The Birmingham age-herald., 1913-09-25

court respecting the dissolution of the
mergers between the Union Pacific and
the Southern Pacific can be avoided in a
perfectly legal way. What is to prevent
the holders of one of the certificates
which the dissolution plan authorizes from
selling that certificate at the present
market quotation, at about 81. and then
with the cash received buying Southern
Pacific stock at the present quotation of
"a? No affidavit would be required from
the purchaser that he or she Is not an
owner of Union Pacific stock
Borrowing From Europe
There are some indications that the
brokers' are now contemplating an extern
sion of the system which has been for
some time in vogue whereby they are able
to secure needed funds for their custo-
mers without asking accommodations
from the national banks. This opportun-
ity has been seized by London and to
some extent by Canada. The broker
visits the agent in the city of some great
banking institution of London and ar
ranges with him for loans depositing as
collateral the securities which represent
the transaction which he is CARRYING on
Business of this kind is likely to be gerat-
ly Increased ii legislation at Washington
tends to curtail the Accommodations
given by national banks TO brokers.
Brokers of high standing would lin-
doubtedly be able to make satisfactory
arrangements with state-chartered insti-
tItions. Yet there are many experienced
bankrs woh are inclined 10 think that
it may be wise to refuse to give large ac-
commodations to stock exchange brokers.
The legislation will protect the banks, al
though the brokers may find some other
means of obtaining funds.
Boston's Discovery
.l.t
Boston of the manner in which it is pos
sible to carry on very large stock con-
troll operations without asking banks for
a penny In the way of accommodations.
The incident occurred about % years
ago, and to this day there is little or
nothing known of its detail excepting
to the few who took part in its transac-
tions. But 1t may be worth while to re-
port it now as an Illustration of the way
IN which brokers of those who come
into large stock control operations are
able to achieve their purpose.
About % years ago a little group of
men of capital in Boston, among them
that master of great undertakings.
Henry M. Whitney, reached by process
OF revolution a plan which involved the
purchase and control of the six leading
street railway corporations of the city.
The plan itself was an evolution from
Mr.. Whitney's original purpose to secure
and develop a large tract of land in the
southern part OF the city of Boston
From the first purpose, which was sim
ply the securing of an interest in one of
the street railway lines so that the real
estate proposition could be the more
easily worked out, there gradually de-
veloped a purpose to secure all six of the
leading street railways.
There was not the slightest doubt of the
ability Of Mr.. Whitney and his asso-
ciates to secure in Boston the funds
needed to finance this proposition. But
1t was regarded as vital to the success
of the plan that it should be kept conf
pletely ebhind the curtain. Otherwise, the
owners of stock in these various street
railway companies would have increases
the prices at which they held the stock
and might in the aggregate have in
creased them so greatly as to make IL
expedient to buy the stock
Could Easily Be Traced
But if money We're borrowed in Boston
1t surely would be traced to those who
were engineering this plan. For the same
reason 1t seemed inexpedient to try to
borrow money in New York, although
there was no doubt about the ability of
Mr. Whitney and his associates to obtain
the needed funds III this city.
There happened to be in Boston at the
etif'o LIZ '7NHt " tl'icStiitdtlNeS OF one
of tn 1argst banking institutions of Lon
don. He asked whether he could obtain
inL london the funds needed upon the
basis of Boston street railway stock and
security He jumped at the proposition
because there was money in it for him
and for his principal. In this way every
penny OF the millions needed to carry
out this plan was secured and nobody II,
Boston outside the parties themselves
knew that the street railway stock was
in possession of this American agent of
gerat London bank, held by him as col-
lateral security for loans.
Brokers in New York at this time. ii
Is understood, are adopting a somewhat
similar method.