investments and liquid assets, which are implied in table IV, raise no serious problems A third test of the accuracy of the interpolation depends on the obvious condition that any asset item for the 200 largest must be smaller than the same item for all nonfinancial corporations. This must apply to taxable investments and liquid assets as well as total assets, capital assets, and total assets less taxable investments. In every case the figures for the 200 largest were smaller than the figures for all corporations. From the three tests described above there would seem to be little objection to the figures in table IV that could arise from the interpolation. Taxable investments were poorly reported and the chain index intended for interpolation had to be based on a small and somewhat erratic sample. Therefore the same index as was used to interpolate for total assets was also used to interpolate for total assets less taxable investments by applying it to the 1929 and 1933 figures for total assets less taxable investments. No inconsistency was detected in the resulting figures. Total assets and capital assets were interpolated from chain indexes made up of yearly percent changes of total assets and capital assets, respectively. 19 PART II-FINANCIAL CORPORATIONS A crude investigation was made of the degree of concentration of financial corporations in 1933. The list examined was composed of the 50 largest financial corporations in 1933, excluding unconsolidated subsidiaries. Of the 50, 24 were banks, 17 were insurance companies, and the remaining 9 were "other financials". The list of the 50 largest was selected after examination of the returns of all financial corporations with total assets over 50 million dollars. The 50 corporations with the largest total assets (considered independently of their unconsolidated subsidiaries) which were independent, according to Moody's, and which were classified by Moody's as financials, were listed. This last requirement eliminated three companies (holding companies) classified by the Bureau of Internal Revenue as financials, but classified by Moody's in the Utilities or Railroad Manuals. One company included in the list actually was not independent at the end of 1933. Since the company was independent through most of the year, since the assets of its parent were too small for the parent to get on the list, and since the corporate structure of its parent was so involved that the Moody analysis in no way corresponded with the situation found by the Securities and Exchange Commission, the company was included in the list as independent. The items tabulated for the financial corporations were selected on the basis of their importance, and are not intended to give as complete a picture as the items for the 200 nonfinancial corporations. In particular, the complete asset side of the balance sheet is not presented for the financial corporations. Life insurance companies file a special type of income-tax return, on which no item corresponding to receipts is reported, so that the receipts tabulated for the 50 largest financial corporations are not a reliable measure of the quantity of business done by them. 19 While the definition included all types of insurance companies, all of these were, in fact, life insurance companies. No attempt was made to adjust the totals for the 50 for missing subsidiaries, as all unconsolidated subsidiaries, of whatever size, had been omitted from the tabulation. In comparing the 50 largest to all financial corporations, the balance-sheet items for all financial corporations were adjusted for corporations not submitting balance sheets, using the same procedure as was used for nonfinancials. Since none of the 50 financials were real estate corporations, it was felt that to compare them with all financials, including real estate companies, would distort the concentration ratios for certain items, particularly capital assets. However, adjustment for missing balance sheets could not be made directly for financials excluding real estate, since the Bureau of Internal Revenue did not separate returns with balance sheets from returns without balance sheets for subgroups of financial corporations. Consequently, the same adjustment factors as were used for all financials were applied to the totals for financials less real estate. The error thus introduced is insignificant. Table X shows the totals for the 50 largest financial corporations, the totals for all financial corporations, and all financial corporations excluding real estate, with their adjustments, and the concentration ratios derived therefrom. This part of the study is very crude, so a few words of caution are in order. The 50 largest financials exclude unconsolidated subsidiaries, so the unit of control is not the same as the unit in the nonfinancial corporation statistics. A "financial corporation" is therefore not comparable to a nonfinancial corporation in the terminology of this study. The 50 largest financials are not to be regarded as an "equally important" or "the same" proportion of the total for all financials as the 200 nonfinancials are of the total for all nonfinancials. Fifty was merely a convenient number of financial corporations chosen to show a significant amount of concentration when compared to all financials. Whether there is "more" concentration in financials or in nonfinancials is a question without meaning by the present definition of concentration. No cross-comparisons should be made between the concentration ratios. The accompanying table is presented exclusively for its own intrinsic interest and is independent of the tables in part I of this appendix. TABLE X.-Derivation of the concentration ratios, and the totals for selected asset items and income-statement items for the 50 largest financial corporations (excluding unconsolidated subsidiaries) and all financial corporations, 1933 Includes obligations of States and Territories or minor political subdivisions, securities issued under the Federal Farm Loan Act, and obligations of the United States or its possessions. Reserves for depreciation and depletion are deducted from total assets as well as from capital assets. Gross receipts from operations when inventories are not an income-determining factor. Gross sales where inventories are an income-determining factor are not reported for financial corporations. 7 Federal income tax plus excess-profits tax. • Statutory net income or deficit, plus interest on tax-exempt investments, plus dividends from domestic corporations, which are also nontaxable income. APPENDIX 12.-INTERLOCKING DIRECTORATES AMONG THE LARGEST AMERICAN CORPORATIONS, 19351 This study of interlocking directorates covers the directors of the 200 largest nonfinancial corporations and the 50 largest financial corporations in 1935. For the nonfinancial corporations, the list of 200 largest nonfinancial corporations with their assets which appears in Appendix 10 was used. The 50 largest banks and financial companies (30 banks, 20 financial companies) are listed in table I.2 The names of directors for each corporation were compiled from the lists of corporation directorates in Poor's Register of Directors, 1936. In some few cases, where Poor's omitted a corporation, Moody's Manuals were used. A summary of the results of this study has been given in chapter IX, charts I and II. The following tables present these results in more detail. Only 25 of the 250 corporations have no interlocks with each other. These companies are relatively small, in terms of assets, as compared with the interlocking companies. Although they constitute 10 percent of the number of companies, their assets amount to only 4 percent of the total assets of the 250 companies. The names of the 25 noninterlocking companies are given in table II. They comprise 16 industrials, 8 utilities, and 1 railroad. There are no banks and no financial companies among them. The absence of interlocking directorates between these 25 companies and others in the list of 200 largest nonfinancial and 50 largest financial corporations does not necessarily mean that these companies are free from other types of links. They include companies which are relatively free from outside control as the Crane Co., which is owned in large part by the Crane family, and companies such as Atlantic Refining and Ohio Oil which are successor firms to the old Standard Oil Co., and are members of the Rockefeller interest group.3 The 225 corporations which show interlocks with each other are classified in tables III, IV, and V, and the assets represented in each class are shown. The interlocking directorates between specific companies have been shown in charts I and II of chapter IX. Chart I, however, shows the complete picture of interlocks only for the 100 companies with the greatest number of interlocks. The interlocks among the remaining 125 companies, which appear at the top 1 Appendix 12 was prepared by Eleanor Poland. Note that this list differs from that used in Appendix 13 since the latter contains the largest 50 banks and includes no other financial companies. See Appendix 13. Central Hanover Bank & Trust Co. First National Bank (Boston). Irving Trust Co.. Manufacturers Trust Co.... J. P. Morgan & Co., Drexel & Co.. Corn Exchange Bank Trust Co... Wells Fargo Bank & Trust Co.. OTHER FINANCIALS Metropolitan Life Insurance Co.. Assets (millions) 2, 350. 5 1, 880. 7 1, 847. 4 1, 277. 4 1, 141. 1 1, 031. 7 925. 4 914. 8 729. 6 720. O 673. 0 625. 2 591. O 584. 2 548. 3 537.9 432. 8 419. 7 395. 9 337. 7 337. 6 334. 5 320. 7 317. 4 271. 8 248. 6 235. 5 235. 3 214. 3 207. 6 4, 234. 8 3, 129. 5 2, 243. 6 of chart I but not at the side of the chart, are listed in table VI. Data on the men who hold these directorships are given in tables VII, VIII, and IX. Table VII gives the residence of all the 2.722 directors for whom residence information was available, with the number of directorships held by these men. Table VIII lists the 83 men who held 4 or more directorships, together with the companies in which they held directorships and other positions held by them. Table IX shows their residences to be concentrated in the financial centers. TABLE II.—25 corporations with no interlocks inside the 250 list, analyzed by type of corporation Industrials: American Tobacco Co.. Assets Eastman Kodak Co... 168. 3 1 Equals 96 percent of total assets of the 250 corporations. Number of companies TABLE IV.-Distribution of companies according to number of directors holding 3 or more directorships on the 250 list |