The Washington herald., 1914-02-28
THE PRICE OF
IGNORANCE

A typical case OF the get-rich quick
game comes out of Canada. A woman
living in Hamilton, Ontario, listened
too long to the eloquence of the sales
men for a new life insurance company
in Toronto. She was induced to buy
nifty shares and to pay $3.50 for them.
Then she waited, expecting that she
would begin to get a very large return
for her money.
AS a matter Of fact. that company
was not In existence when this sale
was made. II had not even obtained
its charter to write life insurance. In
addition to that, tho $3.50 which she
paid was not a payment in full at all,
but was only a payment of the pre-
MUM at which the stock was being
offered. and the papers she signed in
her ignorance bound her legally to pay
$1,000 in addition in the course of
time She cannot possibly make her
payments, and unless the law comes
to her assistance in some form or an
other she will lose the money she has
put in.
Such an open and broad swindle Is
a rather rare episode in the get-rich-
quick game. Long chances OF this sort
are not a part OF the regulation of ma
chinery for separating the ignorant from
their money. The process Is generally
much more subtle and much less dan
gerous
OF late years, the bond business has
been invaded to quite a serious extent
by the get-rich-quick operators of this
country and of Canada. In New York
there have already been discovered six
cases in which concerns operating in
realty have sold their so-called bonds to
the public, and leave the public to dis
cover when 1t is too late that the bonds
In realty were nothing much but an un-
secured obligation with every thin Sc
curity under them.
The most fragrant case in all probability
was the case of a large company owning
several office buildings In Manhattan.
These buildings made splendid pictures In
a prospectus They also made splendid
things to talk about. The company
created what is called a first and general
mortgage under which it issued what it
called sc per cent gold mortgage bonds"
1t told the public that these bonds were
secured on the office buildings and on
other New York real estate. Its statesmen
went around the countryside selling the
bonds on a per cent commission. Judg
ing by the class OF statesmen who visited
the writer of this article, it employed only
men who could talk a whole lot and very
persuasively about something they knew
nothing about Some of the public
those who bought them thought they
were buying real mortgage bond on
New York City real estate. As a mat
ter of fact, however, all the real property
owned by this company was amply mort
gagged ahead of the bonds the company
was trying to sell the general public. the
mortgage as of a year ago being some
thing over ss.0o0,0oo. as against property
valued at 12,ooo.ooo according to the COM
pany's own balance sheet. II these So
called gold bonds the company was push
ing were first mortgage on anything at
all. 1t must have been on q few mis-
cellaneous chattels and little pieces of
various kinds Of property owned by the
company. They are about as far from
being first mortgage on any very SUBJ
stantial real estate as a bond could be-
The upshot of the affair was, of course,
bankruptcy and probably total loss for
the bondholders.
1t seems pity that something cannot
be done to protect the word bond"
There is a tradition In the investment
world that the very word bond" means
safety, solidity. and values. It is a sort
OF sacred institution. If the Federal gov
ernment In its general campaign for the
uplift Of business should do something
to bring back to the word its untarnIshed
glory and make 1t universally a word of
safety. solidity, and value. that govern
ment would bestow upon the investment
public a really inestimable boon.
Outside the bond business, Of course,
there are still great number of schemes
fioated every week. which reveal to a
practiced eye all the signs Of danger and
In many cases also the signs Of fraud
which the public had been unable to de-
tect New companies trying to prom6te
patents, inventions, and deals in various
kinds Of property stiIl seem to be almost |
as numerous as they ever were. There |
have been half a dozen or so instances of |
The notation Of black fox farus in csaadA .