true, and the report shows clearly that the whole thing was planned by those responsible, as I will show you gentlemen.

The CHAIRMAN. They do sometimes have overzealous underlings in these companies, all right.

Colonel CHANTLAND. Oh, yes. But in the case of the association propaganda, it was well and thoroughly directed from the top. That statement made by them was definitely disproven, and the record shows that the entire plan was devised and carried out by the responsible heads of standing committees, including the public relations committee, public policy committee, and executive committee of the National Electric Light Association.

That association represented, by their own say so, considerably more than 90 percent of the commercial industry privately owned. The CHAIRMAN. Who was the president of the association at that time?

Colonel CHANTLAND. They had a different president each year. The managing director at the time we started was Paul S. Clapp. The managing head before that was Milton H. Aylesworth. Mr. Clapp was followed by Bernard F. Weadock, who continued until they put it out of its misery and formed a new so-called "Edison Electric Institute", and he is vice president of that, with the same offices and files, but considerable changes, if you please, in their method of procedure. But very little is handed down now from the heads but most of it is now done by local committees and the companies. I think it is fair to state that. There had also been reveived the previous summer (1927), when it was learned that the Walsh resolution would be pressed for passage, the so-called "Joint Committee of National Utility Associations." This had originally come into existence and functioned as a war-time agency.

Now, again it was set up, and in addition to its headquarters in New York it opened offices with a considerable staff in Washington. The American Telephone & Telegraph Co. withdrew. The Electric Railway Association took only a nominal part. The joint committee, therefore, became largely an instrument of the electrical and gas utilities. The American Gas Association cooperated throughout, but the electrical industry bore the major part of the expenses. Later on, when the joint committee ceased operating, the National Electric Light Association took over its expense burdens also.

As I have said, this propaganda campaign was directed by the responsible heads of standing committees from the headquarters of

the association in New York. As I have already told you, in response to a question, Milton H. Aylesworth had been succeeded as managing director by Paul S. Clapp, a former employee of the Department of Commerce. The director of publicity was George F. Oxley. The National Electric Light Association itself was divided into 13 geographical divisions, no. 1 division being the Canadian division. In each geographical division were State divisions. These State subdivisions sometimes included more than a single State, I mean under one designation.

At the same time there was set up, off to one side, a series of variously styled State committees on public utility information. They were listed by the National Electric Light Association as related organizations. But the National Electric Light Association had a standing committee whose duty was to supervise and direct the activities of these various State committees, and Mr. Oxley's corre spondence is filled with items showing that he took a very active part in forming them and directing their activities.

What might be called the "rough stuff" of the local staff in propaganda matters was mostly carried on through these committeesThe CHAIRMAN (interposing). What do you mean by "rough stuff"?

Colonel CHANTLAND. Well, some of it was fairly raw. Of course, it is not of the best quality if you do not coat it over nicely. A thing would not be successful propaganda, of course, if it were 100 percent opposition. That would be too on its face. But it is best when 90 percent is going along with the tide, and an item is slipped in here and there, that will thus be given a sort of sugar coating. Senator MOORE. And sugar coating is used, is it?

Colonel CHANTLAND. Yes; it looks more natural then.
The CHAIRMAN. You may proceed.

Colonel CHANTLAND. It looks almost as if these committees were set off to one side so that the association could disavow them when it suited their purpose. In fact, such a disavowal was at one time attempted. When one president of the association suggested, about their labors, that each tub must stand on its own bottom, they tried to step out of the picture.

Now, I want to pass on to the expenditures so that you can see the size of these big budgets of the N. E. L. A., and whenever I use the term "N. E. L. A.", of course I refer to the National Electric Light Association. As we report in part 71-A, page 27, the budgets of the N. E. L. A. exceeded a million dollars a year.

And, by the way, I might as well stop here to tell the members of the committee that your clerk has received a sufficient number of copies for the use of the committee, of certain Federal Trade Commissión documents that I think you will find valuable if you have time to give some study to this matter.

Part 73-A includes chapters 12, 13, and 14, of the Commission's final report to date, on the electric light utilities, and some small mention of gas on which we have just made a good start. The legal appendix attached are legal studies on a number of propositions that are pertinent to the proposed legislation, and will answer a number of questions that may arise repeatedly in the hearings, as they arose before the House committeee.

If you will turn to the table of contents of part 73-A, if the members of the committee have part 73-A before you, you will see the title of these seven appendixes. And I will refer to some of them more definitely as I go on with my statement. Chapter 12 of this final report, 73-A, is a survey of State laws and regulations regarding utilities and their holding companies. And, by the way, that is in summarized form, and somewhat states conclusions based on a much more extensive compilation which you will find in part 69–A, that is also handed you.

Part 69-A contains, and I refer to the second exhibit therein, a very exhaustive compilation of the constitutional provisions, the statutory provisions of the several States, with some of the pertinent decisions, what might be called leading cases touching utilities and holding companies. In addition you will find in part 69-A a compilation of proposals and views for and against Federal incorporation or licensing of corporations, which I think will be very interesting if you should go toward that end, and I make that statement even if I did have a part in making it.

Besides these you are also handed portions of part 72-A, which when complete and, by the way, these are all that we have been able to get so far. We have not been able to get them permanently bound up to this time. But, as I started out to say, part 72-A when complete will contain chapters 1 to 11, which are the chapters that deal with the economic or financial part of the Commission's report. The particular chapters that I think you will find especially interesting are 4 to 9 inclusive.

Besides there has been handed to you a series of press releases prepared by Mr. Joe Baker of our staff. He is a good writer and an able man. And these press releases I am handing to you for this reason: They do touch on some of the high lights, of the summarized report of the Commission itself, and I take it one of the things the most of you are interested in is to see how sound the financial structure is.

I call your attention to press release no. 253. At the end of no. 253 you will find a series of tables showing, first, the gross totals of the inflations or write-ups, and following that, the amounts

which

The CHAIRMAN (interposing). Do you call them "inflations"?

Colonel CHANTLAND. Yes, sir. I call them inflations or write-ups or improper items, or items based on nothing except the fiat of the board of directors. They ranged all the way from some that did have some foundation, to those that had no foundation whatever. Following the first page, which gives the totals by groups, you will find the amounts by subholding companies and also by operating companies in the several groups. Let this also be understood: At the time I am mentioning, as Dr. Splawn stated yesterday, this billion four hundred million dollars plus of write-ups represents what we have been able to nail down. It does not by any means represent all, nor does it represent the entire industry.

The CHAIRMAN. What was the total write-up that you claimed that you found?

Colonel CHANTLAND. As disclosed up to that time it was close to a billion and a half dollars. Let it be understood also that this

sum would have been larger if the figures could have been made as of the time the write-ups were made, because, of course, at the time the examination took place, which was after a good many of them had occurred, changes had been made and items added, so that it was impossible to state it just as it was when it happened.

Now, when you speak of percentages of write-ups spread over the entire field, please remember this: That it does not in my judgment signify much, because obviously the percentage of write-ups (and some of them are comparatively free from it), when spread over the entire industry, does not give the picture. A much better way is to find out how much the write-up is in each instance.

Senator COUZENS. At that point let me ask you: Was this done on the theory of reproduction new?

Colonel CHANTLAND. Some of it was on reappraisals going toward that presumably. And these reappraisals, again, if I can state it clearly, were in all degrees of thoroughness or lack of thoroughness, as the case might be. Some of them were quite well done, and some of them

Senator COUZENS (interposing). When you say "well done", do you mean that they had an appraisal made of the value as of that time?

Colonel CHANTLAND. Yes; what I mean by "well done" is that a real inventory was made, and as to what was not physical property a careful estimate was made, I assume, and

Senator COUZENS (interposing). When they did that did they fix the original write-ups by way of reproduction new less depreciation?

Colonel CHANTLAND. In some instances that was the attempt. Senator COUZENS. The purpose of that would be to comply with the ruling of the United States Supreme Court for rate-fixing pur poses, I take it.

Colonel CHANTLAND. Yes; but please understand that reproduction new is not the sole element. That is one of the elements. I think you know that it has gone to the point where it is regarded as the dominant factor. That is the trouble.

Senator COUZENS. That part, I think, is unfortunate.

For

Colonel CHANTLAND. Yes; when I speak about things being well done and ranging from that on to where they were not done in that way, I mean there were some appraisals, as brought out on crossexamination, that we would term "horseback appraisals.' instance, a man goes out and spends a couple of days looking over a big system. That is not an appraisal. An appraisal by doing that is physically impossible. A little later I want to call the attention of the members of the committee to other kinds of appraisals, but I now desire to get back to the proposition I was discussing.

Senator COUZENS. All right.

Colonel CHANTLAND. Now, I was speaking of chapter 12 of the Commission's final report dealing with the State situations.

Senator WHITE. Mr. Chairman, I have another appointment; I must go. I will try to get back before you adjourn. I dislike to miss what this witness is saying.

Colonel CHANTLAND. Thank you, Senator White.

The CHAIRMAN. I am very sorry that you cannot remain, Senator White. You may proceed, Mr. Chantland.