24 



W. G. Langzi'orthy Taylor 



which were 

 sought to be 

 remedied by 

 elaborate 

 checks and 

 balances, — 

 further legis- 

 lation ; 



men would be more careful in putting their means where they 

 could have little influence in the management of them; and while 

 the amount of capital brought together might be somewhat less, 

 with that lessening the growth of monopoly would be checked 

 and the tendency would be to make management more conserva- 

 tive. But modern legislation seeks to cure the evil, not by re- 

 moving the cause but by an elaborate system of palliatives, a 

 system of " checks and balances," by inspection, by registration, 

 by sworn prospectuses, by prescribing the substance and form of 

 the organization, the duties of the officers, and, finally, by official 

 valuation of the assets and by administrative consent to indebted- 

 ness and to nominal increase of capital. ^^ Perhaps, in view of 

 the state of public opinion, this is the best that could be done. 

 Certainly there are ways of doing this well, and of doing it ill. 

 European countries have been more thorough in this detailed 

 legislation than the United States, although the latter country is 

 moving rapidly in the direction of minute and complicated legisla- 

 tive prescription. It is to be noted that the European laws, ex- 

 cellent as they are and formulated by mixed commissions of 

 legislators and economists, after interparliamentary sessions last- 

 ing many years, have been unable to prevent cases of flagrant 

 abuses of trust on the part of officers of banking and other 

 institutions. The involving of the Leipziger Bank in the failure 

 of the Cassel Trebertrocknung concern was one of the most 

 notable cases of this sort in recent years. " In Germany the great 

 banks take a very active part in industry and commerce. 

 Naturally the risk is very great, if the directors and officers are 

 unable to resist temptation. This is the price that must be paid 

 when financial institutions make industrial investments."^^ 



§ 20. Banks, along with other corporations, have gone through 

 all of the stages of attempt to cure the results of bad theories of 

 paternalism with more paternalism,-* and to increase competi- 



*^ An idea of corporation-control legislation may be gained from W. Z. 

 Ripley's Pools, Trusts, and Corporations. 



^ Rafifalovich, Marche financier, 1901-02, p. 54. 



^ Dependence on legislation is bred by excessive legislation. Cf. O. M. W. 

 Sprague, Crises under National Banking System, 273. 



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