In Wall Street in the happy days of the 1920’s, companies were known by the bankers they kept. Mere fact that J. P. Morgan & Co. sponsored a corporation’s securities was enough market-wise to send them soaring the instant they were issued. Since then, however, what with his memories of the Kreuger fiasco and other notable glimpses of bankers at work, the average investor has grown skeptical. Furthermore, New Deal legislation, like the requirement that all private bankers choose between their securities and their deposit business, has severed many a traditional corporate connection. Securities affiliates have been divorced from the big commercial banks and their staffs, migrating to private firms, carried clients with them. No one knows yet what firm will eventually occupy the province of the House of Morgan, now simply a commercial bank.
Names like Edward B. Smith & Co., Kidder, Peabody & Co., Brown Harriman & Co., First Boston Corp. head the important syndicate lists today. But one thing is certain: not the least banking province will have as its capital the dark, narrow building at Manhattan’s No. 52 William Street—the House of Kuhn, Loeb & Co.
Unlike its old rival at No. 23 Wall, Kuhn, Loeb elected to stay in the securities trade, abandoning its deposits. Traditionally railroad bankers, Kuhn, Loeb has lately widened its industrial friendships, particularly in the steel industry. Inland Steel and Youngstown Sheet & Tube have long been clients, and last year the firm assisted President Tom Mercer Girdler with his Republic Steel merger plans. Last week Kuhn, Loeb was preparing to market $50,000,000 of bonds for Ernest Tener Weir’s National Steel—a big industrial issue even in Kuhn, Loeb’s long records.
Even with its $156,000,000 in assets National Steel is small as U. S. steel companies go. Its ingot capacity is less than one-tenth that of sprawling U. S. Steel Corp. Yet National was a Depression star, having made money in every year since it was born 30 days after the 1929 Crash. In the first quarter of this year, when eleven of the 15 leading steelmakers were in the black, National led the field with profits of $3,367,000.
Last year, having won what he tersely referred to in his annual report as “the case of the U. S. v. Weirton Steel Co.” (famed test of the Recovery Act’s labor section), Chairman Weir, found time to ponder finances. Mr. Weir thinks that a big debt is a good thing for a company because it makes everyone work harder but he saw no reason for paying 5% for nearly $40,000,000 of borrowed money when he could pay 4%. Moreover, he was planning for his Detroit plant a new wide strip sheet mill, which is an appallingly expensive aggregation of machinery. Upshot was that by December Steelman Weir and his two top executives frequently darkened the Kuhn, Loeb doors. With some inaccuracy, they were called “the three wisem*n of Weirton.”
Actually the only wiseman from Weirton was Mr. Weir. National Steel was merger of Steelman Weir’s Weirton Steel (which lacked adequate ore reserves), Cleveland’s M. A. Hanna Co. (which had them) and Great Lakes Steel, whose plants were right at the back door of the automobile industry. Mr. Weir’s fellow wisem*n were George Humphrey of M. A. Hanna, who is now National Steel’s executive committee chairman, and George R. Fink of Great Lakes Steel,, who is now National’s president.
It was President Fink who best knew the creaking old elevators at No. 52 William Street. Kuhn, Loeb & Co. had helped Mr. Fink build his strategic plant in a bottomless swamp on the Detroit River, thereby confounding more orthodox steelmen who for more than engineering reasons freely predicted that his mills would sink out of sight. When Mr. Fink called with his friends last autumn, the Kuhn, Loeb doors were open. Inside, the triumvirate was greeted by Partner Lewis Lichtenstein Strauss (pronounced straws), who is something of an authority on the steel industry and the specialist— insofar as Kuhn, Loeb has specialists—in industrial financing.
Raised in Richmond, Va. where his father was a merchant, Partner Strauss was an aide-de-camp to Herbert Hoover in France and Belgium during the War. What is more he is still a stanch Hoover friend and admirer. The late Mortimer Schiff met Mr. Strauss in Paris, asked him to work for Kuhn, Loeb. He was made a partner in 1929 at the age of 33. Like many a past Kuhn, Loeb partner who was not the son of a partner, Partner Strauss married a partner’s daughter—in this case Jerome Hanauer’s Alice.
One, two or all three Weirton wisem*n have been dropping in on Partner Strauss for the last few months whenever they were in Manhattan. Last week the result of their conversations was dispatched to Washington as a registration statement for $50,000,000 of 4% National Steel bonds. About $40,000,000 of the proceeds will be used to pay off other bonds bearing higher coupons, the $10,000,000 balance representing new capital for expansion of the Detroit plant.
Profitable though National Steel has been through the lean years, it will not be so conspicuous when & if real recovery comes to the steel industry. It has prospered through amazing management and strategic plant location, plus the fact that a large part of its output goes into tin cans and automobiles—both steady customers, good years & bad. And it will get more than its share of future prosperity. But U. S. Steel, whose presidency Ernest Tener Weir reportedly refused, can make much more money in a single year than the sum of National Steel’s assets.
