“Did you, as chairman of the finance committee of the Security Life, recommend the purchase of those securities?”
“Yes.”
“And at the same time, as head of the Great Midwestern railway system, you were interested in selling those securities, were you not?”
“We need a great deal of capital,” said Galt. “We are selling new securities all the time. We sell all we can and wish we could sell more. There is always more work to do than we can find the money for.”
“So, Mr. Galt, it comes to this: As head of a great railroad system you create securities which you are anxious to sell. In that rôle you are a seller. Then as chairman of the finance committee of the Security Life Insurance Company, acting as trustee for the policy holders, you are a buyer of securities. In that position of trust, with power to say how the policy holders’ money shall be invested, you recommend the purchase of securities in which you are interested as a seller. Is that true?”
“I don’t like the way you put it, but let it stand,” said Galt.
“How can you justify that, Mr. Galt? Is it right, do you think, that a trustee should buy with one hand what he sells with the other?”
Galt leaned over, beating the table slowly with his fist.
“I justify it this way,” he said. “I know all about the securities of the Great Midwestern. I don’t know of anything better for the Security Life to put its money into. If you can tell me of anything better I will advise the finance committee at its next meeting to sell all of its Great Midwestern stuff and buy that, whatever it is. I’ll do more. If you can tell me of anything better I will sell all of my own Great Midwestern stocks and bonds and buy that instead. I have my own money in Great Midwestern. There’s another Galt you left out. As head of a great railway system I am a seller of securities to investors all over the world. That is how we find the capital to build our things. But as an individual I am a buyer of those same securities. I sell to everybody with one hand and buy for myself all that I can with the other hand. Do you see the point? I buy them because I know what they are worth. I recommend them to the Security Life because I know what they are worth. That is how I justify it, sir.”
Enough of that. Goldfuss had meant to go from the Security Life to each of the other financial institutions controlled by Galt, meaning to show how he had been unloading Galt securities upon them. But what was the use? What could he do with an answer like that? He passed instead to the Orient & Pacific matter. Galt admitted that he had used the power of majority stockholder to make the property subservient to the Great Midwestern because that was the efficient thing to do.