High Tension by John A. Riggs

Author:John A. Riggs [Riggs, John A.]
Language: eng
Format: epub
Published: 2020-08-30T16:00:00+00:00

Howard Hopson, the “crown prince of corporate jazz,” explains the structure of his holding company pyramid to Senators Hugo Black and Lewis Schwellenback. (Library of Congress.)

With the House conferees buttressed by the strong vote against the death sentence and their Senate counterparts reinforced by the publicity from the Black hearings and by administration pressure, the debate in the conference committee was intense. A compromise on the death sentence was the only way to advance. As the conferees met into the second and third weeks of August, Rayburn suggested allowing a holding company to hold two operating systems, rather than only one, and of any size. This would mean Willkie’s C&S and other of the largest companies would survive.63

But Roosevelt championed a different proposal, based on a game plan suggested by Felix Frankfurter. Procedurally, he persuaded the Chairman of the House Ways and Means Committee to say that he would hold a highly popular tax bill in committee to keep Congress in session until agreement on the Holding Company Act was reached. Tactically, he stated publicly that the House bill was unacceptable but hinted at compromise by acknowledging that no particular legislative wording was necessary to achieve his objectives. Substantively, he proposed a compromise suggested by Frankfurter: holding companies could control more than one system if the additional system could not economically stand alone. The additional company must also not be so large or so dispersed as to prevent efficient management and regulation. And no more than two holding companies would be allowed above an operating utility. The death sentence was out, but these conditions would spell the breakup of C&S, Bond and Share, and many other of the largest holding companies.64

A full-court press by Democratic leaders led to acceptance of the Frankfurter compromise in the conference committee, and the House passed the revised bill by a large margin—219 to 142. The bill gave Roosevelt most of what he wanted, complying with his 1935 State of the Union address as it was written, abolishing “the evil features of holding companies.” He signed the final Public Utility Holding Company Act on August 26, 1935, saying that if Congress “had done nothing more than pass this Bill, the session would be regarded as historic for all time.” When Congress adjourned the next day, concluding what became known as Roosevelt’s “second hundred days,” each of the nine significant bills the president had demanded had passed.65

Willkie, though, felt that holding companies had escaped from a certain death sentence only to be encumbered by excessive restrictions. “While a strait-jacket will keep a man out of trouble,” he complained, “it is not a suitable garment in which to work.” He was not ready to concede. He hoped that the narrow victory margin and the need to encourage investment and employment in a still-weak economy might allow a reconsideration in 1936 that would permit companies like his to avoid dismemberment. On November 23 he announced that C&S would not register with the SEC, as required, but would file suit to challenge the law’s constitutionality.

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