The Wheeling daily intelligencer. [volume] (Wheeling, W. Va.) 1865-1903, 1899-04-22
A SPECIMEN CASE
or the Immense Ovcr-cnpitalization
,ofCOmbincs and Trusts = Some of
. the Dangers Clearly Defined.

or the Immense DISQUALIFICATION
ofCombincs and Trusts - Some of
the Dangers Clearly Defined.
New York Journal Of Commerce:
Among the trusts recently organized
under the laws of the state OF New
Jersey is one which may be accepted
as fairly representative Of the constl-
tuition Of the large majority of those In
situations, except, perhaps. that 1t
leaves more competitors In the field
than many others. 1t Is compounded
OF twelve corporations. and one private
firm, their late respective capltaliza-
tiors ranging between 100000 and
| S9,O00,C00. We have every reason for
knowing that the valuation put upon
these thirteea concerns by their mana
gers, one to two years ago. aggregated
close upon SlS,500.OOo: also thai they
were then generally doing a profitable
business, making reasonably liberal
dividends, were enjoying good credit,
and, In most cases, included among their
proprietors men Of large Independent
| means.
This same group Of concededly pros
porous competitors In an important
branch Of mechanical industry have
now amalgamated their interests un-
der one organization, with SEQ, 900, 900 of
share capital, divided evenly between
preferred and common stock. The
capital issues OF the consolidated con-
1pa e., ~, ~
| former valuation of the now united
business, as estimated by the former
proprietors themselves. The prospectus
or this combine gives no intimation that
Its trebied capitalization Is provided in
contemplation OF any important extern
| sion or Its business, requiring augment
cd means: on the contrary, one of the
protested purposes of the amalgamation
of interests Is 10 effect important econ
omizatons in working expenses. which
would so far diminish the requirements
for working capital, rather than aug
ment them.
Why, then, this duplication OF an al
ready sufficient capitalization? Proba-
bly,, we shall be told that it Is intended
to provide additional working capital
and to promote independence of Dor
rowing facilities. But rs an offset
against any such supposed requirements
II IS to be assumed that the several con-
Germs entering the consolidation have
brought In. along with other assets.
their respective working capitals. II
1t Is contemplated to increase the cash
means sufficiently to enable the trust
to dispense with discounts. explanation
is necessary showing why such depar-
ture IS taken from the common expert
ence Of industrialists ard merchants
fh0f thara iC in NJ i,-s
moderate rates for the use of the float
ing funds held by the banks than in
conducting business on strictly cash
basis. It Is probably quite safe, how
ever. to regard this recourse as princi-
pally Il precautioG against the by 10
means improbable contingency that,
owing to the untried risks attending Il
vast system of inflated monopolies
about which little can be known. the
banks may quite generally decline to
extend to these amalgumations the
credit facilities they have been accus-
toned to grant to the original separate
companies. This brings into view Il
very serious stage of this problem. For
in such case. 4 revolution must arise
In our credit system of far-rcaching
Importance. The trusts will probably
stand midway. in the economic system
between producers of raw materials
and distributors; and cash settlement
In the one case will largely carry with
1t the disappearance of credit in the
others. This Is one of the many dar-
ing experiments to which the trust sys-
TEN is driven through It's revolutionary
methods failing to command the conf
dence OF the financial and commercial
communities. The outwOrkingS Of these
innovations involve SO much disruption
and arrangement In the many-Sidcd
relations between our material inter-
ests. and they so d!slocatc the whole
system of economic EXCHANGES that
every interest mus: withhold its con-
iidence from the ;nonopolics until their
success or failure Is determined
through crucial course of trial. They
will greatly need all the help thew may
expect from the large working capitals
they seem to be providing; but that
help will be attended with its own scri-
Gus contradictions. and must be found
UNNECESSARILY Insufficient to carry them
through the formidable obstacles that
surround them.
This particular combine, and the
trusts generally fai! to specify their
reasons for adopting abnormally large
capitalizationS; they seem anxious,
however. that the public should believe
they Will be able TO pay dividends upon
three times the amount of capital h!th-
erto employed in their respective indus
tries. The principal reason they have
advanced for their prctcnsions Is that
they Will be able 10 affect large re-
duction In their working expenses. This
claim has received some crcdencc at the
hands of the public. as. prima facic,
there seems to be Il certain reasonable
ness in the claim. The question Is,
whether more credence has not been
awarded 10 1t than Is lcGitmate!E due.
Take the case OF the combine above
cited. 1t owns thirteen factories, To-
Gated In eight states. and for the most
part widely separated from each other.
Though the general control is placed In
one central Office, yet each one OF the
branches will require an administrative
staff. which. IL efficiency Is to he Sc
cured, must be rs numerous and as
costly as when the factory was under
independent management Whether
the central management will be more
efficient than the former individual d.
rection. must depend upon the wisdom
and ability of Its composition. which.
In many cases, must be largely n mat
ter of chance. II WILL FOR time, at
least have the power to exclude compc-
tition. and thereby procure higher
prices for its products than existed UNI
der the old system. That. indeed.
will be Its principal function and all
other points of management must of
necessity be left very much to the dis
erection Of the local branches. II It be
said that the former high alaricd
heads OF the constituent companies
will be dispensed with. It may be safe
ly assumed that those persons have
taken care that their interests shall be
at least MS well provided for az they
Yl1t. hn
does not seem reasonable expectation
that the trust, with no specific pressure
for economy and able to get what 1t
plcascs for Its GOODS will enforce cCono-