New Iberia enterprise. (New Iberia, La.) 1885-1902, 1899-05-20
BANKS WATCHING THE TRUSTS.

! The warnings of the dangers contained
in the current indiscriminate industrial
combinations form the chief subject of
conversation among bank presidents. The
subject is naturally one that has received
attention at all banks, but it is believed
that this attention has in most instances
| been confined to the necessity of caution
in accepting as collateral for loans the
| shares or certificates of industrial corpora
| tions. Conservatism has for some months
been tho policy of the banks in dealing
with loans for which industrial collateral
was offered. In many instances unmixed
industrial collateral has been refused alb
solutely, while in many erinstances the
amount loaned on it has been such as to
allow such a material decline in the prices
of such shares or certificates as to fully
protect tho banks
Bank officers argue that, while some of
the combinations have undoubtedly been
formed on honest and legitimate lines,
there is no doubt that a large proportion of
the recent consultations have been CAPT
talized at much more than is justified by
dividend prospects. With such companies
as are over capitalized the stock of which
is selling at high prices, there is, the bank
ers argue, but one result, namely, the de-
cline in the market value of such stock to
basis commensurate with its intrinsic
value. Bankers see not only in the indus
trial situation prospects of n readjustment
on the basis of actual value, but they see
also the promise of such readjustment
without long delay on account of political
agitation against trusts.
When questioned as to the probable pc
riod in which the current industrial com
bination movement must eliminate, the
president of one bank answered:
''Just as soon as the working capital of
tho weak combinations is used up and
they are unable to borrow money to carry
themselves along Then the weak ones
will 60 down and will carry with them
those that are shade stronger. 1t is,
believe, not sensationalism to say that
just MS soon as the weaker combinations
break there will be a collapse. How long
that collapse can be averted depends, of
course, upon the duration of the current
period of prosperity, and if the crop pros
poets are bright and the foreign demand
for our agricultural products promises to
maintain its record of recent years, l
should not be surprised to see the culmi-
nation of the industrial movement mate
rally delayed. Experienced business men
profits are capitalized and where the ac-
tual profits do not materialize, there is but |
one result
'The losers will be the public who have
purchased the common stock. The in |
siders, it may be taken for granted, have,
as a rule, made their money by selling to
the public at high price common stock
that represents ittlo but water. When
the dividends do not materalize the pub
lie will want to sell, and prices will de-
cline but as long as the combinations make |
sufficient to meet fixed charges no reor-
ganizations will be necessary. In other
words, unless the combinations are bond |
ed for more than their earning capacity it |
would seem that the only result of the ulti- |
mate collapse would be the whipping out of |
the present nominal value of the common |
shares.
working capital may, of course, be
used for dividends on common stock. !
When that source of supply gives out it |
will be necessary to borrow money, and |
the banks will certainly not loan money
without having full insight into the af-
fairs of any new industrial seeking accom-
mediation. A bank officer would naturally |
say to such an applicant, You have not es-
tablished your credit you have not lived |
long enough to establish your credit why |
should you want or expect accommodation
except on collateral what collateral have
you to offerY"