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Merger Menace: Holding Companies and Overcapitalization

Fortnightly Magazine - January 15 1996

DEI Proxy Statement dated Oct. 25, 1990.

13 The National Power Policy Committee observed in 1935 that "Fundamentally, the holding company problem has been, and still is, as much a problem of regulating investment bankers as a problem of regulating the power industry." If further recommended that holding companies not be allowed to derive fees or commissions from security transactions, noting that "[t]he holding company in the role of banker is in dangerous conflict with the interests of its investors and consumers." S.Rep. No. 621,74th Cong., 1st Sess. at 56-57.

14 Both the FTC and the FERC declined review or enforcement of the merger under the antitrust laws or the Natural Gas Act, Mr. Haws seems to believe that the SEC's deferral of several major hostile utility takeovers to the FERC proves his point about duplication of regulation. The FERC does regulate mergers between interstate public utilities, but PUHCA overrides the Federal Power Act with respect to mergers and acquisitions. 16 U.S.C. 825q; Arcadia v. Ohio Power Co., 112 L.Ed.2d 374 (1990). The SEC's deference to FERC jurisdiction with respect to these takeovers--to the extent they involved holding company manipulation, integration, and size standards, however--is consistent with its abdication of responsibility elsewhere under PUHCA.

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