Old Business, New Jobs

"In order to comply with existing banking laws, both State and Federal, we have . . . made application to ... the State Superintendent of Banks to continue as private bankers."

Thus last week did the House of Morgan bow to the Federal Banking Act of 1933 which cleaves the deposit business from the securities business as of June 16. Last year when the Senate Banking & Currency Committee was dragging ghosts out of No. 23 Wall Street, J. Pierpont Morgan testified that "straight banking" was a more important part of his business than supposedly fabulous securities deals. Since there is practically no securities business today, Morgan partners simply elected to continue receiving deposits on which they pay, say, 1%, loaning or investing them at, say, 3%. Drexel & Co., Philadelphia branch of the House of Morgan, also abandoned underwriting.

J. P. Morgan & Co. will not be commercial bankers in any ordinary sense. Their clients will be, as they always have been, an imposing roster of big corpora tions, big businessmen, foreign govern ments. Without the securities business the Morgan bank will be not unlike Manhattan's First National, which is currently much perturbed by the old but false re port that it scorns accounts of less than $100,000. In size it will rank among the first ten in New York. Its 1932 balance sheet, as dug out by the Senate Commit tee, revealed deposits of $340,000.000, as sets of $424.000,000. Henceforth, when ever the New York State banking superintendent calls for statements of condition. J. P. Morgan's business will be a matter of public record.

By last week most other Wall Street banking houses had also made their choice under the new law. Kuhn, Loeb was understood to have selected securities. Firms like Kidder, Peabody; Lehman Brothers; Goldman, Sachs; Spencer Trask; 00 J. & W. Seligman, which accepted deposits largely as an accommodation lor their investing clients, will also continue as brokers, dealers and underwriters. A. Iselin & Co. and Heidelbach, Ickelheimer & Co. preferred to retain their large foreign banking businesses.

For private bankers the change this week will cause hardly a ripple in day-to-day routine. But to securities affiliates of big banks and their officers and employes, the law meant rough readjustments. Chase Corp., City Co. and Guaranty Co. will be liquidated, their personnel cast adrift. Chase lately arranged to transfer what little remains of its securities organization to First of Boston Corp., divorced affiliate of Boston's First National Bank. Many of the old executives who went to Chase with its purchase of Harris, Forbes in 1930 have already departed to form their own firm. Dissolution of City Co. and Guaranty Co. produced two alliances which may vastly alter the Wall Street map when the investment business recovers.

Brown Brothers Harriman & Co. decided to stick to commercial banking but. instead of abandoning securities, a new company, largely owned by Partners W. (for William) Averell Harriman and E. (for Edward) Roland Harriman, was formed. Four partners (but no Browns, no Harrimans) retired to officer Brown Harriman & Co., Inc. The rest of the executive staff was lifted almost entirely from outgoing City Co., including City Co.'s ranking officer Joseph P. Ripley, who I will be Brown Harriman's president.

The other alliance was concluded between Edward B. Smith & Co. and Guaranty Co. President Joseph R. Swan, old time Yale footballer, and three other Guaranty officers will become Smith partners. i and the firm will move into the Guaranty ! offices, take over most of the Guaranty organization. In the even course of Smith affairs, entry of the Guaranty partners was ! expected to produce startling changes. Founded in Philadelphia some 40 years ago by the late Edward Brinton Smith, railroad banker, the firm grew slowly until after the i War. Then under a group of young Manhattan partners headed by John Wilson Cutler and the founder's son, Albert, things began to hum. Handsome, easy-going John Cutler, oldtime Harvard footballer, persuaded the firm to underwrite the first public issue of International Telephone & Telegraph common stock. New branches jammed its wire system with Stock Exchange commission business. Like all firms, Edward B. Smith floated some astounding flops but it managed to retain a large item of goodwill. Albert Smith died this spring, and Wall Street surmised last week that Joseph R. Swan and his Guaranty associates would have a dominant voice in the new Edward B. Smith & Co., even if they did not hold a dominant financial interest.

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