New-York tribune., 1908-02-10
LETTERS TO THE EDITOR
STOCKS AND BONDS.
Reply to Letter of President Joline
of H., K. 6 4. X. X.
To the Editor OF The Tribune

To the Editor OF The Tribune
Sir: I observe in this mornings paper some
structures my letter by Adrian H. Joline presi-
dent and chairman Of the board Of directors or
the Missouri, Kansas & Texas Railroad Company
He 10 characterize the statement tnat
there has been issue of watered STOCK ana
bonds issued by the railroads "as the result OF
imperfect information and lack of knowledge OF
the facts" The point of my letter was that
vast amount OF stock and bonds had been issued
the proceeds of which had not been received py
the corporations that issued the securities
I notice he takes issue with me on 1hls
proposition. The claim is that these securltles
have been issued by the corporations and soio 10
the public. and the corporations have not received
their proper benefit from the same. MT Joilne
seems to treat this question very lightly. he
says: There is very wise and ancient maxim
of law. caveat emptor.7 I am familiar with that
maxim. and in plain English 1t means let the
buyer beware of the statements Of the seller
This is wise legal proposition but IN All 'he
affairs of life have accustomed ourselves TO
believe somewhat in the statements Of the vender
We could not in the ordinary transactions
In this world get along without that faith
Representations as to stocks and bonds. whether
made by prospectuses and circulars or oy the
authority Of the officers of corporation. nave
unouestionab1y been accepted by the public Mr.
Joline says. Only persons of feeble minds are Sc
duced into buying the idea that the par VaIue
of a share IS it's actual value" It has never oc-
Cured to me to classify the people who nave sur
fered from buying these stocks as being feeole-
minded I had supposed until now that some OF
the brightest and clearest headed men of the lana
had suffered from these misrepresentation Per
haps Mr. Joline is right
Mr.. JoIine further states that no charge has been
made that rates are too high That proposlton Is
contested. The point Of my statement Is tha'
the money received from present rates has gone
largely to pay dividends and interest On stocks
issued not for the benefit of the corporations but
for the benefit of promoters and managers, and
thereby to that extent depleted the treasures OF
the companies, that their securities are no"
looked upon with doubt and suspicion
My contention is that the proceeds of all stocks
and bonds issued should go to the corporation
issuing them. II there is any law or moral canon
that justies issuing stock and bonds to promote
the private interests of the it has escaped
my notice have spent considerable of my life In
studying corporate laws. and know of no just1aca-
ton for issuing securities except for the benent OF
the corporation itself. 1t is true, as Mr.. Johne
states that both the government and the cities
have been eager to offer inducements for the oulId-
ing OF railroads
The precise point Of difference between him and
myself is claim that that eagerness was to pro-
mote the railroads and develop the country and
to lay the foundation for all sorts OF schemes
and projects TO enormously enrich the managers
that they should participate to very great extent
in the benefit Of the development of the country
was be expected. The only criticism make Is
that they have not been content with reasonable
gains but have accumulated enormous fortunes at
the expense the corporations they represent and
TO the great injury OF the investing public
As 1 stated before in my former letter, II the
railroad managers will address themselves strictly
to prove that all stocks and bonds issued have gone
the benefit of the corporations all criticism ana
all controversy will emo at once II they cannot
nrove this then IL would be wise for them to look
at their own bad management as the reason Tor
the present depression, rather than to blame it to
any man or any set of outside OF their organI-
cations
For myself I cannot ethical or legal diff
ference between q misrepresentation made among
gentlemen as to business affairs and that made to
the public. To cheat and rnislead the public is
morally and legally bad to nlisead and cheat
vou- friends e B. HINSDALE.
New York Feb 6. 1905