Victory for Morgan, Stanley

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A fast-moving, three-cornered Wall Street fight ended last week with two battlers down for the count and much of the gilt knocked off the once-popular competitive-bidding method of selling bonds.

The fracas started when the Erie Railroad proudly announced that underwriters Morgan, Stanley & Co. would handle a $14,000,000 Erie bond issue. Up rose peppery, dollar-minded Cyrus Stephen Eaton, boss of Cleveland's Otis & Co. and a Midwestern underwriter, who believes that New York financiers get far too much of the underwriting business. He demanded that ICC stop the sale, open the bidding to all comers.

Next up was newly elected Chesapeake & Ohio Railway President Carl Elbridge Newton, who is a friend of Robert Ralph Young (TIME, Dec. 28), another booster of competitive bidding, and whose road owns 2% of Erie's common stock. Roared he: "I insist the Erie buy its financing on the same prudent basis as it buys its railroad equipment—that is, to benefit its stockholders rather than any selected seller. . . ." Warned Railroader Newton: "I would be reluctant to bring legal action . . . [but] I shall protect the interests of the C. & O."

Despite the uproar, Morgan, Stanley calmly advertised the issue, sold the bonds at 97½ subject to ICC approval. This was a nice contrast to Erie's September 1941 financing, when three underwriters scrapped for the issue. The winning underwriter then offered the bonds at 102½, took a drubbing because the price sagged seven points during the offering period.