Mr. Smith claimed that the tangible assets of the Corporation at the time of its organization were $682,000,000 against which $1,400,000,000 of securities were issued. At the end of 1910, he said, tangible assets had increased to $1,187,000,000 and securities issued to $1,468,000,000. As already pointed out Mr. Smith’s calculations did not allow fully for ore property values, worth hundreds of millions.
The reader will remember that, in an earlier chapter, it was pointed out that the over-capitalization of the Corporation did not admit of doubt, an assertion proven by its practical admission by the management of the Corporation who put $500,000,000 of earnings into new construction for no other apparent reason than to equalize capitalization and property values. Yet Mr. Smith’s figures appear somewhat too drastic. Some of the reasons for this belief have been stated before, but it is pertinent to point out that, in the 1910 valuation, Mr. Smith indicates that the main point of divergence is that of ore reserve values, and on this point it would be safe to say that the mass of opinion in the steel trade, that is the mass of competent observers, would support the Corporation’s figures.
That Mr. Smith’s criticism of the Hill lease was well taken seems to be proven by the decision of the directors to abandon the lease, although another reason for this action was to be found in the gradual decline in the metallic content of the ore as operations proceeded. Yet the question as to whether the undertaking of the lease was intended, as Mr. Smith thinks, to keep out competitors, or merely to secure a safe ore reserve for the Corporation, must always remain a matter of opinion. As the Corporation’s entire history fails to indicate a desire to crush or to keep out competitors, it appears only fair to give it the benefit of the doubt in this instance. On one point, however, the lease is open to criticism; it seems to have been an error of business judgment.
But the work of the Commissioner of Corporations was being done quietly, and in the meanwhile the public were being kept keenly interested in the trust question and politicians were waging active war against the trusts. The evidence brought out in the Standard Oil and Tobacco suits served to inflame public indignation against big business generally and “Hit the trusts!” became almost a shibboleth for political advancement. It was no wonder, then, that the “Steel Trust” should be criticized and it should be questioned why no action had been taken against it, the obvious answer that it had not violated the law being one which would hardly have satisfied the masses and certainly one that politicians were not going to advance under the circumstances. Public sentiment on the trust question, moreover, was being kept at fever heat by a certain class of publication, and it was small wonder that so rich an opportunity was seized upon by politicians. On May 4, 1911, a resolution, proposed by Representative Augustus O. Stanley, of Kentucky, calling for an investigation of the United States Steel Corporation, was introduced into the House and passed, and a committee of congressmen headed by Mr. Stanley was appointed to undertake the work. The other members of the committee, which became known as the Stanley Committee, were:
Charles L. Bartlett, of Georgia, Democrat; Jack Beall, of Texas, Democrat; Martin W. Littleton, of New York, Democrat; D. J. McGillicuddy, of Maine, Democrat; Augustus P. Gardner, of Massachusetts, Republican; Henry G. Danforth, of New York, Republican; H. O. Young, of Michigan, Republican; John A. Sterling, of Illinois, Republican.
The committee shortly began its work and in the course of its investigation summoned as witnesses the heads of the Corporation and of various independent steel companies, experts in economics, consumers, and a host of other witnesses. The greatest publicity was given to these hearings, but the Corporation, although practically put on trial, could not avail itself of the usual recourse of a defendant, could not call witnesses on its own behalf.
On August 2, 1912, the Stanley Committee presented its report, or rather reports, for there were several. The majority report, signed by Messrs. Stanley, Bartlett, Beall, and McGillicuddy, was a sweeping condemnation of the Corporation, its organization and its methods. This was a matter of little surprise as the entire method of conducting the investigation was sufficient to convince the unprejudiced mind that the effort of the investigators was not so much to find out whether the Corporation had been influential for good or evil but to prove that it was actually a violator of the law.
Practically everything the Corporation ever did was condemned in this report. Among the items that came for particular criticism were over-capitalization, the bond conversion plan, the Hill ore lease, the Union-Sharon purchase, the Gary dinners, the Tennessee purchase, the Corporation’s attitude toward labor unions and toward labor generally, and interlocking directorates.
According to the report the Corporation played an important and dangerous part in influencing legislation, particularly in helping to disseminate literature in favor of a high tariff. The letters produced in support of this charge, however, do not seem to be very convincing proof, indicating that no means other than perfectly legitimate ones were used to assist in maintaining the tariff on steel products, the necessity for which all steel men were agreed on.
In regard to the purchase of the Tennessee Coal, Iron & Railroad Co., the Stanley Committee asserted unequivocally that George W. Perkins, a Morgan partner and a member of the board of directors of the Steel Corporation, deliberately attempted to precipitate a run on the Trust Co. of America with the purpose of forcing the interests in control of the Tennessee company to sell. The details of the deal and the events connected with the run on the trust company have been discussed in the chapter devoted to the Tennessee purchase.