The Washington times., 1908-07-23
FEDERAL CONTROL,
KNAPP'S PROPHECY
Public Will Invest More in
Securities and De-
mand Truth.
PEOPLE WILL BUY
BONDS OF TOWNS
Municipal and State Issues Will
Give Place to Railroad and
Industrial Bonds.

That some important readjustments in
the national financial system will result
from the financial furry Of last autumn,
IS the belief of Chairman Knapp. of
the Interstate Commerce Commission.
He anticipates that investment will be.
in increasing measure, substituted for
speculation in securities, and that as
this tendency develops there will be
also a growing insistence on such gov
ernmertal supervision Of the capitaliza-
tion and accounting of great corpora
tions. as Will presently compel legisla-
ton along these lines.
The securities Of railroads and great |
industrials." said Mr.. Knapp, represent !
very large proportion of the subjects !
of quick and easy investment. Instead |
Of investing in these directly. however. |
there has been a disposition on the \
part Of people with money, TO let others, /
representing a more or less speculative !
class. do the actual investing. The /
banks throughout the country have |
found that New York was ready TO pay
attractive interest on their balances;
the New York banks being able to do |
this because they could loan the money !
10 people dealing in these securities
Each Depositor a Speulator.
Thus. the man who deposits his $500
or 5000 in a country bank. which in
turn deposits it in New York, becomes, |
in fact. though indirectly, an investor |
in the securities in which New York
deals But he insists on the security
Of the banks credit standing between
him and his investment. That is, in a
general way, because. the country at
large is not sufficiently familiar with
this kind OF investment, and also be-
cause many people with money in banks
do not lave confidence enough in this
class Of investments to care to use
their own judgment in buying.
I'm the past, even such excellent Sc
curities as the bonds Of cities, towns,
counties, school districts, etc, have geS-
orally been sent away from home to
find "A market The average Western
town may have. through its banks. a
big balance in the financial district Of
New York; yet when that town issues
bonds. instead Of bringing home it's
own money and buying its own securi-
ties, the town has allowed those bonds
10 be sold in the East.
Will Invest Money at Home.
1T seems altogether likely that In
vestments in this kind Of securities will /
soon become more popular; that the
sections of country where bankers and \
investors have not in the past sought
after this class of property will more
and more want it. The new currency
law doubtless will tend to encourage
this kind Of investment throughout a
wider area, because banks will want |
10 equip themselves with the most ac-
ceptable security on which they may 1
issue currency. The tendency to pri-
vate investment will grow at the same
that more money will be directly in /
vested, and less sent away from home. !
through the banks, to be loaned in the /
more or less speculative centers.
This seems 10 me to be a highly de- |
sirable cOnsummation. It Will promote /
a wider knowledge Of and interest in !
the immense mass Of securities which 4
represent a great proportion Of the I
wealth Of the nation II will lessen /
the volume Of those securities held In 4
a speculative way; will reduce the pos
sibility and also the danger OF manipu- /
lation Of the market with disastrous 4
results.
Public Will Demand Truth.
Although the securities Of States and
cities, etc, will be the first ones thus
TO be popularized as subjects Of invest 1
ment, yet the time will come before /
long when there will not be enough of 1
these 10 meet the demand: and then 4
curities Of railroad and industrial cor
porations. When that time comes, the |
country will demand guarantees of the |
value which such securities represent. /
1t Will want 70 know that there is 81, 900
Of good value back Of d S1000 bond. 1t /
Will want some certihcation that the |
share Of stock It buys represents equity 1
in a property that can earn returns on |
II. It will insist on knowing that the |
suowings OF earnings, expenses, prop
erty, etc. made by a corporation, is
honest.
"All this will surely mean that in
order - protect the investing public,
and to assure that legitimate corpora
tons shall be able to raise money for
proper purposes, the Government must |
establish a system by which the public |
shall be informed of these things. We |
shall have legislation along this line, i
and I believe it will come the sooner Il
by reason Of the events of the last few
months" Il