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“But this is the case of a railroad that is being built,” said Montague; “and they are putting up the money to build it.”

“Yes,” said the Major, “of course; and then they are paying it back to themselves by this dodge; and they'll still have the stock, and whatever they can get for it will be profit. And if the State Legislature comes along and asks any impertinent questions, they can open their books and say: 'See, we have spent this much for improvements. This is the cost of the road; and if you reduce our freight-rates, you will cut off our dividends and confiscate our property.'”

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And the Major gazed at Montague with a mischievous twinkle in his eye. “Besides,” he said, “another thing. You say they are putting up the money. Are you sure it's their own money? Commonly the greater part of the cost of railroad building is paid by bonds, and they work those bonds off on banks and insurance companies and trust companies. Have you thought of that?”

“No, I hadn't,” said Montague.

“I know very few men in Wall Street who use their own money,” the Major added. “Take the case of Wyman, for instance. Wyman's railroad keeps a cash surplus of twenty or thirty millions, and Wyman uses that in Wall Street. And when he has made his profit, he takes it and salts it away in village improvement bonds all over the country. Do you see?”

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“I see,” said Montague. “It's a bad game for the small stockholder.”

“It's a bad game for the small man of any sort,” said the Major. “When I was young, I can remember, a man would save a little money and put it into an enterprise of some sort, and whatever the profits were, he would get his share of them. But now, you see, the big men have got control, and they are greedier than they used to be. There is nothing hurts them so much as to see the little fellow get any share of the profits, and they've all sorts of schemes for doing him out of it. I could take a week off and tell you about them. You are manufacturing soap, we will say. You find there are too many soap manufacturers and too much soap, and so you propose to combine, and put your rivals out of business, and monopolise the soap market. Your properties are already capitalised at twice what they cost you, because you are naturally hopeful, and that is what you expected they would earn; but now for this new combination you issue stock to the amount of three times this imagined value. Then you fill the street with rumours of the wonders of your soap combination, and all the privileges and monopolies that you've got, and you unload your stock on the public, we'll say at eighty. You may have sold all your stock, but you've still got control of the corporation. The public is helpless and unorganised, and your men are in. Then the Street begins to hear disturbing rumours about the soap trust, and your board of directors meet and declare that it is impossible to pay any dividends. There is great indignation among the stockholders, and an opposition is organised, but you set the clock an hour ahead, and elect your ticket before the other fellow comes around. Or perhaps the troubles have already knocked the stock down sufficiently low to satisfy you, and you buy a majority of it back. Then the public hears that a new interest has purchased the soap trust, and that a new and honest administration is to be elected; and once more there is hope for soap. You buy a few more plants, and issue more stocks and bonds, and soap begins to boom, and you sell once more. You can work that regularly every two or three years, for there is always a new crop of investors, and nobody but a few people in Wall Street can possibly keep track of what you are doing.”

The Major paused for a while, and sat with a happy smile on his countenance. “You see,” he said, “there are floods and floods of wealth, pouring into Wall Street from all over the country. It comes to me like a vision. The crops are growing, the mines and the mills and the factories are working, and here is all the money. People don't like to take it and hide it up their chimneys—few people have chimneys nowadays. They want to invest it; and so you prepare investments for them. Take the street railroads here in New York, for instance. What could be a safer investment than the street railroads of the Metropolis? An absolute monopoly, and traffic growing so fast that construction can't keep up with it. Profits are sure. So people buy street railway stocks and bonds. In this case it's the politicians who organise the construction companies; that's their share, in return for the franchises. The insiders have a new scheme—the best yet; it's like a Gatling gun against bows and arrows. They organise a syndicate, and get the franchises for nothing, and then sell them to the company for millions. They've even sold franchises they didn't own, and railroad lines that hadn't been built. You'll find some improvements charged for four or five times over, and the improvements haven't yet been made. First and last they have paid themselves about thirty million dollars. And, in the meantime, the poor stockholder wonders why he doesn't get his dividends!”

“That's the investment market,” the Major continued after a pause; “but of course the biggest reservoirs of wealth are the insurance companies and the banks. It's there the real fortunes are made; you'll find you lose the greater part of your profits, unless you've got your own banks to take your bonds. I heard an amusing story the other day of a man who was manufacturing electrical supplies. He prides himself on being an honest business man, and having nothing to do with Wall Street. His company wanted to extend its business, and it issued a couple of hundred thousand dollars' worth of bonds, and went to the Fidelity Insurance Company and offered them at ninety. 'We aren't buying any bonds just at present,' said they, 'but suppose you try the National Trust Company.' So the man went there, and they offered him eighty for the bonds. That was the best he could do, and in the end he had to take it. And then the trust company turns the bonds over to the insurance company at par. I could name you half a dozen trust companies in New York that are simply syndicates of insurance people for the working of that little game.”

The Major paused. “You see it?” he asked.

“Yes, I see,” Montague replied.

“Is there a trust company by any chance back of this railroad you are talking of?”

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“There is,” said Montague; and the Major shrugged his shoulders.

“There you have it,” he said. “By and by they will find their first bond issue inadequate to meet the cost of the proposed improvements. The estimates of the engineers will be found too low, and there will be another issue of bonds, and your president's company will get another contract. And then the first thing you know, your president will organise a manufacturing enterprise along the line of his road, and the road will give him secret rebates, and practically carry his goods free; or else he'll organise a private-car line, and make the road pay for the privilege of hauling his cars. Or perhaps he's already got some industrial concern, and is simply building the road as a side issue.”

The Major stopped. He saw that Montague was staring at him with an expression of perplexity.

“What's the matter?” he asked.

“Good heavens, Major!” exclaimed the other. “Do you know what road I've been talking about?”