nificent sum of $40,000, which was paid, not in cash, but in receiver's certificates that had been purchased at a large discount!
That the foregoing case was not a solitary one, nor so exceptionally bad, might be inferred from the fact that the president of the railroad company, who managed its business, and was understood to be its principal beneficiary, was afterward elevated to the United States Senate, and is said to have been offered a seat in the Cabinet of one of our Presidents.
The business referred to has not been confined to railroads. We now have stocks and bonds upon the market representing nearly all conceivable kinds of property—telegraphs, telephones, mines, cattle ranches, grain and grass farms, water-works, electric lights, factories and mills of every description, steamboat lines, and apartment-houses. There seems to be no limit to their production. There never was a time when it was so easy to invest money—and to lose it. Of the securities that are offered with first-class recommendations, it is probable that about one third are actually good, one third have some value, and one third are practically worthless.
For the condition of things described, the laws of our States, in giving corporations almost limitless power to issue negotiable paper, are, undoubtedly, very largely to blame. Our banks are closely watched and restrained from taking people's money on false pretenses; but how much better is it for railway and other corporations to take it by means of legalized fictitious evidences of value? Banks are by no means the only corporate institutions that need watching. One of the reforms that would seem to be very much demanded is legislation that will prevent companies existing by authority of law from putting out debentures or scrip not represented by money actually paid into their treasuries, or by proprietory interests whose value is to be determined by disinterested parties. Pennsylvania has incorporated substantially such a provision into her Constitution. Her example should be followed by all other States.
For the losses they have sustained, investors, as a rule, have themselves chiefly to blame. The mistake made, in nine cases out of ten, has been the purchase of cheap securities. The hope of realizing a little more than ordinary interest, by buying paper at a discount, has proved to be the rock on which unnumbered capitalists have split. In addition to their money's worth, they have endeavored to get something for nothing, with the result, most generally, of getting nothing for something. It is remarkable how blind are people, ordinarily sagacious enough to make money, to the fact that property can not pay a revenue beyond its producing capacity. For instance, how can a railroad company, whose line is wholly or mainly built from the proceeds of mortgage bonds, sell them at a heavy discount, besides allowing large commissions for selling them, and then pay a high rate of interest on their face?
