Financial Legislation in Principle and in History 23 



be done. The world needs large capitals, and in the event of the 

 failure, say, of the United States Steel Corporation, it would 

 seem ridiculous to exhaust the little remaining property of a man 

 of small means simply because he owned a share or two in that 

 corporation. 



However, enlightened legislation should look partly in that 

 direction. If the responsibility of the shareholder were greater, 

 persons would be more careful in putting their means where they 

 would 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 the management more con- 

 servative. But our modern legislation seeks to cure the evil, not 

 by removing 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, and, finally, by official valuation of the assets. 

 Perhaps, in the view of the state of public opinion, that 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, al- 

 though the United States is moving rapidly in the direction of 

 elaborate checks and balances. It is to be noted that the Euro- 

 pean laws, excellent as they are and formulated by mixed com- 

 missions of legislators and economists, after inter-parliamentary 

 sessions lasting many years, have been unable to prevent many 

 cases of most flagrant abuses of trust, on the part of banking and 

 other institutions, from arising. 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."' 1 



Banks, along with other corporations, have gone through all 



'R'affalovich, op. cit., p. 54. 



243 



