Pitfalls of Timber Bond Issues 555 



of a mortgage for the full and ample protection of the bond- 

 holder. There are so many things to be considered that, after 

 all, one must place a good deal of reliance in the character of the 

 bond house offering the securities and in the reputation for ex- 

 perience in the drawing of such mortgages of the lawyers em- 

 ployed by the house. Personally, it would not satisfy me to know 

 that a house had made a specialty of timber bonds only and had 

 dealt in so many dozens of those issues ! I would much prefer to 

 seek an old established bond house which has had the experience 

 incident to handling corporation issues of various kinds, for only 

 in such a training can the wide knowledge necessary for the pro- 

 tection of the bondholder be acquired. 



Therefore, it is almost useless to elaborate here on such facts 

 as the following : that all titles to the tracts must be clearly shown 

 upon the records ; that the mortgage must be a first mortgage, or 

 that the legal wording of the mortgage will vary according to the 

 State in which the land is located, and according to other condi- 

 tions, the same as in all corporation mortgages, etc. But it may 

 be worth while to suggest that there should be conditions included 

 such as that the maker of the mortgage must safeguard the prop- 

 erty by installing a fire patrol system and other methods of 

 protection ; that the property as well as the books shall always be 

 open to inspection, and that regular sworn statements of earnings 

 shall be rendered to the bond house ; and so on. 



Taxation of timber lands is a vital matter to be considered, 

 particularly so in the case of long time bonds covering proper- 

 ties bought for speculative purposes rather than imm.ediate cut- 

 ting. Where the timber is rapidly being marketed, the question of 

 exorbitant taxes is not so material, but in timber that is to be al- 

 lowed to stand for any considerable time — covered by what are 

 termed "Holding Loans" — one must be assured that the local 

 taxes are not likely to eat up a great deal of its value. 



I am not very enthusiastically inclined towards guaranteed 

 securities, unless guaranteed by a corporation, and even then, 

 there are many pitfalls, but timber bonds, when guaranteed, often 

 carry the endorsement of an individual. Unless that individual 

 puts up marketable securities, for the value of his guarantee, I 

 should not care to accept it regardless of the timber value. He is 

 no more than human ; he may be rich today and poor tomorrow. 



