being that they buy supplies at wholesale in order to get them at a lower price and supply them to the subsidiaries; and, in the second place, under the Alabama & New Orleans Transportation Co. case, they sell securities throughout the United States and abroad. Unquestionably all those companies are doing interstate business, or would be held to be by the Supreme Court.

Now, as to the actual number of companies doing interstate business, we have figured it as 20 per cent of the holding companies actually engaged in doing interstate busines, such as the Appalachian Power Co. There are a number of companies out West; there is an Idaho company that operates in three different States, and there are other companies scattered throughout the country.

The CHAIRMAN. Now take that Appalachian Power Co.; how does it come within the operation of this act? It is true the power is generated in the State of Virginia and it is delivered in the State of West Virginia; and it is true that it is a holding company and that it holds certain plants in the State of West Virginia. Now, none of those plants certainly are competitive with each other in interstate

commerce.

Mr. GIBBONEY. I know; but suppose it goes into the town of Bluefield, W. Va., as it does. It sets up its plant there and offers to sell light and power. Suppose there is a little local company there doing business, which has been doing it in a bankrupt sort of way, losing money, giving inefficient service at high cost. Suppose it wants to acquire that plant, and that the local plant is competing with the plant furnishing gas at the same time. Does not that bring it within the purview of the act?

Senator CUMMINS. I think it does.

Mr. GIBBONEY. Unquestionably, from my point of view.

Senator CUMMINS. I think it does; but you presuppose that under the laws of that State and under the wishes of that community it is wise to bring about a consolidation. Now, there is nothing in this bill that will prevent, under those circumstances, the Appalachian Co. from buying the property of the other company and consolidating it in that way.

Mr. GIBBONEY. But it would force them to buy the company, not to control it.

Senator CUMMINS. Well, do you not think it is a wiser policy, where the laws of the State permit the consolidation and the wishes of the community demand it, that there should be a consolidation of property rather than a consolidation of stockholding interests?

Mr. GIBBONEY. It might be. Each individual case would have to be tested on its own merits.

Senator CUMMINS. What possible advantage can there be in keeping the two companies alive under those circumstances?

Mr. GIBBONEY. The State might not permit it. In all probability it would not.

Senator CUMMINS. That is because they do not want a consolidation.

Mr. GIBBONEY. Oh, no. The State would permit a holding company in New York to obtain control under those circumstances if it were satified it was for the good of the community.

Senator CUMMINS. It would not permit the purchase of the property?

The CHAIRMAN. There is a provision of law which states that the corporation conducting these various utilities shall be within the control of the States themselves, is there not?

Mr. GIBBONEY. Unquestionably.

The CHAIRMAN. And providing against the transfer of those properties to a foreign corporation organized under the laws of another State?

Mr. GIBBONEY. Exactly; and the holding company incorporated in another State comes in there and it does not permit them to do business unless they organize a new corporation.

Senator CUMMINS. You just made a remark which seems rather queer to me. How could the Appalachian Co. have its electric lighting plant there if the State did not permit it?

Mr. GIBBONEY. Why, it would organize a company-a local State company--and hold its stock.

Senator CUMMINS. Then that would take it right out from under the bill?

Mr. GIBBONEY. But the competing company would be there just the same. The House bill has recognized that, I may say. The House bill has particularly provided for a subsidiary corporation of the main holding company.

Senator CUMMINS. Neither of the controlled companies would be engaged in interstate commerce?

Mr. GIBBONEY. Neither of the controlled companies?

Senator CUMMINS. Neither of the controlled companies. Suppose the Appalachian Co. had gone into West Virginia and had bought out a local company; it held its stock; then it proposed to buy the stock of another company doing a gas business. There is nothing here that would prevent that, because the local company doing the electric lighting business and the local company doing the gas business are not doing an interstate business.

Mr. GIBBONEY. I grant you; but suppose the Appalachian Power Co. was allowed to open its own plant?

Senator CUMMINS. If it were allowed to open its own plant it would also be allowed to buy the competing plant.

Mr. GIBBONEY. It might and it might not.

Senator CUMMINS. The same policy that would permit it to have a majority of the stock would permit it to buy the plant itself.

Mr. GIBBONEY. Well, then, my answer to your committee's contention that we are not hurt by this bill is: Except us from the provisions of it if it is not meant to apply to us.

The CHAIRMAN. Have you prepared any amendment?

Mr. GIBBONEY. Yes, sir; we have.

The CHAIRMAN. Have you submitted it?

Mr. GIBBONEY. Yes, sir; it is on the front page of our brief.
The CHAIRMAN. Give it to the stenographer, please.

Mr. GIBBONEY. I will, sir. The amendment we suggest is to add, at the conclusion of section 13 of the bill, on page 18, the following: These sections shall not apply to corporations acquiring or holding the stock of or engaged in the business of conducting a public utility which is subject to State legislation, other than common carriers, as defined in the act to regulate commerce, approved February 4, 1887, and the amendments thereto.

Whereupon, at 12 o'clock m., a recess was taken until 3.30 o'clock p. m.

AFTER RECESS.

The hearing was resumed at 3.30 o'clock p. m., pursuant to the taking of recess.

The CHAIRMAN. Mr. Gibboney, I would like to ask you what the capital stock of these organizations which you represent is?

Mr. GIBBONEY. You mean the companies that we are interested in? The CHAIRMAN. Yes, sir.

Mr. GIBBONEY. I will prepare that. I will have to figure out the various companies. I will prepare it and forward it to your committee on my return.

The CHAIRMAN. You might give a brief statement

Mr. GIBBONEY. Of the localities and how they are operated?

The CHAIRMAN. Yes. As I understand it, they are all holding companies, devoted to the promotion of public utilities?

Mr. GIBBONEY. Entirely.

The CHAIRMAN. Outside of railroads?

Mr. GIBBONEY. Outside of railroads. They are public utilities. Of course, some would call telephones and telegraphs public utilities. When we speak here of public utilities we mean gas plants, electric light plants, and street railroads.

The CHAIRMAN. What might be known as city public utilities?
Mr. GIBBONEY. Yes, sir.

The CHAIRMAN. Possibly some of those street railroads are interstate corporations.

Mr. GIBBONEY. Yes, sir; one or two. The Buffalo street railway system runs over into Canada.

The CHAIRMAN. Yes.

Mr. GIBBONEY. And there are a few cases where some of these Delaware corporations run over into New Jersey and Pennsylvania. I think Senator Saulsbury was interested in an organization which ran from Trenton to Wilmington, Del.

The CHAIRMAN. Is that organization effected through a holding company?

Mr. GIBBONEY. Yes, sir.

The CHAIRMAN. Through a holding company?

Mr. GIBBONEY. Yes, sir.

The CHAIRMAN. And as I understand it, the holding companies do not take the bonds or the stocks of the subsidiary companies with a view of selling these securities?

Mr. GIBBONEY. No, sir.

The CHAIRMAN. Simply with a view of issuing their own securities upon it?

Mr. GIBBONEY. Yes, sir.

The CHAIRMAN. And in that way they are enabled to get the money at lower rates of interest?

Mr. GIBBONEY. Yes, sir; and to get money at all it is sometimes hard. A small town can not come to New York from time to time and get money upon bonds of its electric lighting or gas plant. It is not always possible. These companies seek the money, and not the money the companies. The fact that the national banks hold to-day a hundred million more in public utilities bonds than they held a year ago, is significant.

The CHAIRMAN. You regard them as national conveniences?
Mr. GIBBONEY. We do.

The CHAIRMAN. Not as a scheme for putting off inflated values upon the country?

Mr. GIBBONEY. I think that the work of seeing that this scheme is carried out for the benefit of the people should be left to the State public-service commissions. In our State it has proved to be a godsend.

The CHAIRMAN. What do you mean by "in our State"?

Mr. GIBBONEY. New York. Illinois has a law which is the most drastic of all the laws which went into effect January 1, 1914. Under the provisions of that law, it would be impossible for any company to go in there and water stocks and bonds and pirate a public utility of any kind.

The CHAIRMAN. There are only 17 States that have commissions? Mr. GIBBONEY. Thirty, and two will vote on it this fall, namely, Maine and Colorado. They will vote on a referendum this fall, and I am informed that the State Legislature of Louisiana, which convened on Monday, will, in all probability, pass a statute similar to that of New York.

The CHAIRMAN. So that will leave only about

Mr. GIBBONEY. Thirty-three out of 48; leaving 15 States without them.

The CHAIRMAN. In some of these States the provisions are rather lax, are they not?

Mr. GIBBONEY. They are; but they are improving them all the time. In some of these States which have not had them-in South Carolina they have a railroad commission, which has no jurisdiction over public utilities, but I am informed that it is the purpose of the next legislature to give jurisdiction to this commission over public utilities.

The CHAIRMAN. You have appeared before the House Judiciary Committee?

Mr. GIBBONEY. We have only submitted a brief.

The CHAIRMAN. Did you put in there the limitations which you desired, which would keep

Mr. GIBBONEY. They have not acted on the bill since we filed our brief. We did not file the brief until after May 2, when the last bill was adopted by the committee. They have under consideration, so I am informed by Judge Clayton, the question of giving us this exception in the bill.

Senator ROBINSON. What exception do you refer to the one you gave this morning?

Mr. GIBBONEY. Yes, sir.

Senator ROBINSON. Does it appear in this brief?

Mr. GIBBONEY. Yes, sir; on the first page.

The CHAIRMAN. It reads:

These sections shall not apply to corporations acquiring or holding the stock or engaged in the business of conducting a public utility which is subject to State regulation, other than common carriers, as defined in the act to regulate commerce, approved February 4, 1887, and the amendments thereto.

Mr. GIBBONEY. That is on the first page. We asked for a similar provision in the House bill, and Judge Clayton informed us that he

would take it up with the committee and give it consideration. We did not appear orally before the committee.

The CHAIRMAN. But there is nothing now of that kind in the House bill?

Mr. GIBBONEY. No, sir.

The CHAIRMAN. But there is some exclusion of investment companies?

Mr. GIBBONEY. That was made, I am informed by the committee, to apply to life insurance companies. They are excepted. They hold the stock of corporations for the purpose of investment-the big life insurance companies-and that exception, I am informed by the Judiciary Committee, was inserted with these corporations in mind. The CHAIRMAN. Where is that section contained?

Mr. GIBBONEY. I beg your pardon?

The CHAIRMAN. Where is the section in the Clayton bill-
Mr. GIBBONEY. I had a copy here-

The CHAIRMAN. That gives the exception you refer to?

Mr. GIBBONEY. The Clayton bill, if I may have a copy of the billI do not seem to have one.

Senator ROBINSON. Here is one. [Handing copy to Mr. Gibboney.]

Mr. GIBBONEY. The section is section 8.

The CHAIRMAN. What bill?

Mr. GIBBONEY. The Clayton bill, page 25. That section is very much less harmful to the holding companies, as we see it, than the provision in the Senate bill, for this reason: That you have to have there an interstate holding company and the holding of stock in two interstate corporations doing competing business before the bill can apply. That is a very rare case. That provision is not nearly so barmful.

The CHAIRMAN. Which part of the Clayton bill do you refer to? Mr. GIBBONEY. Section 8, page 25. It is the section dealing with— you will see at the third paragraph on page 25 the exception noted for the benefit of life insurance corporations.

The CHAIRMAN. That reads as follows:

This section shall not apply to corporations purchasing such stock solely for investment and not using the same, by voting or otherwise, to bring about or attempting to bring about the substantial lessening of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce from causing the formation of subsidiary corporations for the actual carrying on of their immediate and lawful business, or the natural and legitimate branches or extensions thereof, or of owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not to eliminate or substantially lessen competition.

Mr. GIBBONEY. That provision is a very salutary one from our point of view. It was not in the original bill, but after considerable deliberation they put it in. We think it is very salutary.

The CHAIRMAN. But you want us to put in this act the provision which you refer to on page 1 of your brief?

Mr. GIBBONEY. Yes, sir; and we have asked to have added to that section, on page 25, after the word "competition," in the first sentence, "nor to corporations acquiring or holding," etc., just the same language as we ask of you, on the ground that if they are going to except life insurance companies they ought to except our companies as pure