New-York tribune., 1909-10-29

the purposes for which corporate stock
can be legally issued are carefully speci-
fed in detail.
HOW PRACTICE STARTED.
From consolidation to 1904 the law
was obeyed In the issue and sale OF cor
porate stock No such thing as the issue
of tens Of millions of these bonds a year
under the blanket specification of ''vari-
Gus municipal purposes" was even
thought Of The advertisements Offering
bonds for sale in all cases specified In
detail for what purpose the money was
to be used. Each bond bore upon its
face the specific purpose for which 1t
had been issued. Upon the plea that
this method laid down in the charter for
issuing corporate stock bonds entailed a
lot of unnecessary detail work in the
city's books of record, Controller Grout
began, in 1904, the pernicious practice
OF issuing corporate stock bonds with
out specifying, before the bonds were
sold, the definite purposes for which the
proceeds were to be used. The practice
was carefully introduced. Out of some
S1S,O0OO00 of corporate stock issued in
that year only SIS, 100000 were sold
under the nebulous designation "for va
rious municipal purposes The rest
were sold for purposes specified in de-
tail, as in former years. But the con-
venient practice of getting corporate
stock money without any string attached
to 1t grew with amazing rapidity. The
Controllers report for 1908 shows that
out of 500, AIS, ,359 of these bonds sold to
the public In that year $50, ,957, ,754 were
for various municipal purposes" while
only SIG, AGO. 605 were specified as being
for water rapid transit and public
library purposes.
NOT TOLERATED ELSEWHERE.
In no other city of any Importance in
the country is such a practice tolerated.
Even the United States government and
the State of New York do not consider it
too much trouble to specify in detail the
specific purposes for which their bonds
are sold in the advertisements offering
them for sale. If it is considered that
specifying the purpose for which each
individual corporate stock bond is sold.
as was done in former years, entails too
much detail work. it would be an easy
matter to at least specify the particular
functional purpose for which these bonds
were disposed of. Even such designa-
tons as, for Streets for sewers, for pub
lie buildings, etc. would at least ap-
proximately carry out the intent of the
charter that proceeds from the sale of
flfty-year corporate stock must be used
only for permanent improvements speci-
fed upon the face of the bond from the
sale of which the money was obtained.
The practice of selling these bonds in
huge amounts each year for no specific
purpose. and after the money has been
received nominally transferring the
proceeds to permanent improvement ac-
counts, is opposed to the fundamental
principle underlying the issue of long
term bonds for permanent Improvements.
A return to the old method laid down in
the charter for issuing corporate stock
for specific purposes would make the
general pot practice of receiving and
disbursing the receipts of the city treas
ury a legal impossibility 1t would also
make it a serious offence for any Con-
troller to divert money raised for perma-
nent improvements to paying the cost of
city government as has been done con-
tinually in recent years.
Such a return would speedily bring
system out of chaos. and make it possi-
BILE for taxpayers to know for what pur-
poses the city's revenues were being
used