J '7 7& OUR FINANCIAL UPH EAVALS THEIR CAUSE AND CURE "By J. SELWIN TAIT PR ICE 50 CENTS LR3KARY of CONGRESS I Two Cooies ReceJ' MAY 31 i9Qf . Copyright Etfry QlASZtfCL XXC., No. i Copyright, 1907, By J. SELWIN TAIT. PRESS OF Byron S. Adams, Washington, D. C. Our Financial Upheavals their cause and cure By J. Selzvin Tait. INTRODUCTORY. THE RECENT CRISIS: CONTRIBUTORY CAUSES. THERE were undoubtedly many causes which contributed to the recent serious slump in prices and the resultant crisis, such as the sending out of the country of large sums of money in the various enterprises in which our people are engaged, the increasing volume of the country's business which called for all the capital it could spare and more, the issuing of huge loans which compelled the setting aside of large re- serves in connection with the bank deposits which they represented, the strain of the long continued investiga- tions rendered necessary by public dissatisfaction with the condition of many of our corporations, overspecu- lation and inflation of the worst kind, and a number of minor influences. These were all contributory, as stated, but none, nor all of them combined, could have left the market in such an unsatisfactory shape, or have brought on such a crisis at this juncture, if the coun- try's corporations had been founded on a sound basis and had thereby earned the full confidence of the pub- 2 Our Financial Upheavals lie. A country resembles an individual insofar that when it has arrived at a robust maturity, as is the case here today, and has a good circulation and a good finan- cial digestion, it can throw off by force of its inherent powers of resistance all ordinary ills of a milder char- acter. The great trouble with the country, however, has been a radical unsoundness in the organization and con- duct of its corporations, with evil results which have been accentuated by an inelastic currency. COMPANY FORMATION IN GENERAL DISCUSSED. In the following paper the writer has discussed the railway situation, but his main object has been to inves- tigate the still greater question of company formation and management in general. The time is fast ap- proaching when railway corporations will bear the same relationship, in point of volume, to corporations in general that the railroad business bears to the entire business of the country today — that is to say, they will form an important part of such corporations, but their share in the whole will by no means be an overwhelm- ing one. The writer would like to give a commercial para- phrase to the adage that "A man is as old as his arteries," by saying, that the continuance of a country like our own as one of the foremost world-powers commercially, depends entirely upon the soundness and honesty with which the corporations which handle its commerce are organized and managed. There is a very suggestive analogy between the arteries of the Introductory 3 human body and our corporations, and this country can no longer continue to flourish under present condi- tions than a man with decaying arteries can hope to long preserve his physical robustness. REMEDY RESTS WITH CONGRESS AND STATE LEGISLATURES. The remedy for the present unsatisfactory condition of the laws governing our corporations rests with the Houses of Congress and our various State Legisla- tures. These can only be influenced by the proper education of the public mind on the subject, and the creation of a healthy popular sentiment calling impera- tively for better laws. It is with this view that the writer offers this contribution by way of an invitation to a general discussion of the subject. I. PAST RAILROAD HISTORY. TWO CLASSES OF EARLY RAILROAD PIONEERS. It is not to be denied that the railroad pioneer who went into the wilderness and risked his capital and business reputation in its commercial development played an important part in the building up of the country, and that in proportion to his risks he was entitled to a larger profit than the man who stayed at home and took no risk whatever. Not only had the pioneer his uses — he was even necessary to the proper and timely development of this country, and those who underrate what he did, or wish to see him expelled from our financial system, have not, it is safe to say, sufficiently studied the subject. So it must be understood that no word uttered in this brochure should be taken as intended to detract from the value to the country of the pioneers of good class. From early days down to the present time they have rendered a service to this country which it would be impossible to overrate, and, considering the stu- pendous difficulties they had to overcome, the cour- age, tenacity of purpose and administrative ability which they displayed, and — in some instances where the work is still difficult — which they continue to dis- play, they are fully entitled to the sincere respect and approval of their countrymen. Unfortunately there have always been two classes of pioneers — one who was content with a moderate Past Railroad History 5 profit and who ought to be reckoned among the coun- try's benefactors, and the other who simply appropri- ated everything in sight, thereby crippling the proper- ties he should have fostered, and doing incalculable injury to his country's investments. It would be an injustice to discourage the honest pioneer. The other, on the contrary, is dear at any price. The country is better without the man who cannot work without the stimulus of a colossal fortune. Not so much by reason of the cost of his assistance, as because of its financial immorality. PROMOTERS' METHOD WRONG IN PRINCIPLE. While our two classes of promoters were widely different in their character, it is evident in looking back that the methods of both were wrong in principle. Where a country's commerce is carried on by means of investments in stocks of corporations by the public, from which without exception these corporations de- rive their power, it is both rational and essential that such safeguards should be thrown around the issue of these stocks as shall make the public feel safe, or reasonably safe, in investing in them; also that these stocks should represent actual existing values, and not a more or less optimistic estimate of future profits, or, what is still worse, the fictitious value placed upon his property by the owner and his associate promoters. To issue stock for prospective profits, or for any- thing but cash or properly determined values, is cal- culated sooner or later to degrade the general quality of the country's corporate stocks, and to strike a vital 6 Our Financial Upheavals blow at the root of its entire financial fabric — a fact becoming more important daily as the country depends in a growing ratio on corporations to transact its business. When our railroad stocks were first issued they were largely placed for sale in foreign countries, where no railroad stocks had ever been issued except for an equal amount of cash, and where such a practice as issuing them against future prospects had never been suspected. The discredit brought upon this coun- try when our practices were laid bare, imparted a shock to American credit which it took many years to outgrow, and which, indeed, it is extremely doubtful if it has even yet fully outgrown. A BETTER WAY TO CAPITALIZE. To the natural question in what other way it was possible ior those pioneers to have reaped the reward of their efforts there are no doubt several answers, but the one which is readiest to hand is this: Had the promoter been content to build his road, giving his financial backers bonds for its actual cost, and had he left the capitalization of the property to a later period, when the future value of the road had begun to be demonstrated, and when competent valuers outside his own interests and in no way connected with them, would have confirmed that demonstration, then he could have sold out his interests on an independent and legitimate valuation of his property, and the result would still have made him and his backers rich beyond the dreams of avarice and without debasing his coun- try's credit, while the purchasers could have organized Past Railroad History 7 a corporation whose securities would have been legiti- mate in themselves and issued in a legitimate way. As it was, the pioneer-promoter frequently did his entire work of capitalization without supervision or outside valuation of any kind. Not only was there no check upon his operations, but he was his own appraiser and auditor, practically without limit as to stock-issuing powers, with the result that he burdened the markets with more or less worthless securities, which derived any ultimate value they had from the unparalleled growth of the country which could outlive and adjust almost any unfavorable preliminary conditions. It ought to have been apparent to all that no pro- moter of a company organized under our laws and sharing their fostering care and the privilege of their protection, should have the right to fix the value of the property he proposed to sell by issuing stock against it without restriction and without proper and inde- pendent valuation. RAILROAD METHODS FOLLOWED BY OTHER CORPORATIONS. It is, however, undoubted that those early methods of our railroad pioneers existed, and that they afforded an example that has been followed with more or less faithfulness by numberless promoters since that time, and a habit of gross over-valuation of properties by the vendors and consequent over-capitalization is one of the most pernicious customs with which our legis- lators and financiers have to contend at this time in connection with our financial methods — another being the habit of transacting our business in a "hole and 8 Our Financial Upheavals corner" fashion instead of in the broad light of day as the affairs of corporations enjoying a public charter ought to be transacted. FIDUCIARY DISHONESTY AND ITS RESULTS. Our railroad presidents — and they are by no means the only offenders — instead of being the servants of the corporations they were employed to guard, and the honest fiduciaries of the valuable franchises intrusted to them, became in known instances financial dictators who withheld vital information from their stockholders ( for their own aggrandizement, made huge fortunes for themselves with the special knowledge they obtained while acting as directors, and by the manipulation of their companies' accounts to suit their own purposes, and in the pursuit of their own interests, again and again brought the country to the verge of disaster. Their reckless and unprincipled acts have on numerous occasions during the last thirty years made such a shuttlecock of values that a considerable section of the investing public has withdrawn largely from railroad securities, of which the rising generation in no small degree inherits a very intelligible distrust. THE RESULT OF PUBLIC DISTRUST. Perhaps at this point it is well to inquire: What might be expected in a country of growing wealth in the case of a system of discredited standard invest- ments ? The natural answer would appear to be : We should find that there would be a disposition to seek other forms of investment; that is to say, that the Past Railroad History 9 money which should have gone into railroad securities would be found to have gone conspicuously in other directions, and from its volume to have brought about certain abnormal conditions in other fields of security. This is absolutely what happened. Conservative men resorted to our savings banks and to real estate in overwhelming numbers, whilst speculative men went into mining stocks and other similar securities — hence the strong development of the curb-stone brokerage business in our great cities. REMARKABLE EFFECT ON OUR SAVINGS BANKS. Today savings bank securities and the real estate of our cities, owing to the demand forced upon them in this way, have grown to prices disproportioned to their values. This was inevitable. With no form of stock investment in sight which the small capitalist who con- demned our railroad methods approved, he put his money into one or more savings banks, where though the interest was moderate, he felt that the principal was safe. To such an extent has this been done that the aggregate deposits in the savings banks of New York State exceed those in all the savings banks of Great Britain, as will be seen from the following fig- ures of the condition of the savings banks of the two countries on the 31st of December last: Savings Bank deposits of New York State $1,362,035,836 Savings Bank deposits of the United Kingdom 996,827,464 $365,208,372 io Our Financial Upheavals Does this mean that the Americans are a more thrifty people? Not at all. It indicates, as already stated, a defect greatly to be deplored — the absence of other investments in which the people have confidence. Does it mean, on the other hand, that England is growing relatively poorer? Not at all. Twenty-five years ago England stated that she was saving at the rate of $500,000,000 a year. She is certainly saving a great deal more now, yet all the money she has in her savings banks is a little less than a billion dollars — in- dicating a healthful outlet for her savings in other directions. EFFECT ON REAL ESTATE VALUES. And this is only the first of the effects produced by distrust in our corporations. The whole trend of the savings banks of today is to educate its depositors to the value of real estate. Savings banks themselves are extensively interested in realty, and when a depos- itor withdraws his money he follows the example of the bank. Thus the reprehensible methods of our cor- porations which have driven thrifty people away from their investments, have forced them to concentrate their attention, not only recently, but for decades, upon real estate, and tens of thousands of individuals — to express it very moderately — besides great investment corpora- tions without number, are interested in real estate to- day, who, in other countries, and here under more favorable circumstances would have embarked their money in the stocks and bonds of corporations honestly and profitably managed, much to the advantage of the corporations and to the profit of the investor. Past Railroad History ii Another curious feature of the situation is percepti- ble — that the absence of safe and sound investments has driven into the savings banks the well-to-do, and in many instances even the wealthy, for whom these banks were never designed, with the result that it is no uncommon thing to find in wealthy cities like New York a large number of people who have on deposit in each of the savings banks in the city the prescribed limit of three thousand dollars — a custom which in the aggregate has still further increased the demand for the municipal and other securities in which savings banks can invest, to the injury of the man of small means for whom savings banks were designed. Turning to the reverse side of the shield, we find that the force of competition for real estate, engendered in the way described, has driven the price of realty in our cities to such figures that the rents are out of all proportion to what they are in more thickly populated European countries. In cities like New York this con- dition of affairs is practically destroying the possibility of a home for the individual of small or even moderate means, who, with like income abroad could have a house of his own. The overflowing tenements, the only less crowded flats, the higher rent for that which is not a home in the old time acceptance of the term, is the result of and is directly traceable to our dishonest corporate management, and another result is the starva- tion of enterprises of national importance by reason of the lack of funds estranged from them in this manner. These fruits of the policy of watering stock will show that we cannot commit a financial heresy of the kind without affecting most seriously all classes of our people. 12 Our Financial Upheavals BAD EFFECT ON FOREIGN CAPITAL. The practice of depreciating our principal securities in the way described has had another effect — it has frightened foreign capital from our shores. Had our railroad enterprises been honestly organized and man- aged from the outset, it is beyond all question safe to say that this country could have had foreign capital practically without end for the development of its en- terprises. Upwards of twenty years ago the writer pointed out that it would pay many British investors, subject to the keen competition of this country, to go out of business altogether, and to invest their large capital in American securities. The result would have been that we would have enriched our best customers, who would have utilized their dividends in buying our goods, so that we would have had the benefit of foreign capital at a time when it was as necessary as life-blood is to the physical body, and the profits earned by it would have been practically as valuable as if in the hands of domestic lenders. This too may be pointed out : That the policy which attracts foreign capital to our shores in huge quantity, is as instrumental in knit- ting the bonds of international friendship as the best argument of the Peace Congress. No nation likes to fight its own capital in the hands of another country. Invested capital is assuredly one of the ties that bind. It creates a condition of comity and even friendship between nations. It is one of the best guarantors of international peace. Again and again during the last three decades has it happened that foreign countries attracted by our magnificent opportunities have poured Past Railroad History 13 their wealth into our laps, only to be obliged to snatch it back at a ruinous loss in the excitement of exchanges convulsed by some fresh revelation of wholesale fraud- ulent mismanagement. The pity of it! Such a slaughter of geese that laid golden eggs ! Do the same practices prevail elsewhere? Fiduciary immorality is for the most part unknown in the leading financial centers of Europe. They may have other sins to an- swer for, but not the national sin which distinguishes us as a country. Until checked by the Companies' Acts Great Britain suffered much from the greed and unscrupulousness of the London promoter, who in a great many instances was grasping and unprincipled almost beyond belief, but he was always more or less under suspicion, and all the injury he could do was done prior to the com- pleting of the organization of the corporation, whereas in the United States irregular incorporating has been too frequently followed by the dishonest management of the corporation itself by its own trusted officials. WONDERFUL SHOWING OF BRITISH CORPORATIONS. Some years ago the writer had occasion to extract from the London Statist particulars of a year's work- ing of three groups of corporations representing as many different kinds of investments. One of these groups embraced trading corporations, another manu- facturing corporations. Two of the groups had a total capital of $612,000,000, on which the average dividend paid was eight per cent per annum ; the capital of the other group was not stated, but it embraced 418 14 Our Financial Upheavals corporations and the dividend averaged over eight per cent per annum. Those particulars were taken hap- hazard out of a leading English financial paper, and the capital referred to is but a small percentage of what is invested in British trading and manufacturing com- panies. In a recent number of a leading London financial paper the writer notices that all the corporations en- gaged in one particular branch of manufacture with an aggregate capital of $117,000,000, earn a little over ten per cent in the way of profits, the number of corpora- tions being seventy-eight; and that the great London incorporated retail trading stores — 11 in number — pay an average dividend of a little over 12 per cent — the only wholesale house mentioned paying 20 per cent. At the same time a list of fifteen of the great London banks representing with their branches over two thou- sand banking offices, pay an average dividend of 15 per cent. These are not selected examples, but simply represent such particulars as are readily at hand and are evidence that the figures of former years already referred to are fully maintained. If the British public were not satisfied with the re- sult of their investments in corporations in the past, the issue of new capital would languish. Instead of this being the case, however, it is found that the new capital applications for the first quarter of 1907 amount to $247,000,000, which is considerably above the average of recent years. The bulk of the subscrip- tions to such companies comes from the profits made in other corporations and in this way the money made in the industrial business of the country is turned back Past Railroad History 15 again into commerce to add still further to the pros- perity of the country. IMPROPER INCORPORATION METHODS VERY INJURIOUS TO COUNTRY. Is it conceivable that money would go into savings banks or real estate in its present proportions if there was as wide a selection of good investment stocks in this country as there is in the United Kingdom ? And is it proper that the profits made out of a coun- try's trade instead of being turned back into it to fruc- tify as liquid capital, should be withdrawn from our commerce and sunk in permanent investment like real estate? It is a national loss to an expanding country like the United States, which needs every cent of the money it can get to develop its commerce to have so large a proportion of its working capital withdrawn in this way, instead of being reinvested in it and further adding to the country's wealth. The money invested in railroad bonds and railroad stocks is directly use- ful in extending the country's commerce. Can the same be said of real estate investments? II. PRESENT CONDITIONS. DISCREDITED SECURITIES. The situation today in this country is as follows : Many of our railroad securities are discredited and it is impossible to obtain the funds for the development of the roads which is made vitally necessary by the rapid expansion of the country's commerce. Simultaneously, a vast number of other enterprises, copying the meth- ods adopted by the railroad companies have fallen into disrepute, and it is evident that in order to give the public full confidence in our legitimate corporate en- terprises, such legal safeguards will have to be thrown around all of them, and not around railroad securities only, as will serve to protect the public, which neither in this country nor anywhere else, has ever been able to protect itself. "THE COMPANIES' ACTS" OF GREAT BRITAIN FOR PERUSAL. In suggesting at this juncture that The Companies' Acts of Great Britain will well repay perusal, as an evidence of what has been done in that country to pro- tect corporate interests, the writer does not wish to be considered as unduly exalting English methods over others. That country has faults of her own to answer Present Conditions 17 for, but whatever her shortcomings may be along other lines, she cannot as a nation be charged with fiduciary dishonesty in the management of her corporations, nor can she be charged with neglect in framing laws to protect her stockholders during or subsequent to incor- poration, or in laxity on the part of her courts to en- force these laws. England, it will be remembered, is a nation of stockholders, and it was a task requiring great delicacy of treatment as well as sound judgment and experience to frame laws which while protecting the investor — in many instances against his own cupid- ity and folly — should not retard the country's proper development by harassing legislation. Even the London promoter or organizer of corpora- tions, unscrupulous though he has been in the past, had his uses — his vast uses — and so important were these that it has been the chief difficulty of the Govern- ment of Great Britain for the past half century in dealing with these matters to avoid putting him out of business, while at the same time safeguarding the interests of the stockholders by protecting them against the wiles of unscrupulous members of his craft. England recognized, too, that in indiscriminate legis- lation an honest man is very much more likely to be harassed than a rogue, who lacks the reverence and fear of the law which the other has, and no nation has been more careful in its avoidance of oppressive legis- lation toward those mixed instrumentalities which go to build up the commerce of the country. The figures given elsewhere show how well it has paid to exercise such care. 18 Our .Financial Upheavals HISTORY OF INCORPORATING IN GREAT BRITAIN. Prior to 1862 British corporations were simply un- limited partnerships. During that year the Limited Liability Act was passed, which limited the liability of the stockholder to the face value of his stock. The passage of that Act gave to that country its greatest impulse in company formation. In the vast number of companies formed were many of worthless char- acter, and England recognized at the outset the inabil- ity of the ordinary investor to protect himself in the face of this greater license in corporate matters, and made his protection her most careful study, and the highest legal talent the country possesses has during the past forty -five years engaged itself in adjusting this subject, with the result that the London Times, in a recent issue, was able to point with pride to the fact that of the 40,000 companies which have their registered offices in England, the great majority are honest concerns. As a standard of corporate honesty which meets the approval of the London Times is by no means a low one, there is no doubt that the tribute paid to English corporations is in reality a very high one, and that it is the direct result of the ceaseless efforts made by the Government to protect the invest- ing public. PROVISIONS OF "THE COMPANIES' ACTS." Among the numerous provisions and amendments of The Companies' Acts for the incorporation, regulation and winding up of trading companies and other asso- ciations, are the following: Present Conditions 19 1. The Act is not local only, it covers England, Scotland and Ireland. It provides that no company, association, or partnership having for its object the acquisition of gain, shall be formed unless it is regis- tered as a company under this Act, or is formed in pursuance of some other Act of Parliament or of Let- ters Patent. THE MEMORANDUM OF ASSOCIATION. A Memorandum of Association usually supple- mented by Articles of Association shall be filed with the Registrar of Joint Stock Companies. These shall describe the full intent and purpose of the company, shall contain precise particulars of any allotment of stock for a consideration other than cash, of any con- tracts of sale, or of services or other consideration in respect of which said allotment was made, and shall furnish all desirable information in connection with these matters. When the memorandum is filed and a certificate of incorporation given by the Registrar that shall be conclusive evidence that all the requisitions of The Companies' Acts have been complied with. A copy of the memorandum with the Articles of Asso- ciation shall be forwarded to every member at his re- quest on payment of the nominal fee of one shilling. 2. The papers filed with the Registrar shall state, among other things, the amount to be offered for public subscription, the amount to be subscribed and paid in, also the minimum amount upon which the com- pany will proceed to allotment — 5 per cent upon the amount subscribed being the smallest amount payable. If the minimum amount stated has not been subscribed 20 Our Financial Upheavals at the expiration of forty days, all money received from applicants for shares shall be forthwith repaid to the applicants. There is a heavy penalty if the repayment is not made within forty-eight days. 3. Mortgages and charges shall be void against li- quidators or creditors unless filed with Registrar for registration within twenty-one days of their creation. Such registry of mortgage shall be open to the public for inspection of any person on payment of a purely nominal fee of not exceeding one shilling for each in- spection. A copy of such mortgage shall be kept for inspection of members or creditors. THE PROSPECTUS. 4. A prospectus is issued by every company. It means any prospectus, notice, circular or other invita- tion or offer to public subscription of any shares of a company. Like the Articles of Association it must be dated and signed. It must state the amount of the minimum subscription in which the directors will pro- ceed to allotment, and also the amount payable on application. In addition to a proper description of any property purchased, it must state the names and addresses of the vendors of any property purchased or acquired by the company, or proposed so to be pur- chased or acquired, which is to be paid ,for wholly or partly out of the proceeds of the issue offered for sub- scription by the prospectus. Any commission paid for subscriptions must be authorized in the Articles of As- sociation and disclosed in the prospectus. If no mini- mum amount of subscription has been fixed in the Memorandum of Articles of Association, or in the Present Conditions 21 prospectus on which the company will proceed to allot- ment, then the whole amount of capital offered must be subscribed and the same paid on application to the company. THE RIGHT OF THE MINORITY. 5. The directors of a company shall on the requisi- tion of the holder of not less than one-tenth of the issued capital of the company proceed to convene an extraordinary general meeting of the company. The requisition must state the object o,f such meeting. If directors do not proceed to cause a meeting to be held within twenty-one days from date of requisition, the requisitioners, or a majority of them in value, may themselves convene the meeting. DIRECTOR'S LIABILITY. 6. Under the Directors' Liability Act of 1890, which is construed as being one with The Companies' Acts, every director of the company at the time of the issue of the prospectus or notice, and every promoter and every person who has authorized the issue of the pros- pectus or notice, shall be liable to pay compensation to all persons who shall subscribe for any shares on the faith of such prospectus, for the loss or damage they may have sustained by reason of any untrue statement in the prospectus or notice, or in any report or memo- randum appearing on the face thereof, or by reference incorporated therein or issued therewith, unless it is proved that he had reasonable ground to believe that the statement was true, and unless he had reason to be- 22 Our Financial Upheavals lieve that the untrue statement fairly represented the report or valuation of an engineer, valuer, accountant or other expert, provided that notwithstanding it was a fair and correct copy, such director, etc., who author- ized the issue of the prospectus, shall be liable to pay compensation if it be proved that he had no reasonable ground to believe that the person making the statement or report of valuation was competent to make it. THE PROMOTER CANNOT RETAIN ANY UNDISCLOSED PROFITS. 7. The Promoter — the individual who forms the company and sets it going — now stands in a fiduciary relation to the company he represents and cannot retain any undisclosed profit. 8. Every contract, document, or matter not speci- fically referred to in the prospectus, and calculated in any way to influence the investor's judgment, shall be void, nor can any compliance with this provision be waived. 9. All the Directors retire at the first general meet- ing of stockholders. After that one-third retires an- nually. Only the company in general meeting can by special resolution remove a director before the expira- tion of his period of office. 10. Directors are liable for funds improperly ap- plied ; if they pay dividends out of capital they may be liable for the whole amount so paid. 11. Auditors are appointed by the stockholders at general meeting. They retire annually and are eligible for re-election. These auditors are the agents of Present Conditions 23 the stockholders. They are furnished with a list of all the company's books, and to these they have access at all times. They are empowered to demand what- ever information or explanation they require of the directors. Once a year at least they make a careful examination of the accounts and vouchers, and of the balance sheet. The latter must comply as far as pos- sible with the form provided by The Companies' Acts. 12. On reasonable complaint the Board of Trade may cause an examination of the company's books. 13. If any director, officer or contributor of any company, destroys, mutilates, alters or falsifies any book, paper, writings or securities, or makes or is privy to such, he is guilty o,f a misdemeanor and liable to imprisonment for two years. LIST OF STOCKHOLDERS ALWAYS ACCESSIBLE. 14. A register of members showing the names and the numbers of shares held by each must be kept at the registered office of the company, where it must be open daily for the inspection of any member gratis, and of any other person upon payment of the nominal fee of one shilling. Copies of such register can be obtained by anyone on payment of sixpence per hun- dred words. There is a heavy penalty for each day of refusal. MUZZLING THE MAJORITY INTEREST. 15. If so specified in the Articles of Association, every stockholder shall have one vote for every share up to ten, and an additional vote for every five shares 24 Our Financial Upheavals beyond the first ten up to one hundred shares, and an additional vote for every ten shares beyond the first one hundred — thus the holder of ten thousand shares would have only 1,018 votes. Note. — The provisions with reference to the gradual retirement of directors, and which limit the voting power of stockholders, throw such dif- ficulties in the way of a sudden seizure of control of a company by a majority interest as to discour- age any effort of the kind. FALLACY THAT THE STOCKHOLDER CAN PROTECT HIMSELF. While certain of the conditions insisted upon in the Memorandum of Association and Prospectus of British Companies have not been overlooked by the laws of some of our own States, the fallacy which England ex- posed a half century ago that the stockholder was able to protect himself apparently exists here still, and it is the first delusion that the country should get rid of. The stockholder has to be protected by law from dan- gers arising from his own cupidity and carelessness, as well as from fraud on the part of promoters. Even where similar conditions exist there is this significant difference between the two countries, that here the con- ditions are treated academically and are apt to be more honored in the breach than in the observance, while in Great Britain those concerned are held to the strictest accountability, whether in the matter of the organization, conduct, or winding up of corporations. This subject is not touched upon elsewhere, but the Present Conditions 25 stern injunctions of the Winding Up Acts of The Com- panies' Acts, will go a long way to make the officials of any corporation exceedingly careful in the manage- ment of its business and solicitous for its success. There are many special features in The Companies' Acts such as the maintenance of the rights of indivi- dual stockholders, and the guaranty of publicity, which are not included in any of our state laws, but, in addi- tion, the bound volume of these Acts is the long his- tory of the half-century battle between the law and its violators, and every point taken is worthy of the most careful consideration. III. THE REMEDY. AMENDED CORPORATION METHODS SHOULD PRE- CEDE IMPROVED CONDITIONS. (a) It seems at the present time to be a matter of the utmost urgency that every attempt should be made to create public confidence in our securities, so that the capital may readily be raised which American railroads so badly need to enable them to handle their growing traffic. While, however, the existence of the present condition is highly prejudicial to the best interests of the country and advantageous to those of its rivals, it is by no means as injurious as would be a resumption of the country's prosperity without the removal before- hand of the evils which lie at the root of the present system of corporate formation and management, an event which would be analogous to the closing of a dangerous wound at the surface, while it was still fes- tering at the bottom — a condition of danger which in- evitably calls for the knife later on, and under still less favorable conditions to avoid blood poisoning. The writer recognizes the difficulty in following English methods exactly because of the fundamental difference in our form of Government, but he is hope- ful that such a clear understanding by the public of the dangers of the present .faulty system of our State incorporation laws and methods, may be reached, as will greatly facilitate the necessary changes, especially The Remedy 27 when the remedies indicated are simple and practical, and have been found entirely successful in other coun- tries. It is primarily to the education of the general public on this subject — and through that means to that of the State legislatures — that the country must look for relief from state obstruction if such occurs in face of the marked trend of this newer thought on corpora- tion matters. THE PRESENT AN IMPORTANT EPOCH. There is no disguising the fact, and the writer wishes to lay the greatest possible emphasis on the statement, that this country has now reached one of the most important epochs in its financial history. Within ten years, perhaps within half that time, there will not be a wheel turning on this continent which is not a corporation wheel, and great as are this coun- try's resources and opportunities, unless sane and sound laws are promptly enacted for the organization and conduct of our corporations, public confidence will be so impaired that every natural advantage the country possesses will be dissipated, and we will be kept on the ragged edge o,f feverish markets and bad times until we mend our corporate ways. Owing to the enormous and unprecedented develop- ment of railroad facilities during the past decade, and' to other causes, the whole world has been elevated to a higher plane in its commerce within that period. This condition of affairs will continue, but if we as a country are to secure our share of this new prosperity, we must provide ourselves with corporate equipment 28 Our Financial Upheavals suitable to the work to be done. A man may be seven feet high and four feet across, but if he develop a radically weak digestion and a feeble circulation, he will not be as efficient a citizen as the man of half his size who is endowed with an unimpaired digestion and vigorous circulation. If the matter of the readjustment of our corporate securities on a proper basis is promptly taken in hand, there is no reason why the country should not quickly recover from its recent set back, or why its trade should not increase in the ratio of the past ten years. CURE SHOULD BE AUTOMATIC. It has been assumed on the part of some foreign writers that what the American Government now ap- parently contemplates, is that no domestic railway shall be able to create or raise capital without Government or Congressional sanction. This opinion the writer thinks arises from a misconception of the situation, as it would undoubtedly be better to remedy the evils com- plained of by enacting laws once for all for the proper formation, capitalization and regulation of our cor- porations, with the view of making the cure auto- matic on their part, than to force a cure by continuous supervision from the outside — a course which would saddle the Government with a grave responsibility, and must end disastrously because the task would be an impossible one. The Remedy 29 A FEDERAL LAW FOR INTERSTATE CORPORATIONS; NO GOVERNMENT SUPERVISION. In the interest of the public and of corporations gen- erally, the writer recommends that Congress should enact for interstate corporations a federal law similar to our National Bank Act, which should include all the protection and privileges of that Act without Govern- ment supervision or responsibility. There should be no attempt at Government inspection. I,f the laws regulating the organization and management of our corporations are wisely enacted, the stockholder with his enlarged rights and powers may be trusted to do the rest. The trouble has been in the past that the stockholder has had no rights of self-protection. These are important points, but the efficiency and prompti- tude of our Courts is perhaps the most important point of all, in order to give effect to the remedies devised. FUTURE CAPITAL MUST REPRESENT CASH OR APPRAISED PROPERTY. (b) That in the future all the capital stock of a rail- way or other corporation should represent not future prospects, but cash-capital paid into the treasury, dollar for dollar, and expended or to be expended upon the property; or it should represent property certified by competent valuers (about whose standing and honesty there can be no question) to be worth at the time of purchase the full value paid for it in stock; also that a special meeting of the stockholders convened for the express purpose fully set forth in the call should be summoned whenever it is proposed to raise additional 30 Our Financial Upheavals capital or to take any other action of vital interest to stockholders. (c) That the annual or semi-annual reports and bal- ance sheets should be in strict compliance with a form prescribed by law, such form to be prepared by skilled experts and to be very specific in its requirements. These should vary according to the character of the corporation. They should give in every case explicit directions as to the source and proper allocation of all earnings and expenditures, and should determine what are divisible profits and what are not. No director or other officer should be eligible as auditor. The auditor should be elected by the stockholders, and should haw the fullest power to examine the books at all times, and to call upon the president, directors, and officials for whatever explanation or information they may re- quire. Said auditors, who should be public account- ants of unquestioned standing, should once at least in every year examine the accounts and ascertain the correctness of the balance sheet. After examination of balance sheet, vouchers, books, etc., they should sign and present to the stockholders a statement to the ef- fect that they have examined these carefully, and that the books are properly kept, and exhibit a true and correct view of the company's affairs. Such statement should specify any cause of complaint which has come under their notice. SUGGESTS "COMPANIES' ACTS" AS BASIS. (d) That "The Companies' Acts" of Great Britain, which represent the costly experience as well as the wisdom of nearly half a century in regulating corpora- The Remedy 31 tions, be carefully examined, and such regulations as are adapted to this country be considered with a view to adoption. Note. — For forty-five years the battle has raged between "The Companies' Acts" and the promoter in just the same way that it has continued between plate armor and rifled guns, till the promoter, ren- dered innocuous on the subject of prospectuses, has resorted to the not unknown American method of raising capital without prospectuses, and hence the new legislation introduced by the British Govern- ment into the House of Lords prohibiting the issue of capital without registration and prospectus. (e)That for the proper carrying out of such a law Congress frame certain clear directions for the treat- ment of accounts of railway and other corporations and with a view to preventing manipulation for stock- jobbing purposes, attaching a heavy penalty to any violation of the law. THE AUDITOR. Much of the value of the above recommendations must of course depend upon the ability and honesty of the auditors. Of late years the high position which these gentlemen occupy in other countries, has been recognized here, and the importance of their work is more fully recognized than it was formerly. In other countries accountants serve fully as long an apprentice- ship to accountancy as the law student does to law, and the final examination before admission is still more ex- haustive, for the reason that the accountant must be familiar with all questions of law relating to accounts. 32 Our Financial Upheavals as well as with the science of accountancy. So de- servedly high is the standing o,f the well-known ac- countant firms in London that all the great capitaliza- tions there which frequently involves millions of pounds, are made solely on their reports, which are never questioned. IMPORTANCE OF ACCESS TO LISTS OF STOCK- HOLDERS. In "The Companies' Acts" perhaps no provision is more important than that which gives the stockholders access to the share registers. It is a principle of Eng- lish law that the creditor has a right to know who his debtors are, and that the stockholders have a right to know who their fellow stockholders are. But under- lying all this is the broad basic principle that a charter or privilege or right of incorporation granted by the public shall compel the transaction of the business of the company in the broad light of heaven. Where the objective point of the directors' aim is the securing and retaining of a majority of the stock, it will readily be seen that it is a matter of prime importance with them to conceal as far as possible the names and addresses of their co-partners in the company, and so to prevent combinations, and thus it is that the transfer books of a company here have a double value compared with what they have in Great Britain — for the reason that this position means fre- quently the ownership of the key to the situation. Under British law each company shall make out at least once in every year a list of all persons who are The Remedy 33 members of the company. Such lists shall state the names, addresses, and occupations of all the members, the number of shares held by each, and the same particulars of those who have ceased to be members since the list was last made. Access to names and addresses of stockholders has indirectly a wide influence, too, in educating the pub- lic to the merits of corporations or joint stock enter- prises and in this way enabling them in a measure to protect themselves. ENGLISH METHODS. Bankers, promoters, and houses of issue generally, which are engaged in the bringing out of companies, follow up those published lists very closely, and there are many promoting firms in London today which have hundreds of thousands of names and addresses of investors corrected up to date and classified. By the issue of prospectuses, which is going on all the time, people are gradually educated in incorporation matters, so that they can form a fair idea for them- selves of the merits of the scheme before them — first, by the names of the .directors and officers on the prospectus, and then by the character, locality and reputation of the investment. In this connection it may be mentioned incidentally that promoters who know their business, send out a prospectus for the most part only to people who favor the kind of investment of which that prospectus treats. This information he gets from the lists of stockhold- ers. In this way the addressee, if he is sufficiently interested, can compare one prospectus with the other, 34 Our Financial Upheavals as the bulk o,f them treat of the same kind of security. Everything in the prospectus has a bearing on the investor's judgment. For instance, the name of the house of issue, the names of the auditors, attorneys, valuers, and bankers, all are closely scrutinized and all have a special standing - which is known more or less to the intending investor. During an experience of fifty years the issued prospectuses have become a species of British literature, and as the same names appear again and again, they come in time to have a value which is known to all with a fair degree o,f accuracy. Notwithstanding the rigid requirements of the Eng- lish Companies' Acts, there is nothing really harass- ing or inquisitorial in their bearing upon bona fide corporations. If in spite of the restrictions imposed by the Acts named something is still possible for a dishonest promoter, on the other hand the directors and managers of the company are held to a strict ac- countability, and no majority can keep the minority from access to the books when a reasonable ground for inspection exists ; nor can a majority long defy a minority which has access to the addresses of the general stockholders. But indeed, the majority scarcely exists in Great Britain in the form that it is known here. The shares of a company offered to the public at large are widely subscribed and they are generally taken by from one to two thousand people. There are comparatively few large stockholders, except where the vendor of a prop- erty purchased has taken a block of stock in part payment, and in his case steps are taken to prevent that interest from unduly swaying the control. The Remedy 35 STRIKING RESULTS OF GOOD CORPORATION METHODS. The result of this wholesale education of the people is that today the smallest capitalist as well as the largest can find to his satisfaction just the kind of security he wants with the further comfort of know- ing that his company is honestly managed. This kind of investment is less troublesome to him than the col- lection of house rents or the worry and responsibility of some independent business should he be disposed like the American citizen to embark in a trade outside his own. When our investments as a whole are suffi- ciently safeguarded, there will undoubtedly be a very great call for them, and if this call is responded to by honest houses of issue, placing sound and profitable investments before the public, the gain to both will be large. STATES HAVE ENRICHED THEMSELVES BY LETTING DOWN THE BARS. The hearty approval and support of the different states is very essential in the case of the remedies pro- posed. These may be difficult to obtain in some in- stances, for the reason that certain states have found it a very profitable business to attract corporations from other states by means o,f a degree of laxity in their corporation laws — a short-sighted and foolish policy. The Federal Government and the State Governments will be compelled to act together in this business, and to come to a common understanding. At the present time one of the greatest stumbling-blocks to the pub- licity afforded by a general meeting of the stockhold- 36 Our Financial Upheavals ers is the custom of registering an incorporation — and so compelling the meetings to be held — in another State. The inconvenience this entails upon the mem- bers of the company to attend these meetings is largely prohibitory in that respect, and the general ignorance as to the company's affairs is fostered in this way. SUGGESTIONS AS TO PUBLIC UTILITIES. In the case of Federal, State, or Municipal utility corporations, it should be arranged that the public should never absolutely surrender its right in its own franchises, but should keep that right permanently alive; (1) By retaining the privilege of buying back its franchises at certain future dates at figures based on an agreed advance on the outlay, which while pro- viding a reasonable, and, where the risk is considerable, even a handsome return upon it, would prevent any- thing like the payment of an extravagant profit for the return of a property, which not only belongs to the public to begin with, but which derives all the profit which it makes from their custom or support; (2} or, by stipulating for a share in all the profits after an agreed return has been made to the stockholders. TRAFFIC IN STOCKS BY FIDUCIARIES. It is also suggested that certain legislation be enacted looking to the regulation o,f stock exchange practices, and discouraging the illegitimate traffic by fiduciaries in the shares of their own companies, by compelling the evidence of members of such exchanges under The Remedy 37 heavy penalty, where reasonable proof of irregularity is submitted. The speed of the fleet is the speed of its slowest ship, and if the Courts are tardy in enforcing the laws enacted to protect stockholders, all other efforts will practically be in vain. If some of these remedies appear drastic it must be remembered that, to all appearance, the time is not far distant when the entire business of this great country will be intrusted to corporations, and there is nothing today of such importance in this country as that a firm and honest foundation could be laid for such organiza- tions. An assurance of confidence in our companies' organizations on the part of the public will double the country's business in a very short period, will prevent anything in the way of locking up of capital, and will give a liquid character to our currency which will mul- tiply its value manifold. On the contrary, if the lim- ited few who grow rich by their breach of fiduciary duties are allowed to continue in their present course, they will breed socialistic ideas, will clog every wheel in our commerce, and will put us at the mercy of great commercial rivals, who do not have to deal with dis- honest fiduciaries. Other remedies indicated herein may, on the other hand, at first glance seem inadequate to the gravity of the disease, but in actual practice in Great Britain, after a battle with promoters for nearly a half cen- tury, it has been found possible to so condition a prospectus that the company shall be honest in its or- ganization and worthy of public confidence, and the company honestly begun is in a fair way to attain permanent success. 38 Our Financial Upheavals DECLINE IN BANK AND COMMERCIAL STOCKS. If, as is commonly supposed, the price of our lead- ing bank stocks fairly reflects the condition of public confidence — since banks are but the concrete manifes- tation of the condition of our trade — then there is a sinister significance in the fact that within the past two years the capital stock of twelve of the lead- ing banks and trust companies of New York City have- declined $60,000,000 in value, or an average of $5,- 000,000 each. During the last period of crisis it is estimated that the prices of the stocks marketed on our exchanges fell between fifteen hundred millions and two thousand millions of dollars. This crisis has been termed a rich man's panic, but even assuming that to be the case, there can be no doubt that thousands of middle class investors were caught between the upper and nether mill-stones of that time, just as there can be no doubt that the entire upheaval was caused by the unsatisfac- tory condition of many of our most important cor- porations and the uncertainty engendered by it. The pride one would naturally feel in an exhibition of tensile strength on the part of our financial institu- tions which can stand such a strain without breaking, is very seriously modified when it is remembered how perfectly unnecessary it was to so impair a naturally vigorous constitution. In the same way would one de- plore the spectacle of some self-imposed sickness rav- aging a physique of extraordinary natural robustness. An injury which no foreign country, or, perhaps, com- bination of foreign countries, could have done us, this country has wantonly inflicted upon itself. IV. SUGGESTIONS. A SYNOPSIS. i. For Interstate and State corporations a Federal law and a State law respectively, the Federal organ- ization to be similar to that of national banks, and to have the word "National" incorporated in its title. While every practicable safeguard should be incorpo- rated in these laws, there should be no Government re- sponsibility or inspection. 2. The safeguards to be embraced in the Articles of Incorporation by Congress, in the case of Federal corporations,and by the States in the case of the others, should include such as have been outlined in this paper, and no corporation should be organized and no capital invited after the organization without the issue and registration of a prospectus — which should contain full particulars for the information and guidance of the subscriber — and without the granting of a certificate authorizing the issue. Such information as is de- manded here, should include every material fact relat- ing to the purchase, contracts, intermediary profits, etc., and should supply certified valuations of property taken over, with evidence that the directors have taken precautions to ascertain that the valuers are competent authorities, on whose valuation reliance may be placed. Nothing of interest should remain undisclosed. 3. At the meeting of such corporations full state- 40 Our Financial Upheavals ment should be made with reference to the company's business and condition, and members of the Press should be invited to be present and to make, as in other countries, full reports of what transpires. 4. The names and addresses of stockholders should be registered where they can be seen by members and the public, and where full copies can be obtained for a reasonable compensation, as is the case elsewhere. 5. Directors and officers should be under oath not to- traffic in the shares of their companies, directly or in- directly, or to benefit by any transaction connected with the company. Any deviation from this rule sanctioned by the directors should be reported in detail in the company's minutes, which should be on hand at gen- eral meetings in case the question should be asked. All profits made by breach of this agreement to be forfeited to the corporation, and directors guilty of such breach to be summarily dismissed from office. 6. To avoid the adverse action of the majority, to direct where necessary that the voting power shall be divided as in the case of certain English companies, in which, as already indicated, the proportion of votes decreases with the amount of the holdings. 7. The practice o,f paying an excessive amount of stock to the vendor of a property to enable him to turn back a portion of that stock so that it can be" sold for the benefit of the company later on at a discount as treasury stock, will, of course, be prohibited by the rule compelling that full value shall be given by the vendor for any stock received by him in payment or part payment of his property, but in any event the custom should be prohibited, and there should be no> Suggestions 41 evasion of the act forbidding the sale of stock at less than par. THE FULLEST PUBLICITY DESIRED. 8. Every new company launched, or every new issue of stock or bonds should be accompanied by publicity in the fullest terms. If we cannot give to our varied securities the fixed value we give to our moneys, we can at least ear-mark them so that the investing public will know that one hundred dollars in actual cash has been paid for each one hundred dollar share, or that value to that amount, fixed by competent and inde- pendent valuers, has been given in exchange. No law can be made retroactive so as to injure the innocent holder, and if we would avoid a still worse condition of affairs than has existed in the past ,few weeks, we must confine our suggestions to the future. And these suggestions, it must be understood, cover all bonds or stocks whether issued direct to the public or through the medium of banking houses. The statement in the prospectus by an interested party, should not shift the responsibility of the house of issue. STATES ACTION CALLED FOR. Such remedies as are here merely indicated, should at once be taken up by the different states, and if they secure the President's approval, and his recommenda- tion of favorable Congressional action at the next ses- sion, a reaction will promptly set in which will be healthful and beneficial, and the wound to our country's commerce and finances will close from the bottom in a 42 Our Financial Upheavals natural way. If some such action is not taken, the great prosperity of the country will probably gloss over the present condition temporarily, but only to be opened up much more violently later on. Any laws en- acted must clearly define how Interstate and State cor- porations are to be incorporated and managed. Let this be done with great clearness and detail, and let the stockholder be clothed with ample powers to protect his own interests at all points, so that the cure of our existing evils may be automatic. Encourage the full- est publicity in the organization and conduct of cor- porations, for in that, more than anything else, as a moulder of public opinion and an encouragement of fiduciary honesty, will the most successful remedy be found. Last, but not least, give to the public courts which will be swift to see that proper effect is given to these laws. The man who accomplishes the work of putting our corporations on a sound basis, will have done what it has taken all the best legal talent of England half a century to accomplish, and the benefit he will have conferred on his country, will be such as will not be computable in any sum which our intelligence can grasp. He will have stricken the shackles from our commerce and finances, and his work will insure a prosperity in the near future such as even this country has never seen. Suggestions 43 RAILROAD VALUATION BY GOVERNMENT OR STATES DISAPPROVED. This article would not be complete without some reference to the proposition that the Government, or the different States, should undertake the valuation of our railroads. This, it may be pointed out, would be a costly task with but little prospect of a tangible result to recommend it beyond the hurtful depreciation of our securities, both while the investigation was pending and after it was completed. If a glaring discrepancy were laid bare between cost and capitalization, the question would be, can the money be got back from those who benefited by it? If this cannot positively be done, the interests of the present innocent holder of securities would be need- lessly sacrificed by their depreciation. Great Britain, as indicated, has always paid for her railroad stocks on the basis of one hundred cents on the dollar, but it has largely been her custom to charge up to capital account many renewals and improvements which are ordinarily charged against revenue in this country, and it may be doubted whether a valuation of British railroads today where there is little of that elastic growth which there is in this country to rec- tify early errors or irregularities, would show a better relationship between cost and capitalization than many of our domestic railroads. Would any sane man pro- pose to England that she should value her railroads today with a view to readjusting their capital? A railroad insofar resembles a manufacturing plant that its actual cost — except for the satisfaction of find- 44 Our Financial Upheavals ing out where the money has gone, is of but little importance compared with the really vital question of the roads' sustained earning capacity. Unless this is satisfactorily established, the property and plant, whatever their cost, are practically valueless. Of far more importance than the valuation of a rail- road based on its cost in the past, or even on the cost of replacing it, would be an absolutely reliable state- ment ( i ) of its physical condition, in order to deter- mine whether the existing property and equipment are respectively so wisely located and so sufficient as to insure a profitable return on a given capital and bonded debt, and (2) of the probable outlay necessary to main- tain it in a maximum condition of efficiency to do its work at a minimum cost for running expenses, so that it may preserve and increase its earning power. CORPORATIONS SHOULD CAUSE VALUATION TO BE MADE ON OCCASION OF FRESH ISSUES. For the Government or the States to value the rail- roads of the country, would be, as stated, the assuming of a grave and undesirable responsibility. If exam- inations are necessary — and the writer thinks they are — for the purpose of showing the road's condition and earning capacity, but not of determining their cost, let the railroad companies in their applications for fresh loans, or in placing fresh capital, furnish a full report on their properties by independent experts, engineers and auditors of national reputation, who, like army engineers should be beyond suspicion, and if this is not deemed sufficient, then let the Govern- Suggestions 45 ment appoint the experts, without responsibility as to their findings. There is no difficulty in carrying out this plan once it is decided upon. There are plenty honest experts in the country for all requirements. If, instead of adopting some such plan of action as is here suggested, the Government of the United States, or the different states, begin an investigation to determine the actual value of our railroads based on the cost of duplicating them, it is not difficult to imagine what the result will be. First of all, it will entail a period of disquiet which will render the bor- rowing of further capital for our railroads an impos- sibility, and will keep the country on the ragged edge of a crisis for an indefinite period; and in the second place, it will give, not only to our own investors, but to the investors of every great country in Europe a sense of distrust of our methods which will not be got over in the life time of any man now of middle age. At this point the writer makes bold to quote a sen- tence from an article from his pen entitled "The Fruits of Fraudulent Railroad Management," which ap- peared in the Engineering Magazine o,f New York City eleven years ago at a time when the methods of certain of our railroad officials were under the same severe condemnation from which they suffer now : "In the case of municipal mismanagement and corruption, a country's 'dirty linen' may be washed at home and the world at large not be made unpleasantly aware of the process or of the need therefor. In the improper handling of its finances, however, that is of securities which have an international importance, its 'dirty linen' is 46 Our Financial Upheavals washed in the thronging centers of every great monetary nation, to the mortification, discredit, and loss of the country of issue." The same may be said today. THE COUNTRY'S TWO DANGERS; A MIDDLE COURSE. The country, therefore, stands exposed to two dan- gers : In the first place, that its abounding prosperity cause the people to forget the recent crisis and what led up to it, thereby necessitating a reopening of the question later on, and under less favorable conditions; and, in the next place — if our railroads are submitted to Federal or State valuation — the danger of a crisis and of permanent injury being done to our railroad finances, as well as to the reputation of the country at large. In this article the writer has endeavored to indicate a middle course, which if promptly adopted, will tend to the restoration of confidence in our railroad proper- ties and general corporate enterprises, and that with- out dragging the good name of the United States in the dust. LIBRARY OF CONGRESS 11 1 1 013 823 066 1