Hardly had the United States Steel Corporation commenced operations than the directors found themselves faced with the necessity of raising additional working capital. The $25,000,000 cash provided by the under-writing syndicate proved insufficient for the needs of the giant industry. Obligations entered into by the constituent companies before the merger, it was discovered, called for the expenditure of approximately $15,000,000, and fully $10,000,000 was needed to refund what were classified as “purchase money obligations.” It was also thought desirable that expenditures should be made for improvements and additions which, it was estimated, would increase the big company’s earning power at least $10,000,000 a year. Furthermore, it was deemed advisable to add from $10,000,000 to $15,000,000 to the Corporation’s fluid assets to provide for further expansion and to strengthen reserves, as it was obvious that if the Corporation were to need ready cash in a time of stress the amount wanted would not be a matter of a million or so but of many millions and it would be impossible to obtain a very large sum at such a time except at a great loss. By increasing fluid assets the probability of the need for borrowing would be minimized. The issuance of $15,000,000 new preferred stock or second mortgage bonds was discussed at length, but these courses were not favored as either, aside from initial expense in commissions to underwriters, would have increased fixed charges against earnings--a stock issue permanently and a bond issue for the term of its life--while an increase in capital in either of these two ways so shortly after the formation of the Corporation would almost certainly have attracted unfavorable comment and might have severely affected the value of their holdings to owners of its stock. Eventually what was known as the Bond Conversion Plan was adopted and promulgated. It provided for the issuance of $250,000,000 new second mortgage bonds and the redemption of $200,000,000 of the outstanding preferred stock, holders of the stock being given the opportunity to subscribe for the bonds to the extent of 50 per cent. of their holdings, 40 per cent. through deposits of stock and 10 per cent. in cash. A syndicate, headed by the Morgan firm, was formed and guaranteed to turn in not less than $80,000,000 in stock and $20,000,000 in cash in exchange for $100,000,000 of the bonds to be issued. For its work the syndicate was to receive 4 per cent. on the total value of the bonds actually issued under the plan, the house of Morgan receiving one fifth of the commission, or four fifths of one per cent.