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States under which the mortgagor is organized, the amount covered by prior mortgages, and the provisions of the bond itself.

Many bonds partake of the nature of several classes— thus a First Consolidated Sinking Fund, a General Consolidated. A General or an Income Bond where no second mortgage exists on a property may be practically on the same footing as a second mortgage on another property. In many cases a first mortgage is little better than worthless-in other instances a Debenture Bond may sell at a premium.

Some of our large corporations have so great a mania for issuing new obligations that it becomes difficult to invent a proper title for all of their bonds. It may be stated as a general rule, however, that very few corporations, and none of high standing, issue bonds which in their nature conflict with one another; thus we seldom see a consolidated mortgage bond and a general mortgage issued on the same property, or second and third mortgages where a consolidated, a collateral, or a general mortgage exists. In the first place the laws of many States seek to prevent confusion of rights; in the second, and what is more important to the companies, the investing public will not purchase at a good price securities on whose title a cloud

rests.

Certificates of Indebtedness (Floating Debts).-Certificates of Indebtedness are frequently issued by corporations as evidence of their floating, accrued, unfunded debts. The holders of these certificates possess a claim on the property and assets of the company for the amount stated in such certificates, and if it is not paid within the time named they may apply for the appointment of a receiver.

Trust Company Receipts, Certificates of Deposit, etc.

Trust Companies' receipts and certificates of deposit, although securities which are of a temporary nature, re

quire a brief description, as they are often listed, bought, and sold on the Stock Exchange the same as securities of a more permanent nature.

The certificates of deposit usually represent the deposit of securities under some plan for the readjustment, consolidation, or reorganization of properties, such securities being held in trust until the same has been effected.

The receipt by the trustee to the depositor for the security deposited with it enable such depositor to avoid the inconvenience and loss which he might suffer from inability to use the security so deposited; the title to such security being transferable by the holder of the certificate, or it may be used by the holder as collateral in the securing of a loan.

Receivers' Certificates.

Once a property is placed under the management of a receiver, it is in the hands of the Court under whose jurisdiction the receivership has been granted.

The rules which ordinarily apply to the financiering of a corporation as regards its stock and bonds may, at the will of the receiver, if approved by the Court, be set aside. The receiver operates the property, under the direction of the Court, for the benefit of its security holders.

Receivers' Certificates are issued for the purpose of obtaining money for the company, and are seldom resorted to except in cases of absolute necessity or of great emergency. When a company is practically bankrupt and unable to either sell or obtain a loan upon its assets or securities; when its plant, or road-bed and equipment, as the case may be, is in such condition as to render operation unsafe or impracticable; or when payments for rentals, loans, cars necessary to conduct traffic, etc., must be made, otherwise involving disintegration of its system, or still further and more disastrous losses in earnings, it

then becomes necessary to issue these certificates. They must be approved by the Court, and if objection is made to their issuance by security holders, a hearing is granted their attorney or counsel before such approval is granted.

When receivers' certificates have been duly approved and issued, they take precedence over every other obligation of a company, first mortgage bonds included. They constitute a first lien upon its earnings (excepting only the wages of employees and necessary expenses of operation), and upon its property.

In the face of any determined opposition from holders of first mortgage bonds or other securities of the company, and the submitting of evidence that such issue of certificates is unnecessary, their issue will hardly be allowed. They seldom cover an amount large enough to jeopardize or imperil the rights of bondholders; and, as stated above, are issued only to prevent further and greater losses which would ensue from the lack of funds which they are intended to raise.

These certificates, even when put forth by the receiver of the most hopelessly overburdened and overmortgaged company, are generally considered a perfectly safe investment by the most conservative financiers.

Investment Securities.

The United States, the different States, counties, townships, cities, villages, and school districts issue bonds payable at a specified date, on the principal of which interest is paid at the rate therein specified. These bonds are not secured by a mortgage on any real present value, and their worth consists entirely in the ability of the issuer through its taxing power to meet the obligations incurred.

States and cities issue also refunding bonds, which are bonds to refund either other bonds, or to secure funds to provide for the payment of outstanding obligations. The

Federal Government, State governments, city and county governments have also in many instances issued bonds to assist in corporate enterprises of a semi-public nature, such as the building of bridges, the laying of railroads, the erection of waterworks, etc.

Many cities issue bonds to provide for improvements; and some cities issue special assessment bonds, chargeable against the abutting property. By way of illustration: if they want to pave a street, or make other improvements of a local character in a particular part of the city, the city issues bonds chargeable against the property in the district benefited, but not against the whole city; the city merely acting as agent for the collection and payment of interest and principal.

Many of the States and cities issue Interest Warrants, which are payable within a given time, bearing a specified rate of interest, and are issued to provide needed funds.

These warrants are either paid at maturity or funded in bonds by their makers.

CHAPTER XIII.

Commercial Houses-Commercial Agencies.

Commercial Houses.-In order to form any just estimate of the financial operations of any large city, and in fact of the financial institutions, properly so-called, therein, it is necessary that we should have some adequate idea of the method by which the business of our larger commercial houses is conducted. While it is true that the great variety of business in which these houses are engaged necessitates more or less change in detail, the principles governing the management of the financial part of their business is practically the same in all well conducted houses.

It will be necessary, however, to give some brief outline of the method by which, first, the indebtedness is created by the selling of goods, before we come to the indebtedness itself, which constitutes the primary element in the finances of a house, and leads to their first dealings with financial houses. To proceed regularly, we will first consider the system under which the house obtains possession of the goods which it sells.

All large houses are divided primarily into what, for want of a better word, will have to be termed " departments." One, the Buying Department, through which all the goods sold by said house are purchased from various sources, and the other the Selling Department. Both of these departments, according to the magnitude of the

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