The Washington herald., 1909-01-18
MARKET WAS WEAK
SpeculativeD Doubt Regarding
Erie Is a Factor.
OPERATORS HELP DECLINE
URfavorabIe Eject on Large Inter
ests by Gas DecisiOn-InvestigR-
tiOn OF stock Exchange by Gov
erBOF's Commission Excites Inter
est-Wash sales scrutinized.

New York, Jan I7.-It became fairly
evident last week that-aside from the
operation OF certain general tendencies.
such as perhaps those not infreQuently
noticed IN the first two or three months
Of the calendar year, making for dulIness
and rregulaTity and what stock specu-
lators call an unsatisfactory though not
necessarily weak condition OF the secu-
rity market-Drioes Of stocks were under
the direct influence Of two particular
market factors.
The first fsthese was mass Of spec
uiatiTe doubt which arose concerning the
status for the time being Of different
classes Of Erie securities. It was NJ
nnored that the public service commits
sion had demurred TO the application,
or al least 10 the form Of the application.
Of the Erie Company to take an issue Of
collateral trust bonds, and the question
presented Itself how the Erie would
be affected II the application should be
denied
Served 20 Weaken Market.
Operators for the decune endeavored 10
increase the uncertainty by sII the arts
IN their power and entered into large
contracts for the decline In the Erie
stocks. The fan that took place in the
Erie issues coming in addition to the
previous sensational drop in ConsoIi-
dated Gas stock and a very considerable
decline also in the local traction shares
served 10 weaken the market as a whole
T
some actual liquidation IN the Erie stocks
based on the idea that as the new anan-
cial plan for the Erie includes a scheme
for funding coupons on the general mort
gage bonds Of the company for q period
OF i've years the arrangement precIudes
the declaration Of dividends on the Erie
stocks in this period.
In the second place, the market suf-
fered~ last week from the decidedly IN
favorable effect made upon the minds
Of large capitalist interests throughout
the country by the decision OF the Su-
preme Court Of the United States IN the
Consolidated Gas case.
On Fair YaIuztfon.
While the court was very careful to
point out that reference was only had
70 the distinct case under consideration
in its ruling that a per cent dividend
return upon a fair valuation OF its prop
eTty was sufficient compensation TO the
Consolidated Gas Company for the public
services performed by It, yet neverthe-
less tbs general intimstion conveyed n
the opinion Of the court as unanimously !
rendered was that if concerns OF a sim /
liar nature 70 the Consolidated Gas Cou,-
pany IN different States were able 10 nav
dividends on their stocks at the legal I
rate OF interest II could not be said that 4
their property was confscated II by Rc- 4
non OF the State authorities their diVi-
oends were limited 70 the rate described. (
Naturally enough the current investiga-4
ton now being privately held OF the pre-
Taiiing practices and methods Of dealing
IN securities and commodities BY the in
IoTnaI commission appointed By the gov
ernor of the State Is exciting a consider
able amount OF interested discussion in
the financial district
The governors Of the stock exchange
have indeed always acted with Draconian
severity With the single exception Of the
permission granted members OF the stock
exchange TO deal on the floor OF the ex-
change In securities rated as belonging n
an unlisted" department. for vHich
prices are recorded BY the stock quotation
Instruments in the same way as those for
listed stocks and bonds and whose 81
called unofficial status Is but little recog-
nized BY the great majority OF the general
public, there is little that can he criri-
cised in the established scheme 1n6e-
which stock exchange transactions era
carried on
I1fractiOnS Are Petty.
Sometimes infractions Of the rules ere r
petty; al other times they are grave Let
the case be taken. for illustration. Of the
custom OF crossing bonds IN the bond
market, a practice that is in itself per
fectly proper and which Is often neces-
sary for thoroughly legitimate reasons
The meaning Of this crossing is.
briefly. that a broker dealing In bonds
VIII not infrequently report transaction
IN given security where ne himself
figures as both the buyer and seIlar in
the operation; and II may indeed bappen
that the broker IS merely reporting 10
the exchange a purchase IN the market ,
by client Of bonds at given figure and
sale OF the same bonds by anotherl
client az the same figure or with the
broker himself, il may be, acting. as is
his right, as one Of the parties 10 the
trade
But It Is very clear that the custom is
oAe lIaL dllONs opportunities for fraud. I
even il such opportunities be IN the verv
nature Of the case inevitable When a
broker who IS known 70 De q man of
small capital reports day after day large
transactions Of the crossed" variety ]
issue OF bonds the suspicion arises that
these transactions are merely washes l
that IS TO say fictitious. and that the
reason they are made is TO give a quota
ton for the bonds that could not be {
obtained in the course Of genuine busi- :
ness +
Injustice apparent.
The injustice OF all this to people who 7
desire their own brokers 10 make genuine \
purchases OF sales OF the same bonds is q
apparent. and It IS apt TO furnish rather a
cold comfort TO bona fde customer OF
q commission house who thus finds him
self barred from seemingly fair and :
active market 10 be told by his broker r
that the seeming sales OF the bonds that ?
were going on were merely crossing" h
transactions. as if this furnished a final
and reasonable explanation OF the affair. q
Il IS experiences like these that give z
people a bad idea Of Wall Street; and the =
bad idea could easily be dIsSipated II the .
and honest men who con- q
stltute nine-tenths OF the membership OF Il
the stock exchange would make It their II
business 10 cause an investigation Of n
each suspicious transaction Of the kind a
10 whenever they OF their Gus I.
toners we're victimized by It It may be "a
H--a