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The cash items of insurance companies.

Besides these items there appears among the assets of companies what is termed "cash in office and in bank." This item has a peculiar status. The laws of the several States require that the insurance companies make a statement of investments, assets, liabilities, etc., in order that there may be a published record of their doings. Furthermore, the various States have appointed special officers for the investigation of the condition of insurance companies for the protection of policy-holders. In the rivalry between insurance companies a point is made of the character of their assets. Nearly all of the insurance concerns make advances to their agents. With the numerous agencies scattered through the country small advances made to each will amount to millions in the aggregate. In order that these advances may not appear in their true light -in other words, that it may not be placed on record that they are doing business in this way-many of the large insurance companies, being in control of banking institutions, take to the banks under their control the notes of the various agents on which advances have been made and, for the purpose of the statement made to the public, temporarily discount these notes and have the amounts entered to their account as cash credits. These are then canceled by the return of the notes when convenience may serve after they have performed the service intended. While this may, in ordinary business experience, be considered an illegitimate practise, yet the practise itself has arisen very largely out of the rivalry between companies and the atti

tude of certain unintelligent inspectors to interfere in what may be considered a legitimate business arrangement, and one which does not necessarily jeopardize any of the interests of policy-holders or of stockholders.

With the enormous holdings in stocks and bonds, and with investments in such securities limited by statute of the Insurance several States, it may be well understood how companies as it is that what are called "gilt edge" stocks factors in the security and bonds command a low rate of interest or market. dividend return on market price paid. The successful investment agent or investment manager of a large insurance company keeps his eye constantly open for opportunity to invest in accredited stocks and bonds at a rate that will return to his company an income which will produce a dividend to policy-holders and to stockholders. Moreover, a certain pro rata of the funds of insurance companies are loaned to speculators on what may be called "call" or "collateral" loans. These have as collateral security listed stocks and bonds. The Equitable of New York, for example, has outstanding on collateral loans $25,371,587, over one-third of all the collateral loans of the combined companies. Let us suppose that a margin of ten per cent is allowed between the market price of securities held as collaterals and the amount of advance. For a company safely to make loans on a kind of collateral that is constantly fluctuating with the movements of market price, it becomes incumbent on an institution making such loansand most of the old line companies do make advances of this kind-constantly to keep a watch of the market in order that the margin of safety may not be impaired. The usual thing is for such a company to have a corps of clerks whose duty it is to keep a constant record of all the stocks and bonds in which they are interested. This also serves the company as a record from which investment calculations may be made. Such power have the combined insurance companies in the market that were they to con

spire to that end, every financial concern in the country might be brought to a condition of distress, possibly of bankruptcy. On the other hand, with the strong support of such companies the market, financial institutions, and the Government itself find in insurance companies the greatest financial security. The effect of the enormous risks undertaken by the insurance companies, therefore, is not only to relieve the business world of speculative uncertainty in the numerous relations to which it is applied, but also, by the financial conservatism adopted to secure this end, the investment companies assist very materially in steadying the market and relieving financial distress in time of strain.

INDEX

Accommodation, signature to note, 120;
accommodation mortgage, 156.
Appropriation, funds obtained by, 87, 88.
Assignment of note, 121.

Balance-sheet, 152.

Bank draft, Bank of the United States,
67.

Bank of the United States, illustration

of note of first bank, 42; illustration
of note of second bank, 43; illustra-
tration of check drawn by Andrew
Jackson on, 57; illustration of check
drawn by Daniel Webster on the
Boston branch, 58; draft of, 67; un-
secured bond of, 167.

Bill of lading, attached to draft, 143.
Bonds Form of bond, 163; Trust
Company as agent of sale and trans-
fer of bond issue, 164; private bonds,
165; unsecured bonds, 165; how
bonds differ from other credit instru-
ments, 169; security used in bond
issues: (1) personal security of in-
dorsement and guarantee, 169, 170;
guarantee of Reading Terminal bond,
171; indorsement of bond, 172; (2)
lien security, trustee necessary to lien
security, 172; who may be trustee,
173; how corporate bonds differ from
corporate shares, 173; real estate
bonds, 168, 174; general mortgage
bond, 174; general mortgage of the
Reading Company, 175; blanket
mortgage bonds and consolidated
mortgage bonds, 175; divisional
bonds, 175; Collateral Trust bonds,

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175; equipment bond, 178; car-
trust bond, 177-179; car-trust bond
of Railroad Equipment Company,
177; of American Transportation
Company, 179; debenture bond of
Financial Company, 179-189; deben-
tures of railroads, 181; income bonds,
and how they differ from preferred
stock, 181, 182; purchase-money
bonds, 183: improvement bonds, 183;
gold bonds and legal-tender bonds,
183; coupon bonds as distinguished
from registered bonds, 185; payment
and extension of bonds, 185; bond
extension contract, 188.
Broker. The note-broker, 265; foreign-
exchange broker, 268; the stock-
broker, 269; the produce-broker, 269;
other forms of broking, 269.
Broker and brokers' board, 265–279.
Broking. Nature of broking business,
265; organization of broker's office,
276; speculative side of broking, 276;
distinction between investment and
speculation, 277; the speculative con-
stituency, 277; board-room of Haight,
Freese & Co., 278; the bucket-shop,
279; chart of private wires of Haight,
Freese & Co., 280.
Bucket-shop, 279.

Building Loan Association, 229-238;
service of the building loan associa-
tion, 229; distinguishing features of
the building loan association, 230;
conditions out of which the institu-
tion arose, 231; the first building
loan association, the growth and pres-

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