mines in the West; it would apply to everything that is now the subject of private industry and private enterprise? Mr. WILLKIE. Yes; until Government credit broke down. Senator DIETERICH. Yes; until Government credit broke down. My understanding of the theory of Government is to regulate, and that it is the pleasure and the privilege of the citizenship to engage in private enterprise. Mr. WILLKIE. Being also a Democrat, I subscribe to that, sir. Senator BONE. Did I understand you to say that the reports of the properties that form a part of the Commonwealth & Southern structure indicate that only about 10 percent of your total revenue is from domestic service? Mr. WILLKIE. No; I did not say that. Senator BONE. That is what I want to make clear. Mr. WILLKIE. I think the national percentage that residential lighting in gross revenue bears to the whole is some place pretty close to 15 percent. My guess as to our system is that it is less than that by reason of the fact that we have a higher average domestic use than the national average. Therefore I am assuming that our percentage to lighting load is less than the national average. I think that would be correct, but I do not have the figure in mind at the moment. My guess is that it is around 10 percent. Now, if I may revert momentarily to some of the abuses that have occurred in this business and some of the changes or some of the suggestions that I have to make, and which I do not offer for anybody except myself Senator BONE. You are preparing now to enter upon a discussion of some suggested changes in the bill? Mr. WILLKIE. Not particularly changes in the bill. I have some suggestions as to amendments of the Securities Act which I believe will lead to elimination of the abuses in the business. Senator DIETERICH. And render unnecessary this particular bill? Mr. WILLKIE. Yes. Senator BONE. You are leaving your general statement behind, now, I take it? Mr. WILLKIE. Yes. Senator BONE. I have a memorandum which was placed in my hands because of my interest in one of these Federal Power Commission reports, dealing with the disallowance to the Alabama Power Co. of about 30 percent of the cost of the Mitchell Dam project. You are familiar, of course, with that? Mr. WILLKIE. Yes; I am fully familiar with that. Senator BONE. Certain items of fixed capital were eliminated, amounting to nearly three and a half millions. The thing that I particularly direct your attention to is the elimination of fees to the Dixie Construction Co. Mr. WILLKIE. Yes. Didn't I say that this morning, that the Dixie Construction Co. formerly did this work of the Southern Co.? Senator BONE. Where is their place of business? Mr. WILLKIE. They are not in business. As I made very clear this morning, we do not have any engineering organization aside from the engineering service supplied by Commonwealth & Southern; and I may say to you that that matter is still in litigation. The courts have not yet found that the Federal Power Commission is correct. Senator BONE. That is still being questioned in court? Mr. WILLKIE. Right; exactly so. No tribunal has as yet determined that that is a correct elimination. Senator BONE. I had assumed that it was still being questioned. Mr. WILLKIE. In the first place, before I go to that point: There has been a great deal of talk about the effect of the attack on utility companies on the market price of utility securities. I have a chart here [handing a chart to the members of the committee]. The second chart I give to you shows the course of all securities on the New York Stock Exchange, classified as to industrials, gas and electric operating companies, and gas and electric holding companies. You see the decline goes right along together until the early part of 1933. That is, all stocks fell together, and almost identically in the different groups. If you will look at the second chart you will see what has happened since that day. I just wanted to call your attention to that incidentally in connection with the problem. (Two charts referred to and submitted by the witness are here reproduced as follows:) INDEXES OF THE TOTAL MARKET VALUES OF ALL GAS AND ELECTRIC Jan 1st 1933 1934 The CHAIRMAN. This fact should not be overlooked, it seems to me, that the stocks of operating companies have been quite different from the stocks of holding companies. Mr. WILLKIE. Sir, if you will look at this chart [indicating], you will see that there is no difference. The CHAIRMAN. But the difference is this, that about 80 percentdid you not state that a moment ago? Mr. WILLKIE. Seventy-five to eighty percent. The CHAIRMAN (continuing). Seventy-five to eighty percent of the common stocks of operating companies are held by holding companies outright. Mr. WILLKIE. That is right. The CHAIRMAN. So when you are taking this chart you are taking into consideration only the 20 percent of the operating companies, and you are including all of the holding companies. Mr. WILLKIE. No. I have separated operating and holding companies. The CHAIRMAN. You are separating operating and holding companies? Mr. WILLKIE. Yes, sir; gas and electric operating companies, and gas and electric holding companies. It shows that the reason for the decline in the holding companies is because of the fundamental belief that the operating stock is declining. That is what makes the operating company's stock. Throughout the chart you will see the same thing. The CHAIRMAN. There is no real basis for that, is there? Because the operating companies have shown, as a matter of fact, more recovery than any other industry in the United States. Mr. WILLKIE. That is the doubly strange thing about it, Senator. The CHAIRMAN. The reason these stocks have not gone up has been largely because of the fact that people have lost confidence in the utility industry due to the things that have taken place in these holding companies. Mr. WILLKIE. Senator, I know that is your belief, but I think if you will follow me you will find just the reverse of that to be true. These stocks of industrial railroads, operating utility companies, holding-company utilities, moved right down together-industrials, everything, moved right down, and they started up together; and when the attack on utility companies commenced let me illustrate to you by just a little experience in the Tennessee Valley. When it became apparent that that act was going to pass, the bonds and preferred stocks of those companies which had previously held up very well began to decline very rapidly, and they declined, as I say, to a low point where the preferred reached in some cases 24. Judge Grubb held that the Tennessee Valley Authority was exceeding its power, and the stock started to move right up, and the bonds started to move right up, and the bonds are now up in the 90's. The CHAIRMAN. I can readily appreciate that. Mr. WILLKIE. Let me give you another illustration of what I meant by that. I never buy or sell a utility stock. I buy some, but I never sell. I never deal in them, and I have never made a dollar off utility stocks in my life. We negotiated along with the Tennessee Valley Authority from the time of the passage of the act until January 4, during all of which period there was a decline in Commonwealth & Southern stock, a decline of all its operating company preferreds. On January 4, a year ago, we entered into a contract with them. The day before the contract was entered into I said to one of my |