274 



FINANCIAL REVIEW OF 1899. 



situation. The conservative measures above noted 

 consisted principally in discriminating against the 

 stocks of the new corporations when such stocks 

 were offered as collateral on loans, the bankers 

 with good reason insisting that the dividend- 

 earning capacity of the properties should be fully 

 demonstrated before the stocks could be recog- 

 nized as adequate security. Influenced by this 

 conservative policy, the digestion of such stocks 

 as had already been sold by the promoters of 

 the organizations was arrested, and the market 

 for them became congested. The promoters of 

 many new concerns found it difficult to secure 

 capital sufficient to float their enterprises, and 

 a large number were abandoned. Some schemes 

 notably iron and steel combinations met with 

 success, mainly because of the marvelous pros- 

 perity of these industries,- and this success gave 

 encouragement to the promoters of other enter- 

 prises, so that some progress was made with 

 these organizations almost to the end of the 

 year. Where success depended, however, upon 

 borrowing in the market or the enlistment of 

 capital other than that represented in the in- 

 dustry embraced in the* combination, progress 

 continued exceedingly slow, and increasing diffi- 

 culties were experienced when the money market 

 grew stringent. In the opinion of close observers, 

 the stringency in money which was noticeable at 

 intervals after August was in great measure due 

 to the vast amount of overcapitalized properties, 

 which were constantly being offered upon the 

 market as collateral, and also to borrowings by 

 the promoters of these organizations from insti- 

 tutions other than banks. 



The grand total of stocks and bonds repre- 

 sented in the above-noted combinations created 

 or projected during 1899 was $5,215,795,000. Of 

 this amount, the capital of completed industrial 

 organizations was $712,850,000 of preferred and 

 $1,125,650,000 of common stock, and $182,395,000 

 bonds. The capital of other completed organiza- 

 tions was $37,000,000 preferred and $310,500,000 

 common stock, and $50,000,000 bonds. The capi- 

 tal of uncompleted consolidations, pending at the 

 end of the year, was $619,500,000 common stock. 

 The capital of consolidations projected and aban- 

 doned was $1,110,700,000. The capital of new 

 companies formed was $769,850,000, and new is- 

 sues of stock by other companies were $288,350,- 

 000. This makes a classified total of $749,850,000 

 preferred stock, $4,233,550,000 common stock, and 

 $232,395,000 bonds; a grand total, as above noted, 

 of $5,215,795,000. Adding the capital creations of 

 such organizations in 1898, as above, makes the 

 enormous amount of $6,089,058,000 in two years. 



The organizations, it may be noted, embraced 

 almost every conceivable branch of industry, from 

 iron and steel to bicycles; from electric to com- 

 pressed-air motors; from interoceanic-canal con- 

 struction to matches; from railroad cars to auto- 

 mobiles indeed, everything of whatever nature 

 whi<-h was manufactured or otherwise produced 

 was secured by the ever-watchful promoter for 

 conversion into a consolidation or combination 

 of some character. The attractiveness of the 

 htocks of these companies was sought to be in- 

 creased by provision for from 6- to 8-per-cent. 

 dividends, most of which were made cumulative. 

 The capitals of some of the companies were enor- 

 mous, few being less than $5,000,000, and by far 

 the majority being between $25,000,000 and $100,- 

 300,000. The largest capitalization was that of 

 the Carnegie Steel Company $350,000000 of 

 which $100,000,000 was in bonds. This organiza- 

 tion, however, was abandoned. The Distilling 

 Company of America had $55,000,000 of preferred 



and $70,000,000 of common stock; the National 

 Steel Company, $27,000,000 of preferred and $32,- 

 000,000 of common stock ; the Amalgamated Cop- 

 per Company, $75,000,000 of common stock; and 

 other companies of similar character had equally 

 large capitals. It is not surprising that conserva- 

 tive bankers early in the year reached the con- 

 clusion that such capital creations, which were 

 in very many cases entirely unjustifiable, were 

 a menace to the market. Neither is it surprising 

 that the attempt to float these properties met 

 with resistance through utter inability of the 

 market to digest them. 



A noteworthy incident of the year was the 

 payment by the United States to Spain of $20,- 

 000,000 gold for what is known as the Philippine 

 indemnity. On April 11 ratifications of the treaty 

 of peace between the United States and Spain 

 4 were exchanged at Washington, M. Jules Cambon,. 

 the ambassador from France to the United States, 

 representing the Spanish Government. On April 

 29 the State Department officially requested the 

 Treasury Department to pay the $20,000,000 in- 

 demnity to M. Cambon, whereupon four warrants 

 for $5,000,000 each were drawn, and on May 1 

 M. Cambon received these warrants and receipted 

 for the same, thus completing the payment of 

 the indemnity under the provisions of the treaty. 



Not only was the payment of this indemnity 

 noteworthy, but likewise was the manner in 

 which the money was transferred to Europe. It 

 should be observed that, owing to the scarcity 

 of notes in the Treasury, the assistant treasurer 

 at New York had since April in the previous 

 year settled his debit balances at the New York 

 Clearing House with gold. In order to avoid, the 

 daily transfer of the metal between the subtreas- 

 ury and the clearing house for this purpose, the 

 assistant treasurer devised a form of receipt 

 which, with the concurrence of the Clearing House 

 Association, was accepted in lieu of the gold. 

 This receipt represented the theoretical deposit of 

 gold in the subtreasury. For example, the man- 

 ager of the clearing house would collect from 

 the assistant treasurer the amount of the debit 

 balance of the latter at the clearing house for 

 that day, whereupon the assistant treasurer would 

 theoretically pay this sum in gold. The man- 

 ager would then theoretically deposit this gold 

 in the subtreasury, taking therefor a receipt or 

 receipts for divisional parts of the total amount, 

 which receipts, drawn to order, would be paid by 

 the manager to such banks as were creditors at 

 the clearing house on that day. The receipts were 

 available by any of the banks for the settlement 

 of indebtedness at the clearing house or for de- 

 posit at the subtreasury in the customs fund, 

 against which banks having the accounts of im- 

 porters drew checks for the payment of duties 

 at the customhouse. Gradually, therefore, the 

 receipts would be returned to the assistant treas- 

 urer and be canceled, having performed the origi- 

 nal function of settling his debit balance at the 

 clearing house, and indirectly the later function 

 of the payment of duties at the customhouse. 

 And this too, it should be observed, without the 

 bodily movement of gold. 



On May 4 the first of the three warrants for 

 $5,000,000 of the Philippine indemnity above 

 noted was deposited by a representative of 

 the French embassy with Mr. James Stillman, 

 president of the National City Bank of New 

 York, for collection. This warrant, instead of 

 being collected by the bank directly from the as- 

 sistant treasurer, which manner of collection 

 would involve the movement of gold, was col- 

 lected through the clearing house on the follow- 



