(7 of 9)
Bank secrecy: Q. Should not private banks be examined and forced to publish statements of condition? A. Possibly—but hitherto publication of such statements would conflict with State law prohibiting private bankers from advertising for deposits. Q. What assurance has a depositor of the solvency of Morgan & Co.? A. Faith. Q, Are not depositors entitled to statements of Morgan & Co.'s condition? A. They can have them if they want them; no one has ever asked. Q. Has any public statement of this fact ever been made except when the Elder Morgan testified before the Pujo Committee 20 years ago? A. (by Mr. Morgan) "No. That is the only public statement we have ever made about anything."
Income Taxes. Q. Did Morgan use the admission of S. Parker Gilbert to partnership as a means of establishing a $21,000,000 loss to avoid paying income taxes in 1931, 1932 and 1933? A. For 20 years the firm has always taken profits or losses by sales of assets every time a new partner was admitted or old partners retired; actually the firm had other losses in 1931 and 1932 so that no taxes would have been paid even without establishment of the $21,000,000 loss.∙ Q. Has not the firm used the capital gains and losses section as a means of avoiding taxes "within the law"—did not Morgan pay taxes in England for 1931 and 1932? A. Morgan paid such taxes in England but England has no capital gains and losses tax. If the U. S. had no such tax the Morgan partners would have paid a lot less than $11.000,000 taxes for 1929—the tax has worked both ways. Comment by Senator Glass: The fault is with the law.†
Bargain lists. Q. Did not the Morgan firm in effect make hand-outs of $8,000 each time it sold 1,000 shares of Standard Brands at $8 below the market price (and similar amounts with offerings of Alleghany Corp. and other shares)? A. No. The firm had no such intent, regarded the shares as speculative (not the type of securities it would offer to the public); therefore disposed of them to people who knew the risk and could afford to take it; probably would not have done so except at cost. Q. Was not the offer of such shares at wholesale prices a kind of bribe to get favors from public and corporate officials? A. No. The shares were only offered to clients and friends, including retired public men; it was not Morgan's fault if its clients and friends included a number (such as Charles Francis Adams. William Woodin, Norman H. Davis) who later held public office.
To the following Morgan "Friends" in public life (before or since) went Standard Brands stock at wholesale or bargain prices:
No. of Shares Calvin Coolidge......................3,000
Norman H. Davis.......................500
Charles D. Hilles ...................2,000
Col. Charles A. Lindbergh......500
Williamm Gibbs McAdoo.....1,000
Gen. John J. Pershing ............500
John J. Raskob .....................2,000
William H. Woodin ...............1,000
Arthur Woods ..........................500
Also favored were the following potent bankers and industrialists: