New Ulm review. (New Ulm, Brown County, Minn.) 1892-1961, 1911-10-04
Making Fortunes over Night.

The second instsllment Of the report
Of the commissioner Of corporations
on tho tobacco trust illustrates most
vividly some Of the more familiar
means BY which the American public
has been robbed OF vast riches by the
financial geniuses who understand the
game.
The Duluth Herald describes the
process in the following manner:
First get hold of as many business
enterprises in an industry as possible;
then capitalize the combination as
many times the price paid for it; then
force the people to pay dividends on
the watered capital; and then rig the
securities SO that q few insiders get
most OF the profits while the common
or garden variety Of stockholder must
content himself with q modest return.
You vary this, whenever you feel in
the mood, by starting something that
will depress the stock as low as you
want it, buy heavily and then start
something more that will put its price
up again. Thus the insiders catch
both the public and the minority
stockholders both coming and going,
and it's no trouble at all to pile up
vast fortunes for the insiders in q
very short time.
Tho commissioner reports that the
tobacco trust has earned excessive
dividends on excessively watered
stock; that the greater part OF these
earnings have been diverted to In
siders by deft financial manipulstions;
that wherever there 10 high degree
OF control there Is q correspondingly
high rate of profits; and that the trust
resped enormous profits on top OF
profits already enormous by keeping
for itself the war revenues on tobacco
when the government repealed them.
One striking example is given OF
how the game is played.
One of the tobacco concerns that
went into the trust was doing satts'
factory business and making money
in 1885 on a valuation and capitaliza-
ton of s25O,O0O.
Five years later, when the old
American Tobacco company was
organized, this one concern formed
the basis for the instance of securities |
to $1,000, 000-thirty times
it's worth before it went into the trust.
Eight years later, in 1908, the securi-
ties based on this $250,000 business
amounted to 1922, 100000 and in the
cash dividends and interest
on these securities haG amounted to
SIG, 900, 900 more.
Thus modestly rich business worth
$3.50, 900 has been made the basis for
wealth to the tobacco trust stock
holders : principally the Insiders
to s3s, 100000, or more
than one hundred and fifty times its
value.
That wealth was not charmed out of
the air. 1t was wruug from the
tobacco consumers of the country by
the power of an unregulated monopoly.
This is but one example, add there
are hundreds, even thousands, of
others. There was nothing to prevent
this process. Men consolidating bust
ness enterprises could capitalize them
for what they pleased, and if their
control of the industry was firm
enough they could make the American
people give substance to every dollar
of the watered stock by forcing to pay |
prices for the commodity or service
handled high enough to yield divi-
dends on the inflated capital.
1t was easy, ridiculously easy, and
few years ago it was being done
right and left. On relatively small
foundation of property prodigious
edifce of capital has been erected.
Unsubstantial at first, because most
of it was based on nothing, it was
made substantial by the power to
compel the people to pay dividends on
it.
And yet some people profess to find
it a mystery that egregious wealth and
sickening poverty exist side by side in
this country!
The other day an Irishman was