The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1878-01-01
The Wall street Fafiures-A New
Method OF Swindling.

business hours, tnat JOIN DohAcA ~ W.
brokers, and the Bankers and Brokers Asso-
citation, Of which Bonner is president, had
suspended and ''gone to smash. This IS a
repetition, on larger scale, OF the similar
collapse of Meter Il Co. last week. 1t is
| good symptom that the street preserved SO
much steadiness and balance as it did yes
| terday under the circumstances.
| The method of obtaining money by Bon
ner Il Co. is precisely the same as that re-
sorted to by Meter a. Co. They lent money
| on pledge of stocks and then borrowed
money of other parties on pledge of these
same stocks. This may be illustrated by an
instance taken from the transactions OF
Bonner A firm borrowed from him sixty
thousand dollars, hypothecating bonds
valued at eighty thousand dollars So far
it was legitimate business transaction and
a perfectly safe one for the lender by the
ample margin. It was the understanding
that the bonds would remain in possession
of Bonner & Co. until the debt matured,
and be returned to the owner who had
pledged them when he repaid the loan.
But Bonner, as soon as these eighty thou
sand dollars worth Of bonds came into his
hands, goes out and rehypothecates them
with another money lender, borrowing sew
enty. five thousand dollars on them. This
also would have been n proper business
transaction if the bonds had belonged
to Bonner, and it was a safe one
for the new lender, BECAUSE the margin,
though considerably less, was still sufficient.
But as Bonner was not the owner of the
bonds he committed a deliberate fraud; not,
however, fraud against the party from
whom he borrowed the seventy-fve thousand
dollars, but against the firm to which he
had lent the sixty thousand dollars, and
whose property he had used in such a man.
ner as to involve a gross breach of faith.
1t is as arrant piece OF swindling rs was
ever practised, but it is species which. so
far as we know, there is no law to punish.
The only way for the real owners Of the
bonds to recover possession OF them
is by paying the debt for which
they were rehypothecated They might
Co. for damages, but as this firm
are utter bankrupts this last would be
bootless proceeding. The instance we have
mentioned is merely one Of countless oper-
atoms Of the same kind by the collapsed
firm Of Bonner Il Co. Bonner was COM
and during the four years that have since
elapsed he has maintained false show of
credit by his experiences and inventive
genius as a Jeremy Diddler. The losses
happen in this case to fall upon operators
in the street, and inasmuch rs the victims
are mostly sharp, shrewd men, supposed
to be capable of taking care of themselves,
less commiseration will be felt for them
than for the poor depositors in broken saw
ings banks and the victims ofSswindling
life insurance companies. BY the failure
of Meter l. Co. even SO skilful fnancier
as Mr.. Vanderbilt is among the heaviest
sufferers, and Jay Gould is said to be among
those who were badly bitten by the failures
yesterday.
This novel form of swindling ought not
to be a difficult one for the Legislature to
deal with. The disqualification Of securi-
ties should be made misdemeanor punish
able by heavy penalties. 1t is q clear breach
Of the understanding between the loaner of
the money and the borrower who deposits
the security, and, therefore, plain breach
of trust. That it is not thing against
which men may protect themselves by rea-
sonable care and vigilance is proved
by the fact that many of the most
keen-sighted men who are daily CONVEX
SAINT with the business Of the street have
been taken in. 70 be sure, this abuse
making it penal offence. 1t might, for
instance, be enacted that in all loans made
on the hypothecation of negotiable securi-
ties the securities shall be deposited in
trust with some institution or some third
party. to be mutually agreed upon between
the borrower and the lender, and that they
shall be delivered to the owner on the pre-
sentation by him of o receipt in discharge Of
the debt, or to the party to whom they are
pledged if the debt remains unpaid after
maturity. This, however would be feeble
safeguard and would cause embarrassment
in the transaction of business. 1t is q
thing to be done by the Stock Exchange
through its rules in the absence Of legisla-
ton rather than by the Legislature. The
right thing for the lawmaking power to do
is to pass an act making the rehypotheca-
ton Of negotiable securities a misdemeanor
punishable by fine in cases where the
offender is solvent and by imprisonment in
cases where he is insolvent. The reason
for such distinction is that when person
who commits such breach of trust is solv-
ent aggrieved parties can maintain an ection
at law and recover damages. But rs a dis
tnction Of this kind might be difficult to
enforce in practice in cases where men were
on the brink, but not yet in the gulf, Of
sal=~s.s,4as II sraald ha ha4tar =