Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1922-04-22
HALF BILLION
SPENT A YEAR
ON "BLUE SKY"
BY FREDERIC j. HAsI1IN.

Washington, April 21.--The Unit
cd States is the only great nation
which maintains no regulation gov
lerning the issuance of what are
known as blue sky securities. Blue
Sky securities are stocks or bonds
or other negotiable evidences of in
debtedness which are based on no
real tangible value. The term
blue sky" is an old one. Its origin
is this: The seller of blue sky
stock gives to his customer a hold
ling in a nearly, or entirely, worth
less or unattainable value. The
buyer becomes u bona fide owner
which the security is based, bu.
that basis has no tangible value
Wherefore he is doing practically
tie same thing he would do If he
paid money for patch of blue
Sky. No one could dispute his
ownership, but his property would
be entirely valueless to him as y
tangible asset.
The blue Sky salesman and pro-
moter has become immortalized in
American life through the charac.
ter of fiction known as Get-Rich-
Quick Wallingford. That charac
ter represents the typical blue sky
stock salesman. There are many
in real life. A favorite scheme is
to organize and incorporate de-
velopment company. The corpora
ton will claim to have land con
cession, for instance. in the Soutf
Sea Isles. Glowing prospectuses
will be prepared claiming that mil
lions can be made by growing CO.
coanuts on the land. Gullible per-
sons will believe the tale and, hav
ing visions of sudden, fabulous
wealth, will invest hardearned saw
ings in the stock. Or company
may be incorporated to exploit q
patent or secret process which
may not exist at all and if 1t does,
has no commercial value common
surate with the amount Of stock
issued against it. Oil is a favorite
field. Leases will be acquired and
stock sold on the chance of striking
oil 1t is q common saying among
investors and brokers that more
money goes into the ground thar
comes out of it. This means that
moro people pour money into pure
ly speculative oil companies than
receive profits from oil that comes
out of the wells.
State Laws Inadequate.
About half of the states Of the
union have raws regulating the is
suance Of stocks. Under their pro-
visions, promoters desiring to sell
securities must have their projects
examined by state commissions.
They may not sell stocks unless the |
of the state in which |
the product is launched certifies
that actual value stands back of |
the stock. The weakness of this |
regulation is that it restraints fraud
ulent activities only within the |
home' state of the blue sky enter |
prise. Statesmen can sell in other
states quite freely, the states hav-
yond their own borders.
In recent years various branches |
Of the government repeatedly have |
recommended to congress the en-
1ctment of federal blue sky legis
ation which would cover the en-
tire country, terrifying and sup
the state laws. Bills
rave been introduced, but to date
no action has been taken and the
United States remains practically
IN unrestrained hunting ground for
he blue sky Wallingford.
During the war, under the broad
powers OF the government, the capt. |
tai issues committee was formed to
estrain the issue of blue sky stocks.
This was necessary in order that
he investment funds Of the nation
he conserved TO pay war costs.
The committee existed only from
Nay II to December 81, 1918, and
n that short time handled applica-
ions to issue securities amounting
o s3,777313.000. The amount
as representing FRAUD