New-York tribune., 1899-12-29
TRUSTS AND THEIR METHODS.
FAIRCHlLD AND JAMES
B. DILL ADDRESS THE ECONOMIC
ASSOCIATION.

| in detail, the methods rnpioyeu IN the cohsoi''
ton Of constituent induS'laI cofPorh'lo"s H.
trusts The following are his conclusions as -
general value and effect upon the money market OF
this class Of securities:
The larger combinations, through their securities,
AFFECT financial matters 9emti1dE 10 Sireser e d "a
into The field OF investment and speculation Nat
f T6i ,tfepdint upon one OF these enterprises
while II t. new will make lis securities Il IruIllui ii
object OF speculation. Time and experience VIII
sift thcm and cause each one 10 take its proper
place i'm the share list All other business securl-
ties be they railroad. telegraph. bank STOCKS or
what not have and must go through ike strung
and settling process. and thclr values are any w
trials as they are called have come 10 be as regG-
lar in their dividends and stable in price as the
best OF railroad stocks. and some Of ;hem are much
more removed from the speculative field
THE EFFECT OK THE MONEY MARKET
As to the effect upon the money market OF all
/ these new securities, il is nara 10 say IL must pe
hands OF the owners O; the original constituent
properties. II must also be remembered that the
cash capital provided upon the formation OF ihe
new CORPORATION has taken from the money market
"a large amount OF industrial commercial paper IN
new coi poraiions As 10 what proportion the one
a venture. however would say that mere Is ll.iC, ~,
if any more money loaned now upon the shares or
new Industrial combinations than there would be
now loaned upon the business Paptr oI @ tne , So,,
Sfituent concerns had the combinations not berh
formed or course. say this bearing In nina lhe
demand for money accommodation tnat "o9'I % nI(
been caused 10y the present business ana manu-
loans are made have been changed More comes
upon NcwYork ana the business centres ana .eSS
upon banks IN the places where The separate fac-
tories This may partially account for the
greater money pressure i'm NewNoTK' win com
XII OF This win however soon adjust itself by
tuc aid OF the rapid communication given bN idi
roads and telcgrdphs. and the business world Will
move on with certainly no more rapid changes up
and down in the future than IN the past. In me
. mean time prudence and judgment must he ustd
that 'hc unworthy. may not haze undue opportuni-
ties and also that the worthy ma! not be un1uy
"a f4f lDIn ffl
S"' , ven & u} ,oet "' ,,E nln would serve the
financial and general business public. and ar the
and wei conducted business combinaton.
Addresses on THE lnhucnte of Trusts IN the De
velopment OF Undertaking Genius" by Professor
: Sherwood. Of Johns Hopkins University. and on
some Tendencies Of Recent Combinations Which
May Become Dangerous by James B ON. took
up the remainder of the morning session Mr. Dill
spoke lu part as follows.
The nr.t tendency which may hc regarded as
dangerous to the public ari 10 corporate capital -
@NcrSs'Fe c.ptaH@"tloh. i.NtesSNr 'nPHlt". t r'~
Whether ,mrrop.r or fraudulent is alwlvs accom-
panied boy one other element without which the
enterprise promoted could never come mo 'Nlel-
enco Tho marketing Of ANY UNDERLYING whether
good bad or Indifferent is generally dependent
upon the nnancicr. Therefore. these two objects
may bo discussed together
From theoretical standpoint promotion Tor pro-
motions sake merely apt TO be improptr pro-
motion Where YOU ind secret and undisclo-"d
considerations proceeding from the promoter either
the directors OF the corporation itself or TO the
mOneyed corporation. " it, officers who finance II.
then I'm such cases you may look for cases OF pro
motion which are perhIps unWsc.
rms ieadS MS again 10 suettSt 'u"l INC lt''H' I
FOR such possible STATE Of afairs Is reasonable
degree Of publicity. end Of publicity That makes
h the corporate proposition public.
The results Of excessive capitalization are three
fold First--A country with securities that wildly
huctuate that are affected 10y every bIeh'h vi 'S-
pcion. suggestion or state Of fact ~ somewhat ln
The state ship ar sea WITH loose ana
rolling cargo thrown from side 10 Side IN IN" hoIl
with every movement OF the vessel me root oI
from lack Of knowledge and from want 81 means
OF positive information as to how high or how low
6rse - th cornd1oi,n fraciion
Second Result improper dividend payments 4
corporation that Is excessively capitalized. IN order
dividends. The tendency Of an attempt TO pay
pay dividends IN excess OF me actual earning
power. and out Of capital account
Third Result.-The third eject Of excessive capl-
talzatien and the attempt 10 pay dividends upon
such capitalization is TO create tendency "hlCh ~
tendency IS 10 make earnings upon an artificial
capital either by artihciaily raising the price or 10y
the depreciation Of the wages paid. The result l"
the public from an economic STANDPOINT ~ oo
The question Of publicity is one concerning which
there are wide differences OF opinion II IS QucS
ton concerning which men may honestly dIu'I
cussed but even in the discussion 81 this question
there is a common ground OF approach. Al must
that II must be restricted TO those matters con
cerning which the public have a right 10 kno"
/
face OF the bond every limitation upon th" bond-
holders rights contained In ne m"rtfaH'' Lge ~, e.
vesting public would less often come 10 gricf 50
II there should be placed upon the ceruhcaie or
stock every restriction upon ne po"eI Ci nn'
then the public would less often make mistake
~ The hhs Iaws OF The State OF New-York are some
times held up as a pattern In the mater, OF re-
CURED pqbcy b sses s of of SewYork shows S
dency require from year to year less In the way
/ In Conclusion, / am no believer In drastic legsle-
ton or attempt 20 bring about by ehactineIl.S
/ Of statutes that which should and may 6e resu-
/ lated by an intelligent public opinion: me ten
dency of Incorporated capital to-day IS to be right
to DO right and to comply WIN whatSVCr ihay , i w.
| demanded Of Il by a well educated and fair pubHc
opinion l believe that the proposiiion has a., been
and liabilities for stockholders are but too often
pitfalls for the unwary ana the inn%cfh, Id ap Pp
pears TO me that incoIpora'ca CAPIii .ui'c ,,r ~
| better led by intelligent public opinion ha'
forced by unwise hysterical legislation Reason
able publicity and proper restrlction are hu,'s,I,i
! and necessary Much publicity ana many rcsltlc-
cap,iaI because Of a desire to raise their own
! standing in the public community 10 - para,
the public exchange for true puDncly Ie"II" nI,aUa
from state surveillance as TO unimporant detalis.
A high moral standard is often better than police
slpervlsion and the proper aim should be 70 induce
Incorporated capital to voluntarily taxi & ths s.. higf
| by strict supervision and petty surveillance
The National BANKS oigaIog HIueI ~ ,hat 49," a.
| comply with strict requirements as 70 the manage
ment Of their finances and the publicity Of their
| affairs In return for this they are granted Ger
tain immunities which are not incidental TO ofd-
| nary corpora tions-their assets. for example, are
| free from attachment, no matter where located
| Applying this principle. 1t has been adVo
| Gated and with sound wisdom, that nigh class
| corporation act be passed embodynR all these
particulars so far as the public and publicity arr
| concerned which are desirable. but In return
| granting 10 the corporations immunity from othe
| details of LEGS Importance. The result would be
| the same as I'm the case OF the banks.
| Apply the same principle TO the suggestion already
| made and. creating higher class Of corpoi ator
| law we would find that those corporations Wht
are able and willing to stand the test would VOlun
| tarily come under such law for the very purpose
| OF showing clearly in the minds OF the public tht
| difference between themselves ard those corpora
| tions who not able thus 10 stand before th'
| public.
! CONGRESSMAN BOUTELLES CONDITION