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2) Stocks. Morgan & Co. does not float common stocks, seldom preferred stocks, but when it arranges the financing of companies there are often common stocks to be sold. In such cases it may buy a block of common shares, which it gets at wholesale price, may make a handsome profit, for as in the case of Standard Brands (see p. 58) when the wholesale price is $32 a share, and the opening market price is over $40 a share, there is a paper profit of $8 a share to begin with. Of the block of shares purchased part may be resold at cost (the wholesale or bargain price) to Morgan partners and to wealthy clients of the firm, who will pay cash in full and will not dump the shares on the market. But, unlike other firms, Morgan & Co. have never given an "inside" participation to anyone in any security which they have offered to the public.
Composite. But the success of Morgan & Co.'s business depends on all of its parts together. The composite is the source of Morgan's power, the basis of honest alarms about the too great concentration of financial and social power, and the reason why investigators have so much difficulty in putting their finger on what they complain of. The success of its loans may be insured by its intimacy with corporations for whom it has floated securities. Its ability to make large loans brings it security business. Its prestige brings it the cream of financial business. Having the cream, its prestige and influence increases, etc. and though it cannot control the capital market, it at least has the front or inside seat. The whole is greater than the sum of the parts, and the whole is responsible for Morgan & Co.'s profits.
Profits. What the profits and losses of the firm are can be inferred in a general way from the fluctuations in its net worth: up $20,000,000 in 1928, up $27,000,000 in 1929, down $27,000,000 in 1930. down $39,000,000 in 1931, up $200,000 in 1932. But fluctuations in net worth do not take account of profits distributed, or capital brought in or taken out due to partnership changes. Income taxes are normally a better measure of a concern's profits, hut Morgan & Co., not being a corporation, does not pay a uniform 13¾% tax on net profits. Taxes are paid individually by the partners on their shares in the profits and are graduated according to the individual income tax. The aggregate taxes paid by the partners amounted to $11,000,000 for 1929, $48,000 for 1930, $0.00 for 1931, $0.00 for 1932. Failure to pay taxes in the later years is due to the fact that in their regular business, the partners of J. P. Morgan severally and jointly lost more money than they made.