POWER AND PELF
The operations of so comprehensive a system of concentration necessarily developed in the bankers overweening power. And the bankers’ power grows by what it feeds on. Power begets wealth; and added wealth opens ever new opportunities for the acquisition of wealth and power. The operations of these bankers are so vast and numerous that even a very reasonable compensation for the service performed by the bankers, would, in the aggregate, produce for them incomes so large as to result in huge accumulations of capital. But the compensation taken by the bankers as commissions or profits is often far from reasonable. Occupying, as they so frequently do, the inconsistent position of being at the same time seller and buyer, the standard for so-called compensation actually applied, is not the “Rule of reason”, but “All the traffic will bear.” And this is true even where there is no sinister motive. The weakness of human nature prevents men from being good judges of their own deservings.
The syndicate formed by J. P. Morgan & Co. to underwrite the United States Steel Corporation took for its services securities which netted $62,500,000 in cash. Of this huge sum J. P. Morgan & Co. received, as syndicate managers, $12,500,000 in addition to the share which they were entitled to receive as syndicate members. This sum of $62,500,000 was only a part of the fees paid for the service of monopolizing the steel industry. In addition to the commissions taken specifically for organizing the United States Steel Corporation, large sums were paid for organizing the several companies of which it is composed. For instance, the National Tube Company was capitalized at $80,000,000 of stock; $40,000,000 of which was common stock. Half of this $40,000,000 was taken by J. P. Morgan & Co. and their associates for promotion services; and the $20,000,000 stock so taken became later exchangeable for $25,000,000 of Steel Common. Commissioner of Corporations Herbert Knox Smith, found that: