The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-03-07
INSURANCE FINANCE.
GETTING Something For Nothing With the
Modern Philosophers stone.

To THE EDITOR or The SUN-Sir; What
seems to some of va to be a mysterious ability
TO make something out of nothing ~ Il iaaf we'd
feature OF modern finance and factor in the
creation OF great individual and corporate
wealth One little philosophers stone for
creating gold. not from base metal. but out
OF thin air. may be worth describing for two
reasons: First. because It Ia Ingenious and
secondly, as an item In the present discussion
OF the mysteries OF some OF the large life in
surance companies
Some years ago a man who had leased OF
tho writer large parcel Of real estate. at a
rental OF about $40. 900 year. got into serious
financial difficulties, was unable to pay his
rent and had no assets and no prospects.
Here WAS the nothing TO which an ingenious
life insurance agent applied successfully his
philosophers stone.
A corporation was formed under the laws
of Maine with nothing paid in on the capital.
The only stockholders were the bankrupt.
his son. and his clerk. This corporation pro-
posed to issue 100000 OF debenture bonds.
payable in thirty years, and every bond was
TO bear an Endorsement about a. follows:
The Blank life Insurance Company guarantees the
payment OF the principal OF this bond at maturity
The writer was asked 10 head the subscrip-
ton for the bonds with an agreement on the
side that no would not be called upon to take
them. and 1t was pointed out TO him that I'M
less these bonds were sold. and he helped
along their sale by the use OF his name. he
would never receive the money due him for
back rent 1t was also pointed out that II
the great Blank Life Insurance Company was
willing to have its name used "a guarantor
OF the bonds humble individual need have
no hesitation at putting his name down
Investi CATION u little below the surface OF
this scheme showed that the consideration
to the life insurance company for its guaranty
was a certain percentage (about 90 per cent.
as | remember ~ OF the proceeds OF the sale
OF tho bonds. The purchasers Of the bonds
were 10 be told that II the life insurance com
pany thought well enough OF the enterprise
10 guarantee the payment OF the principal OF
the bonds there was no need OF worrying
about such trlfe as the interest.
See the result OF the working OF this philoso-
piers stone. The corporation. or rather the
Incorporated bankrupt. got $4,000, and the
life insurance company got 500. 900. The
bankrupt could pay his debts and havo a
handsome amount left over. lie had no
personal obligation to pay either tho principal
or interest on the bonds. The life insurance
company had SOC. 900 and an Obligation to pay
400. 900 at the end Of thirty years.
The 800. 900 realized from the sale OF the
bonds was 10 come. as many another 100000
had come before. from tho inexperienced
small investor who has saved his few thou
sands and witessly puts them into the great
pot controlled by the great financial wizards
OF the day.
This scheme was brought to the attention
OF several prominent life insurance men. and
practically the same surprising answer was
received from each namely. that it seemed
TO DO a safe risk for tho company and that
the companies all wanted business. II being
suggested that 1t was rather hard on the in
weston 10 put him in the position OF having
given up his 500. 900 without interest for
thirty years. the reply was that this scheme
was better than many in that the investor
was sure to get his principal back In time.
Lest 1t be thought that the above story is
OF an extraordinary or unusual case 1t may
be stated that one individual examined and
put a stop to no less than FIVE similar schemes
BosroS. March 4. Z.