THE TRUSTS IN AMERICA.

Press, Volume LX, Issue 11691, 18 September 1903, Page 4

THE TRUSTS IN AMERICA.

It is curious that just as our Government are bringing down their legislative nightmare for the suppression of trusts, news reaches us of the serious condition ot many of tho American trusts. It is estimated that the past four years have seen tho formation of 143 important trusts, besides a number of smaller organisations. Of the big trusts it was reported some six weeks ago that only twenty-five were paying any dividend at all on their ordinary shares, and only a few more were able to pay dividends on preferred stock. "in ordinary stock alone," raid a New York correspondent, "the enormous total of "£340,185,000 has been invested, largely "by the outside public, not a penny of "which is earning dividends." Mr. Maurice Low, the "Morning Post's" wellinformed American correspondent, put a rather better face on the situation, though he was only able to say that the dividends on common stock of 215 of the largest combinations amounted to an average of hardly more than 1£ per cent, a year. A feeling of insecurity was everywhere prevalent, which managers of trusts found reflected in tho attitude of the banks, who refused to lend money to extricate them out of their difficulties. As a consequence, a number of trusts were forced into the hands of receivers. Among these wen) some of the largest combines in the States. With the affairs of the Shipbuilding Trust we have already dealt. The Asphalt Trust, capitalised at five millions sterling, and including nine-tenths of all the asphalt companies in the United States, was found to be in a bad way, the total assets amounting to less than £700,000, against an indebtedness of six millions sterling. The Cotton Yam Trust, reputed one of the most conservative in the country, entirely collapsed, and its capital of £3,100,000 may bo considered as lost. The Malting Trust, controlling seventy-seven businesses, and capitalised at six and a half millions, tho Paper Trust, with a capital of more than six millions, the Cotton Duck Trust, capitalised at £5,200,'000, and a Shipbuilding and Dry Dock Company, with a capital of four millions, were all in serious difficulties, the latter having to sell its office furniture to satisfy a debt of £76. In the case of most of these combinations the shareholders were alleging faulty and fraudulent management, and assertions of false representations by the organisers were frequent, while in one or two instances legal actions based on these charges were pending against the latter. A month later about thirty smaller concerns had been put into the hands of receivers by indignant .and disappointed shareholders. It is interesting to note that in contrast to the depressing experiences of these investors, the shareholders in the Chewing Gum Trust were looking forward to a fat dividend, the combine having made a profit for the year amounting to one-third of its total capital. On the other hand, even the mighty Standard Oil Trust found it necessary to reduce its dividend for the June quarter, paying only 7 per cent., as against the 10 per cent, of the previous quarter. It was not to be expected that the United States Steel Corporation,: tho "Steel Trust" with which the names of Mr Carnegie and Mr Pierpont Morgan are iadissolubly connected, could pass unscathed through the perils of a period when values were falling on every hand, and Wall street was daily convulsed with excitement. The Steel Trust is the monarch of the trusts. It was capitalised at something like three hundred millions sterling, but at the beginning of last month, when Mr. Charles Schwab formally resigned his position as President, the shares showed a loss in value amounting to £65,000,000, while the shrinkage was going on daily. On tho day following Mr. Schwab's resignation a tremendous "bear" movement against the Steel Trust's shares took place, driving Wall street, already irritable and nervous with the continuous failures of important houses and the incessant decline in values, to the verge of panic. Some mystery surrounded the operations of the 'Taear" clique, which seems to be dispelled by Mr. Schwab's previous statement that he was the largest holder of Steel Trust shares, and the assertion that his friends were thirsting for revenge on Mr. Morgan, who was believed to have forced him to resign. However this may be the effect of the operations was to drive the. Trust's common stock below tho previous lowest record, representing a decline of 60 per cent, from ', the price it was fetching two years ago. Mr. Morgan was then fighting for his prestige and financial supremacy, and though the tension was eased, the Trust does not appear to be out of its difficulties.

The cause of the reaction in the affairs of the trusts is not hard to find. They have attempted what is practically impcssfble with inadequate methods. They have been absurdly over-capitalised, having made, as Mr. Low points out, the mistake of writing down large sums to goodwill on which sufficient dividends could not be earned. Tho management of the concerns has, in most cases, lacked the personal oversight of the master, .and with the remote supervision given by boards of management has come "the carelessness and extravagance which inevitably result when men think in millions instead of thousands." The moral is that when trusts are carried beyond legitimate limits they tend to break down of their own accord. The danger, fortunately, produces its own reinedv.