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The Marketing of Securities, 1930–1952

Published online by Cambridge University Press:  03 February 2011

Donald L. Kemmerer
Donald L. Kemmerer
Affiliation:
University of Illinois
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Extract

One of the major centrifugal forces in American economic history is the industrial revolution which has been taking place for the past 150 years. Corollary to it are the agricultural revolution and the transportation revolution. Most of the investment capital and working capital for the expanding enterprises involved in these revolutions came from plowing back profits, but a sizable amount had to be borrowed or obtained from outside investors. Mobilizing this capital was a major undertaking, especially in a new nation in which capital was relatively scarce. Its successful accomplishment involved a financial revolution.

Type
American Financial Institutions
Information
The Journal of Economic History , Volume 12 , Issue 4 , Fall 1952 , pp. 454 - 468
Copyright
Copyright © The Economic History Association 1952

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References

1 United States Department of Commerce, Historical Statistics of the United States, 1789–1945. pp. 281–82.

2 Nugent, Rolf, Consumer Credit and Economic Stability (1939), pp. 48–51Google Scholar.

3 Kuznets, Simon, National Product Since 1869 (New York: National Bureau of Economic Research, 1946) p. 84Google Scholar; National Industrial Conference Board, The Economic Almanac for 1950, p. 102.

4 Conference Board, Almanac, 1950, pp. 114–15; Survey of Current Business, monthly, 1946–50, passim.

5 Conference Board, Almanac, 1950, p. 453.

6 Federal Reserve Bulletin, July 1948, p. 777.

7 Business Week, March 11, 1950, p. 111.

8 Federal Reserve Charts on Bank Credit, Money Rates, and Business, August 1952, pp. 25–26.

9 Life Insurance Fact Book, 1951, p. 47. Life-insurance companies' total annual income in 1940 was $5.2 billion; in 1950, $11.3 billion.

10 Ibid., p. 50.

11 Business Week, May 19, 1945, p. 64.

12 Ibid., June 19, 1945, p. 78.

13 Ibid., December 14, 1946, pp. 118 ff.

14 Hale, E. V., 1952 Yearbook of Private Placement Financing (Chicago, 1952)Google Scholar. Also Business Week, August 24, 1946, pp. 80, 90; July 3, 1948, p. 59.

15 New York Herald Tribune, September 5, 1952, p. 24; Business Week, November 22, 1947, p. 90.

16 Report of speech in Commercial and Financial Chronicle, January 10, 1952, p. 98.

17 Much of this information was obtained while I was a Fellow of the Foundation for Economic Education at the National City Bank of New York for six weeks during the summer of 1952.

18 Gilbert Stephenson, Trust Business in the United States in 1947, Studies in Trust Business, 4th Series, Study No. 4, pp. 19–20.

19 Conference Board, Almanac, 1950, p. 92; Annual Report of the Comptroller of Currency (1951), p. 100. An average individual trust in 1946 was $109,000.—Trust Bulletin, May 1948, p. 12.

20 Torrance, Bascom, “Legal Background, Trends, and Recent Developments in the Investment of Trust Funds,” Law and Contemporary Problems (Duke University), Winter issue, 1952, pp. 138–43, 161Google Scholar.

21 Business Week, March n, 1950, p. 111

22 Massachusetts Reports, 9 Pickering, 446, 457, 461 (January 10, 1831).

23 Business Week, March 11, 1950, p. 111; June 17, 1950, pp. 100 ff. Under the New York law trustees may invest up to 35 per cent of legal list funds “in such securities as would be acquired by prudent men of discretion, using intelligence in such matters, who are seeking a reasonable income and the preservation of their capital.”

24 B. Torrance, “Legal Background,” pp. 138–43, 161; Business Week, July 8, 1950, p. 81.

25 Morgan Stanley and Co., Pension Plans and Common Stocks (New York, 1950), p. 9Google Scholar; Alexander, Henry C. (President of J. P. Morgan, Inc.), “Observations on Pension Funds,” Commercial and Financial Chronicle, June 26, 1952, p. 28Google Scholar.

26 Quoted in Business Week, March 26, 1949.

27 Hearings of Subcommittee of Committee on Interstate and Foreign Commerce of House of Representatives, 76th Congress, 3rd Session, on HR 10065. June 13–14, pp. 78–79 and passim; Business Week, October 12, 1940, p. 57.

28 July 14, 1952, Release of National Association of Investment Companies.

29 Vernon Vivian speaking for Fundamental Investors, a large and successful mutual fund, pointed out that $10,000 invested in the nation's favorite stock, American Telephone and Telegraph Common, on January 1, 1942, would have risen 21 per cent (to $12,124) by December 31, 1951, ten years later, and have paid $6,983 in dividends. The same $10,000 in Fundamental Investors would have risen 164 per cent (to $26,383) and have yielded $7,198 in dividends and also $4,333 in capital distributions (personal interview).

30 Fortune December 1949, pp. 117 ff.; Business Week, July 16, 1949. PP. 70–71; June 30, 1951, P. 92; February 9, 1952, p. 120; July 12, 1952, pp. 112 ff.

31 1951 Annual Report of Merrill Lynch, Pierce, Fenner and Beane. Also interviews with several employees, present and past. Business Week, February 18, 1950, p. 102; March n, 1950, p. 112.

32 Kimmel, Lewis H., Share Ownership in the United States (Washington, D.C.: Brookings Institution, 1952), pp. 138–40Google Scholar.

33 Ibid., p. 89, passim.

34 Ibid., pp. 129–31.

35 According to the University of Michigan Research Center, in 1949 six out of ten holders of savings bonds listed that type of security as their first investment choice. By 1951 the proportion had dropped to four out of ten. On the other hand, the “pollsters” found that, whereas in 1949 only one out of nine persons interviewed preferred to invest in stocks or real estate, assets whose value fluctuated considerably, by 1951 one out of four preferred stocks and real estate. “1952 Survey of Consumer Finances,” Federal Reserve Bulletin, July 1953, pp. 743 ff.