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More serious was the effect on International's financial position. At the end of 1931, bank loans amounted to $36,000,000 and Chase National Bank began to have a louder voice in the management. But the conspicuous fact about International is that it did not go into receivership or a 77-6 reorganization during a period when nearly every other big newsprint company in North America did. By the end of 1934, President Graustein had cut bank loans to $15,000,000, though utility profits continued to drop and newsprint was, and still is, selling near its Depression low.
In 1934 International wrote off virtually its entire investment in utilities and dropped the International Hydro-Electric system from its consolidated balance sheet. Just before the Public Utility Act took effect last December, President Graustein legally washed his hands of New England Power Association, delivering voting control to three trustees. International retained its property rights in the trusteed New England shares and holds title to its Canadian power system. Having taken its losses on these investments, it still has the undiminished possibilities of making money on them eventually.
Mr. Graustein is not a paper man but a lawyer, a utilitarian and a financier. Voluble, aggressive, brilliant, he finds it difficult to think in any except expansive terms. Son of a German-born Boston milk dealer, he romped through Harvard in two years, graduating magna cum laude. After Harvard Law School, he entered the Boston firm of Ropes, Gray, Boyden & Perkins, learned about paper while reorganizing a paper company, was pushed into International by the Phipps interests. President Graustein's prime paper policy was volume at almost any cost. International now dominates the kraft industry, which mushroomed in the last 15 years, and accounts for nearly one-half of North American newsprint.
Lately International's directors have been tightening up on budgets, paring personnel. An executive shake-up occurred last spring when E. A. Charlton resigned, to be succeeded as active boss of the paper mills by Kraftman Cullen. At a board meeting last month it was decided that Mr. Graustein should resign as president of International Paper Co., remain as head of International Paper & Power, the top holding company. Presumably Mr. Cullen was to have a free hand in paper, Mr. Graustein in power.
However, Mr. Graustein had his own idea about this arrangement. He interpreted the board action as a vote of no confidence, sat down forthwith and wrote a three-page resignation. Having by repute no love at all for Chase National Bank, Mr. Graustein is supposed to have spied that institution's long hand behind the directors' attitude. Elected to succeed him was Kraftman Cullen. Even Mr. Graustein does not know where Mr. Cullen was born.