"Holding companies must go," says President Roosevelt in yesterday's message to Congress. Not only bad holding companies, or holding companies which are semi-social, or holding companies which are used merely for the concentration of control, and for the issuance of watered securities, but all holding companies of public utilities must go.
There is a lot to be said for trust busting, for the breaking up of monopolies which interfere in the natural adjustments of a competitive system. There is a lot to be said for stringent laws to prevent banker or promoter exploitation of the investing public. But President Roosevelt does neither. His N.R.A. codes glorify and exaggerate the kinks of monopoly in price fixing and output restriction. And now his recommendation is to break up all holding companies in the one field in which monopoly is most inevitable. Secondly nothing is suggested to protect the exploited investors who have their savings in the public utilities.
Holding companies in themselves are the most effective and economical means of combination. Over outright merger or consolidation, they have the advantage that they can be backed out of if the proposed combination is unsatisfactory. They form a complete concentration of the management and control of an industry without the increasing inefficiencies of large scale business. They are a useful instrument. It is poor logic to abolish them as a whole because some men have abused them in the past.