This paper consists of a fusion of two papers presented by the author in the 1930s. Their interest lies in the fact that he advances a theory of schizophrenia which is very similar to the views which Hartmann has described more recently. Hendrick pointed to the failure of the ego in schizophrenia to deal with excessive quantities of aggressive energy. He regarded dream resistance as similar in its mode of operation to schizophrenic thought. In both there is a prolific outpouring of sexual phantasies which mask violent hostility. In schizophrenia the libidinal processes attempt to neutralize the destructive tendencies within the organism. The libidinal phenomena observed in psychoses are not, therefore, primary manifestations but are the result of attempts to maintain the integrity of the ego by means of neutralization of aggression.