Other People's Money, and How the Bankers Use It

by Louis Dembitz Brandeis

TRUST RAMIFICATIONS

But the potency of trusts as a factor in financial concentration is manifested in still other ways; notably through their ramifying operations. This is illustrated forcibly by the General Electric Company’s control of water-power companies which has now been disclosed in an able report of the United States Bureau of Corporations:

“The extent of the General Electric influence is not fully revealed by its consolidated balance sheet. A very large number of corporations are connected with it through its subsidiaries and through corporations controlled by these subsidiaries or affiliated with them. There is a still wider circle of influence due to the fact that officers and directors of the General Electric Co. and its subsidiaries are also officers or directors of many other corporations, some of whose securities are owned by the General Electric Company.

“The General Electric Company holds in the first place all the common stock in three security holding companies: the United Electric Securities Co., the Electrical Securities Corporation, and the Electric Bond and Share Co. Directly and through these corporations and their officers the General Electric controls a large part of the water power of the United States.

... “The water-power companies in the General Electric group are found in 18 States. These 18 States have 2,325,757 commercial horsepower developed or under construction, and of this total the General Electric group includes 939,115 h. p. or 40.4 per cent. The greatest amount of power controlled by the companies in the General Electric group in any State is found in Washington. This is followed by New York, Pennsylvania, California, Montana, Iowa, Oregon, and Colorado. In five of the States shown in the table the water-power companies included in the General Electric group control more than 50 per cent. of the commercial power, developed and under construction. The percentage of power in the States included in the General Electric group ranges from a little less than 2 per cent. in Michigan to nearly 80 per cent. in Pennsylvania. In Colorado they control 72 per cent.; in New Hampshire 61 per cent.; in Oregon 58 per cent.; and in Washington 55 per cent.

“Besides the power developed and under construction water-power concerns included in the General Electric group own in the States shown in the table 641,600 h. p. undeveloped.”

This water power control enables the General Electric group to control other public service corporations:

“The water-power companies subject to General Electric influence control the street railways in at least 16 cities and towns; the electric-light plants in 78 cities and towns; gas plants in 19 cities and towns; and are affiliated with the electric light and gas plants in other towns. Though many of these communities, particularly those served with light only, are small, several of them are the most important in the States where these water-power companies operate. The water-power companies in the General Electric group own, control, or are closely affiliated with, the street railways in Portland and Salem, Ore.; Spokane, Wash.; Great Falls, Mont.; St. Louis, Mo.; Winona, Minn.; Milwaukee and Racine, Wis.; Elmira, N. Y.; Asheville and Raleigh, N. C., and other relatively less important towns. The towns in which the lighting plants (electric or gas) are owned or controlled include Portland, Salem, Astoria, and other towns in Oregon; Bellingham and other towns in Washington; Butte, Great Falls, Bozeman and other towns in Montana; Leadville and Colorado Springs in Colorado; St. Louis, Mo.; Milwaukee, Racine and several small towns in Wisconsin; Hudson and Rensselaer, N. Y.; Detroit, Mich.; Asheville and Raleigh, N. C.; and in fact one or more towns in practically every community where developed water power is controlled by this group. In addition to the public-service corporations thus controlled by the water-power companies subject to General Electric influence, there are numerous public-service corporations in other municipalities that purchase power from the hydroelectric developments controlled by or affiliated with the General Electric Co. This is true of Denver, Colo., which has already been discussed. In Baltimore, Md., a water-power concern in the General Electric group, namely, the Pennsylvania Water & Power Co., sells 20,000 h. p. to the Consolidated Gas, Electric Light & Power Co., which controls the entire light and power business of that city. The power to operate all the electric street railway systems of Buffalo, N. Y., and vicinity, involving a trackage of approximately 375 miles, is supplied through a subsidiary of the Niagara Falls Power Co.”

And the General Electric Company, through the financing of public service companies, exercises a like influence in communities where there is no water power:

“It, or its subsidiaries, has acquired control of or an interest in the public-service corporations of numerous cities where there is no water-power connection, and it is affiliated with still others by virtue of common directors.... This vast network of relationship between hydro-electric corporations through prominent officers and directors of the largest manufacturer of electrical machinery and supplies in the United States is highly significant....

“It is possible that this relationship to such a large number of strong financial concerns, through common officers and directors, affords the General Electric Co. an advantage that may place rivals at a corresponding disadvantage. Whether or not this great financial power has been used to the particular disadvantage of any rival water-power concern is not so important as the fact that such power exists and that it might be so used at any time.”