Memphis daily appeal. [volume] (Memphis, Tenn.) 1847-1886, 1872-07-06
AGE OF RINGS.
The New Credit Companies.
Frnm the United stetes Reonomist.l

Prom the United ststes Economist
Credit companies on the plan Of the
famous or notorious Credit MObiiiere
system Of France, promise TO become q
marked feature Of American finance and
business. They have not vet assumed
the magnitude Of the great French in
stitutions, and have s somewhat differ
ent form and name. But those already
established present the same character
istics and generally have the same Oh
ject They may be defined IS irregular
banking institutions, which do not issue
notes OF their own, but indo-se those OF
their customers, and thus give them 8
weight and character that would not
otherwise attach 10 them The Credit
Mobilier, which built the Union Pacific
railroad, was the first institution Of the
kind in the United States, and il was
hoped that il would be the last, as it had
achieved an unpleasurable reputation
for jObbery and speculation
The Southern Railroad and Security
Company presents the best example Of
the new credit institutions as they are
now forming in the United States, This
company has q capital Of i've million
dollars, but IS il is managed snd
backed by some Of the heaviest busi-
ness men and capitalists in The North,
numbering among It's members such men
as Moses Taylor, ESQ, Of this city, and
tral railroad il exerts an influence much
greater than seems warranted by It's ac-
fuaI capital II is known that too
many Of the railroad companies in
the South are still suffering rom the
injuries caused by the civil war. The
rolling stock is sgeneraIy in an inefficient
condition; the rOadbeds require repair
ing: the rails are worn out and should
be replaced, and the companies are gen.
orally too much IN debt 10 be able TO
make the improvements that are absO-
Iutely Necessary for a profitable business.
Under these circumstances the Southern
Railroad and Security Company step
in, lease the road on a guarantee Of
dividends to the stockholders and then
make improvements, and by their infiu-
ence and credit divert business to the
road, and soon render il profitable con-
cern, with little or no actual outlay Of
capital. The company in this way has
assumed responsibilities to the aggregate
Of not less than forty million dollars,
and 50 far without any unfavorable re
suits.
The Pennsylvania Company, often er-
roneously confounded with and taken
for the famous Pennsylvania Railroad
COMPANY, is also another prominent
credit company. Oh the Pennsylvania
Company very little is known by the
outside public. Its operations so far
have been marked with equal bOldness
aud shrewdness. II IS the Credit No
bilierof the Pennsyl vania Railroad Com
pany When the latter company wishes
70 make q lean, or annex line Of rail-
road in any part Of the country, the di-
rect responsibility for which President
Thomson and acting Nice-President
Scott 30 not wish 70 saddle on the great
Pennsylvania Railway Company, then
the Pennsylvania Company II put for
ward as a sort Of dummy il the trans
action. Il is true, the membership OF
the two companies is the same, or nearly
80, bat il by no means fOllOws-ss is
elaimed-Ihat their actual credit or re-
sources are equal But As the two com
panies act together and play into each
others hands, the Pennsylvania Rail-
road Company can at any time make
the fortunes Of any of the semi-baEkrupt
companies that may have been indOrsed
by the Pennsylvania dummy company.
nAll's vel that ends we'll" snd 50 far
no unfortunate results have followed
from the extensive operations Of the two
companies.
A new Angio-American Credit Com
uanv, with cash capital Of ten million
dollars, has recently been organized in
London. This company viii do business
on a very extensive scale. Its objects
are to loan money on security Of real
estate in the Western States. The rate
of interest for money in the West is ten
Der cent, and az it only rules at five
per cent in England, capitalists Of that
country anticipate handsome profits by
lending money on bond aud mortgage
to this country. But II We take INTO
consideration the expense Of manage
ment and the risks, the advantages win
appear to be less brilliant than would be
supposed at first glance. The English
miliionaires are likely to find to their
cost that Il Is much easier % loan their
money than il VIII be 10 Obtain returns
from it. Experience shows that 70 lend
money en- real esrate-and especially on
Western real estste-is a duty that prin-
eipals can never safely delegate to third
parties. It involves examination Of
titles. calculations OF the actual and con-
eingent values Of property that require
the very highest business qualifications
The AnglO-Ameriean Credit Company
may. and it is 70 be hoped that Il will
be Sufficiently fortunate In is selections
Of agents to guard against losses. But
the probabilities are all against il, and
the ultimate results are scarcely likely
10 realize the great expectations OF the
promoters Of this enterprise.
If these and the other credit cOmpa-
nies now organized or IN course OF fOrnas-
ton. could cOnfine their operations with
ia tie legitimate channels OF business
they would Be equally profitable TO their
stockholders and beneficial 70 the p7blic.
But the trouble is that it is scarcely pos
sible 70 keep them always in the line OF
strict business enterprise. They are COM
PEELED TO keep other capital in constant
activity in order to realize DIVIDENDS,
and are thus tempted TO cross the dan
gerous line Of speculation. This was nc
tabIy the case with the French Creoit
Mobuiere. At first they aided legitimate
business operations. but afterward they
invested IN all sorts Of unsafe specula-
tioDs which helped ORly TO enrich the
politicians and great capitalists at the
expense Of the public, SO that IN France,
st least the general effect Of these insti-
tutiOns was most disastrous. 1t Is 70 be
feared that the results viii be similar in
tins county. IL these large credit COM
panies are successful at first 81 they are
quite certain TO oe, for various obvious
reasons, they viii gradually develop q
spirit Of speculation thst cannot be IA
Vorable to the interests Of the people.
FOREIGN SUMMARY.