The purpose

is the mortgage loan bank. The of such an institution is to give to the ownership of real estate something of the transferability and divisibility of other property. This is accomplished by converting the aggregate of many small mortgages upon real estate into negotiable bonds. In Europe great banks of this character exist in France, Germany, Austria-Hungary, Spain, and several other countries, and recently the system has been extended to Egypt. By the sale of a block of debenture bonds, secured by mortgages upon the land upon which loans have been made, the investor has a security which is negotiable at any time on the market, instead of dealing with a single mortgage which he might find difficulty in selling, in case of need, for what he paid for it.

There is no doubt of the perfect practicability and safety of the system, when loans are made to only a legitimate percentage of the ascertained value of the property and other proper precautions are taken. The Crédit Foncier of France,

which is engaged in such business, has mortgage bonds out to the amount of about $350,000,000. In Germany thirtythree such banks have similar obligations to the amount of more than $1,500,000,000, scattered over every part of the empire; while the Land Mortgage Bank of AustriaHungary has debentures of nearly $40,000,000, and the Mortgage Bank of Spain has similar obligations of $17,000,000. These institutions practically bring into the security market a large part of the land values of Europe. A mortgage bank of this sort is able to increase its loans to the limit of the debentures which it can sell, and every few months witnesses an offer of a block of such securities, which are eagerly subscribed for by those seeking a safe and steady investment.

The genius of American financiers and promoters has blazed out investment paths of its own. The path followed during the last few years has been the conversion into large corporations of industrial enterprises. The Wall Street Journal recently estimated the new securities thrown upon

the market as a result of this process at nine billions of dollars, and declared: .

"The next stage was the sale of these securities to people who had up to that time neither been owners of plants and manufacturers, nor investors, but who, tempted by the novel opportunity, invested their money in the new industrial securities. The fact that the United States Steel Corporation now has something like 55,000 stockholders is the best demonstration of this that any one could wish. Consequently, the industrial promotions had the effect of tapping to quite a large extent a fund which had heretofore not been available to the security market, having found investment largely in savings banks, real estate, etc."

When capital began to accumulate rapidly, therefore, after the recovery from the long prostration of 1893-97, and only a limited outlet was found for it at first in the creation of new manufacturing plants and the extension of railways, the financier turned naturally to the project of organizing manufacturing industries upon the basis of stock companies. Other reasons, like the severity of competition, undoubtedly produced the tendency to consolidate industries by bringing to an

end useless duplications of expenditure and getting rid of competition. These causes, however, could not have produced all the recent phenomena of the money market if there had not been a great fund of capital in the market seeking new investments. There would not have been the capital available in the hands of one manufacturer to buy out another, or in the hands of promoters to buy them both out, which has been found available under the conditions of recent years.

When, however, the earning power of a number of mills or factories could be capitalized into bonds and preferred stock, a supply of securities could be thus created which would meet the demand for new forms of investment arising from among those who were rapidly making money under favorable commercial conditions. In many cases it was found that the owners of the old establishments were willing to retire from business and to accept a fixed income upon their capital. To others the original investment could be reimbursed from the savings of outsiders

who became shareholders in the consolidated industries. The transfer of such considerable sums to the owners of the old plants, where they were paid in cash, added to the fund seeking investment, and thereby added to the capacity of the market for absorbing securities.

That this tendency to create securities has been overdone within the past few years is undoubtedly true. The inevitable operation of the law of supply and demand curtailed demand when the supply of capital available for such investments was absorbed. The process of creating new securities proved so profitable—or at least appeared so that the demand was soon more than satisfied. Hence came the phenomenon of a mass of "undigested securities," which could no longer find the ready market of a few years before. The fault has not lain entirely with the character of the securities.

The fall in quotations for "industrials" on the New York stock market is not due altogether to impairment of confidence in the value of such enterprises, but is the