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Mr. BOLLARD. This table, or rather the left-hand half of it, let us say, is an indication of the groups of investors there are in the United States, by broad classifications, and the amounts of funds which they have available for investment. By way of illustration, take the information regarding insurance companies: There are 1,325 insurance companies--of that number 305 are legal reserve life-insurance companies and 1,020 engaged in other forms of insurance-having altogether admitted assets of $36,000,000,000.

There are savings deposits aggregating $23,872,000,000. That is from a compilation made by the American Bankers' Association, which states that there are 45,791,000 depositors in savings banks in the United States having savings deposits aggregating $23,872,000,000.

There are reporting to the United States Office of Education 1,434 colleges and universities, which in the aggregate report endowment funds totaling $1,710,000,000.

Foundations and pension funds—we have been unable to obtain any figures as to their aggregate amounts.

The same thing is true of hospitals, churches, and other philanthropic funds. No aggregates known.

Trust funds: We do not know the complete aggregate, but the report of the Comptroller of the Currency states that the national banks report administering 137,629 trusts aggregating $9,345,000,000. The national banks have 46 percent of the deposits of all banks of the United States, so that is just some indication of what trust funds may aggregate, and that, of course, takes no account of trust funds outside of national banks and trust companies, and banks, other than national banks and trust companies.

There is no information as to the aggregate of individual investors. Of course, we all know the aggregates must be very big, both as to number of individual investors and amount of their funds.

The New York City banks have resources aggregating $27,000,000,000. The banks outside of New York City report total resources aggregating $61,000,000,000. There are over 15,000 banks in the United States.

Now, the right-hand part of that table tabulates the distribution of those $802,000,000 private placements in 1938. In other words, out of the 1,325 insurance companies in the United States, 23 were the only ones which participated in that $802,000,000 of private placements and they got althogether 80 percent of the $802,000,000.

Out of savings deposits of $23,872,000,000 three banks participated whose total savings deposits were $1,000,000,000.

Out of endowment funds of $1,710,000,000, one, Yale, with endowment funds of $104,000,000, had a participation of $300,000.

The foundations and pension funds—there were six participations, but five of them had a special relationship to the issuer which apparently got them that participation. Seemingly, only one dealt at årm's length and that one had $100,000 of the $802,000,000 of private placements.

There were no hospitals, churches, and other philanthropic funds; no trust funds; no individual investors.

Out of a total of 15,091 banks, 39 banks were the only banks participating in these private placements. They had 27.2 percent of the total bank resources in all of the 15,091 banks in the country, whose

total resources aggregate $88,000,000,000. Banks whose total resources
aggregate 72.8 percent of the total resources of all banks in the United
States got no apportionment.

here is another interesting fact.
Mr. YOUNGDAHL, Mr. Chairman.
Mr. CROSSER. Mr. Youngdahl.
Mr. YOUNGDAHL. Are you through with that exhibit?

Mr. BOLLARD. Yes, sir. Perhaps, Mr. Youngdahl, this table which I am about to give you, which is a short summary of the investors which did not participate in these private placements may give you some of the information you are asking for.

(The tabulation referred to is as follows:)

Investors without opportunity to buy $802,000,000 private placements issued in


1302 Insurance companies with admitted assets of_

$10,000,000,000 Savings bank deposits of_

22, 834, 000, 000
Colleges and universities with endowment funds of.. 1, 606, 000, 000
Foundations and pension funds---
Hospitals, churches, and other philanthropic funds_
Trust funds

National banks (whose deposits aggregate 46 percent

of all bank deposits) report they are administering
137,629 trusts aggregating-

9, 345, 000, 000 Individual investors

(1) 15052 Banks with total resources of

64, 144,000,000 1 Aggregates unknown.

* These bank resources include a major part, exact amount unknown, of savings banks deposits shown above.

Mr. YOUNGDAHL. If you do not mind, I would like to ask you a question.

Mr. BOLLARD. Yes, sir; indeed.

Mr. YOUNGDAHL. As I understand, it is a fact that only 23 insurance companies out of 1,325 participated in this total amount of $802,000,000.

Mr. BOLLARD. That is right, sir.

Mr. YOUNGDAHL. No doubt the balance of the 1,300 insurance companies are constantly looking for investments.

Mr. BOLLARD. They certainly are.

Mr. YOUNGDAHL. Is it not logical to assume that many smaller companies would be interested in the issues between $100,000 and $1,000,000, because of their inability to participate in the larger issues sold at private sale.

Mr. BOLLARD. I should think that would be true of many of them.

Mr. YOUNGDAHL. Would you say that a majority of them, a majority of these issues, up to a million dollars, would be sold at private sale ?

Mr. BOLLARD. To the insurance companies?

Mr. YOUNGDAHL. Well, not only to the insurance companies, but let us say to the banks.

I am surprised at the small amount of these institutions that invest in these issues.

Mr. BOLLARD. Yes, sir; the small number of participants.

Mr. YOUNGDAHL. And 'I wonder whether these other companies are not doing the same thing with the issues of a million dollars and under which you have not included in these statistics.

Mr. BOLLARD. There may be a certain amount of that being done. I should imagine it is rather small. To begin with, Mr. Youngdahl

Mr. YOUNGDAHL. Well, you get the point that I have in mind now. Mr. BOLLARD. Yes.

Mr. YOUNGDAHL. I am interested in your testimony, because I believe you are trying to show that many of these issues sold today should be sold to the public at large under registration rather than in private markets.

Mr. BOLLARD. Yes, sir.

Mr. YOUNGDAHL. And that the investing public is deprived of buying these securities?

Mr. BOLLARD. Yes, sir.

Mr. YOUNGDAHL. Now, does not the same thing hold true with regard to issues up to $1,000,000, or smaller ?

Mr. BOLLARD. Not to the same extent.

Mr. BOLLARD. Because from the very nature of things, the smaller issues, relatively smaller issues, are not as seasoned securities, are not as seasoned enterprises, as the bigger issues, and the life insurance companies are buying the most seasoned issues, so that you take an issue of $250,000, it is quite possible it would not have the seasoned investment quality that would appeal to the most conservative investor, which does not mean to say that it may not be a good security. It will pay a higher rate of return and it might very probably be taken by an individual investor.

Mr. YOUNGDAHL. Would you consider in your term “seasoned” investment that a larger concern's issues or securities would be worth more than the smaller, provided the ratio of assets and liabilities were the same?

Mr. BOLLARD. Your proviso is important. If your ratio there of the assets to liabilities and the record of earnings over a long period in the past is equally good, then I should say a smaller issue might be just as good; but ordinarily that is not the case, because in the United States our markets are so vast that the company which is long established, successively grows bigger, and it therefore gets to issuing larger amounts of securities.

Mr. 'YOUNGDAHL. Would you give any credence to the statement that a local concern having been in business for many years, having a good standing, regardless of their records of profits or dividends, would be better off, so far as their future business is concerned, to have the support of the local people as a result of their investment in that company than in selling that issue to some foreign concern!

Mr. BOLLARD. Yes; I should think that many times that might be the case.

Mr. YOUNGDAHL. So for the benefit of the business of our country, it would be better to keep these smaller issues in their local communities and make it possible for the local investors to buy them.

Mr. BOLLARD. I should think so.
Mr. YOUNGDAHL. That is all, Mr. Chairman.
Mr. McGRANERY. Mr. Chairman.
Mr. CROSSER. Mr. McGranery.

Mr. McGRANERY. There is just one thing that is not quite clear to me. I am sorry. Mr. Youngdahl said that he was amazed to find that only 23 companies, as he put it, “gobbled” practically all of this business; gobbled all

of the life-insurance business in 1938. Mr. YOUNGDAHL. That is a phrase from the sticks. Mr. BOLLARD. Well, it is very expressive, sir.

Gobbled up the insurance companies' participation, or did in 1938, and I think that is a representative year.


Mr. BOLLARD. And it was 80 percent; 23 companies got 80 percent of the $802,000,000.

Mr. McGRANERY. What is the situation with respect to that, as to these 23 companies; how do they compare with the other 1,300 companies ?

Mr. BOLLARD. In size?

Mr. BOLLARD. They are much the largest. The assets of those 23 companies aggregate $26,000,000,000 out of total assets of the industry of $36,000,000,000.

Mr. McGRANERY. So, no matter how you figure this out they would be the larger participants.

Mr. BOLLARD. Yes, sir; naturally.

Mr. MCGRANERY. Then there is nothing astounding about that, is there?

Mr. BOLLARD. That they have the largest assets?

Mr. BOLLARD. No; I do not think there is anything so astounding that they are very large, but I think it is quite significant that they got all; 1,300 companies did not have any participation whatever.

Mr. McGRANERY. And those 1,300 companies, of course, do not have the capital.

Mr. BOLLARD. They have got $10,000,000,000 assets.
Mr. McGRANERY. $10,000,000,000?

Mr. McGRANERY. But, you say that that is about 20 percent of the whole?

Mr. BOLLARD. No; $10,000,000,000 out of $36,000,000,000 would be a good deal more than 20 percent.

Mr. McGRANERY. You said that these 23 companies represent about 80 percent, so I thought

Mr. BOLLARD. I think that we are crossing things up; 23 companies got 80 percent of the $802,000,000 of private placements. Those 23 companies had admitted assets of $26,000,000,000 out of $36,000,000,000 total admitted assets of the industry.

Mr. McGRANERY. Thank you, sir.

Mr. BOLLARD. Now, this table which I have just distributed to you shows a summary of the investors who were without opportunity to buy any part of that $802,000,000 we have been analyzing in 1938, and this is the group. There are 1,302 insurance companies with admitted assets of $10,000,000,000.

Savings banks deposits of $22,834,000,000.

I am deducting the parts which participated from the totals shown on the left-hand side of the table.

There were three savings banks that had together $1,000,000,000 deposits, so I have taken off the billion out of the total savings deposits and show the remaining $22,800,000,000.

Colleges and universities which did not participate, with endowment funds aggregating $1,606,000,000.

Foundations and pension funds with aggregates unknown. No participation except for six, five of the six being affiliated with the issuers. One unaffiliated got $100,000.

Hospitals, churches, and other philanthropic funds, aggregate unknown. There was not a single participation.

Trust funds; there was not a single participation. Aggregate unknown. And yet the national banks alone are administering 137,000 trusts with funds in those 137,000 trusts of $9,345,000,000. The national banks have only 46 percent of the deposits of all of the banks.

Individual investors; not a single participation. Fifteen thousand and fifty-two banks, with total resources of $64,144,000,000, did not participate.

Mr. WaDSWORTH. It is fair to say, is it not, that your testimony up to this point has portrayed the effect of some force or cause now at work. Don't you expect to comment before the committee as to the causes back of this effect?

Mr. BOLLARD. I did not intend to do so. I had not expected to, Mr. Wadsworth, because I think Mr. Stewart covered that ground in his testimony as to why this large amount of security issues has gone by private placement procedure. That is only part of the story. There undoubtedly is a dearth of supply. Let us put it this way, undoubtedly the supply of investments available in the United States today does not equal—and I am speaking now of corporate investments as distinguished from Government securities—the supply of corporate investments does not equal the demand.

Mr. WADSWORTH. And yet the market is stagnant.

Mr. BOLLARD. The market is stagnant for common stocks. The market is not stagnant for the kind of securities we are talking about. There are bond issues and note issues-high-grade bond and note issues. That market is not stagnant. Those securities are selling at a very low yield. You see this analysis has to do only with bond and note issues.


Mr. BOLLARD. And the situation is quite different as to bonds and note issues, from that as to common stocks. Common stocks are the equities in companies faced with the prospect of very heavy taxation and the effect of priorities. The business of the country is being concentrated increasingly in defense industries. Those companies and industries which are getting the major portion of defense expenditures, when peace comes will be faced with very serious probIems. The difficulties facing one investing in common stocks are such that they create very real problems; but my analysis has nothing to do with common stocks. Perhaps the market for common stocks is what you might call stagnant. As to the high-grade bonds and note issues—they are not stagnant. They are eagerly sought for.

Mr. WADSWORTH. Would you say that the bond market was a strong market?

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