556 Forestry Quarterly 



Thus the merits of the investment should be judged entirely aside 

 from the guarantee. This does not assume that the latter is an 

 undesirable feature, it may prove very desirable; everything else 

 being equal, it should not be refused. The great danger lies in 

 that the guarantee of some very wealthy man may be so alluring 

 as to blind the bond house, and cause omissions ordinarily in- 

 corporated for the protection of the buying public. 



Many will remember that one of the great factors which led 

 to the widespread losses in farm mortgage investments during 

 the early 90's, was the fact that they were guaranteed. Also, those 

 who, only a few years ago, so confidentially bought irrigation se- 

 curities in immense numbers through one of the leading banking 

 houses in the Middle West, have cause for serious self reproach, 

 because the guarantees have proved absolutely worthless. A 

 man's guarantees cannot very well be limited. The tendency is 

 that, when once entering upon this vicious form of greasing the 

 ways for security marketing, no sane limit is ever exercised, so 

 that even if guarantees to a certain value might prove safe, it is 

 almost unheard of that the guarantor ceases his pernicious 

 methods within such limits. 



There is also a legal phase to be considered here, viz., the status 

 of an investor holding a guaranteed security in case of recourse 

 upon the guarantor, who may be forced into financial difficulties 

 thereby. The bondholder would merely come in with all the other 

 unsecured debts of the guarantor, all of whose property may have 

 been mortgaged or put up as collateral for other loans, and thus 

 his endorsements prove of little assistance. 



One more consideration which I shall attempt in this discus- 

 sion is the fire hazard, for many objections have been harbored by 

 investors that timber bonds are more than ordinarily risky in- 

 vestments, because of the danger of having their property wiped 

 out by fire. This belief is certainly very much exaggerated, and, 

 in the large proportion of timber issues, mostly without founda- 

 tion. 



This risk from fire to timber properties has in some ways 

 greatly diminished, due to government and state fire wardens 

 and patrols, and the general better education of the public as well 

 as the keen desire natural to the lumber companies for protec- 

 tion against such a fearful plague. 



