Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1931-05-02
rvs UNBEARABLE BURDEN

Froblems Of financing win doubtless attract growing at
tenon the halls Of congress- IN the columns q
ana n the minds Of the public These problems are 80 init
atey connected with the Sterilization Of business ana nou
srysthat they cannot longer be ignored
Economists and financial writers have skrtea 81 arg
M subject but been oath TO attack dreety Ihe
nave written in generaities Of initiation and IT'S perls o.
"dsflaon and its dangers Iney nave avoided us WIN
Yet the facts are 50 plain that high school student
hod Be- able 10 understand them The new era nanciers
ook il For rantedat least in pubctha American indus
y would be able from 800 to 500 year on us IN
vested capital And they sold soaled securities to the public
On that assumption few they even assumed
thai business could pay 2oOO% per year.
These times require candid study and fearless discus
sion Of certain fundamentals in finance When statesmen Jour
nasts educators and investors reearn their arithmetic there
wiz be less likelihood OF another speculative orgy sueh
brought about the current depression
F'safe investments normal times may receive guaran
eed incomes high 80 1t bonds bring oso, preferred
stocks should return from So So Common stocks with no
prior rights taking most Of the business risks should
me system Of mass distribution that eliminated in the
panic Of 1929 precpated the depression de-
pended on initiation Of values perhaps averaging 5000
that is to say the average stock sold for five times too
much certain Of the prices paid BY the pubic
we're hundreds Of times too high
The trouble with the country today is that Wall Street
brokers aided by Of Better Business Bureaus are
under the exemption clause Of the buey laws loaded the
earn 500 per year order pay reasonable dividends
And the number Of companies earning SOC per year
Before the days bluesky lawsbefore the New York
Stock Exchange and its satellites became instruments OF gov
ernen-prOmoters Of enterprises could finance opera
tons Of about 2Os Eighty cents Of each dollar went
nt the companys hands twenty paid the Of
the fiscal agents and statesmen Not always did the
cost Of financing reach 2096 Sometimes it fraction
With 209o financing cost company need make only
1915 in order to pay 1919.
But when the financing cost reaches 509sand that is
the average praced under the buesky laws when
stock sold by agentsa company must zoe N order
pay 10 Bueky commissioners say that they never
permit 500 financing cost but they aresn They do
The permissible costs theoretically from 25 TO $3.50 but
il always possible to evade this restriction by gifts and
Of stock agents and sesmen that practice
about half the money raised under the permit system reaches
the company financed
Why bother with buesky laws however, when they can
easily evadedf Why sell dime for 20c under blue
sky permit when it be sold for $40 through stock
change Why advertise treasury stock IN Legitimate com
pay through the newspapers when you manufacture
market furry and get the newspapers to free propa
gandaf
Under the financing system controlled by the New York
Stock Exchange the cost Of distributing ownership in Amer
lean business has been around 80%in less IN
many That that pay fair return to
stockholders the companies must 500 per yearom
there up to 200So.
That system, repeat unbearable burden in
dustry.
Unless that system cOntrOlled-unless method Of
financing substtueduness the destructive buesky laws
replaced with constructive stautesuness direct indus
trial financing encouraged and market manipulation pun
ished BY prison termsthe depression win be totally
echpsed by the panic Of 1885.