, GIVING AND GETTING CREDIT BY FREDERICK B. GODDARD art of Selling 12MO, FLEXIBLE CLOTH, 50C. <3i\>fng and (Setting Credit 12MO, CLOTH, $1.00 NEW YORK F. TENNYSON NEELY 114 FIFTH AVENUE GIVING AND GETTING CREDIT A BOOK FOR BUSINESS MEN BY FREDERICK B. GODDARD NEW YORK F. TENNYSON NEELY 114 FIFTH AVENUE ' V / T 6 W COPYRIGHT, 1895, By FREDERICK B. GODDARD CONTENTS. CHAPTER I. CREDIT AND MONEY. PAGE The meaning of Credit. It utilizes the present value of a future payment. It neither creates nor destroys capital. Credit system a vast se- ries of mutual dependencies. Credit the "soul of commerce." Ninety per cent of business done upon Credit. Coined money the standard measure of values. Is a medium, and also an object of exchange. Money is supposed to stand still while prices of other things move. The wealthy deal chiefly by Credits, they ex- change the title to money by checks, etc. Long and short Credits. A link broken in the chain. When confidence gives way to distrust. Credit unused grows rusty. Merchants' notes in the market. The simple and national rela- tions of buyer and seller. The merchant a bet- ter judge of Credits than the banker. The "nimble sixpence." 7 CONTENTS. CHAPTER II. OP FAILURES AND CHANGES IN BUSINESS CONDITIONS. PAGE Some failures will surely occur. Proportionate uniformity in the number of failures in a series of years. Average losses on credit sales. Total failures and liabilities during the last thirty- eight years. Business prosperous about three- quarters of the time. Cardinal considerations in giving Credit. Changing conditions. Fraudulent and unfortunate failures. It is the unexpected which makes bad debts. Meaning of insolvency, failure, and bankruptcy 23 CHAPTER III. SUGGESTIONS AND PRECAUTIONS. Business men should make known their financial position, the age of mystery passing away. Applicant for Credit should prove that he is worthy of it. Policy of establishing a Credit when it is not needed. Chances taken with old patrons. Merchants' ledger his barometer. Where is the money of a tardy debtor? "Dry rot" in old concerns. "No friendship in busi- ness" an atrocious maxim. Most men mean to be honest. Weakness of the Credit system. Must walk by facts and not by faith. Neither display nor liberality should mislead. Should be not merely persuaded but convinced. Giv- ing Credit implies risk. The weakness of timidity and over-caution. The cost of con- CONTENTS. 3 PAGE ducting business. Personal expenditure. The catechism of a business house. Bed tape. " Not processes but results" wanted 37 CHAPTER IV. ESTIMATING CREDITS. Balance sheet or statement, duly signed and verified, the best test of a man's financial condition. The construction of a statement indicates much. Assets shrink, but liabilities never. "Real" and "nominal" assets. Houses in irretrievable difficulties holding on. References and their value. Questionable references. The best type , of buyers. Overloading Credit customers. Dating. Cash discounts. A "time to watch and a time to pray." 53 CHAPTER V. POINTS ON GIVING CREDIT. Nature of the patronage upon which a credit cus- tomer must depend. Agricultural, manufactur- ing, mining,and mixed pursuit communities. Over-production. Better stimulate consump- tion than try to check production. A crusade of development. Losing sight of the trend of affairs. Business a matter of principles and methods. Difference in men. Luck. The line between speculation and enterprise. Amateur gambling. Opinions of a New York merchant. Giving Credit upon instinct or intuition. The Jewish race in commercial affairs. Credit in other countries 69 4 CONTENTS. CHAPTER VI. COLLECTION. PAGE Enforcing prompt payments. Differing collection laws of the States. Credit obligations resting upon honor. Fraudulent default. The menace most effective which lies in firmness, not irrita- tion of speech. The first offer of a bankrupt. Circumstances should qualify final basis of settlement in each case. Sending distant claims for collection to unknown lawyers. Collection agencies, etc 91 CHAPTER VII. CORPORATIONS. Advantages of a corporation over a partnership. A favorite method of forming corporations in times past. Liabilities of stockholders defined. Unincorporated companies. Industrial cor- porations. Trusts. The Sherman Anti-Trust Law has but little restraining power. Many corporations have been based on schemes of dreamers and swindlers. Special cautions in extending Credit to corporations 106 CHAPTER VIII. THE MERCANTILE AGENCY SYSTEM. Its origin in 1841. Early history and growth. Leading mercantile agencies of the past and present. Agency methods. The usefulness of CONTENTS. an agency. The American mercantile agency system unique. The agency of the future. The agency has become a necessity of trade 120 CHAPTER IX. CREDIT GUARANTEE OR INDEMNITY SYSTEMS. Their beginning and the principles on which they are based. New and ingenious features. Some notable differences between Credit insurance and other kinds considered. May in time become a bulwark of trade. Merchants appear to wish them success. They have met with unfavorable conditions so far, in the business depression. Must pass through their experi- mental stages 136 CHAPTER X. A UNIFORM BANKRUPT LAW. The general need of such a law. Difference between bankrupt and insolvent laws. Earlier bankrupt laws. Bankrupt laws in other countries. A good law would operate to punish fraud, and protect creditors. The Torrey Bill. Popular demand for its passage. Advocated by the Na- tional Board of Trade, and why 144 CHAPTER XI. PANICS. Panics since 1814, equal in number in the civilized countries, and practically simultaneous. Spec- ulations on their underlying causes. History of each panic in the United States since 1814. . 153 6 CONTENTS. CHAPTER XII. THE PANIC OF 1893. PAGE Its proximate cause distrust of the stability of the currency. Other events which helped to produce and intensify it. The demonetization of silver a monetary evolution. Its effects upon trade. The Bland Bill. The Sherman Bill. These measures held responsible by many for the crisis. The Barings' failure. The condi- tion of affairs in 1891-2. The year 1893 opened with gray skies. The Australian bank failures. Gold exports. The President's action. Failures in June, and scarcity of currency. The Government of India suspends free silver coin- age. Congress repeals the silver-purchase clause of the Sherman Act, Nov. 1. It did not restore confidence. Review of affairs in 1894. The export of gold checked early in 1895. The turning-point in the panic. The advocates of free silver coinage. The nation demands an honest dollar. Bimetallism a "back number." The prevention of panics. Panics beacon lights of warning and instruction. Their lessons to business men 168 APPENDIX. The assignment, insolvent, exemption, and other laws of all the States and Territories. . . 195 GIVING AND GETTING CREDIT. CHAPTER I. CREDIT AND MONEY. COMMERCIAL credit is the name of that trust which is reposed in men because of their char- acter and resources. In other words, it is an estimate of ability and disposition to fulfil busi- ness engagements which confers purchasing power ; power to command the industry or the capital of others. Credit is the opposite of money, for it pays nothing. Debt is a thing to be paid, and money is the thing that pays. But the value which is attached to a merchant's word, the skill and experience he has acquired, and the relations he has established, must surely be considered, in some sense, as capital. The man who buys with money uses the real- S. GIVijtfO AND GETTING CREDIT. ized profits of the past. If he buys upon credit, he utilizes the present value of a future pay- ment. He promises to pay a sum of money, and gives the creditor a right of action against him if he fails to pay; this is the legal basis of credit. If, by the lapse of time, or a bankrupt law, he is legally discharged, the obligation is not thereby extinguished ; the creditor is merely denied the use of the law to enforce his claim. Credit neither creates nor destroys capital ; it merely transfers to the debtor the property of the creditor, and one is plus only by as much as the other is minus. If, for example, five men buy from each other, consecutively, a thousand dollars' worth of goods, and each gets the note he receives discounted, five thousand dollars are thus brought into circulation, but no new value is created. If the last purchaser fails to pay his note, and none has surplus capital, the loss of a thousand dollars must run along the line, and each becomes bankrupt. Yet the goods may still exist, and, except in the confusion and .distress which follow, the community is neither richer nor poorer than before. CREDIT AND MONEY. 9 This is the condition of affairs when credit becomes too much expanded and the crash of widespread bankruptcy sponges the slate. It shows that the credit system is a vast series of mutual dependencies, and that the solvency of merchants rests largely upon that of their neighbors. Credit is a tax upon labor, because prices on credit are higher than for cash. Those who take credit and pay, are charged to make up average losses from those who do not pay. The good insure the bad, so to speak, and cash discounts show the cost of credit. No one becomes bankrupt who does not owe. Credit is, therefore, a cause of bankruptcies. Credit favors extravagance and speculation. It is easy to spend or risk money which has cost neither labor nor self-denial, but merely a promise to pay hereafter. Social economists say that a family which buys its supplies on credit spends much more than if it pays cash. Credit stimulates demand and raises prices, yet it is a blessing to the sick or unemployed work- man, because it enables him to draw upon the i future for his necessities. 10 GIVING AND GETTING CREDIT. Credit pays capital for permitting itself to be employed in reproduction, and transfers it from hands that cannot use it into hands that can. It enables those who have industry but no cap- ital to enjoy the advantages of both, and leads it into channels through which commodities are moved over the civilized world from pro- ducer to consumer. Without credit, the present business of the world could not be transacted. Not all the gold ever taken from the earth could perform its service. It constructs railways, opens mines, improves farms, and builds houses: it is "the soul of commerce," an agent and promoter of civili- zation wherever human energies can be exerted. Credit is the fruit of a settled condition and was therefore unknown in the early stages of societj T . It has succeeded the primitive periods of barter and money, or cash, and appears only when the observance of contracts is enforced by public authority. Wise and beneficent credit follows the largest personal liberty, but is op- posed to every form of misrule and anarchy, CREDIT AND MONEY. 11 and flourishes best under the wing of strong and secure government. It is estimated that from ninety to ninety-five per cent of the world's present business is trans- acted upon credit. Daniel Webster declared that " credit has done more a thousand times to enrich nations than all the mines of all the world." Real or metallic money, coined by public au- thority, is the standard measure of values which denotes and carries in itself an exchangeable value equal to that of the average quantity of labor required to mine and coin its metal. It is therefore not only a measurer and medium of exchange, but an object of exchange, like other products of labor and capital. It is this intrinsic property which insures ab- solute confidence in it, without which there is sure to be confusion and distress. One of the chief causes of the panic of 1893 was that while gold and silver were equal in legal=tender qual- ities, their relative value was unstable. 1 1 Silver dollars are an unlimited legal tender in the United States. In Great Britain silver is a legal tender for forty shillings. A legal- tender dollar contains 412 12 GIVING AND GETTING CREDIT. The price of a thing, which is its trade or commercial value, may fluctuate according to demand and supply ; money is also subject to constant oscillations between plenty and scar- city, but it is supposed to stand still while prices of other things move. As a gold dollar is a unit of value, we cannot think of it as worth more or less than a dollar. "Its pulsations of commercial value are not registered in itself, but in the prices of staple commodities; in- crease their supply and they become cheaper; increase the relative quantity of money and they tend to rise in price. If business stagnates, less money is needed; consequently it becomes more abundant, with an easy rate of interest, which encourages enterprise and advancing prices. Money is also a token of credit for labor per- grains of standard silver. The faith of the Government is pledged to maintain its current parity with gold. The "free silver" advocates desire that the Government shall coin all the silver offered by any person, at the ratio of sixteen to one with gold. The Act of June 9th, 1879, provided that the subsidiary silver coin of the United States should be legal tender in all sums not exceeding ten dollars. Five-cent nickel pieces are legal tender to the amount of 25 cents ; one- cent pieces to the amount of 4 cents. CREDIT AND MONE.Y. 13 formed. Bastiat says, " Money is, in effect, an order to pay to bearer a service equal to that which he has rendered mankind." Burke called 'gold and silver "the two great recognized species that represent the conventional credit of mankind." Paper money is merely a promise to pay in metallic money. Coin money is the standard, paper money the instrument. Being more con- venient, it is seldom converted into coin unless the holder becomes alarmed. Perhaps the wealthy actually handle less money than the poorer classes, because they deal chiefly by credits. They exchange the title to money. They deposit checks in bank and draw checks upon it. The principal function of the bank is to transfer credits from one ac- count to another, and it neither receives nor pays out much cash, relatively to the amount of its transactions. It has been said that the bulk of current money is used by those who are too poor or too little known to obtain or to utilize credit. Proportionally less money is now required to transact the world's vastly increased volume of business, because it has been so generally 14 GIVING AND GETTING CREDIT. superseded by credit, with its implements or machinery. But credit must rest upon some substantial foundation, some absolute, stable measure and representative of value, and to furnish this is, in these days, the chief func- tion of money. As confidence, so essential to credit, is best assured where personal and property rights are most secure, there is the highest civilization; there also is the largest variety of pursuits; money and credit are most active, and the rate of interest lowest. There, therefore, is the greatest demand for labor and the most abun- dant production. Credit is practically the rule in wholesale transactions throughout the world, while money passes chiefly in retail trading, or in payment for labor. It is obvious that the abolition of credit would mean a vastly increased demand for money. It is to be noted, however, that while time transactions may still maintain their relative proportion in general wholesale business, the credit system is undergoing certain important modifications. During the last few years there CREDIT AND MONEY. 15 has been a great decline in the price of most commodities, and to secure former profits a larger bulk of goods must be handled. Increas- ing competition adds to the cost of effecting sales, while it also decreases percentages of profit. Under these circumstances manufac- turers and merchants find it necessary to elimi- nate risk as much as possible from their deal- ings; hence the large discounts offered for cash, and an increasing desire to curtail the length of credits. Industry, like climate, has its seed-time and harvest, and the consumption of its annual products has its natural progression and its periodic completion. The distribution of these products under the credit system should prop- erly conform to this natural order of production and consumption. So, also, shorter credits should follow improved transportation, because goods pass more quickly from producer to con- sumer. But, in fact, long credits are given rather as a temptation to the purchaser than as a requirement of natural conditions. Every debt implies a credit, and all tho debts are equal to all the credits. Debts for merchan- 16 GIVING AND GETTING CREDIT. dise are extinguished by selling that merchan- dise and applying to them the proceeds. Men buy and give promises to pay, they sell and take promises to pay, and their capital or credit en- ables them to stand in the gap and apply those they take to those they give. It virtually re- quires all the credits to pay all the debts. Experience shows that, during a generally prosperous condition of affairs, credit is ex- panded until a fever of speculation culminates, and debts are incurred by "booming" towns, building railways, and similar projects. But when the mercantile community has been se- duced into devoting any considerable proportion of its credits to purposes outside its natural channels, the process of adjustment is deranged and confidence gives way to distrust with its train of evils. Our periodical panics have in fact been born less of adversity than of the abuse of prosperity. Again ; it is impossible that the entire debts of a community could be paid at once. The ability to pay depends on the gradual and regu- lar manner in which they mature, and the amounts paid to-day render possible to the CREDIT AND MONEY. 17 business world its payments of to-morrow. Each line of trade establishes for itself its cus- tomary terms of credit. If it were the general custom to extend a credit of four months to purchasers in the boot and shoe trade, for in- stance, and a material quantity of intermediate credits of eight months be granted, a link is broken in the chain. Bankers complain that " an adequate supply of business paper is yearly becoming more diffi- cult to obtain." Some trades, notably those which deal in staple products, the rubber, the jewelry, and a few other lines, still largely re- tain the old-fashioned system of settlement by notes; but merchandise is now chiefly sold on open account. So common has this practice become that the offer of a bunch of small notes, as bills receivable, for discount, is sometimes held by bankers to signify a "needy condition." At least two-thirds of all the paper bought by banks and capitalists in New York is " single name" paper. It is generally preferred by them to " double name" paper, because the simple and direct promise to pay of a concern whose character and resources are known and 18 GIVING AND GETTING CBEDIT. approved, is deemed safer than a shared respon- sibility which may introduce some devious fea- ture of accommodation for both maker and indorser. 1 It is no longer considered " kiting" for houses in good credit to sell their notes, and with the avails secure cash discounts on purchases. It is even currently said that if, in ordinary j'ears, merchants in some lines of trade cannot float their single name paper and buy for cash, they are "undesirable as customers." But there are many concerns which enjoy excellent credit in mercantile circles, whose paper cannot be sold to banks and capitalists, because it is not known to the note-brokers. An enormous volume of paper is kept afloat by some large houses, and they cannot afford to withdraw their names from the street, even though they have no use for the money. Credit unused grows rusty. "It is now," says a 1 M. Leon Say avers that the best form of credit for banking purposes is purely personal credit: "Le credit tout court sans phrase. Le credit sur gage n'a jaraais ete que 1'enfance du credit. Le credit public n'existaitquandles rois empruntaient surleurs reliques ou sur les bijoux. " CREDIT AND MONEY. 19 banker, "a prevalent idea among merchants that a concern which does not place its paper in the open market, or use bank facilities, is not in first-class credit." 1 Chartered trust companies and savings banks are forbidden by law to loan on single name paper; large amounts are, however, passed into loans by some of these institutions, through brokers, with "straw" indorsements. National banks are not thus restricted. There are some who think that later on, in accordance with specialization, or the division of labor principle, the special and peculiar concern of the manufacturer will be more to fabricate, and of the merchant to distribute, and that the credit of both will increasingly centre in the banker. In other words, it may become still more his function to measure the responsi- bility of the others and supply them with cash for their dealings. But it is unlikely that any 1 It will be understood that the movement of com- mercial affairs under exceptional conditions, such as have existed during the present business depression, may not indicate their general drift or tendency. " All signs fail in dry weather." 20 GIVING AND GETTING CREDIT. system will ever prevail extensively which brings a financial intermediary between the simple and natural credit relations of buyer and seller, unless under some form of guarantee. Nor is the banker, as a rule, as well qualified by circumstances to estimate the responsibility of an applicant for credit as the man from whom he buys his goods. It is an old saying in the business world that " if you wish to know any- thing about a bank's customer, don't ask the bank." The merchant's relations with his cus- tomer are closer. He knows whether he is a prudent buyer and a good business man, and his ledger account shows the degree of prompt- ness with which he has met his payments and the manner of his dealing. All this knowledge the banker can only obtain at second-hand. Aside from the fact that there is less risk in granting a short credit than a long one, there is also more profit in the nimble sixpence, or the more frequent turning-over of capital. It is interesting to see the figures; for example, a thousand dollars turned over once each year with accrued profits, for five years, reckoning the profit on each investment or sale at twenty CREDIT AND MONEY. 21 per cent, will give an aggregate of $2,488,32. The same sum turned over twice each year, for five years, under the same conditions, will amount to $6,191.74; and three times yearly to $15,407.02; in another year, or in six years, the thousand dollars will, under the same condi- tions, if turned over three times yearly, aggre- gate $26,623.33 as against but $8,916.10, if in- vested but twice a year. CHAPTER II. OF FAILURES AND CHANGES IN BUSINESS CON- DITIONS. ON the Canton River numbers of people live in house-boats, or sampans, and raise water- fowl, which are taught, upon a signal, to scurry home to the boat as fast as possible. But some one of the ducks and geese must be the last to get in, and that unfortunate is always punished. And so among business men; some failures will surely occur because it is not in the nature of things that all can succeed. All in trade are liable to casualties and reverses which imply no crime, and which the average sagacity can neither forecast nor avert. A.nd there appears to be as practical uniform- ity in the number of business failures, propor- tioned to the " business population," in a series of years, as in the social phenomena of mar- 22 FAILURES AND CHANGES. 23 riages, births, deaths, suicides, etc., in propor- tion to tHe general population. 1 There is much disparity in the proportion of losses by bad debts in the various kinds of busi- ness, and it is difficult to obtain facts upon which to base calculations of the average per- centage of net loss on the total volume of credit sales of merchandise. Some estimates have placed it as high as T \ 5 o- of one per cent, others as low as T 4 oo- of one per cent. Probably it lies somewhere in the mean, but we shall never know how near we are to the truth of the mat- ter until we have reliable data upon which to generalize and reckon. We do know, however, that about one concern in ninety fails annually, on the average, and statistics show also the ag- gregate liabilities of all failed concerns and their assets. A French economist reckons that ten out of every hundred who enter business succeed, fifty vegetate, and forty become bankrupt. It has been lately calculated that in the United States 1 The expectation of everywhere discovering regularity in the midst of confusion has now become an article of faith with the most eminent scientific men. 24 GIVING AND GETTING CKEDIT. ninety-five per cent of the business men "fail to succeed." Things in business go chiefly by law, and not by luck; the fittest only survive, and at least eighty per cent of those who fail, with liabilities exceeding assets, can find in themselves the causes of their failure. The Mercantile Agency approximates the total number of commercial failures in the United States during the last thirty-eight years, or from 1857 to 1894 inclusive, at 252,524, with liabilities amounting, in round numbers, to $5,- 500,000,000. These constant losses have fallen upon the mercantile community sometimes as noiselessly as snowflakes, and again fitfully, in gusts and swirls. Some idea may perhaps be had of the amount of new business necessary to be transacted in order to retrieve them. Such an aggregate gives one a feeling of re- spect for that cautious and thoughtful Dutch- man, who sold his goods lower on credit than for cash, in order to cut down his risk from bad debts. These figures show the average liabil- ities of each failure to be about $20,000. No data is obtainable to show, even with ap- proximate accuracy, what proportion of this FAILURES AND CHANGES. 25 vast sum was finally paid to creditors, or what relation it bears to the total volume of business transacted upon credit during this period. These and many kindred statistical facts, care- fully gathered, analyzed, and considered in their relation to currency, tariffs, and other varying political and financial conditions, would cer- tainly be of practical benefit to the business world and useful to public men, as a basis for induction to great and guiding principles. The history of commercial affairs during the last fifty or sixty years demonstrates that busi- ness in the United States has three phases, viz., prosperity, panic, and reorganization, or liqui- dation and settlement, and that we have been relatively prosperous about three-quarters of the time. There seems to be a rhythmic oscillation toward a period of extreme depression about every tenth or twelfth year. These facts are suggestive. There are times when a prudent merchant will take warning from the past ; seasons when he should be ad- vised that a panic is "due." Again, after a panic, when the liquidation has been radical and complete, he may reasonably expect a 26 GIVING AND GETTING CKEDIT. period of comparative safety for expanding enterprise. It is often asserted that, in credit dealings, a poor man who is honest is safer than a richer one whose good faith is not assured. Certainly, men possessing a talent for business can often largely increase the energy and effectiveness of even a small capital and come safely off. Cap- tains like Napoleon have led a handful of sol- diers to victory against overmatching battalions, and many a poor man with superior qualities has struggled against, great odds to the very front rank of fortune and credit; and many more will do so. But Mercantile Agency returns show that, in recent years, downright dishonesty is a less im- portant factor in mercantile losses than " lack of capital and capacity," which are held to ac- count for about " three-fifths of the total num- ber of business failures, and three-quarters of the aggregate liabilities." Too many are like Artemus Ward when he " tried to do too much and did it." Therefore simple probity, which means proved honesty, while a great strengthener of FAILURES AND CHANGES. 27 confidence, cannot be generally accepted as a sufficient basis for extensive credit. It is evi- dent that capital and capacity should also be cardinal considerations. A man with tangible means has a hostage in sight. His property is, in a manner, collateral security that he can and must fulfil his engage- ments. The first steps to wealth are difficult; its accumulation implies sagacity, experience, and thrift, or the valuable habit of saving, and its owner usually becomes more cautious and conservative than one who has no capital to lose. Cynical observers say that men in comfortable circumstances are also less liable to do crooked things than those who are pinched for money, because they are less tempted. Those who with a large capital do an unsafe- ly large business are proportionately less nu- merous than those who carry too much sail on a limited, or small, capital, and they are apt to be in a relatively better position to secure quicker and stronger support in time of need than the smaller concerns. Changed and changing business conditions render it constant- ly more difficult to succeed, without sufficient 28 GIVING AND GETTING CREDIT. capital and business aptitude, and they tend also to limit losses by hastening, as never be- fore, the almost inevitable catastrophe. Steam and electricity have changed the rela- tions of men. 1 The range of affairs to be over- seen is immensely widened. We are now in quick touch with all the world, and every im- 1 It is stated as a significant instance of economic pro- gress that the works at Niagara Falls will, when com- pleted, furnish and distribute as electricity "an amount of power available for manufacturing purposes, equal- ling, if not exceeding, the aggregate amount of steam and water power in use in all industries in the United States as reported by the census of 1880." The passing age of steam bequeathes to us the coming age of elec- tricity, and probably the dreams of to-day will be the substantial realities of to-morrow. In a recent issue of The North American Review, the English statistician and political economist, Professor Mulhall, says : "If we take a survey of mankind in an- cient or modern times as regards the physical, mechan- ical and intellectual force of nations, we find nothing to compare with the United States in this present year of 1895. At the same time we see that the wealth of the American people surpasses that of any other nation, past or present. . . . The United States in 1895 possesses by far the greatest productive power in the world ; ihis power has more than trebled since 1860 ; the intellectual progress of the nation is attended to in a more liberal manner than in Europe, and the accumulation of wealth averages $7,000,000 daily." FAILURES AND CHANGES. 29 provement in communication and transporta- tion, and each labor-saving invention, adds to the delicacy of trade calculations. Prices fluc- tuate within narrower limits then formerly, but the element of speculation is still a factor to be considered in manufacture or importation. New facilities sweep by old ones and distance them, and possibility of invention, labor condi- tions, demand, and competition are all con- stantly more uncertain. A single mistake, or misadventure, may sweep away the enterprising man with small capital. And there is a curious disproportion between causes and effects, which is natural perhaps, because the public imagination is whimsical and not governed in its conclusions by laws like those which control ants and bees. A great as- tronomer said, he could calculate the motions of erratic stars, but not the opinions of men. For example, an event logically calculated to pro- duce a certain movement of prices upon the exchange, appears often to affect them in an opposite and most unexpected manner. If harvests are scanty, the products may sell for more than if they were abundant; a small 3 30 GIVING AND GETTING CREDIT. crop often brings more than a large one; and when abundant the price may decline so that less can be realized upon the whole product by an amount many times the value of the surplus. And so in many things. The most sagacious must often grope their way, because at times future events and prices can as little be conjec- tured as if they depended wholly on chance. Yet, after all, in intricate and perplexing con- ditions the advantage remains with the master mind. And it is a corollary of the growth of such conditions in industrial pursuits that a constantly increasing tribute is paid to superior business ability and training. In earlier and simpler, and perhaps happier, times, creditors and debtors came nearer to- gether. Merchants and customers became friends ; they looked into each others' eyes and discussed resources, advantages, and prospects. But in late years, this pleasant and beneficial contact has become less frequent. We have no personal acquaintance with a large proportion of the people we deal with. In the complex march of modern affairs, busi- ness has become more mechanical. We deal FAILURES AND CHANGES. 31 less with men than with things. We have lost the personal equation of our customers, or get it only at second-hand. The name of a debtor or creditor on our books is only a symbol which might as well be represented by a number. This transition has reached even local lines of business. One of the largest livery-stable pro- prietors in New York says that ten years ago he knew all his customers personally, while now he practically knows none of them, all his busi- ness being transacted through the labor-saving telephone. Thus intuitions, personal knowledge of human nature, and judgment of individual character can be no longer accounted as helpful factors in determining credit, in the majority of cases. The trader is also deprived of the personal interest and counsel of the merchant, and if disaster overtakes him he has none of the regrets of friendship for the losses of a man whom he never knew. His honor becomes an abstract sentiment without the strengthening of a social compact, and his course is more liable to be swayed by the fitful winds of his own per- sonal advantage. 32 GIVING AND GETTING CREDIT. But there are also compensations in modern progress. It has multiplied sources of infor- mation in regard to men and their affairs, so that their home reputation, resources, and the man- ner of their dealing can easily and quickly be known. The knave can no longer hide himself ; the shadow of a fraudulent failure follows him to the remotest village or cross-road, and his unsavory record confronts him whenever and wherever he again asks credit. Nor can he who has shown himself incapable or negligent when entrusted with the property of others, altogether conceal the facts. He must show that he has gained wisdom and prudence before he will be held as again entitled to substantial confidence and credit. On the other hand, he who is overwhelmed through no fraud or folly of his own, finds his record for probity and ability an unforgotten and helpful force to put him again upon his feet. Yet it must be confessed that poverty often seems to get more punishment than crime. We have all seen men whose " debts were the only measure of their profits," and who flourish on fraud. They fail, force a compromise, and FAILURES AND CHANGES. 33 with their booty start afresh. They ride while their creditors travel afoot. 1 We have also seen cases where men have made an unfortunate rather than a fraudulent failure, and who, after giving up all and strug- gling for years to obtain another footing, have finally gone into hopeless oblivion. They could obtain no credit because they were destitute, and remained destitute because they could ob- tain no credit. These causes are often pitiable. To feel hon- est poverty is bad enough, but there is a deeper 1 A thief who had grown gray in the exercise of his profession at length declared himself warmly in favor of the proposition that "Honesty is the best policy." The reasons he gave for his conversion were substanti- ally as follows : He had known two crooks who became tired of doing time in prison, and they agreed with each other that when they got out they would be " honest. " So, upon their release, they went to another city and began a legitimate business. By dint of in- dustry and promptness in meeting their obligations they prospered, and at length built up such a credit that they succeeded in obtaining merchandise to the value of a hundred thousand dollars ! Then they sold the goods and skipped out with the proceeds. "They couldn't have done it," said the old thief, "if they hadn't been honest." 34 GIVING AND GETTING CREDIT. pang when we are made to realize that we have not sufficient merit to retrieve our circum- stances, and that the world has hopelessly for- gotten us. But in such a state of affairs, as Mr. Lincoln said of himself during the darkest days of the War, we " need success rather than sympathy." It will generally be found, however, that in the latter class of cases there is a deficiency of pluck, energy, or balance, and in the former, that the perpetrators of such frauds possess qualities which would have ensured to them a greater degree of prosperity, had they been hon- est and avoided the stigma of dishonorable fail- ure. Observation and experience teach pru- dent merchants that one successful crime sooner or later invites to the commission of another, and they cannot afford to forget. It is a clumsy rogue who, in these days, fails, in order to make money. He cannot cover his tracks. There are smoother paths of robbery. When the year's bad debts are charged off to profit and loss, the merchant may console him- self with the thought that the lessons he has learned will make him more cautious in the FAILUBES AKD CHANGES. 35 future. He thinks that experience has satu- rated him with wisdom. But experience has been likened to the stern-lights of a ship, which illuminate only the path it has gone over. The conditions of yesterday never return ; dealings with one have little prophetic value in dealing with another; the next loss may come under totally different circumstances, and from a direction entirely unsuspected. Human activities present such a tangled coil ; character and conditions vary so greatly, that particular decisions respecting men and their affairs have no universal application. All losses are exceptional. We never sell goods that we do not expect to be paid for. It is the unex- pected which makes bad debts. As confusion sometimes exists in regard to the meaning of the words Insolvency, Failure, and Bankruptcy, it may be well to define them. Insolvency is a state, or condition ; Failure an act flowing out of that state ; Bankruptcy the effect of that act. A man who is insolvent can- not pay his debts in full ; one who fails ceases to pay. The bankrupt is strictly a trader who is "bank broken," and who legally surrenders 36 GIVING AND GETTING CBEDIT. his property into the hands of his creditors. Bankruptcy is a legal act which dissolves the firm. Insolvency signifies more than bank- ruptcy. A concern may fail and become bank- rupt and yet not be insolvent, for the estate may pay in full ; and many a man who, if pressed to liquidate, would be found solvent only as snow in the sun is solvent, may never fail or become bankrupt. 1 1 An insolvent law is essentially a law by which a debtor is exempted from liability to arrest or imprison- ment for debt previously contracted, on condition of his delivering up all his property for the benefit of his creditors. Distinctions between bankruptcy and insolvency have been practically abandoned in this country, yet enact- ments of State legislatures for the relief of debtors are still called insolvent laws, those of the General Govern- ment bankrupt laws. Chief Justice Marshall says : " A bankrupt law may contain those regulations which are generally found in insolvent laws, and an insolvent law may contain those which are common to a bankrupt law. " CHAPTER III. SUGGESTIONS AND PRECAUTIONS. INTELLIGENT business men now broadly rec- ognize that both the ethics and the policy of trade require them to make known their finan- cial position. It is a practice to be encouraged, because, as it becomes general, it tends to sup- press blind and undeserved credit risks which so often lead to irritating losses, while it helps to fortify the business world against panics, by giving it more exact knowledge .of debtors' resources, and therefore greater confidence and stability. A man in good circumstances who refuses to reveal his condition renders it impossible for his banker, his .references, or the mercantile agen- cies to speak with certainty in regard to his affairs. His reticence may naturally raise doubt and indirect inquiry, and it generally de- prives him, in some measure, of that valuable 37 38 GIVING AND GETTING CREDIT. confidence and credit which he might other- wise be justified in expecting. Nor can he as surely and quickly obtain financial help in time of need if his resources are unknown or merely conjectured. A prominent New York bank official, of long experience, asserts that " an applicant for credit should be willing to make a full and frank showing in writing over his signature, and if he declines to do so, I believe that we should give no consideration to his application for dis- count. After gathering careful statistics on the subject, I have reached the conclusion that when a borrower refuses absolutely to give any information in this way, his credit is impaired and it is only a question of time when misfor- tune will overtake him. There is no concern that does any amount of business that at some time in its history does not need the help, confi- dence, and co-operation of its bank, and nothing should be concealed from it." In a recent address before the Illinois Bankers' Association, Hon. S. S. Lacy, ex-Comptroller of the Currency, and president of the Bankers' National Bank of Chicago, said : SUGGESTIONS AND PRECAUTIONS. 39 " The age of mystery as related to business affairs is happily passing away. The time was when business men considered it akin to an in- sult to be called upon, when asking credit, for a statement of their affairs. Fortunately wiser and sounder views now prevail, and no right- minded man or well-managed institution now hesitates, when asking favors, to place the prospective creditor in full possession of the facts upon which credits can be intelligently extended." In February last (1895), the Executive Coun- cil of the New York State Bankers' Association passed a resolution recommending to banks throughout the State the procuring from bor- rowers of written statements showing their as- sets and liabilities. It was asserted that if this measure were generally adopted by banks and bankers, they could act with more adequate knowledge, and therefore with greater security, and that it would also, in effect, "eliminate from the mercantile community borrowers whose standing and credit are now a menace to reputable merchants." It is certainly a sound business principle that 40 GIVING AND GETTING CREDIT. he who is asked for credit is justified in mak- ing the applicant prove that he is worthy of it, and that the latter is bound to furnish forth all essential facts in aid of the investigation which he virtually challenges. This principle would be insisted upon univer- sally by merchants if sellers were as much in de- mand as buyers, and could afford to be as inde- pendent. But competition is keen, and all are eager to sell goods, to keep things moving, and to reap profits. The buyer generally holds the honors, and rules are apt to bow before him as "nice customs courtesy to great kings." If an applicant for mercantile credit declines to answer reasonable inquiries, or is restive under them, it is a natural inference, but not always a certain conclusion, that he wishes to conceal something unfavorable. He may be eccentric, and yet solvent and prompt of pay. He may object from pride or from prejudice. He is, perhaps, unreasonably sensitive about having his credit investigated. He may be re- luctant to make known, not how poor, but how rich he is. Possibly he is mindful of the in- come tax, or shy on account of his property SUGGESTIONS AND PEECAUTIONS. 41 taxes. There are responsible men who appear to regard interrogatories in regard to their affairs as so many impertinent conundrums. Others assume that it implies ignorance not to know their standing, and affect to be irritated when it is questioned. And there are some, reti- cent by nature, who believe in a "still hunt." But the real thing is not as likely to be mis- taken for a sham, as a sham for the real thing; and the cranky, reticent man is never as danger- ous as the plausible rogue who can prove as much as anybody will believe. 1 Nature sometimes withholds stability, judg- ment and effectiveness from a man, and by way of compensation endows him with a most plausible tongue. But if the applicant for credit, as Hamlet says, "doth protest too much," it operates to put a sagacious merchant on guard. Nor, on the other hand, will he often let a good but buttoned-up customer slip through his fingers, because he cannot learn that he is responsible. 1 The United States Commissioner of Labor, Carroll D. Wright, who knows all about statistics, puts it that " figures will not lie, but liars will figure." 42 GIVING AND GETTING CREDIT. The logic of business requires that capital should be kept as active as its safe and legiti- mate employment will permit. Except as a safety reserve there should no more be idle dol- lars than idle clerks. Facilities for obtaining information are abundant, and he who neglects to provide himself with them either takes blind risks, or limits his business and narrows his profits. Men in trade sometimes say, "I don't care about my credit, I buy for cash," forgetting that a great advantage of the capitalist is not altogether his hard cash, but the credit his capital commands, which many times multi- plies its producing power. Many a concern has failed because it neglected to establish credit when it was not needed, that it might be available in time of need. Chances are often knowingly taken with old patrons which would not for a moment be con- sidered from new applicants for credit. We are more the creatures of habit than we realize, and the risks we are familiar with are apt to be minimized against our better judgment, by long intercourse and safe dealing. This is natural SUGGESTIONS AND PRECAUTIONS. 43 and kindly, but in business it is weak. The unlucky passengers are those who are on board when the ship goes down. A merchant's ledger is his barometer, so to speak ; it often indicates that a storm is gather- ing. If a customer's account is analyzed and it is found that two years ago he discounted his bills, that last year he grew tardy in his pay- ments, that he pleads for " dating," and is slower still this year, there is some reason for it. Is he doing too much business for his capital? This can be ascertained. Has he lost his money? If not, it is surely not in the right place. In either case it is time for the merchant to take careful bearings and perhaps shorten sail. Prudence and precaution surely do not con- flict with the Golden Rule, neither do they im- ply truth in the popular but atrocious maxim that there should be "no friendship in busi- ness." It is true that sharp competition is not a nourisher of sentiment and that principle is better than feeling. Damon and Pythias have become rivals in the race for money, and fin de siecle friendship is apt to be more a matter of calculation than of emotion. 44 GIVING AND GETTING CREDIT. Yet withal, keeping in mind Thoreairs bon mot, "Good heart, weak head," cordial and friendly relations are quite compatible with strict business principles and mutually benefi- cial. Trade would become a dismal and de- pressing pursuit indeed, if all kindly, disinter- ested, and generous sentiments were to be banithed from it. Admitting that, in a large and general way, there is a law of average losses from bad debts, it can have no bearing upon individual risks, because each has peculiar circumstances which call for the exercise of special scrutiny. Giv- ing credits upon the chance that only a certain percentage will turn out badly is like shooting without aim. As eternal vigilance is the price of liberty, so also it is the price of success in giving credit. It does not follow that because a man has paid many times he will pay again. Argus eyes have time and again warded off serious losses by discovering signals of "dry rot," or of dis- tress, in concerns whose solvency was not ques- tioned in the community. The wisdom of fifty men is not the wisdom of one multiplied by SUGGESTIONS AND PRECAUTIONS. 45 fifty. If the one is alert enough to discover new and leading facts, he may have a clearer vision than all the rest. A failure seldom occurs that some one does not get an inkling of it before- hand. The majority of men prefer to be, and mean to be, honest, but it is natural to be hopeful and to present the most sanguine view of one's own circumstances and prospects. The tendency is to advertise profits and conceal losses. Men do not talk of ill luck until near the end of the struggle. Rumor usually magnifies wealth and soon becomes current opinion. Many walk about in a popular halo of stocks and bonds who cannot pay their debts, and the general be- lief in their mythical possessions enables them to flourish, at least for a time. The weakness of the credit system lies in the fact that a man's credit depends, not upon his real worth or property, but upon his reputation for having it, and he is tempted to puff himself. Neither common report, good birth, good clothes, good address, political reputation, fame, nor evangelical piety, establishes a sufficient basis for credit. Men in high station some- 46 GIVING AND GETTING CREDIT. times have a hearty contempt for their pecu- niary obligations. An English nobleman said of a man, that he had muddled away his fortune in paying tradesmen's bills; and Pelham argues that it is respectable to be arrested for debt, be- cause it shows that the party once had credit. Our business salvation requires that we walk by facts and not by faith. Display will not mislead a sensible business man, neither will excessive liberality. It has been said that there is perhaps no character so seldom met with as that of a man who is strict- ly reasonable in the value he sets on property ; who can be liberal without profusion, and eco- nomical without avarice. The chief end of man is not to accumulate dollars, but the majority of men cannot pay their honest debts without being frugal and saving; and those who gratify themselves when they cannot afford it, do so at the expense of others. Thrift implies the habit of sacrificing present enjoyment for future good. A good merchant will not permit his confi- dence to precede knowledge, or his action to blunder on in the front of thought. He must SUGGESTIONS AND PRECAUTIONS. 47 be convinced, not merely persuaded, before he will entrust his property to others. He realizes that giving credit implies risk, and also that he is not in business altogether for his health, but to make reasonable ventures for the sake of profit. He will recollect that there is a hundred-fold more good business than bad in the world, and while he makes safety the chief consideration, he will also guard against the weakness of timidity and over-caution. He will be deliber- ate, but enterprising also and steadfast. The cost of conducting a business is a highly important consideration ; and, as a general rule, expenses do not increase in proportion with the volume of business. A leading Mercantile Agency made some special investigations along this line at the request of a New York bank presi- dent. Eleven representative concerns in vari- ous lines, doing an annual trade of $109,000,000, showed expenses of $6,925,000, or an average of about 61-2 per cent, as follows : Per Cent. Jobbing hardware, one house 15 Jewelry, one house 15 Steam pumps, one house 15 Railroad supplies and machinery, one house 10 48 GIVING JLND GETTING CBKDIT. Expense* Groceries (no liquors) two houses : Per Cent. One house 6 One house 6| Groceries (with liquor) one house 8 Dry goods, jobbing, two houses : One with annual business of $40,000,000 5 " " " " " $10,000,000 6i Commission dry goods, one house, with annual business of $10,000,000 H Commission woollens, one house 2-J- Similar statistics taken from the statements made direct to the same gentleman by ten leading houses in representative lines of business, show : Total annual business $12,693,000 Total expenses 900, 000 Percentage of expenses to annual business, a small fraction over 7 per cent, proportioned as follows : Per Cent. Retail dry goods, two houses : One 20 One 16.6 Wholesale groceries, two houses ; One in New York 3. 5 One West 5 Wholesale hardware, one house 9 Wholesale clothing, two houses : One 5. 7 One (reputed close and economical) 3. 6 Wholesale tobacco, two houses : One 2 One 4 Manufacturing cigars, one house 4. 9 SUGGESTIONS AND PRECAUTION'S. 49 The matter of personal expenditure is also worthy of attention, because many failures are due to this item. Extravagant living is even more ruinous than light profits, because, while the former is never relinquished except under compulsion, the latter may improve. Those who in prosperous and piping times have established stylish social relations find it particularly hard to retrench when business de- clines and the income is impaired. They sometimes shrink from making known the act- ual condition of their affairs, even to their own families, and enforcing the necessary economy, so they grow poor, in order to keep up the ap- pearance of being rich. Some houses have an exhaustive formula of questions prepared, to which satisfactory an- swers are obtained before a new account will be opened. The paper is then filed away for future reference. The catechism given below is prac- tically the one now in use by a successful house in New York city : Full name? Locality? Age? 50 GIVING AND GETTING CREDIT. Nationality ? Nature of business? Capital in business? Capital outside of business? Volume of business to capital? Has the business been profitable? Withdrawals for personal expenses? Expense of conducting business preceding year? Nature of the assets? Liabilities? Previous dealings with whom? Who are the principal creditors? Agency rating? References? Past record ? Ever failed? Ever had a fire? Married? Habits? Ability? Industry? Experience? Punctuality? Speculative outside? Insurance? Partners, general and special? Family connections? Contingent liabilities, as indorsements, etc? Remarks. Definite and verified answers to all these queries should certainly furnish a basis for posi- tive conclusions. But not every man whose trade is desirable will permit himself to be led SUGGESTIONS AND PRECAUTIONS. 51 solemnly to the " sweat box" and put through such a formal inquisition. A man of tact can, however, bring out many of these facts, with clews to other facts, in an easy conversation, and obtain the rest from col- lateral sources. A sensible business man, opening an account with strangers, should know, and does know, that they must somehow acquire knowledge of his responsibility. And with such a customer, a courteous and expectant attitude at the proper moment is often the only interrogatory needed to elicit a voluntary statement. It is only leading and influential houses that can carry much red tape in these days of com- petition. We can all sit on the fence and order the mountain to come to us, but if it will not come, we go to the mountain. It is easy to make all sorts of rules, but with the great majority of concerns the rule that is never broken is the rule of expediency. "I do not want processes, but results," said Jay Gould. A travelling salesman has called many times upon a firm, and at last he secures an order out of the very teeth of a dozen fierce competitors. 52 GIVING AND GETTING CREDIT. He is instructed to investigate the standing and character of his customers, but when he begins to propound the usual questions, the buyer says, "Oh, I have no time to go into all that. If you are afraid, you can cancel the order. I can get all the goods I want in a dozen directions." This firm is probably good, and what is the salesman to do? He will do the best he can. He will act, and his house will act, upon collat- eral information. CHAPTER IV. ESTIMATING CREDITS, ETC. THE most searching and decisive test of a man's actual financial condition is his balance sheet, or statement, signed by himself and fully verified. Other information concerning him may be misconceived, or uncertain, but there is no mistaking such a presentment of his affairs. Nor can he wriggle away from his written statement as he might from his verbal declara- tions. If it is garbled, if the assets are wilfully placed too high and the liabilities too low, in order to obtain credit favors, or an agency rating, the maker braves the penalty of fraud. The construction of a statement, or the man- ner in which it is made up, indicates much as to the business methods of the concern which makes it. Some statements are plain, explicit, comprehensive; others vague, confused, and perhaps equivocal. 53 54 GIVING AND GETTING CREDIT. An ambiguous statement points at one of two conclusions : if it is a frank transcript from the books of the applicant for credit, and does not set forth his condition clearly, he is ignorant in regard to his own affairs. He is not a good business man. On the other hand, if it is a case of suppressio veri and suggestio falsi, it is a trap. More than one instance is upon record in re- cent years where two members of an important firm have made simultaneous statements of its affairs unknown to each other, which varied greatly in essential respects. The liabilities and receivables of a house are constantly varying quantities, and so also is the relative proportion of cash; a statement made at one season should therefore be considered with relation to the probable position at another. A trader will, for example, appear to be upon a much stronger and more conservative footing after he has made his collections and paid his debts of the past season, than when, a few months later, he is extended between the pay- ables and receivables of the next active season. Large outstandings, in proportion to the amount ESTIMATING CREDITS, ETC. 55 of business, imply either too liberal credits, or slack collections. And it is generally regarded as against the canons of credit for a merchant to permit any concern to owe him more than twenty or twenty-five per cent of its capital. In analyzing a statement, special heed should be given to the capital, volume of business, and the average time of credit given, taken in rela- tion to each other. The larger the amount of business, and the longer the credit given, the heavier may naturally be the liabilities of the average concern, while, of course, a small busi- ness, with moderate capital, should show but small liabilities. Two values may be estimated upon every man's estate one before, and one after failure; and the effects of the contingency should be kept in view. Assets shrink, but liabilities never. Traders' merchandise, and accounts re- ceivable, are said to net, on the average, cer- tainly no more than sixty or sixty-five per cent under the process of winding up for the benefit of creditors ; and the manufacturer's machinery and plant but twenty 'or twenty-five per cent. In fact, machinery, in such cases, is often sold 56 GIVING AND GETTING CKEDIT. for old iron. If, therefore, the assets of an aver- age concern do not considerably exceed its liabilities, it is really insolvent if compelled to liquidate; although, if circumstances favor, it may continue, meeting its engagements, and gaining financial strength. As a rule, merchandise is a quick asset at current value, in proportion to its nearness to raw material. That is to say, articles like cot- ton, wool, leather, iron, rubber, etc., can gener- ally be turned into cash with less delay and loss than their manufactured products, such as cloth, garments, shoes, hats, hardware, etc. In mod- ern times, the more labor expended upon a raw product, the further it is removed, as a rule, from a general into a more special and narrow field of demand. 1 There is too often a vast disparity between "real" and "nominal" assets. The best ma- chinery will not wear forever, and experience 1 Growers' products, in fact, sell for cash all over the world, except in New Zealand, where, according to our consular reports, "articles of luxury," strangely enough, command cash returns more readily than do the neces- saries of life. ESTIMATING CREDITS, ETC. 57 has shown that its worth is soon impaired, more or less, by new inventions. Soiled and unfash- ionable stock accumulates ; goods held over de- preciate ; doubtful and worthless book-accounts multiply. Surely the statement of an upright man of business should reflect these facts. If he stands upon absolute verities, he will reso- lutely charge off such shrinkages, and place the value of his assets upon a real basis. Where real estate figures in a statement, the mortgages and liens should properly be scheduled as liabilities, because they are a claim upon the general assets if the real estate does not satisfy them. In many statements the equity is merely shown as an asset. Real estate is slow to be realized upon, and seldom brings schedule prices at forced sale. It is very likely to be blanketed with the heavi- est possible mortgage before it reaches the as- signee, and, under such circumstances, the value of the equity remaining is problematical. It is complained that many houses, in irre- trievable difficulties, have a propensity to hold on too long. Ethics would seem to require that, when a concern knows itself to be hopelessly in- 58 GIVING AND GETTING CKEDIT. solvent, it should quit at once, and divide up, rather than keep on to multiply debts, filch a living, and end up with a lot of doubtful or in- iquitous preferences. It was said of one such firm that, at last, its affairs were easily wound up, for its only remaining asset was a silver watch. A statement sometimes shows a respectable capital which is nominally at the risk of the business, but which is really borrowed from relatives, with the secret understanding that they shall be preferred in case of disaster. The balance carried in bank is good construc- tive evidence of financial strength, when it is not forced, like blossoms in winter, and bears due relation to other circumstances. But insol- vency may lurk behind a big bank account, and knaves have too often flourished it as a decoy, for prudent business men to accept it in these days as a voucher of solvency and decisive gauge for credit. We are not prone to do much exhaustive thinking, or be painfuUy anxious over the risks which others may assume; although it may be said that, as a rule, American business men ESTIMATING CREDITS, ETC. 59 cheerfully reflect their honest opinions, when reference is made to them in regard to the stand- ing of an applicant for credit. And if two or three houses, known to be respectable and con- servative, have acquired sufficient confidence in a man to give him a line of credit, and approve him to others, it is a fair presumption that he is, in some degree, worthy and responsible. But such evidence is not always conclusive. A smart trader will see to it that those to whom he refers are qualified to speak favorably of, at least, their own specific experience with him. And it sometimes happens that houses thus re- ferred to have been influenced to extend credit to the party in question solely by the example and reported experience of other houses, and that none have knowledge of his actual condi- tion beyond that derived from rumor, or their own personal and limited dealings with him. Again, it is conceivable that a trader may be heavily indebted to a house which knows him to be honest, but extended, and struggling along with an impaired, or limited capital ; to weaken his credit would be fatal. Under such circum- stance, a not over-scrupulous creditor might con- 60 GIVING AND GETTING CREDIT. ceal tne facts, and even help to fatten his debtor's assets against his probable bankuptcy. On the other hand, if he is a good and desirable customer, business jealousies and rivalries might prompt an artfully dubious report of him. Such cases especially manifest the value of the Mercantile Agencies, because, being wholly disinterested, their reports are made without prejudice or partiality. Nor are instances lacking where the confident statements of a leading house have procured credit for a little-known dealer, whose subse- quent failure exposed the fact that the concern which stood as his reference held judgment notes against him at the time they recommended him for credit; or, perhaps, a chattel mortgage upon his property, equivalent to a judgment execution and levy. It has been well said, that " the integrity of the many renders possible the fraud of the few." The remark is often made, that concerns which cannot be trusted to " stand without hitching" always manage to obtain credit in some direc- tion. The bait of a big profit is sure to allure some confiding dealer, and he who is regard- ESTIMATING CREDITS, ETC. 61 less of how many cents he will, by and by, pay on the dollar can afford to be very generous in the small matter of prices. Men of this stamp measure their strength by another's weakness, and are quick to see a vul- nerable point. They bank largely on eagerness to sell. If the most desirable and salable goods "fly too high" for their pretensions, they be- come interested in the surplus stock of the last season, slightly unfashionable or shop- worn goods, "job lots," anything which, while hav- ing good value, it is especially desirable to be rid of. And they often inspire a degree of confi- dence in their intention to pay by artfully hag- gling over prices. It has been said, that the business of the world would be transacted by men possessing real means, if it were not antici- pated by men without means. The desire to sell goods is so general that the trade of responsible concerns is almost daily solicited, wherever in the country they may be located, and they will probably be offered all the credit they are entitled to, if they make known their condition. They need not beg for it. The receipt of an unsolicited order from a stranger 62 GIVING AND GETTING CREDIT. for the common sorts of merchandise is un- usual. If such order comes from a locality not naturally tributary, it should be viewed with increased caution, and only accepted when good reasons are made apparent for wandering away from customary and more convenient sources of supply. Yet the margin of profit on some articles is such that the vender can lose every other bill and still grow rich. Sheet music, etchings, prints, chromos, and other things, the chief cost of which lies in the preparation of plates, or facili- ties for their multiplication at a trifling expense, are examples. So also are proprietary medicines and similar articles. It is evident that dealers in such goods can afford to take greater risks than those who sell metals, sheetings, or any kind of staple commodities. In fact, some dealers in the former say they never refuse an order, if they can learn that the party ordering is actually in trade, and is not a fraud. The type of buyers who inspire most confi- dence is frank, but not garrulous. His claims to credit are stated clearly, candidly, confident- ly, but in few words. He meets no doubt until ESTIMATING CREDITS, ETC. 63 the doubt arises. He identifies goods for his own conclusions, and buys, or rejects, upon his own judgment, and his " no" stands for a fact against all the arts of persuasion. He has a keen eye to price, but an equally clear and in- telligent vision for quality and style, and he catches opportunity on the wing. The bear- ing of such a man proclaims that he is a living force, and implies that he at least deserves con- sideration. If, in times of financial stringency, it became necessary for such a merchant to press his claims for discounts or favors upon his bank, he will set forth his needs frankly, and urge the equities of his case with dignity. He who cringes, and pleads for financial favors, or for credit, creates an unfavorable impression. It was Stephen Girard who said, to one that shed tears when asking for a loan : " The man who cries when he comes to borrow will cry when he is asked to pay." The customer who can be overloaded with goods by a pushing salesman is a very question- able risk. If he is without experience, it is prob- able that, later on, he will acquire it at the ex- 64 GIVING AND GETTING CREDIT. pense of his creditors. If he is naturally credu- lous, irresolute, and infirm of purposes, he is sure to be a prey upon all sides, until he goes to the wall. Wise old Dr. Samuel Johnson made, many years ago, a practical commentary on the mod- ern practice of forcing goods upon a reluctant customer. In urging the abolition of imprison- ment for debt, he declared that failure to pay was not always the crime of the debtor alone, because the creditor shares the act, and often more than shares the guilt of improper trust. He invites, or urges, to the contraction of a debt, in the hope of advantage to himself; and proportions his profit to his own opinion of the risk. And therefore, if the debtor is unable to pay through misfortune, he should not be pun- ished by the creditor, because both concurred in the contract. " Dating," means that goods sold, say in Janu- ary, are to be delivered at once, but not invoiced until March or April, when the specified term of credit will begin. Purchasers insist that they are justified in asking such credit conces- sions, because of the exigencies of the season, ESTIMATING OEEDITS, ETC. 65 etc., and dating has, in some lines, become a prevalent custom. A large house in New York states that "dating" and "time stealing," or de- lay in payments due, cost it, on an average, more than its losses from bad debts, and many other houses estimate their loss of interest from this source as a serious item. Some dealers think, or pretend to think, that if they pay interest on past-due bills and ac- counts, the creditor should be well satisfied, and make no complaint. But not so : the merchant is not a banker, and six per cent interest does not reimburse him. He needs his money to pay his own bills, and he needs it when it is due. Not to receive it is disappointing, and in viola- tion of business equities. He is held strictly to the fulfilment of his own obligations, and he has the right to expect, and demand, that others shall keep their promise with him. 1 1 Suppose a trader owes half a dozen concerns, on ac- count, $10,000, payable about January 1. He has in hand $5,000, November 1, but sees no way to get the other $5,000 until March 1. It is obvious, that if he pays half a book- debt two months before it is due, and the balance two months after it is due, he averages the 66 GIVING AND GETTING CREDIT. No merchant can reasonably expect to flour- ish long, in these days of driving competition, if he pays higher prices for his goods than his neighbor. But, as a rule, he is charged more for them, if he is careless and tardy in his pay- ments, or if, from any cause, his credit is im- paired or doubtful. Lax business methods, or limited resources, multiplied into high prices for goods, sooner or later, give failure as a product. The old Ger- man proverb applies to mercantile affairs with increasing force : " Lange Krankheit ist sicker- todt." ("Long sickness is sure death.) And there are some who insist that, in this era of sharp competition, if a merchant cannot make his payments so as to secure cash discounts, the sooner he winds up, the better it will be for all concerned. A Jewish merchant in New York, who for payments. He should, therefore, promptly apply his $5, 000 to his debts, pro rata. This may not be altogether as satisfactory to the merchant as regular payments on time, but few will complain, and it is better for all parties that the debtor should not wait until the last moment to pay his $5, 000, and then plead for extended time on the remainder, with, or without, added interest. ESTIMATING CEEDITS, ETC. 6t more than forty years has maintained his credit, and grown rich in fair dealing, gives the follow- ing leaf from his experience: On a pleasure trip to the West, a few years ago, he read in a local paper that the head of a firm, which had a large credit account with him, had become in- volved with a woman in his employ, and that his wife had obtained a divorce on the usual statutory grounds. Without delay, he instructed his firm to close the account as soon as possible, and a few months later the Western firm failed disastrously. A prominent merchant in Philadelphia re- lates the following : " One of the best men whom I ever knew, and who was in business for him- self, called upon me one day to get me to ac- company him to the noon-day prayer-meeting, at which he was a regular attendant. In answer to his solicitation, I said: 'No, sir; twelve o'clock to one o'clock is not my time to pray; it is my time to watch.' A few years afterward, he was doing business as an 'agent.' He had overlooked the divine injunction, 'Be diligent in business. ' " CHAPTER V. POINTS ON GIVING CREDIT. IT is worth while to ascertain the nature of the patronage upon which a credit customer has to depend whether upon farming, manufac- turing, mining, or mixed pursuits; and what promise of success there is in the conditions which surround him. Perhaps he is attempting to conduct a first-class business in a poor neigh- borhood, or a business for poor people in a first- class neighborhood. Agriculture is the basis of the national pros- perity, and a farming community has always been considered stable and reliable. Yet, sec- tions are subject to the possibility of drought, floods, or frosts, in unfavorable seasons, which destroy the crops. In such cases, the store- keeper may be unable to collect from his im- poverished patrons, and become embarrassed, unless his resources are sufficient to tide him over to another harvest. 68 POINTS ON GIVING CREDIT. 69 Agricultural conditions have changed essen- tially during the present generation. Farm- ing is not as profitable as in former times, and, in some parts of the country, farm lands have declined in value, while the acreage under cul- tivation has also decreased, which is due to the fact that the lands could no longer be profitably cultivated. * 1 The aggregate extent of this decrease, from 1880 to 1890, in a number of the older States, is shown by the Eleventh Census to be equal to the combined total area of several of the New England States. This census also shows that, in 1890, about 2,500,000, or rather more than half the farms, were under mortgage, the rate of inter- est paid being from 5.57 to 12.61 per cent. About 75 per cent of the indebtedness in the newer States ap- pears to have been incurred for purchase -money, or for making improvements on the property. More recent statistics indicate that the farms of the single State of Ohio, for instance, depreciated in value more than $50,000,000 during the year 1894, while the indebtedness of their owners increased about $8,000,- 000. There were formerly but few renting farmers in the country, while now there are many, and they are increasing in number. In 1890, the percentage of the whole population inhabiting farms was 41 per cent ; in 1894, 39 per cent. Since 1890, the rural population has increased but one-sixth as fast as the urban ; a porten- tous change to the wage-earner. In forty years rural or agricultural wealth has only quadrupled, while urban has multiplied sixteen-fold. 70 GIVING AND GETTING CREDIT. Hitherto, the natural fertility of our vir- gin soil, and the superiority of our farming im- plements, have enabled us to compete with other producing nations in the world's markets, even at a prodigiously greater cost for labor. 1 But foreign competitors multiply, and adopt our labor-saving inventions, and farmers' pros- pects grow less hopeful. In addition to other prolific sources of supply, Argentina now makes claim to a vast area adapted to the growth of cereals, and her surplus of wheat last year was upward of a million and a half tons. Prices of growers' products were never so low as of late; and it is probable, that if anything like "five-cent cotton, and fifty-cent wheat," are henceforth to be the rule, great numbers of our 1 The Kansas State Board of Agriculture stated, two or three years ago, that the average cost of raising wheat in that region is $3. 86 per acre, as against $5.07 in India, notwithstanding that the half-starved Ryot of the Gan- getic plains gets but five or six cents a day for his work. This is equivalent to saying that the cost of raising a bushel of wheat in India is 53 cents, as against 30 cents in Minnesota, the Dakotas, or Kansas. Professor Mulhall said recently : " An ordinary farm- hand in the United States raises as much grain as three in England, four in France, five in Germany, or six in Austria. " POINTS ON GIVING CREDIT. 71 farmers will abandon agriculture for more re- munerative pursuits, and that still more farm lands will lapse into wilderness. 1 Manufacturing and mining communities, be- sides such vicissitudes as may arise from the general laws of supply and demand, are sub- jected to the possibility of labor troubles, which may impair their prosperity. It follows, of course, that when, in such a neighborhood, the number of wage-earners is diminished, and earn- ings curtailed, the average resident trader must share in the general distress. 1 There has been a significant decline inthepopulation and prosperity of small towns during the last ten or fifteen years. It is asserted that the States of Ohio, Indiana, Illinois, and Iowa contain 6, 291 townships, of which one-half, or, to be exact, 3, 144, declined in popu- lation between 1880 and 1890. A South American correspondent of the New York Herald wrote to that journal, in October of last year (1894), as follows: "If Argentine agriculturists desire to extend their facilities for wheat-growing, they can do so to nearly the same area, if not more, than in the United States. Land that will serve for wheat-culture exists in nearly all of the middle and southern provinces of the re- public. There are at least 20,000 leagues of land, in the hands of the general government, suitable for cereals, while the area owned by private individuals is esti- mated to be at least 100,000 leagues." 72 GIVING AND GETTING CKEDIT. The power of production is increasing in a much higher degree than the increase in the number of workmen employed, and it is prob- able that we have only seen the beginning of the complications which will accompany further industrial development. 1 But while these facts are significant of star- tling possibilities for the more or less remote future, it is expected that they will affect exist- ing conditions so gradually as to have little immediate practical importance from the view- point of the ordinary mercantile creditor. 2 1 In the 12th Annual Report of the Commissioner of Labor Statistics of the State of New York, made in February, 1895, it is asserted that "recent improve- ments in labor-saving machinery, especially in the printing trade, have caused a decrease in the number of employees from twenty per cent to sixty- six and two- thirds per cent ; in other branches of industry, the decrease will average eighteen per cent, and in some instances it runs as high as sixty per cent." These figures are made up from returns furnished by labor or- ganizations in the State. 2 After a degree of density (of population) has been attained, sufficient to allow the principal benefits of combination of labor, all further increase tends in itself to mischief, so far as regards the average condition of the people. (J. S. Mill.) It is not the poor, but those with vested interests, who now encourage immigration. POINTS OK GIVING CREDIT. 73 There is usually more cash afloat in a manu- facturing town, and goods are sold more nearly upon a cash basis, than in a purely farming neighborhood, and collection facilities are better in such localities. Traders should, therefore, be expected to collect more closely, and to pay with promptness, and they may perhaps require less capital to conduct their business successfully in such towns. A mixed-pursuit locality is less liable to ex- treme fluctuations of prosperity and adversity than one which is "all cotton," "all wheat," or "all corn," or its equivalent a town chiefly de- pendent on a single industry. Paterson, with its ninety or more silk factories, and twenty thousand operatives, is an example of such a place ; so also is Fall River with its cotton fac- tories, or Trenton with its numerous potteries. These facts will suggest to careful merchants the precaution of fire insurance companies, which refuse to concentrate risks. " Over-production" is held accountable for a full share of the jarring competition, distress, and failure among manufacturers and merchants in recent years. And, without doubt, there is 74 GIVING AND GETTING CREDIT. such a thing as over-production, relative to de- mand ; but in no way can it be held in check save by its own penalties. Men's desires are boundless, and we shall more wisely try to stim- ulate the world's consumption than attempt arbitrarily to control production. To accom- plish the former is the problem and quest of the age. 1 Natural law controls the development of human affairs as surely as it regulates the sea- sons ; and it is a suggestive fact that, under such law, the wants of men increase as they become civilized and enlightened. A demand arises for the products of more advanced nations, and the vitalizing energies of capital and credit multiply with an expanding market. 1 Two men came into a Broadway cable car. The trousers of one were quite worn, and very ragged about the knees, while the lamentably tattered condition of the other man's trousers was only concealed when he sat down. It would be interesting to develop the opinions of these men in regard to the over-production of trousers, for instance. It was estimated, some years ago, that cloth was con- verted into clothing at the ratio of three parts materials and two parts manufacturing and distributing, and that the average annual consumption of clothing was about $25 per head. POINTS ON GIVING CEEDIT. 75 The temperate zone was first brought under subjection, in virtue of its more favorable cli- matic conditions and fewer physical impedi- ments. The seeds of modern progress were not earlier planted in Arctic regions, because of the cold, nor in the Tropics, because of the heat. In torrid countries agriculture is hindered by dense forests ; cleared land springs back into a jungle ; harvests are destroyed by myriads of insects; the rivers are too wide to bridge; the heat enervates. But now that civilization has subdued and appropriated the gentler zone now that men have equipped themselves with labor-saving implements, and harnessed steam and electricity, enterprise is prepared to cope with the forces of nature in any part of the world, and it would seem that things are ripe for a general crusade of development. Medieval Mexico lies upon our borders. The great natural resources of the African continent and also of South America invite attention, and the surprising result of the war between China and Japan is significant of tremendous possibilities. Newly awakened Russian enter- 76 GIVING AND GETTING CKEDIT. prise is already opening up vast regions with incalculable resources, through the near com- pletion of the trans-Asiatic railroad across Siberia to the Pacific Ocean. For many reasons, it is easy to believe that an evolutionary, economic movement may at any time arise, which, while largely absorbing the surplus capital, will also give wider scope to the surplus energies of the dominant races. One effect of such a movement might be to lessen the evils of so-called over-production, by extend- ing the markets of the world, and stimulating consumption of the products of civilization among millions who are ignorant of them now. But it is also possible that, when once the teeming, imitative races of the East know and prize these same manufactured products, they themselves will soon learn to produce and re- turn them upon the world in an ever-swelling tide. The current of affairs presents a different as- pect from different posts of observation, and there is usually a certain vantage-ground of vision from which relations and consequences stand out most clearly ; like that famous picture POINTS ON GIVING CREDIT. 77 in Europe, which shows neither form nor design but from one single standpoint. Some men and things require to be seen near to be well judged of; others are better observed at a distance. Lookers-on at a game of chess often see broader combinations than the players who are absorbed in making the moves. There are men, with " no admission except on business" written on their foreheads, who are so occupied with petty de- tails as to lose sight of the trend of their affairs. They are like a man in a boat, who rows hard and thinks he is getting on, while the man on shore can see that the tide sweeps him steadily backward. Take an illustration from the wall-paper trade. A few years ago, medium grades of this article sold at three times their present prices. Dealers who bought yearly, say $3,000 worth, sold, and perhaps hung it upon the wall, at a hundred per cent advance upon cost, and con- tinued to do so as the price declined. They had grown accustomed to this rate of profit. It had been satisfactory, and they saw no reason for alarm until, under some stress to meet obli- gations, they realized, perhaps for the first 6 78 GIVING AND GETTING CKEDIT. time, that a hundred per cent yearly profit on $1,000 worth of goods was a different thing from the same ratio of profit on $3,000 worth. The store was as full of goods as ever, but they had only one-third of the former value, arid ex- penses had diminished but little. The condi- tion of the business had changed almost insen- sibly, and the result has been the failure of many small dealers, and some manufacturers and jobbers. 1 It inspires confidence in the credit of a mer- chant, if he is known to regard business, not merely as a series of transactions, but as a matter of principles and methods. These are to 1 A Broadway merchant of judgment and experience says he " sometimes recommends an easy-going customer to compute carefully the cost of transacting his busi- ness each day, each week, and each month ; including, of course, all expenses, such as rent, clerk hire, light, fuel, etc. Add personal expenses, and place the totals on a card to be kept in sight, or within reach. Keep the sum of sales and profits day by day, and if expenses exceed profits in any month retrench in some direction. " The same gentleman furnishes another piece of good advice for the trader. He says : " To hold your trade through hard times, keep up your assortment ; don't let it run down. Buy little and often. Keep everything in sight, and nothing under the counter. " POINTS ON GIVING CREDIT. 79 him what a compass is to the seaman, or a con- stitution to the State. They give character and stability to his dealings, and become a sort of mental machinery, which balances the judgment, and simplifies the solution of difficult questions. Keal business is neither a game of cunning nor a dodging from one expedient to another, and its vision extends beyond the next dollar. Give two of the commoner sorts of men equal facilities, and one will fail while the other grows rich. One is a good credit risk, and the other is not. Upon what different meat do they feed? Surely they must differ in essential char- acteristics; in judgment, prudence, honesty, thrift, energy, economy, tact, diligence, etc. Some men are like horses trained for speed rather than endurance. Your fussy man is apt to be narrow, and to give his affairs much attention, and little thought. He has more zeal than good sense. He loses much labor for lack of judgment to direct it. The amiable, yielding man, who cannot say " no," is often more applauded as a horn of plenty by his customers than by his creditors, while the resolute, pugnacious man may lack tact, and re- 80 GIVING AND GETTING CREDIT. pel or drive away business. One may have energy enough in his play, or at the call of pas- sion, and yet lack the power of persevering work. "Some men would fail in Eldorado," said an American financier. As before stated, those who do not succeed can generally find in them- selves the cause of their failure. Most people believe more or less in "luck," and perhaps there is something in it, but the luck of your successful merchant is generally that of having faculties and using them. It is the luck of forecast, insight, and judgment, born in the sky, to be used with energy on earth. It has been said that lucky men are often more the creators than the creatures of circumstances. A restless and progressive people like ours is prone to speculation, because it consorts with enterprise and growth; but ordinary business men, who have the reputation of being specula- tive, are not generally regarded as the best credit risks. Dreams of quickly acquired wealth, without industry, are apt to bear one away from simple integrities into very un- certain regions; and capital fights shy of "plungers." POINTS ON GIVING CKEDIT. 81 Yet it is sometimes difficult to draw the line between speculation and commendable enter- prise. Popular sentiment concerning a man's conduct of affairs is largely modified by his ul- timate success or failure; and again, what at one time might properly be considered specu- lative and rashly hazardous may, at another, be really a prudent process of dealing. So may the undertaking of a wealthy man be entirely within the scope of his legitimate business, and yet a reckless, speculative venture for one with smaller resources. It is to be noted, that speculations in one's own line of business seldom look as inviting to him as something outside, with which he is less familiar. It is the tailor who takes stock in a new pegging-machine for the shoemaker, and it is the latter who leaves his last to invest in a patent goose for the tailor. Sharp men with schemes prefer to avoid those who are practically acquainted with the details of the project they seek to promote. There is no scope for the play of the imagination not distance to lend enchantment. In very many cases of failure, it is found that 82 GIVING AND GETTING CREDIT. the insolvent had become entangled in operations not necessarily connected with his regular busi- ness. " The lofty and sounding phrase of the manifesto" had seduced him into some specious undertaking, which has ended, so to speak, in a squirrel-track up a tree. Farther down the list is the business man who is also an amateur gambler. It needs no gypsy to foretell his fortunes, whether he runs up against faro games, habitually bets on the races, or plays against Wall Street on margins. If all these dollar traps were honestly con- ducted, and "luck" might be relied upon to break even, the money, in the long run, would surely go to the "kitty" in "percentages," "odds," or "commissions." It is the amateur, the "lamb," who "pays the freight." Legitimate business implies mutual advantage through the interchange of equivalents; it is humanizing and beneficent. In gambling, mutual benefit is impossible. It is reckless, un- thrifty, and demoralizing ; and, once bitten by the gambling tarantula, the sufferer seldom learns wisdom from what he suffers. POINTS ON GIVING CREDIT. 83 A successful New York merchant discourses substantially as follows : " I have no use for a man who gambles or gets drunk, and I will not sell him goods on credit if I know the fact. When I open a new account, I ask the debtor how far he wishes to go, and keep him to his limit, which I place against his account in the ledger. I want to know what kind of creditors he has to lean upon. If his capital is limited for the amount of his business, I prefer that he shall confine his purchases on credit to a few houses. It is for his own interest also, because, if he buys every- where, and gets behind in his collections and payments, some one of his creditors will be sure to jump down on him, and close him up. I don't want to do business for nothing, and when it is necessary to say c no,' I do so boldly, but without unkindness. " Those concerns which habitually, and upon the smallest pretence, make claims for allow- ance, or deduction, thinking they will be granted for fear of losing trade, I meet with manly re- sistance, rather than the 'mush of concession.' I make no such peace-offerings in business, un- 84 GIVING AND GETTING CREDIT. less justice requires it. I look upon them as defeats, and they bring no thanks. "There is a little in 'luck,' but the best credit man is he who makes fewest losses and holds trade. He should have good common-sense, a knowledge of human nature, experience of affairs, and be naturally cautious and conser- vative. I am superstitious about giving a man credit after I have turned him down, un- less there is a change in his circumstances. Whenever I have been persuaded to do so, I have lost by it. It is a good sign to see a man take his sons into partnership. I am chary of a man who does business in the name of his wife, nor will I trust any concern, whatever its rating and repute, if my instincts are against it." Presentiments in regard to extending credit, derived from so-called " instinct" or " intuition," are common among merchants and salesmen, and such estimates are not necessarily indepen- dent of reason, or altogether unreliable. Conclusions sometimes seem to leap into the mind from nowhere, while the fact is that the thinking faculty has reasoned them out without realizing what it was about. They are the fruit POINTS ON GIVING CREDIT. 85 of an unconscious exercise of the intellect, which has been swiftly registering a multitude of per- ceptions, such, in our case, as the appearance and bearing of a man, his method of buying, the order and arrangement of his store, and numerous other conditions which surround him. Moreover, it is a well-known fact that we are almost invariably attracted or repelled, in a greater or less degree, by the personality of a stranger, and we should sometimes be at a loss if compelled to express in words the reason for our impressions, 1 yet experience teaches that they are quite apt to be correct. Every face is either " a history or a prophecy," and we are rea- sonably justified, therefore, in paying heed, in the matter of estimating credit, to what we call our "intuitions." Within recent years, the Jewish race has ac- quired a remarkable ascendancy in financial and commercial affairs in most of our trade centres ; and it cannot be denied that their keen and ac- tive rivalry has developed, with some, a degree of prejudice, expressed often by invidious re- 1 "I do not like you, Dr. Fell ; The reason why, I cannot tell," etc. 86 GIVING AND GETTING CREDIT. marks concerning their characteristics and methods. But candid men will admit that their success is chiefly due to a natural genius for business, complemented by enterprise, self-con- fidence, and tireless energy. 1 It is a brilliant race, with a strange history, and the annals of every art, and every science, are adorned with illustrious Jewish names. They have been less conspicuous as soldiers, in- ventors, manufacturers, and are seldom tillers of the soil; but statesmanship, philosophy, economics, jurisprudence, medicine, letters, music, finance, have all been enriched by their labors. Nor are they less distinguished in the field of philanthropy and practical charity. 2 1 The story is told of a Jewish new-comer in New York who, when asked how he, a stranger with small means, and speaking English indifferently, dared to plunge into competition with our two million people, made the characteristic reply : " But dose two million beeples must compete with me too, ain't it?" 2 Those who have been led to believe that the Jews are generally harsh, unfeeling, and exacting employers are misinformed. A recent report of the United States Commissioner of Labor, giving statistics concerning the condition of working- women throughout the coun- try, declares that female employees are treated with more kindness and consideration by Jewish employers than by any others. POINTS ON GIVING CREDIT. 87 Among our Jewish merchants are many who are ideal business men; just, kind, sensible, prudent, with a high sense of personal honor and obligation, and alive to the value of an untarnished credit. It will be admitted, also, that there are some who are unpleasantly avar- icious and selfish, crafty in dealing, "fresh" and arrogant in prosperity. A considerable proportion of our more recent Hebrew immi- grants are ignorant and squalid, with charac- teristics as repulsive to their intelligent and en- lightened congeners as to others. Yet withal, the country could but ill spare its enterprising and indomitable Jewish citizens; and surely the time has come when no social or commercial discrimination should confront them as a class, on account of race or religion. It is just and broadly politic that the credit of every Jewish concern should, like that of any other, stand upon its individual character, its record, and its resources. l 1 The Jewish house of the Rothschilds is probably the most shining example of what financial genius can ac- complish, when joined with integrity and favored by fortune. The house was founded by Mayer Anselm Bauer (born 88 GIVING AND GETTING CREDIT. It is remarkable, that countries differing wide- ly in their social and economic conditions appear to use credit relatively to the balance of their trade. For example, Germany, Canada, and Siam contrast strongly ; yet it is believed that, in each, ninety per cent of the business is done upon credit. American Consuls reporting from Belgium, prosperous and progressive, and also from China, at the time prosperous but stationary, declare alike that eighty per cent of all trans- actions are based on credit. Somewhat vague 1743) , who became a money-lender at the sign of the "Red Shield," (Rothschild) in Frankfort. When, in 1806, the Elector of Hesse-Cassel had to flee before Napoleon, he entrusted five millions in silver to Roths- child, who buried it in his garden for a time, and eight years after repaid it with the most scrupulous fidelity. This was the groundwork of his prosperity. Mayer Anselm died in 1812, leaving five sons, who established branches in the chief financial centres of Europe, the brothers being equally interested. Nathan Mayer, who died in 1836, has been regarded as the financial genius of the family. Various estimates have been made of the wealth of this colossal house, which has been called "the seventh great power of Europe," but they must be largely con- jectural. It has, however, been prophesied, by men ex- perienced in large financial matters, that, before the POINTS ON GIVING CKEDIT. 89 consular estimates of the proportion of business done upon credit in France and Italy place it at sixty-five per cent of the total, while Holland leads the van as the most cash-paying nation in the world. As there is probably no country where credit is extended so freely, so public sentiment is more lenient in the United States, in regard to busi- ness failures, than in other countries, and in- stances of complete recovery are more numerous here. The British trader is more conservative than the American ; he neither gets rich, nor is ruined as quickly. close of the next century, the Rothschilds will be worth five thousand million dollars. It has always been the policy of the Rothschilds to build up rather than tear down, wherein they differ from some of our American financiers ; and in all the generations of the family not one member of it has brought a stain upon his character, either as regards his integrity or the purity of his life. When the widow of Mayer Anselm was upward of ninety years old, a brilliant fete was given in her honor. She was quite deaf, and could not hear ordinary con- versation, but she observed that those around her seemed anxious, and were talking earnestly. " What is it all about?" she inquired. "Bad news has come, and they are afraid we are going to have war," was the re- ply. "Oh, there won't be any war, " said the old lady, "for my sons shan't give the kings any money." 90 GIVING AND GETTING CREDIT. Those among our retail traders who do a " high-class" business give more credit than do those who sell more cheaply to the masses. The middle classes pay best, and cash dealings be- come more general every year, yet the class of easy buyers and bad payers does not seem to diminish. 1 As a nation, we rest under the impu- tation of giving little heed to economy. With the French, by way of contrast, the prevailing idea in every household is that of economy ; ex- travagance and excessive display being little known out of Paris. 1 Quoth Panurge to Pantagruel : " You ask me when I will be out of debt. The Lord forbid that I should be out of debt. Be still indebted to somebody or other, that there may be somebody always to pray for you that the giver of all good things may grant unto you a blessed, long and prosperous life ; that will always speak good of you in every company and ever and anon purchase new creditors unto you, to the end that through their means you may have a shift by borrowing from Peter to pay Paul and with other folks' earth fill up his ditch. It is a divine thing to lend ; to owe, an heroic virtue. Yet doth it not lie in the power of every one to be a debtor. To acquire creditors is not at the disposal of each man's arbitratement." CHAPTER VI. COLLECTION. WHEN the executor of a certain eccentric physician's estate came to overhaul his books, he found, under numerous long-winded accounts, the words, " Paid by God," contracted sometimes into " Paid B. G." Being a pious man, he was much shocked; until he discovered that there were no corresponding entries in the cash-book, and that, instead of being used profanely, the words signified merely that the debt had been absolved, or wiped out, by the divine hand, in the death of the debtor. We seldom hear of a man who is willing to die to pay his debts, but there are many who are quite willing to live peacefully on and not pay. And it is this class which we come now to consider. Next to being known as free and liberal in granting credits, nothing tends more to promote losses by bad debts, and to saddle undesirable 91 92 GIVING AND GETTING CREDIT. customers upon a house, than the reputation of being lax and easy-going in collecting its dues. As a rule, that concern, whether it deals at wholesale or retail, which enforces prompt pay- ments, is more respected, and loses little if any good trade by it. There are of course times and cases when it is humane and expedient to show forbearance to a dilatory debtor ; but the slipshod account which is perpetually in arrears, and can never be brought to a balance, merits little consideration, and is a good one to throw overboard. It is customers of this kind who avoid the patient and confiding house they owe, and sneak into rival establishments with their ready money, in order to obtain cash discounts upon their purchases. A New York merchant insists that a concern may make more money, and prove a better credit risk in the long run, if its capital is scant, or barely sufficient, than if it be superabundant. And, he adds, that many who began rich, and are now poor, would now be rich, if they had been poor at the start. His reason is, that the house which must have its money to meet en- COLLECTION. 93 gagements will be more active, will discriminate more cautiously in its credits, and will not per- mit overdue accounts to accumulate, which, like eggs, are apt to become addled with the lapse of time. In historic times the debtor was at the mercy of his creditor. The ancient Romans cut the in- solvent into pieces, and distributed them among his creditors ; and, not so very long ago, the Eng- lish clapped their helpless debtors into jail, and kept tljem there until they paid or died. But the pendulum has swung, and, under the pres- ent condition of our laws, the creditor is practi- cally at the mercy of his debtor. The American people are, in many respects, prodigious sufferers from that uncertainty of the law which Burke called the " essence of tyran- ny." The nation is commercially one, but the relations of creditor and debtor, under the laws of the different States, vary essentially touch- ing the rights and remedies of the one, and the duties and liabilities of the other ; and they are, moreover, constantly changing. The result is, that many times the too confid- ing or unwary creditor finds himself unex- 7 94 GIVING AND GETTING CREDIT. pectedly confronted with homestead, exemption, preferential, insolvent, or other sectional laws, which favor the debtor to such an extent as practically to frustrate all attempts at collection. So long as debts rest upon a legal basis, how- ever slippery, uncertain, or inequitable that may be, there will be faithless debtors who recognize only their legal obligations. If the creditor appeals to the law, and such debtor can evade payment under the law, he will do so without scruple. It has more than once been urged that laws for enforcing payment should be abolished, and that credit obligations should rest solely upon honor. Decent men everywhere regard their word of honor as inviolable, and a debt of honor as more binding than a legal claim. 1 Probably such an innovation would quicken the public and private sense of honor and in- 1 Charles Fox, the English statesman, an inveterate gambler, had long owed a onsiderable sum to a trades- man, who came upon him one day while he was count- ing a pile of money. " Now that you are so rich, " said he, " you will surely take up your bill. " " I can't, " re- plied Fox, "this must all go to pay debts of honor." " And what is a debt of honor?" asked the creditor. " It COLLECTION. 95 tegrity, and credit would more generally be founded on character. Public opinion would then brand the fraudulent or faithless debtor, and cast him out as unworthy of credit. Many years ago, one of the most respected and prominent merchants of New York declared that, during the thirty most active years of his experience and observation, more money had been expended in lawsuits (if the value of time be included), than had been recovered by the aid of collection laws. He had sold merchan- dise upon credit to the value of many millions, aiming always to deal with those who esteemed is an obligation which rests solely upon my word, " said Fox. "Now," said the tradesman, tearing the bill to pieces, "mine is a debt of honor too." "Then I must pay it," said Fox, and he did. Consul- General Strother, writing from Mexico, says the "proverbial Spanish sense of honor" prevails there in regard to debts. Credit is more freely given and less frequently abused, as a rule, than in more enterprising and speculative communities ; and if there is bad faith in a failure, it is almost impossible for the bankrupt to recover his position. Many instances of the effect of this sentiment can be found nearer home. For example : where States have enacted that debts for spirituous liquors should not be collectible at law, payments, as a rule, have been prompt and satisfactory. 96 GIVING AND GETTING CREDIT. character more than money, and making it the rule to credit none to a greater extent than he would had there been no law. His defaulted claims he had always collected, or compromised, without a suit. But laws to enforce collections will never be rescinded so long as the innocent need protection from the guilty and designing. The matter is only referred to here in order to bring out more clearly the fact, that the majority of men pay their debts from quite other reasons than because they can be legally compelled. The sense of moral obligation is even a stronger motive with great numbers of people than the sentiment of honor. Some unseen force makes the grass grow, and the stars shine, and whatever form of creed men hold, all feel that they are expected to do right, and generally admit that somehow, and somewhere, they must account to the Intelligence behind that force if they do wrong. They know also that false promises and broken engagements are not right. There are other potent influences or springs of action, such, for instanc'e, as policy, pride, or friendship, which move honest men to fulfil COLLECTION. 97 their obligations, when they are not provoked into obstinacy by reproaches and threats. All these facts lead up to the proposition that many tedious and expensive lawsuits and losses might have been avoided, had the fumbling creditor better understood the characteristics of his debt- or, and wrought upon them with ingenuity and patience. In cases of fraudulent default, the creditor's expedients are limited to out-manoauvering the juggling debtor by some swift master-stroke, such, perhaps, as recovering the goods by re- plevin, or to those legal proceedings which the circumstances warrant. Threats are sometimes, but not often, effective ; the sharp knave regards them as the letting off of steam which is a sign that the vessel is not yet going to sea. If menace is used, that is most effective which lies in the firmness, not the irritation, of speech. When legal measures are once decided upon, they should be prompt and resolute. It is the custom, with some concerns, to accept the first offer of a bankrupt in full discharge of his obligations, unless fraud is suspected, and, in many cases, this is certainly judicious 98 GIVING AND GETTING CREDIT. policy. Legal measures involve the expense of lawyers, tedious delays, the loss of time and perhaps temper in attending trial, anxiety, and the chances of final defeat. If in the end suc- cessful, it is quite often found that acceptance of the original offer would have been more economical. And again, it is easy to believe that a feeling of relief may come to the broken trader, after the shock is over which the announcement of his failure has caused. The crisis is past, anx- iety over ways and means to meet maturing obligations is at an end; he feels more cheer- ful, and his mind naturally reacts toward a hope- ful view of his position. As yet, he has talked chiefly with friends and sympathizers, and is without a full foresight of the difficulties which probably await him. His first offer is, therefore, likely to be his best. Creditors are not necessarily harsh and per- verse. On the contrary, all are themselves debtors, and the majority will probably express sympathy, and give words of encouragement to the unfortunate dealer. But there are generally some who must frown and scold, and the man COLLECTION. 99 in difficulties is almost certain to encounter in- difference and censure, and perhaps even im- putations upon his integrity, whatever the cir- cumstances of the case. Unexpected obstacles and shrinkages confront him, promised remit- tances are delayed, his business falls to pieces. At length he becomes despondent, or exasper- ated, and modifies his first offer. A few mercantile houses have made it an in- flexible rule never to compromise with a delin- quent debtor, but to reduce all overdue accounts to judgments, and hold them for a hundred cents on the dollar, with interest. This seems a pitiless rule of action, to which no compas- sionate creditor could long adhere, because it does not discriminate in its treatment of an honest, but unfortunate man, and a fraudulent knave. Nor, aside from its inhumanity, does the success of its results, so far as can be learned, recommend it as a gainful course. The concern which adopts this principle toward its debtors may be known and avoided by the fraudulent, but others also are deterred from dealing with it. It becomes unpopular with the trade. People have no liking for such 100 GIVIKG AKD GETTING CREDIT. a house. As it does not give, neither does it re- ceive good -will. The influence of the debtor and his friends is forever against it. As a co- creditor, its selfish policy often retards or de- feats the settlement which other creditors desire, and provokes them to resentment. And, for all this, such a concern receives no compensation beyond the mere gratification of a vindictive feeling, because it appears to get no better re- turns in the end than the more lenient creditor. There is hope of a debtor who has exceptional business ability, with character, youth, health, and energy, or of one who has expectations of inheritance, or wealthy relatives who will stand by him. But chances of payment are too re- mote for a judgment against the ordinary bank- rupt trader to be a very valuable asset, espe- cially if he is heavily in debt. If, however, he can manage to compromise with the larger credi- tors, he sometimes pays the smaller ones in full, in order to be able to use his name. When John Doe finds, after his failure, that he can neither compound nor secure a legal discharge, he frequently continues on "under cover." He puts up the name of his wife, or COLLECTION. 101 perhaps a friend buys in the old stock' and fix- tures for him at a bargain, and he conducts the business under the style of the " John Doe Com- pany." He thus places himself out of the reach of his creditors, and claims against him are worthless. There is, to be sure, a chance that he may prosper, and quietly buy them up after a few years, as he can make terms. But, as a rule, concerns do not prosper under borrowed plumes ; they find it almost impossible to regain the confidence of the mercantile community and a respectable credit, and have all they can do to keep along without paying old debts. Practical experience suggests that the creditor should verify the statements of the defaulting debtor, and possess himself of all the facts of the case before he accepts offers of settlement. "My estate is naught, it is naught," saith the fraudulent bankrupt ; but, after he hath settled for a few cents on the dollar, he goeth his way, boasting of the relative who will lend him moneys to start afresh. It is not well for the business world that such debtors get off too easily. It does not seem desirable, then, that a progres- 102 GIVING AND GETTING CKEDIT. sive rnercha&t; should apply any arbitrary rule of final action to all his insolvent debtors alike. Invariable harshness and obstinacy is neither just nor politic, while invariable leniency may pay a premium to fraud and incompetence. Circumstances vary in each case, and each should therefore stand upon its own special moral and legal equities and expediencies. It is the principal creditors the " pall bearers" who are most interested to investigate the cir- cumstances of a failure, and most anxious to reach the best and quickest results. Their ac- tion and recommendation, therefore, usually set the pace for the smaller creditors, if there be no suspicion that they are attempting to secure some advantage, whereby they can gobble up all the assets. In compromising claims, a quite common basis of settlement is 33 per cent of the amount due. Not infrequently, a large creditor keeps in the background, and as much as possible conceals his loss, lest it may damage his reputation and impair his credit. Many small creditors give their claims little or no attention, preferring to charge the account off, rather than expend time COLLECTION. 103 and money in following it up. The sluggish in- difference and inaction of small creditors is one of the most perplexing obstacles in the way of speedy settlement of a broken trader's affairs. English bankrupt-law officials complain of this same inertia, and it has also proved a retarding factor under our own insolvent and bankrupt- law proceedings. The merchant, who has a claim for collection at some distant point, takes a leap in the dark if he entrusts it to a lawyer located there, with- out some certain knowledge of his character and responsibility. Complaints are constantly made of mismanagement and bad faith, in the conduct of such cases, on the part of unprincipled attor- neys, and also of their exorbitant charges. Some of these gentlemen, learned in the law, are prone to look upon the sum total of a claim placed in their hands as all too small to bear dividing, and they, therefore, calmly bolt the whole of it, knowing that the far-away credi- tor is practically helpless. The relations between the practising attorney in a town, especially a small town, and the party to be collected from, are often so friendly 104 GIVING AND GETTING CREDIT. as to prevent the former from pushing a claim vigorously which comes to him from a remote and unknown source. The lawyer's interests are largely local, and his expectations of support and advancement rest more upon the esteem and good-will of his townsmen and neighbors than upon the cold a pprobation of strangers whom he has never seen, and may never see or hear of again. It is only reasonable, therefore, to expect, that in many cases the interests of a friend and fellow-citizen will be favored and promoted, at the expense of a personally un- known client ; and the experience of merchants bears out this expectation. It is a better plan, if claims for collection are not given to one's own trusted attorney, to place them in the hands of a responsible Collection Agency. This generally involves no cost to the creditor, further than a small docket fee, unless the claim is collected, in which case ten per cent of the same is retained. Special terms are made upon large claims. If legal proceedings are found necessary to compel payment, the creditor is required to ad- vance the sum which will be needed for disburse- COLLECTION. 105 ments in the suit, some portion or all of which may be returned to him, if it results success- fully. Some of the leading Mercantile Agencies take charge of the interests of creditors in cases of insolvency, and do also an extensive general col- lection business. They are especially qualified to perform such services advantageously, be- cause of having active and experienced repre- sentatives at all points. These deputies, or sub- agents, obtain personal interviews, and often bring out facts and explanations which ward off lawsuits, restore harmony, and secure prompt payment. Like David Crockett's coon, the re- fractory debtor is willing to come down without waiting to be fired at. CHAPTER VII. CORPORATIONS. A CORPORATION is created by the law, upon the general principle that the resources of many may, with advantage, be combined for certain specific purposes, under one flexible manage- ment. 1 The advantages of a corporation over a part- nership are that, while it may buy and sell, sue and be sued, and conduct its proper business like an individual, its shareholders are under no obligation to pay its debts. They are liable only to a certain extent, which varies according to the laws of the State from which its charter, or franchise, is derived. New York laws, for example, are considered as among the best for 1 Chief Baron Man wood, an English jurist, was the author of the famous syllogism : " None can create souls but God : corporations are created by the King ; there- fore a corporation can have no soul. " This is perhaps the reason why stock companies have so little sense of moral responsibility. 106 CORPORATIONS. 107 the creditor, and those of West Virginia as among the most "liberal," or poorest for the creditor. The corporation idea is not new ; it was put 'n practice by the ancient Romans, and, along down the centuries, corporations have superseded ordinary partnerships in commercial enterprises which were extra hazardous, or which required large capital. Chancellor Kent declared, in 1820, that the growth of joint stock companies in New York was "astonishing," and in 1821 the State tried in vain to check their formation. 1 1 The tendency to multiply corporations has, however, never been as great as just prior to the panic of 1893. The number of certificates of incorporation for the for- mation of stock corporations filed in the office of the Secretary of State at Albany, from January 1, 1893, to June 1, 1893, was 689. This is the largest number of stock corporations organized during any five months in the history of the office. During the corresponding period in 1892, only 479 were formed, the increase in 1893 being more than 44 per cent. New York passed its first law for the taxation of cor- porate capital and earnings in 1880 ; this law was crude and unsatisfactory, and in 1885 it was amended. A very considerable revenue is now derived from this source, although it is claimed that the larger proportion of what is actually due still fails to reach the State treasury. 108 GIVING AND GETTING CREDIT. In 1844, joint stock companies, with a few exceptions, were for the first time, in England, enabled to incorporate under a general law, that is, without applying for a special charter. 1 But members of these companies were still respon- sible for the debts to the whole extent of their fortunes. In 1855, limited liability was intro- duced ; but companies with this privilege must use the word "Limited" after their names. It was said, in 1890, that one-third, at least, of English commerce was in the hands of incorpo- rated companies. Many corporations have been formed in this country for all sorts of purposes permitted by law, and in various fashions. A common plan has, in times past, been substantially as follows : an inventor, for example, with his associates, organized a corporation, to which he transferred the rights to his invention, receiving as pay- ment therefor all the shares of the company. The stock was, by this process, accounted " full- paid stock," and the holders were supposed to be 1 The objects of certain companies, as for example, railways, involve an interference with private rights which requires special and direct charter, or authority, from the Government. COBPOKATIONS. 109 exempt from liability for debts of the company. The inventor's associates then bought from him a part of the stock at prices before agreed upon ; the purchase-money, or a part of it, was placed in the "treasury" for a "working capital," and the company was ready for business. This was also a favorite method in working mining schemes. Thousands of companies organized after this fashion have lived and died most of them have died. But while, in the absence of statutory restric- tions, a corporation may have power to receive payment, otherwise than in money, for a sub- scription to its capital stock, it has been held that stockholders are liable to creditors for the difference between the reasonable value of the property transferred and the par value of the stock. The New York Statutes, of 1892, impose a lia- bility upon stockholders " for every debt of the corporation, to an amount equal to the amount of the stock held by them respectively, until the whole amount of its capital stock, issued and outstanding at the time such debt was incurred, shall have been fully paid." 110 GIVING AND GETTING CREDIT. The members of an unincorporated company are liable individually for all its debts, no matter what agreement they make among themselves. But there is no personal liability attached to membership of churches, lodges, clubs, etc. If persons organize under a general law for a purpose prohibited, or not authorized, by it, or if they fail to comply with its requirements in any material point, or if the statute under which incorporation is claimed be unconstitutional, the stockholders are liable as partners. A more recent development is known as the "Industrial" corporation, which is based upon the grocery, brewery, or dry-goods store, etc. Among the reasons usually given for its for- mation are, that the proprietors are growing old, and they wish to place the business upon such footing that, while they remain interested ad- visers, they can be relieved of administrative labors and responsibilities, and, in the event of their death, the business may be continued without interruption or embarrassment. Or again, it is professedly done to give faithful and deserving employees an interest in the business. Some of these corporations are organized upon CORPORATIONS. Ill a substantial and equitable basis, and are justly entitled to confidence and credit. But the industrial corporation too often re- presents a worn-out plant, and a waning " good- will," and the business, in a large proportion of cases, is found to be capitalized largely in ex- cess of its actual value. If earnings are all paid out in dividends, as has been frequently the case, the rich shareholder is reluctant to risk advan- cing from his private means for the benefit of poorer ones when a pinch comes, and banks do not, as a rule, take kindly to the paper of such concerns without a good indorser. A " trust" is formed by placing a majority of the shares of each corporation which it embraces in the control of persons called "trustees." These agree to vote upon the stock so held for the perpetuation of the trust during the time agreed upon ; to elect officers in each corporation as provided for by law, and generally to direct the business of all. Unity of purpose and action is thus secured in the management of vast and widely distributed properties. 1 1 The Standard Oil Trust was organized in 1882, and the Cotton Seed Oil Trust in 1884. There are now trusts 112 GIVING AND GETTING CREDIT. The " trust" was, three or four years ago, de- scribed as a "colossal, gigantic partnership, having no corporate function, owing no cor- porate allegiance, and capable of an elastic and irresponsible increase of capital stock. It may be a combination of corporations as well as of individuals, or firms, and its limits are bound- less. It may embrace a hundred corporations, or any number more, chartered under the di- verse laws of forty different States ; with five hundred, or five thousand shareholders in each corporation, and each corporation may be char- tered to carry on a certain business, different from either of the others. Trusts are now usually incorporated. 1 in a great variety of articles, from cradles to whisky and coffins. It has been said that the American citizen has now to deal with trusts from the cradle to the grave. 1 Trusts have, in some cases, succeeded in obtaining special State charters, granting certain advantages in the matter of taxation. The firms and corporations which combine to organize them turn over their prop- erty to the. new corporation, receiving what they deem an equivalent in its stock. If one of these great companies wishes to be listed at the Exchange, some promoters and stock operators are likely to be joined in the management, and its stock soon becomes a football of speculation. Sometimes the CORPORATIONS. 113 Some of these great concerns may be " good" from the creditor's standpoint, but if their ob- ject be to monopolize business, by crushing out their competitors, they surely do not conduce to the "goodness" of others. An individual act, or circumstance, which is not important of it- self, acquires strength, and may become illegal, when many combine to give it force. Union and concert invest it with effect against the public welfare. 1 Those who oppose trusts aver that they are of the nature of conspiracies to enforce private interests, by combined action, regardless of the practical men are gradually crowded out of the board to make room for more stock-jobbers. The original in- corporators cannot recover control of their property, un- less through a receiver. Profits shrink and expenses increase. Some of the assets are converted, in order to keep up the payment of dividends, and at length an issue of bonds is made. In short, the company is plundered, until, when the crash comes, little or nothing is left. 1 Chief Justice Gibson, of Philadelphia, held in 1821, that "A combination is criminal whenever the act to be done has a necessary tendency to prejudice the public, or to oppress individuals, by subjecting them to the power of the confederates, and giving effect to the purposes of the latter, whether of extortion or of mis- chief." 114 GIVING AND GETTING CREDIT. rights of others. That they oppose honest and healthful competition, which seeks to merit suc- cess, with a ruthless rivalry, eager only to ob- tain it. 1 That they violate the spirit and menace the existence of republican institu- tions ; are in restraint of trade, . and against public policy. President Cleveland said, in his last inaugural address: "The existence of immense aggrega- tions of kindred enterprises, and combinations of business interests, formed for the purpose of limiting production and fixing prices, is incon- sistent with the fair field which ought to be open to every independent activity. . . . They fre- quently constitute conspiracies against the in- terests of the people, and in all their phases they are unnatural and opposed to our American sense of fairness." High State courts have, in recent years, re- peatedly declared trusts illegal upon various grounds. Among other reasons it is held, that 1 "A competitor strives to surpass by honest means; he cannot succeed so well by any other ; a rival is not bound by any principle ; he seeks to supplant by what- ever means seem to promise success. "Crabbe. CORPORATIONS. 115 the corporations which they embrace are vested by the chartering States with certain powers and privileges, on condition that they shall be used in subservience to the public welfare, and that their functions can neither be abdicated nor delegated. The text of the Sherman Anti-Trust Law is as follows : " AN ACT TO PROTECT TRADE AND COMMERCE AGAINST UNLAWFUL RESTRAINTS AND MON- OPOLISTS. " Be it enacted by the Senate and House of Representatives of the United States of Amer- ica, in Congress assembled: " SEC. I. Every contract, combination in the form of trust, or otherwise, or conspiracy in re- straint of trade or commerce among the several States, or with foreign nations, is hereby de- clared to be illegal. " SEC. II. Every person who shall monopo- lize, or attempt to monopolize, or combine, or conspire, with any other person, or persons, to monopolize any part of the trade or commerce among the several States, or with foreign na- tions, shall be deemed guilty of a misdemeanor, 116 GIVING AND GETTING CREDIT. and, on conviction thereof, shall be punished by a fine not exceeding $5,000, or by imprisonment not exceeding one year, or by both said punish- ments, in the discretion of the court. "SEC. III. Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce in any Territory of the United States, or the District of Colum- bia, is hereby declared illegal. "SEC. IY. The several Circuit Courts of the United States are hereby invested with juris- diction to prevent and restrain violations of this act, AND IT SHALL BE THE DUTY OF THE SEVERAL DISTRICT-ATTORNEYS OF THE UNITED STATES, IN THEIR RESPECTIVE DISTRICTS, UNDER THE DIRECTION OF THE ATTORNEY-GENERAL, TO INSTITUTE PROCEEDINGS IN EQUITY TO PRE- VENT AND RESTRAIN SUCH VIOLATIONS. "Approved July 2d, 1890." ' It has hitherto been found difficult to sup- press trusts; they still flourish and multiply, defying public sentiment, and managing to evade legal restrictions. Many fear that, as 1 It is found that this enactment possesses very little restraining power. CORPORATIONS. 117 they continue to increase, they will absolutely stifle competition in their respective fields, and, with the patronage and vast resources at their disposal, combine to influence such legislation as will give them a freer scope and a firmer seat in the saddle. It is contended, on the other hand, that com- bination must in some way replace competition in the sphere of production; that great organi- zations are in keeping with the progressive spirit of the age ; that numerous desirable results for the public benefit can only be achieved by uniting the resources of many, and that we have reached an era of development at which large consolidations of capital and ownerships are natural and necessary to social economics and advancement. It is also pointed out to us, that the free employment of organized association has favorably affected every social interest in Ameri- can history, and that wherever there is most in- telligence, and the best administration of affairs, there is the most corporate life and activity. It will not be denied that there are many cor- porations honestly organized, and admirably conducted, which illustrate the best principles 118 GIVING AND GETTING CREDIT. of corporate association, and show that they are beneficent when not perverted; but a wide- spread feeling or conviction also exists, that the arrogant and accumulating abuses of the cor- porate franchise should be rebuked, and sup- pressed. In glancing over the legion of companies in- corporated under our facile laws during the last twenty-five or thirty years, it may be noted that comparatively few of them have been capitalized at less than a hundred thousand dollars, and that a very large proportion have been based upon schemes of dreamers and swindlers, which have swallowed up all that has been put into them. Few have had an actual capital of the amount stated in their articles of incorporation, and it is unnecessary to say that the majority of them have utterly perished. Special caution should be observed in extend- ing credit to a company which puts forth its best ability to dispose of its stock ; To a company whose officers will make no de- tailed statement of its affairs ; To a company which gives notes, and has a large indebtedness to stockholders; CORPORATIONS. 119 To a " parent" company, or a company being " promoted ;" To a "sub" company, on which the parent company holds a large portion of the stock, and exacts a royalty ; To an industrial company with a bonded in- debtedness. The creditor will remember that he contracts with the corporation, and not with its members, however high their standing and responsibility. CHAPTER VIII. THE MERCANTILE AGENCY SYSTEM. SIXTY years ago, we had no railroads or tele- graphs, and only a few small steamboats plying on inland waters. There was no ocean steam navigation, for it was not until 1838 that the Sirius and Great Western made their first regular passages, across the Atlantic. The great West was sparsely settled, and the total popula- tion of the United States was but 13,000,000. It has since increased to about 70,000,000, or more than five-fold, while the volume of busi- ness has expanded several times five-fold. Peo- ple then had fewer wants. They lived frugally, and produced for themselves many articles which are now made exclusively by machinery. There were fewer great fortunes, and less ex- treme poverty; and there was also less fraud and commercial knavery. Yet, even in those ancient days, the lack of 120 THE MERCANTILE AGENCY SYSTEM. 121 any convenient method for investigating the character and responsibility of traders began to be seriously felt. Inquiries by letter were slow and unsatisfactory, and some of the larger houses employed travelling agents to visit their customers, and report upon their condition and home standing. But the information thus ob- tained was costly, exclusive, and temporary. Many relied upon the references given them by those who applied for credit. But it some- times happened that houses thus referred to looked with a jealous eye on the efforts of rival concerns to share the trade of good customers, or, on the other hand, might recommend the extension of credit to a doubtful debtor, in order to increase the probability of collecting their own claims against him. In any case, there was no certainty that the information thus re- ceived would be disinterested and truthful. After the great financial troubles of 1837, which swept so many business men into bank- ruptcy, credits were much restricted, for mer- chants were all at sea in regard to the condition of traders throughout the country. But, with the slow reorganization of affairs, the need of 122 GIVING AND GETTING CREDIT. some system for obtaining information became pressing, and, in 1841, " The Mercantile Agency" was put into operation in New York city. It is said that the original nucleus was a book kept by the then prominent house of Tappan & Co. , in which, for some years, had been regis- tered all the information obtained respecting its customers. However this may be, both the brothers, Louis and Arthur Tappan, were identified with the organization in its early days. The business of the agency was at first limited; but in 1846 Mr. Benjamin Douglass was admitted to a partnership with Louis Tap- pan, under the style of Tappan & Douglass, and he at once assumed the chief management and extended its operations. In 1854, Mr. Douglass succeeded to the business, and the style of B. Douglass & Co. was adopted, with the admis- sion of Mr. Robert Graham Dun. "The Mercantile Agency" now made rapid and substantial progress, and soon gained a re- cognized and assured position among the useful and necessary mercantile institutions of the country. In 1860 Mr. Douglass withdrew, and THE MERCANTILE AGENCY SYSTEM. 123 ever since that time Mr. Dun's name has re- mained at the head of the agency. A number of agencies, more or less extensive, have been founded for furnishing reports since " The Mercantile Agency" began its operations. Many merchants will recollect those of W. A. Cleveland & Co., Woodward & Dusenberry, Potter & Gray, McKillop & Sprague, Brad- street & Son, etc. The latter firm, founded somewhere along in the fifties, was, a few years ago, merged into "The Bradstreet Co.," which is now a popular an 1 flourishing concern, with many friends and a large number of subscrib- ers. There are others whose reports are con- fined to a single line of trade, or are merely local, and others still which furnish their patrons with a list of persons, mostly lawyers, in different localities, who answer inquiries by letter. European Commercial Agencies are con- ducted on a different plan, and the service they render their home patrons would hardly satisfy American merchants. The principal one in Great Britain is probably that of Stubbs & Co., of London. There are also several on the Con- 124 GIVING AND GETTING CREDIT. tinent. South of the equator a few small offices, or bureaus, exist for obtaining and dispensing commercial information, as, for example, the " Prudencia, " of Buenos Ayres. It is the purpose of the writer merely to glance briefly at the origin, operation, and economic principles of a system. If special reference is made to " The Mercantile Agency" of R. G. Dun & Co., it is because that was the pioneer institution of the kind. It has seemed fittest for the purpose of illustration, and we will there- fore follow its development. "The Mercantile Agency" early discovered that the demand for information was not con- fined to New York, but existed also in other trade centres, in proportion to their extended wholesale traffic. And as the vast labor of re- porting all the business men of the country could not well be performed by a single office, or its expense borne by the merchants of one city, a system of auxiliary branch offices was gradually extended to other points in the United States and Canada, dealers at those places speedily be- coming their patrons and supporters. "The Mercantile Agency" has now upward THE MERCANTILE AGENCY SYSTEM. 125 of one hundred and fifty branch offices, and it continues to establish them wherever the growth of business gives warrant of their usefulness. Each of these branch offices has its special district, or field of operations, and its manager is responsible for the accuracy and completeness of the reports from that district. There is a constant interchange of informa- tion between them, through the main office in New York. Each has also its subscribers, to whom it supplies the books of ratings, the weekly "Notification Sheets" of changes and events, and such special reports as may be re- quired. It may also issue circular letters to its subscribers, without extra charge, which enable commercial travellers to obtain reports at any of its kindred offices in North America. One might suppose that to be prepared to furnish instant and accurate information as to the character and responsibility of any and every business man on the continent, from Nova Scotia to the Pacific, or the remotest cross-roads of Texas, would furnish scope and swing enough for the most boundless energy. But not so, thought the proprietors of "The Mercantile 126 GIVING AND GETTING CREDIT. Agency." They have also extended their sys- tem of branch offices to the larger cities of Europe and Australia, and developed for their patrons reliable sources of information through- out the civilized world. They can furnish re- ports upon a Parsee banker of Bombay, a tea merchant of China, Formosa, or Japan, a spice dealer of Sumatra, or a trader of San Luis Potosi. The representatives, or "reporters," who ob- tain most of the information for a first-class Mercantile Agency, are chosen with great care. They must be men of character, integrity, and experience ; of good judgment and habits, free from prejudice, and naturally fitted for the duties they have to perform. These are often arduous, and always responsible; and they are apt to be pleasant or otherwise as the parties with whom they come in contact are intelligent or ignorant. In the larger cities, a certain line of trade is generally assigned exclusively to the care of a " reporter" and his assistants. In time he be- comes acquainted with every dealer in his line in his district. He knows the best-informed THE MERCANTILE AGENCY SYSTEM. 127 merchants and arbiters of credit in the larger houses, and exchanges information with them. He interviews bank presidents and cashiers, watches offices of record for transfers, mort- gages, and judgments. He acquaints himself with the abilities and characteristics of junior partners, managers, salesmen, and accountants, and has his own ideas of who among them is fitted, or fitting himself, to enter successfully into business on his own account. A new concern in his line catches his attention instantly; in fact, it is probable that he knows all about its affairs before its sign is up. He enjoys the respect and friendship, and is often the confidential adviser, of many mer- chants in the line to which he is attached. Reporters and correspondents throughout the country are selected with equal care, and with due regard to their freedom from prejudice and partiality, which might bias their reports. As a check upon them, or by way of verification, travelling agents are sent to the various districts, who make independent investigations. In cases where the reports are greatly at variance, or 128 GIVING AND GETTING CREDIT. where they differ strikingly from former reports, the discrepancy is looked into by a third per- son. The reports of a first-class agency should, of course, be truthful and explicit; they must also be frequently revised, and, last, but not least, promptly furnished. The excellence of an agency depends also largely on the universality of its reports. If it can furnish information on but one-half, or two- thirds, of the traders in a certain line, its value to a general dealer in that line is obviously limited. As it is, in fact, entrusted with the business of others, the nature of its service is that of a deputy or susbtitute, and the relations existing between it and its subscribers are closer than those between buyer and seller. They are largely mutual, and, in proportion as its hands are strengthened by its patrons, it can do more and better work for them. The greater their number, and the higher the compensation re- ceived, the more it can extend and improve the quality of its information for the benefit of all. Justice has been defined as the virtue which consists in giving every one his due ; and the steady and substantial growth of " The Mercan- THE MERCANTILE AGENCY SYSTEM. 129 tile Agency" for fifty years bears witness that this must have been the cardinal principle of its proprietors. It has also demonstrated to the public that, for the object in view, no more sat- isfactory system has been, or perhaps can be de- vised, than that by which its operations are con- ducted. It has no motive to injure or misrepre- sent any one. On the contrary, the best inter- ests of an agency prompt it to get as near the truth as possible in every report, because the con- fidence of those upon whom its prosperity de- pends will surely be proportioned to the accu- racy of its information. Objection has sometimes been made that the system tends to create a sort of moneyed rank, or that it practically discriminates against men of small means, and in favor of the rich. But this is not true. A respectable mercantile agency refuses to become the arbiter or censor of any man's affairs. It simply records what it can find and verify. It deals in facts, rather than opinions; yet in its ratings and reports, reputation and character must be as carefully considered as mere ability to pay. And, furthermore, if wealth confers any distinction, 130 GIVING AND GETTING CREDIT. it is not in this country hereditary, and is acces- sible to all. Death brings division of property, and new financiers come to the front. Nor does the agency make public its written or printed information. It is communicated only to annual subscribers, specifically for use in their own business, "as an aid in determin- ing the propriety of giving credit," under the written pledge that it " shall be strictly confi- dential, and under no circumstances be com- municated to others." No intelligent man can expect another to en- trust him with his property without inquiry to ascertain if he is worthy of such confidence. If he is honest and responsible, he cheerfully in- vites it. If he objects to it, it is a reasonable inference that the result would be unfavorable to himself. He who asks for credit virtually challenges such investigation, and accords the seller the right to make it. Nor can this right be con- fined merely to the seller personally. Qui facit per alium facit per se; he may deputize his salesman, or his bookkeeper, or he may properly confide the troublesome and delicate service to THE MERCANTILE AGENCY SYSTEM. 131 an organization which will perform it for him promptly, and at the least expense to himself. Probably the greatest usefulness of the mer- cantile-agency system consists in the protection it gives against incompetence and dishonesty. It traces absconding debtors wherever they may locate, exposes false and fraudulent representa- tions, and gives caution against the doubtful. If, for example, a trader in New York pre- meditates a fraudulent failure, he stretches his credit limit with his accustomed houses, and strives, right and left, to open new accounts. Requests for reports at once pour in upon the leading agencies, and an extraordinary number of inquiries concerning any person, or firm, signifies either distrust, or exceptional con- ditions of some kind, which call for prompt investigation. But the mercantile agency does far more than this. It places in the merchant's or manufac- turer's hands a complete list of the solvent buy- ers of the country, states their resources, gives their home reputation for ability, thrift, and integrity, and the promptness with which they meet their obligations, from the actual experi- 132 GIVING AKD GETTING CREDIT. ence of those from whom they buy. It is con- stantly on the alert to discover and apprise its patrons of changes which may affect their in- terests, and it prevents delay in the shipment of goods to any part of the country if the purchas- ers are responsible. The agency system is of vast benefit also to buyers in all parts of the land, for it expands far more than it restricts credit. It opens the entire markets of the country to every substan- tial and upright dealer, without regard to the locality of his business. The books and records of the agency are his best letters of introduction. He need not now, as formerly, be confined in his purchases to a few houses where he is per- sonally known. It tends also to protect him from the injurious competition of irresponsible and unprincipled traders, and in many other respects renders him essential service. Feeling that he and his affairs are observed and open to the scrutiny of the business world, the country merchant may naturally become more prudent and conservative in his dealings. It tends to check extravagance, restrains him from doubtful speculation, and promotes in him a THE MERCANTILE AGENCY SYSTEM. 133 finer sense of the value of industry, and thrift, and of character, for he knows that the agency mirror will reflect what he is. If he finds that his credit suffers from his uncertain hab- its, his lack of economy, or of punctuality, he is driven to retrieve himself, and, like the wounded oyster, "mend his shell with pearl." The American mercantile agency system is unique; nothing comparable to it exists else- where, but it is a natural outgrowth of our pe- culiar needs and conditions. The great extent of the Republic ; its subdivision into numerous sovereign States with diverse laws; the freedom of interstate traffic; the rapid growth of the country ; the energy and enterprise of the Amer- ican people; their cosmopolitan and somewhat migratory characteristics; the general use of credit, and the absence of that governmental scrutiny of individuals which exists in many European countries, all combine here to ren- der the institution indispensable. The mercantile agency of the future will prob- ably be conducted upon substantially the same methods as at present, unless essential changes occur in commercial conditions, which cannot 134 GIVING AND GETTING CKEDIT. now be foreseen. It is, in fact, difficult to con- ceive of any general plan for gathering and dis- tributing the required information, which could be substituted with advantage for the one now operative. But it is believed that the institu- tion is progressive, and that it will continue to multiply checks on fraud, and in other respects further promote the interests of the mercantile community. Commerce goes hand in hand with intelli- gence. It pays the wages of science, and is the patron of art. It is fruitful of ideas, of systems, of railways, ships, telegraphs, cities, machines, manufactories, fabrics, houses, comforts, and conveniences. It is the nation's life-blood in circulation. Who shall deny it the right to claim all facilities for the extension and security of its operations? Commerce required the mer- cantile agency system for its protection and it was created. It has grown with the growth of the country, and so long as the credit system exists it will remain, for confidence is the foundation of credit, and knowledge is the cradle of confidence. It has now become interwoven with the trade THE MERCANTILE AGENCY SYSTEM. 135 of the country, and is so generally leaned upon, that were it to be, from any cause, suddenly abolished, or its operations seriously curtailed, uncertainty, confusion, and distrust would come at once. Credits would shrink, and the distribution of merchandise be restricted. CHAPTER IX. CREDIT GUARANTEE OR INDEMNITY SYSTEMS. A NOVEL and interesting system for indem- nifying business men against excess losses from bad debts was put into practical operation,, about six years ago, by the United States Credit System Company, whose headquarters were in Newark, N. J. Since then, several organizations, con- ducted substantially upon the same plan, have entered the field as Credit Indemnity or Guar- antee Companies, some of which are still in ac- tive operation. Broadly stated, the principle upon which this S3 T stem is based is, that in each line of business there is a certain specific average of losses on credit sales. Up to this point, the insuring merchant or manufacturer must himself take the risk ; but he may obtain a certificate of in- surance against further losses, within certain limits, by paying something like three or four 136 GUARANTEE OR INDEMNITY. 137 per cent premium on whatever amount is covered by his certificate. He is, however, restrained from taking reckless risks, by the ratings and reports of the leading mercantile agencies, certain low grades of credits being exempted in the guarantee. The premium exacted has usually been a fixed one, in proportion to the amount of in- surance, the varying quantity being the stipu- lated percentage of loss which the insured must bear before his indemnity begins. This changes with the nature and extent of the business, it being higher for a small than a large concern. It is claimed that, while careful provision is made against fraud, there is no irksome espion- age upon the insured, nor is any meddlesome supervision or interference with their business necessary. The company is to be notified at once ot excess losses, and upon due proof of the same they will be adjusted, and paid within a reasonable time. The new and ingenious feature of the plan lies in the fact that the interests of both parties jog on together until the insured reaches the stated limit of "average losses." To this point, the 138 GIVING AND GETTING CREDIT. less the loss, the better for the merchant, and the farther off the insurer's risks. If not reached, the premium is all profit to the insuring com- pany, while the merchant has had the satisfac- tion of feeling protected against disastrous mer- cantile contingencies, as his insurance policy has protected him from loss by a possible fire. A company for guaranteeing credits, which operated on a seemingly more speculative and hazardous plan, was also organized in New York several years ago. This was simply to guarantee the payment of notes and accounts, on such terms as might be agreed upon in each case. But its offerings were chiefly doubtful or rejected risks, and but few which could be deemed reasonably safe. This company was unsuccessful, and soon withdrew from the busi- ness. There should be no more difficulty in ascer- taining the average losses in each kind of busi- ness, through an extended series of years, than there has been in acquiring a knowledge of the averages upon which all fire, marine, life, and accident insurance is based. And it would surely seem that, if equipped with the necessary GUARANTEE OR INDEMNITY. 139 data, a well-ballasted company might as safely, as profitably, and as equitably, insure against credit losses as against losses by fire or ship- wreck. But there are some notable differences and perplexities to be considered. A necessary condition for the success and permanence of any insurance company is that the premium paid for insurance shall be remun- erative. It is from the premiums that the losses must be paid, or the business will soon perish. Fire, life, and marine insurance have generally proved profitable to their respective companies in all parts of the world. Losses in most kinds of insurance vary so little from year to year, that an adequate premium for an ensuing year might, with a watchful regard to current changes, be fairly predicated upon the experi- ence of several preceding years. Yet fire insurance, for example, is now so care- fully administered that the data, from which to establish the general premium rates, is not taken merely from the experience of any one company, but from the accumulated and combined experi- ence of all. Still, even these rates constantly fluctuate. It will be observed, that if a season's 140 GIVING AND GETTING CREDIT. fires have been large and numerous, and losses unusually heavy, premiums are advanced all along the line. But credit insurance is subject to greater and more frequent vicissitudes. The movement of mercantile affairs in uncertain cycles of ele- vation and depression depends upon many cir- cumstances, which can neither be foreseen, nor guarded against, by the credit insurer. Panics seldom come on schedule time, but often sud- denly, and when least expected; and the losses of a Credit Indemnity Company, in a year of panic and liquidation, may easily exceed the losses and sweep away the profits of several or- dinary years. It is evident, therefore, that the premium de- manded by such a company must be such as will cover varying degrees of mercantile pros- perity. It must be large enough for the com- pany to gain a reserve when trade prospers and losses are few, so that it may be in a position to meet the exigencies of a crisis which is liable to come at any time, and may not come for years. On the other hand, it must not be much above the actual risk incurred by prudent and GUARANTEE OB INDEMNITY. 141 intelligent merchants, or they will decline to insure. The business of insuring credits could not be profitable in calamitous times, if the premium were based on average losses. A company in- suring credits upon this basis, during a season of panic, could only hope to find compensation for extraordinary losses through a continuation of business, at the same premium rate, when prosperity returns. But people insure against fire and wreck be- cause such casualties are so largely due to for- tuitous circumstances, which no ordinary exer- cise of wisdom can foresee or prevent. The credit losses of a mercantile concern depend less upon mere chance, and it has often been proved possible for experience, skill, and prudence to limit them to a very low figure. It therefore remains to be seen, whether the better class of merchants will continue to insure their credits freely, at a long-range premium, when trade thrives again, and losses are small. It is thus manifest that it can be no easy mat- ter to determine upon an inflexible premium beforehand, which will be reasonably safe for 10 142 GIVING AND GETTING CREDIT. the insuring company, and satisfactory to the in- sured ; because the rate must come first, and a wide range of uncertainties in either direction afterward. The cost cannot be known, until the goods are sold. Yet withal, reasons are as plenty as Falstaff's blackberries, why a company, which can furnish absolutely safe and equitable insurance against credit losses, should receive welcome and sup- port, and become, in time, a bulwark of trade. If such possibilities do not lie within the scope of the system at present operative, or in some modification of it, it is reasonable to think that some other plan may in time be devised, which will extend this valuable privilege to the busi- ness community. The companies which have been organized for this purpose have shown commendable enterprise, but they have been unfortunate in stumbling upon hard and unfavorable condi- tions so early in their career. Yet the large number of substantial concerns, in all parts of the country, which have been and perhaps are still their patrons, shows a willingness to sustain them, and manifests the general de- GUARANTEE OR INDEMNITY. 143 sire for some form of protection against credit losses. There are many reasons to believe that Credit Insurance will receive a full measure of public confidence and support when, and only when, it has passed through its experimental stages, and settled its foundations firmly upon broad, ac- curate, prudent, and approved generalizations. The great, trusted and successful company of the future will be a growth or an evolution. CHAPTER X. A UNIFORM BANKRUPT LAW. IT is a constant source of perplexity and loss to American merchants, who give credit, that while all the people speak the same language, use the same kind of money, obey the same national control, and trade freely throughout the general domain, each State has its own special laws for regulating the property rights and duties of its citizens. Forty or fifty independent legislation-mills in the country grind out, every winter, from five to eight thousand laws, many of which are incon- gruous, unjust, or oppressive; and there is a constant ebb and flow of enactment and repeal, bewildering even to a Philadelphia lawyer. Worse still: lobbyists swarm at every State capitol, and statutes are made to order for rich men's money, or the votes of the rabble. Surely, no nation on earth has greater need for a uni- 144 A UNIFOKM BANKRUPT LAW. 145 form system of bankruptcy than the United States. The Constitution vests in the general Govern- ment the power of making such a law, while it forbids the States to impair the obligation of contracts. And although, in the absence of a National law, some of the States have enacted insolvent laws, such statutes are incomplete and unsatisfactory. The foundation doctrine of an insolvent law is, that it extends only to exempt a debtor from liability to arrest or imprisonment for debts pre- viously contracted, on condition of his giving up all his property for the benefit of his credi- tors; that of a bankrupt law, to protect his future acquisitions from his creditors. Insolvent laws are therefore passed for the benefit of debtors, and they bind only citizens of the State which enacts them. Under none of them can a debtor secure a release from non-resi- dent creditors : few provide for even a limited discharge, except through the clemency of credi- tors, and they afford the latter but scant protec- tion against fraud and chicanery. All State laws on the subject are suspended when a gen- 146 GIVING AND GETTING CREDIT. eral law of bankruptcy is in force, and the fail- ure of Congress, for many years, to pass such a law is thought to have been unfavorable to the best interests of the country. Congress passed the first bankruptcy bill in the year 1800, and repealed it in 1803. Another was enacted in 1841, and repealed in 1843. Both were passed for the relief of debtors who had failed during the preceding commer- cial crises. The loose and burdensome meas- ure of 1867 was amended in 1874, and repealed in 1878. 1 Early in the century, the eminent Chancellor Kent, and other lawyers, were of the opinion that a law which discharged debts without full pay- ment was demoralizing. It was thought to en- courage reckless trading, speculation, and ex- 1 This law of 1867 was framed by Congressman Jenckes of Rhode Island. It was an attempt to secure equity by forbidding preferences, and by dissolving all recent at- tachments upon the debtor's property ; and to relieve honest debtors by granting them discharges on certain conditions. The amendment in 1874 rendered it diffi- cult and expensive to force a debtor into bankruptcy. It also enabled him more easily to obtain a discharge by composition, which was objected to as giving too much power to the debtor, and too little to the courts. A UNIFORM BANKRUPT LAW. 147 travagance, and as tending to diminish that wholesome horror of bankruptcy which all men should feel. But experience, under the vastly changed con- ditions of more recent times, teaches otherwise. Officials familiar with the administration of the present English bankrupt law declare that it tends to promote more prudent habits and greater carefulness, that its operation gives much satisfaction, and shows a steady and per- manent improvement. It is now generally conceded that the material advantages of a well-devised bankrupt law far outweigh all objections that can be brought against it, and that it is also desirable on the ground of common humanity. During the progress of the century, legal severities toward the unfortunate have been more and more relaxed or mitigated. Judge Story early called imprisonment for debt a meas- ure " disgraceful even to an enlightened despot- ism," and it is now, happily, a thing of the past. But that profound and accomplished jurist also declared that he could recognize no distinction between the injustice of imprisoning the body 148 GIVING AND GETTING CREDIT. of an honest debtor, and of monopolizing all his future earnings. The law formerly regarded the bankrupt as a quasi criminal. It now generally looks upon him as neither innocent nor guilty, but as one whose conduct requires examination. If it be found that his failure is the result of honest misfortune, the law, under every civilized flag but our own, distributes his property among his creditors, and compassionately grants him a dis- charge ; but denies it to his faults. If any think a well-planned bankrupt law to be merely a legislative act which enables a lot of debtors to escape their obligations, they mis- take its scope and spirit. It operates also to frustrate and punish fraud, and protect creditors. It bears the same relation to estates in liquida- tion, because of dishonesty or failure, that pro- bate laws bear to the estates of deceased persons. Without doubt, the abuses practised under the administration of each of the former bankrupt laws gave much cause for dissatisfaction ; and there are some who profess to believe it impos- sible to pass a wise law, because the old ones were defective. But this is to deny that ex- A UNIFORM BANKRUPT LAW. 149 perience and intellectual progress can bear fruit. Our early legislators had, upon this subject, but a narrow range of precedent and practical knowledge from which to draw conclusions. The nation has since observed and cogitated, and now thinks itself qualified to frame a single law, which shall avoid the errors and embody the wisdom of all the many State and National in- solvent and bankruptcy laws which have pre- ceded it. That such a measure has, in fact, been already prepared, those familiar with the provisions of the Torrey Bill firmly believe. Every part of this bill has been long and carefully scrutinized, both by legal knowledge and mercantile experi- ence. It has been much amended and improved from the original draft, and is now considered ripe for enactment. Congressional committees have warmly ap- proved the Torrey Bankruptcy Bill, and urged its passage. In response to the popular, non- partisan and non-sectional demand, it will prob- ably soon become a law. In June, 1892, Mr. Gates, chairman of the 150 GIVING AND GETTING CREDIT. House Committee on the Judiciary, submitted a report on the Torrey Bill, which characterized it as follows : "A summary of the bill in five words: A square deal all around." " A summary in a paragraph : a measure for the discharge of honest insolvents, the diminu- tion of fraud, the prompt and economical ad- ministration of bankruptcy estates, the main- tenance of integrity in transactions on credit, and the promotion of commerce." Many commercial bodies have addressed Con- gress in advocacy of the Torrey Bill. Among them is the National Board of Trade, which, at its session in Louisville a few years ago, adopted a memorial to Congress, commending its provisions, and requesting its passage. This memorial declared that, in the opinion of the Board, the Bill, if made a law, would effect the following results, viz : 1st. Diminish the number of failures. 2d. Increase the amounts paid by insolvent estates. 3d. Abate the class of fraudulent adven- turers. A UNIFORM BANKRUPT LAW. 151 4th. Hold in check that class who make a business of failing. 5th. Put an end to the system of legalized robbery, constantly perpetrated through con- cealed or pocket judgments founded in fraud. 6th. Substitute one uniform, equitable law for the numerous incongruous and inefficient State insolvency laws. 7th. Provide a uniform collection law. 8th. Restrain compulsory processes against honest, solvent, but embarrassed merchants, who, under present conditions, are liable to suffer from contests between creditors to secure preferences. 9th. Repress commercial wrongs not now designated as crimes, but forbidden in the Tor- rey Bill. 10th. In effect increase the invested capital of all dealers by giving more general confi- dence. llth. Secure to honest unfortunates a dis- charge from the excess of their indebtedness over the amount of their assets. 12th. Check the fraudulent system of indi- vidual creditors obtaining from bankrupt debtors 152 GIVING AND GETTING CREDIT. a larger percentage than others receive, as a condition precedent to discharge. 13th. Prevent fraudulent preferences. 14th. Secure a prompt adjustment of matters in controversy, by arbitration, compromise, or litigation. 15th. Provide for holding creditors' meetings at places which will best serve the convenience of the greatest number. 16th. Secure an equitable division of the as- sets of insolvents among their creditors, quickly, and at a minimum cost. If Congress will enact this or a similar bill, and its operation fairly justifies the claims made in its behalf, it will prove a benefaction to the commercial world. The wonder will then be that, for seventeen years, we have tolerated the inequitable, confused, exasperating, and unnec- essary conditions which have prevailed in the absence of such a law. CHAPTER XI. PANICS. THE people have repeatedly suffered during the century from visitations of what, for want of a more definite word, is loosely termed a "panic." From the fact that these calamities have never been produced by natural causes, such as earthquakes, pestilence, or famine, they have sometimes been held to signify some radical defect in our economic system, which can only be remedied by reconstructing it upon a different basis. 1 The English economist, W. Stanley Jevons, 1 A writer in the English Journal of the Statistical Society states, that in the llth, 12th, and 13th centuries, the average was, in England, one famine every fourteen years. Authorities like Godwin, Ricardo, and Mill say, that we have succeeded in rendering a famine "next to impossible. " The masses no longer fear a famine, but its opposite, a glut of those commodities which they themselves produce and most need, because such a con- dition is followed by distress among them. 153 154 GIVING AND GETTING CREDIT. related panics to the sun-spots which, in modi- fying the rainfall, affect crops and prices. 1 Others refer them to over-production. John Stuart Mill pronounces this an error, and says panics are caused by a contraction of credit, and the remedy is a restoration of confidence. This seems about like saying that sickness is due to ill-health, and the remedy is to get well. A panic, and a general loss of confidence, are practically equivalent and reciprocal terms. One is as much the cause as the effect of the other, and either produces contraction of credit. England has had, since 1814, as many panics as we ; and so has France, except that she es- caped that of 1873, because of the Franco- Prus- sian War. Sometimes the panic has appeared a year or two earlier or later in one country 1 In a recent issue of Les Sciences Populaires, Professor Mascari assigns the latest maximum of sun-spots to August, 1893. The last sun-spot maximum preceding this occurred early in 1884. This record is made up by the Professor chiefly from his own observations at the observatory of Catania. It may interest some to note the coincidence, that both 1884 and 1893 were years of panic. PANICS. 155 than in the others, but its effects have been prac- tically simultaneous in the three, and to a greater or less extent throughout the commer- cial world. We have been accustomed to think that, while the changing phases of foreign affairs the financial attitude of other nations, and their de- mand for our products, might bear close relation to our welfare, they did not cause our panics. These have nearly always been popularly and perhaps plausibly attributed to domestic events, such as unwise legislation, tariff changes, scant crops, credit inflation, or unsound currency. But, unless the above facts are no more than coincidences, they would seem to indicate that these sweeping commercial revulsions really originate from causes common to all the panic- stricken nations, and that our national occur- rences are but proximate or secondary causes. Perhaps some philosopher will arise and tell us that a recondite tendency to panics is to be found in modern civilization, or, deeper still, in the natural foibles of human nature, to be developed, like great epidemics, by some un- known influence. 156 GIVING AND GETTING CREDIT. It is not difficult to see now, why we have been afflicted with a full share of the world's panics. The amazing progress of the country, and the nature of its institutions, have seemed to render it necessary to attempt the solution of many pressing legislative and economic prob- lems in an experimental way. We have, there- fore, lived, more than the people of any other great nation, in a constant state of uncertainty not perhaps as to general results, but in re- spect as to what to-morrow's legislative meas- ures may have in store for us as manufacturers and merchants. Trade has its natural laws, under which its highways, methods, and usages are established along the line of least resistance. But they must be constantly readapted to changing con- ditions; and constant change, or apprehen- sion of change, creates that uncertainty of the future which renders business speculative, hazardous, and demoralizing. Mercantile in- terests generally, and the credit system es- pecially, demand a stable basis upon which to calculate. Business men prefer to anchor upon even tolerable conditions, rather than PANICS. 157 drift in shifting channels, which is always dangerous. The panic of 1814 followed the war with Eng- land in 1812. The blockade of our ports had prevented the export of produce, and drained away our specie. Peace came in 1814, when England inundated us with her wares and drove our own manufacturers and merchants out of business. The war debt created exceeded $80,- 000,000. Much paper money was afloat, and the want of a solvent currency was severely felt. The banks, except in New England, sus- pended specie payments. In 1816, Congress chartered, for twenty years, a National Bank, with a capital of $35,000,000. It was located at Philadelphia, but permission was granted to establish branches elsewhere, under certain conditions. There were twenty- five directors, five of whom were to be chosen by the President, and all were made personally liable for violations of the charter. A vast issue of paper money followed. In 1818, the bank had passed the safety line, and was at the mercy of its creditors. A panic was pre- 11 158 GIVING AND GETTING CREDIT. cipitated upon the country, and there was much distress. 1 Liquidation ceased in 1819 and prosperity re- turned. But we had not learned how to deal with banking institutions, and " wildcat" banks of issue sprang up in various parts of the coun- try, because they could be organized with little or no tangible capital, and were subject to no 1 Our patriotic forbears seem to have been as much befogged on the money question as are some of our fel- low-citizens. Here are some specimen views : " Do you think, " said a delegate to Congress during the Revolutionary War, " that I will consent to load my constituents with taxes, when we can send to our printer and get a whole wagon-load of money, one quire of which will pay for the whole?" An address issued by Congress to the States, in 1779, contains these words : "Let it be remembered that paper money is the only kind of money which cannot take unto itself wings and fly away. It remains with us ; it will not forsake us. It is always ready and at hand for the purposes of com- merce, or taxes, and every industrious man can find it." At this time Congress had no power to tax, and efforts were made to keep the paper currency from sinking in value by legally regulating the prices of commodities. Prior to these events, Adam Smith, author of the famous " Wealth of Nations, " had compared the use of gold and silver money to a highway on the ground ; that of paper money to a wagon -way through the air. PANICS. 159 effective supervision or control. There was, for several years, an abundance of currency ; but a crisis came in 1825, and again confusion and distress prevailed, although England suffered still more severely. 1 After recovery, business continued active and money plentiful until, in 1831, there were some considerable embarrassments, due to ex- panded credit, and other circumstances. In 1833, President Jackson, who opposed the Bank of the United States, ordered that the pub- lic deposits held by it, amounting to some $37, 000,000, be transferred to eighty selected local banks in various parts of the country. These banks soon came to regard this money almost as a permanent deposit, and, upon the strength of it, poured forth volumes of paper currency. It was a period of swift and splendid national development. The lakes and rivers of the coun- try teemed with steamboats. Stephenson's loco- 1 The bank charters of those days were largely " based upon ignorance, intrigue, favoritism, or corruption." James Buchanan thus characterized the Bank of the United States: "It has defied Congress, violated the laws, and is mixed up in politics." 160 GIVING AND GETTING CREDIT. motive, "The Rocket," had firmly established the practicability of steam travel and transpor- tation by rail, and the eleven hundred miles of railway in operation in 1835 were destined to be doubled, each five years, until 1860. Coal displaced wood as fuel. New towns and cities marked the outburst of progress. Chicago, which was only a frontier post in 1832, became in six years a flourishing town, having eight steamers connecting it with Buffalo. Under these conditions credit expanded pro- digiously, and a frenzy of speculation fell upon the people. There were great land " booms" in Maine and throughout the West, and the ster- ling simplicities of life were forgotten in dreams of quickly acquired wealth without labor. Im- ports, in 1836, exceeded exports by more than fifty million dollars, which called for specie. The day of reckoning was at hand. In 1835, the President announced to Congress that the public debt was extinguished, and urged legislation in regard to the disposition of the surplus. A law was therefore passed in 1836 withdrawing the scattered millions of specie from the banks, for the purpose of distributing PANICS. 161 it among the States. Sales of the public lands had increased from about $3,000,000 in 1831, to $25,000,000 in 1836, and the President, who seemed resolved to smash things and leave the repairs to his successor, now ordered that hence- forth only coin should be received for them. People at once awoke to realize that they had " been a-riding in a balloon, and the gas was out." A heavy decline in the price of cotton and other exports increased the troubles. The Bank of the United States, and most other banks, suspended. Nearly everybody failed. Notes were worthless, loans unpaid, confidence utterly destroyed. Some States repudiated their obligations, and the General Government was in peril of bankruptcy. It was a dismal time. Stay laws were hastily passed, and American credit received a shock from which it did not fully recover for many years. 1 The panic of 1857 burst upon the country like a tempest from a clear sky. California had poured into the lap of the world over four hun- dred millions of gold during the seven preced- 1 It was estimated that the panic of 1837-39 caused 33,000 failures, involving a loss of $450,000,000. 162 GIVING AND GETTING CREDIT. ing years, and her yield in 1857 was fifty-five millions. Immigrants had been coming to our shores at the rate of a thousand or more a day, and, avoiding slave soil, had swarmed upon our Western lands. The harvest of the preceding year was one of the finest ever garnered. Our carrying trade was increasing; factories were nowhere idle. There was no governmental exigency, no popu- lar discontent. The telegraph had been brought into general use, and a great mileage of railway had been recently completed, or was under con- struction. The conditions of life were changing with bewildering rapidity. Prices were high and advancing, and there was a prodigious ex- pansion of credit. But with the coming of summer there was a vague uneasiness in the air, which soon grew into distrustful apprehension. Banks carefully scrutinized their collateral, and called in loans, and prudent merchants set their houses in order. On the 24th of August the Ohio Life Insur- ance and Trust Company failed. This was a large institution, located by its charter in Cin- cinnati, but its chief business was banking in PANICS. 163 New York, where its cashier resided. He had borrowed several millions on call, upon securities which could not be turned into cash when de- mand was made for the return of the loans. This event was the panic signal, and the pub- lic confidence at once gave way to fright. Within a few days, prices fell fifty per cent upon the Stock Exchange. Everybody wanted money, but it was impossible to realize upon any kind of property, except at a disastrous sacri- fice. Many houses failed, and within a few weeks the banks of New York and other cities suspended payments. The effects of the panic of 1857 were widely and profoundly felt, but recovery was compara- tively rapid. It was generally thought to have been caused by the inflation of credit, over-trad- ing, and speculation. The great Civil War began with the sur- render of Fort Sumter, April 14th, 1861. Specie payments were generally suspended throughout the United States on the 30th of December, 1861, because of the issue of paper currency by the Government for war purposes. Commercial dealings with the Southern States 164 GIVING AND GETTING CREDIT. were entirely cut off. The surrender of Lee to Grant, April 9th, 1865, practically ended the war, and the issue of greenbacks ceased. The country now resolutely set itself to the task of grappling with its huge war debt, and before all the soldiers had been sent home it was reduced $30,000,000. As might naturally be expected, there were some financial and busi- ness disturbances at this juncture. 1 In the spring of 1866, Overend, Gurney & Co. , one of the largest and most influential firms in Europe, suspended payment. This house stood next to the Bank of England as a tower of finan- cial strength, and was known all over the world. This, and other events, produced stagnation and distress for a time, but its effects were not very seriously or extensively felt in this country. Some years of rapid material progress fol- 1 The national debt was, in 1857, twenty-eight millions ; in 1860, sixty-five millions ; in 1861, ninety-one millions ; in 1862, five hundred and fourteen millions ; in 1863, eleven hundred and twenty millions ; in 1864, eighteen hundred and sixteen millions. In August, 1865, it reached twenty-eight hundred and forty-five millions, which was the maximum. Specie payments were not resumed until January 1, 1879. PANICS. 165 lowed this epoch, notwithstanding that the people insisted upon paying the National debt as fast as possible. It seemed that, in passing through the terrible war, the Nation awoke for the first time to a full realizing sense of its greatness, its strength, and its resources, and all the arts of peace now sprang forward with amazing elasticity. Prosperity was general, at least throughout the Northern States. Produc- tive and transportation facilities were greatly increased. The country was busy with its in- dustries. The period around 1870 is remarkable for its railway construction, which opened up large areas of new territory to settlement. 1 But much capital was absorbed in these enterprises, many of which proved unproductive. Money grew scarce, interest high, and times hard. The collapse of the " building mania" in Vienna, in 1873, was followed by financial troubles through- out Europe. The American crisis came, in September of this "bad year," with the failure of Jay Cooke '4,615 miles of railway were built in 1869; 6,070 in 1870, and 7,379 miles in 1871. 166 GIVING AND GETTING CREDIT. & Co. The head of this house had been the financial agent of the Government during the war, for the sale of its bonds, and more than $2,000,000,000 had passed through his hands. He afterward became financial agent for the Northern Pacific Railway, and his failure fol- lowed this connection. The country was flooded with securities, and other failures came swiftly. Eighty-three rail- way companies suspended payment, and the New York Stock Exchange found it expedient to close its doors from the 18th to the 30th of September. All industries were affected. Commodities declined in price; factories in all parts of the country were closed down, because their prod- ucts were unsalable, and great numbers of peo- ple were thrown out of employment. Several grim and weary years elapsed before this industrial paralysis passed away. In fact, many believe this panic to have been more grievous than any which preceded it, because its results were of such long duration. Enormous speculative enterprises came again with the advent of prosperity, and reached their PANICS. 167 climax in 1880-81, when a movement toward lower prices for railway securities set in, owing to competition in rates, and stock manipulations. In 1883, warehouses were crowded with goods, gold was being drawn away from the country, and failures were somewhat numerous. 1 In May, 1884, the New York house of Grant & Ward failed disastrously, with liabilities of $17,000,000, and several New York city banks suspended. Other failures followed, and for a time intense anxiety prevailed. But the city banks formed a syndicate for mutual protection and support, and the general distrust soon died away. This crisis was more severe in New York than elsewhere. It may, in fact, be called a panic in securities, which affected speculators and financiers more than those in trade. 1 Railway construction in 1880 reached 7,174 miles; in 1881, 11,142 miles; in 1882, 10,821 miles; in 1883, 6, 400 miles, CHAPTER XII. THE PANIC OF 1893. THE most severe aDd extensive panic, in many respects, which has ever afflicted this nation, was that of 1893. No section of the country has escaped its ravages, nor any indus- try its blighting effects, and the spell of its in- fluence has not yet passed away. It cannot fairly be imputed to over-trading and specula- tion, and it sprang neither from too much nor too little currency in circulation. It will, how- ever, pass into financial history as a " currency panic," from the fact that its proximate cause was distrust of the stability of the currency, which produced a demand for our gold, and caused a general contraction of credit. But numerous events, here and elsewhere, have certainly assisted, more or less directly, to pave the way for, and intensify, this great crisis. Among these may be noted the depreciation of silver throughout the world, and the attendant decline in the prices of staple products, the bank- 168 THE PANIC OF 1893. 169 ruptcy of some foreign nations, and the in- creased financial difficulties of others, the scan- dalous failure of the Panama Canal project, the collapse of the house of Baring Brothers & Co., the Australian bank failures, the suspension of silver coinage in India, our own tariff uncer- tainties, and. the condition of the public Treasury. The five years from 1888 to 1892, inclusive, comprised a period of fair prosperity in the United States. Crops averaged satisfactorily, the volume of business was large, and labor was well employed. But speculation, as a rule, was only moderate on the exchanges, there was a constant decline in the prices of commodities, and competition was excessively sharp in all lines of business. It was a period of severe trial for small capitalists, and mercantile fail- ures were numerous. 1 1 Commercial Failures. Liabilities. 1888 10,679 $123,829,973 1889 10,882 148,784,337 1890 10,907 189,856,964 1891 12,273 189,868,638 1892 10.344 114,044,167 1893 15,242 346,779,889 1894 13,885 172,992,856 Dun's Review. 170 GIVING AND GETTING CKEDIT. One of the most important economic questions of modern times relates to the circulating me- dium, or currency. With the progress of civilization, the vastly increased production of commodities, the quick- ened intercourse between nations, and the mul- tiplied appliances of credit, there has come also a monetary evolution. Among barbarous peo- ple, wampum and cowry shells serve as a medium of exchange; but the tendency is, as wealth and knowledge increase, to adopt a more substantial, convenient, and valuable form of money. For many centuries, there- fore, the more enlightened races have used gold and silver. Owing, however, to the constantly increasing difficulty of keeping these two metals at a parity of value, or from "parting company" in their relative values, and the fact that payments will always be made in the least valuable currency in virtue of the law that "bad money drives out good money," the most important commer- cial countries have, one after another, closed their mints to silver, and adopted a gold stan- dard. The result has been that the annually THE PANIC OF 1893. 171 increasing surplus of silver has "glutted and cloyed all markets." * This mighty measure of alleged contraction has not been accomplished without much oppo- sition. It is stoutly maintained that money owners, and creditor nations like England, have been benefited, while agricultural, industrial, and commercial interests throughout the world have correspondingly suffered. It has been followed by a great reduction in nominal values, by frequent trade depressions and financial revulsions, and by the bankruptcy of several debtor nations. As the United States is the leading silver-pro- ducing country of the world, there has naturally been a strong and widespread feeling averse to the demonetization of the white metal by our Government, and the policy pursued for many years was a waiting one. In 1873, however, the Government ceased to coin silver on private 1 This would probably have occurred long ago but for the fact that the populous East has absorbed such pro- digious quantities of silver from the Western nations. Humboldt observes that silver has always moved in a direction opposite to the movement of civilization. 172 GIVING AND GETTING CREDIT. account, and made preparation to return to a gold standard, thus practically demonetizing sil- ver. But in 1878 the passage of the Bland Bill once more made silver a legal tender, and re- established the double, or bimetallic standard. 1 But the friends of silver became dissatisfied with this measure. It did not go far enough. New mines of the metal, and new and improved processes for its extraction, were being constant- ly discovered and developed, and its production correspondingly waxed in quantity, while it waned in Value, as compared with gold. 1 The Bland, or Bland-Allison Bill imposed upon the Secretary of the Treasury the duty of purchasing silver bullion and coining at least two million dollars every month, each to weigh 412 grains, the same to be legal tender. This bill passed the Senate by a vote of 48 to 21. It became a law over the President's veto. The bill had the support of both Senators from Penn- sylvania, Ohio, Indiana, Illinois, Wisconsin, Nebraska, and Minnesota. Of those opposed, seven were Demo- crats and fourteen Republicans. Among the Democrats were Bayard of Delaware, Kernan of New York, Whyte of Maryland, and McPherson of New Jersey. Among the Republicans were James G. Blaine and Roscoe Conkling, Morrill and Edmunds, of Vermont, and both Republican Senators from Massachusetts, New Hamp- shire, and Rhode Island. One California senator voted against the bill, the other in favor of it. THE PANIC OF 1893. 173 The Government was pledged to maintain parity between its coinage of both metals, and additional pressure was brought to bear that, as the mint was open to the free coinage of gold, so also it should be opened to the free coinage of silver. Happily, wiser counsels prevailed, and the country escaped the task of carrying the sil- ver of the world a burden too heavy for the shoulders of any single nation. It was at length proposed, as an alternative which the free-coinage advocates hoped would be but temporary that the Government should purchase silver bullion, and hold it as a basis for the issue of paper currency. This project was rendered more plausible by the great reduction in the National debt, and the gradual retire- ment of the bonds which serve as a basis and security for the currency issues of the Na- tional banks. 1 There was much opposition, but in the sum- mer of 1890, under the exigencies of party poli- 1 From July 1st, 1884, to July 1st, 1893, the National debt was reduced 586 millions of dollars. (The Director of the United States Mint reports the silver money of the world as $3,820,571,346 ; the gold money as $3,727,018,- 869.) 174 GIVING AND GETTING CREDIT. tics, the Sherman Bill became a law. This en- actment directed the Secretary of the Treasury to purchase each month 4,500,000 ounces of silver bullion, and to issue against it legal- tender notes, payable "in coin." This measure is held by many as immediately responsible for the panic of 1893. It is alleged to have impaired confidence,at home and abroad, in the stability and soundness of our currency, incited the withdrawal and prevented the inflow of foreign capital, plunged the nation into un- certainty and apprehension of the future, checked enterprise and investment, and brought paralysis upon all our industries. 1 The early effect of the Sherman law was ap- parently to impart a degree of buoyancy to busi- ness and advance the price of securities, al- though the latter was in part, if not chiefly, due to large railway earnings and easy money. It was generally believed that this silver legis- lation would enhance nominal values through ' The total value of all the silver purchased by the Government under both the Bland and Sherman laws is but a fraction of the loss which they are believed to have caused ; a striking commentary on the worth of confidence and credit. THE PANIC OF 1893. 175 inflation of the currency. Our harvests in 1890 were disappointing, and in the fall months came shrinkage of prices and depression. 1 The j'ear 1889 had been one of the most flour- ishing years in the commercial history of Great Britain. Good things were going in various parts of the globe, and "John Bull," with his jingling gold, had secured a full share of them. But along in the autumn of 1890 it suddenly transpired that the great London house of Bar- ing Brothers and Co. must fail disastrously, unless it could at once receive material aid. Its inability to meet its obligations, amounting to upward of a hundred and forty million dollars, was chiefly owing to investments in the Argen- tine Republic, which had been widely bulletined as "the finest undeveloped country in the world." In this emergency, Mr. William Lidderdale, Governor of the Bank of England, secured from a syndicate of great London houses a guarantee 1 Many large industrial corporations were organized during the year 1890. Notably the H. B. Claflin Co. , J. P. Coats' Thread Works, American Tobacco Co., Proctor & Gamble Co. , etc. The McKinley Tariff Bill went into operation on the 6th of October. 176 GIVING AND GETTING CREDIT. of protection against loss, to the extent of four million pounds sterling, if it would undertake to liquidate the Barings' estate, and, from the British Government, authority to issue seven million pounds sterling of notes to facilitate the matter. The Bank therefore assumed, on the 15th of September, the task of meeting the Bar- ings' engagements, to the amount of twenty- eight million five hundred thousand pounds sterling. It was said that this action prevented the culmination of what "would have proved the most terrible panic recorded in history 1 . The crisis was averted, but the business world was stirred to its depths, and general confidence was but slowly restored. What English writ- ers described as a " semi-panic" existed for many 1 In recognition of his services at this juncture, Mr. Lidderdale received the thanks of his Government, and the freedom of the city of London. The successful liquidation of the Barings' Estate has since fully justified the wisdom of his course. The paper signed by the parties to this great transaction is interesting as a model of brevity and simplicity ; it was as follows : "In consideration of advances which the Bank of England has agreed to make to Baring Brothers & Co. , to enable them to discharge at maturity their liabilities existing on the night of November 15th, we, the under- signed, hereby agree, each individual, firm, or company THE PANIC OF 1893. 177 months in London, and this, together with de- bates in Congress upon the silver question, caused foreign investors to return to us large quantities of securities which, under our low bank reserves and money pressure, fell heavily. The North River Bank, of New York city, went into the hands of a receiver, and there were numerous failures; but the manufacturing and mercantile interests of the country were not so much disturbed as to excite general apprehen- sion. Bank statements, in 1891, revealed a consider- ably improved condition of affairs. Bountiful harvests, in face of scant crops in other coun- tries, helped greatly to restore confidence and advance prices, despite the possibilities of silver for himself, or themselves alone, and to the amount set opposite his or their names respectively, to make good any loss, whenever the Bank of England shall determine that the final liquidation of the liabilities of Baring Brothers & Co. has been completed, so far as in the opinion of the Governors is practicable. All the guarantors shall contribute ratably, and no one in- dividual, firm, or company shall be called on for his or their contribution without a like call being made on the others. The maximum period over which such liquida- tion may extend is three years, commencing Novem- ber 15th. 178 GIVING AND GETTING CREDIT. legislation. A still larger volume of business was transacted in 1892, and failures were less numerous and important than in the year pre- ceding. Bank clearances exceeded those of 1891 by nearly ten per cent. But crops, and especially that of cotton, were short, and the fact was reflected in railway earnings, and in ex- ports. There was increasing agitation of the silver question, a growing disposition abroad to drop American securities, and an alarming out- flow of gold. The year 1893 opened with gray skies. Prices of everything were low and falling, and though trade continued fairly active, there was little sale for commercial paper. During the first two months of the year our exports exceeded im- ports by thirty- six million dollars, yet gold was rapidly leaving the country, and the Treasury reserve as steadily declining a fact which caused much anxiety. Failures during the first quarter were more numerous than for the same period in many preceding years. Large amounts of capital had, year after year, been sent from England to the banks in Austra- lia for investment. Most of these banks had THE PANIC OF 1893. 179 branches throughout the country, a dozen some- times existing in a locality which could not offer legitimate business enough to support even one. There was much competition be- tween them, and as English money was plen- tiful, it easily found its way into all sorts of speculative enterprises, such as mines, railway and irrigation companies, sheep and ostrich farms, etc. This bubble was pricked early in 1893, when, from January 15th to May 15th, fourteen banks failed, with liabilities of nearly $500,000,000. The event did not create a notable panic in Lon- don, but it was another severe shock to confi- dence, and it made money more stringent. The effect upon trade, on both sides of the Atlantic, was depressing. As the popular anxiety and uncertainty con- tinued to increase, President Cleveland an- nounced, on the 20th of April, that he had deter- mined " to preserve the parity between gold and silver, and between all obligations of the Govern- ment." On the sixth day of June, he declared that "Congress must deal with the currency question, the condition of which is the only 180 GIVING AND GETTING CREDIT. menace to the country's welfare and pros- perity." ' By June there were runs upon banks in vari- ous parts of the country, and an alarming num- ber of failures. Prices continued to droop upon the stagnant exchanges, and there soon came an embarrassing scarcity of currency. People were hoarding it. The banks of New York city rallied for mutual support, and authorized the issue of clearing-house certificates. The same thing was done in Philadelphia. It proved a helpful measure. On the 27th of June, it was announced that the Government of India had suspended free silver coinage, and determined upon a gold standard. There was an instant fall in the price of silver all over the world. Three days later, the President convened Congress, in extra ses- sion, for the 7th of August. 1 The total net gold exports, during the first six months of 1893, were $61,958,895, as follows : January $12,213,553 February 12,988,068 March 1,504,991 April 18,344, 979 May 15,205,760 June.. 1,701,544 THE PANIC OF 1893. 181 Confidence was now so badly wilted that its revival seemed almost hopeless. The number of banks which suspended during July and August was unprecedented in the history of the country, and numerous railway companies, and other large corporations, became bankrupt. A large proportion of the manufacturing concerns of the country closed down, or curtailed their hours of labor. Great numbers of people were thrown out of employment, and there was wide- spread distress. Congress met on the 7th of August, and all eyes in the land were eagerly turned towards Washington. On the 28th of August, the House voted to repeal the Sherman law by a majority of 131, and there was an instant re- bound of hope and confidence. But repeal was fiercely resisted by a power- ful and adroit faction in the Senate, and for two months that august body debated, and "pre- served its traditions," while industry lan- guished, and the people suffered. At length a bill passed both houses of Con- gress, and became a law on the first day of November, 1893, which provides, not for the 182 GIVING AND GETTING CREDIT. demonetization of silver, but for the repeal of so much of the Sherman Act as required the pur- chase of silver bullion by the Government. It was hoped and expected that a revival of business would follow this legislation, but it had less effect than was anticipated. The silver market in Europe responded but slightly. Shipments of gold continued. There was no maintained advance in the price of securities or commodities. Confidence did not return; the waters had been too deeply troubled. There were fewer mercantile failures during 1893 than might naturally have been expected under the conditions which prevailed, although the proportion of those failing in good credit is given as fully four times that in preceding normal years. The manner in which manu- facturers, and merchants generally withstood the strain bears witness that, as a rule, they were in a sound and conservative position. The year 1894 was a period of extraordinary depression in all departments of industry. Sev- eral times during the year there was a tendency toward improvement; but the deficient revenues of the Government which twice compelled the THE PANIC OF 1893. 183 issue of fifty millions of bonds, the heavy gold exports, the low prices of our products, tariff uncertainties, the wrangle over the proposition to "coin the seigniorage," fears of "free silver" legislation, the revolutionary labor troubles, and other events, constantly deferred the return of confidence, and arrested the revival of trade. 1 In April and May came disastrous floods in the Middle States, the strike of the Connellsville coke-workers, the Coxey armies of tramps, the 1 " The gold exports are themselves the evidence of the destruction of confidence, for on the basis of our ordi- nary trade requirements there could be no need for gold shipments, as ohe excess of exports of merchandise and silver for the twelve months ending November 30, 1894 amounted to the large sum of $211,932,000. In face of this large trade balance, we were obliged to ship in the same twelve months no less than $73, 704, 000 gold, net, making the total excess of exports almost three hundred million dollars ($285,636,000). Low prices nearly everywhere were a striking char- acteristic of the year, accentuating the depression, while at the same time aggravating it. The price of wheat several times got down to below 55 cents a bushel in New York ; cotton sold at 5J- cents a pound in Novem- ber ; print cloths got down to 2f cents a yard. Besides this, we might mention various other articles and com- modities which sold at extremely low quotations, such as iron, steel, sugar, etc. " Commercial and Financial Chronicle. 184 GIVING AND GETTING CREDIT. bituminous coal-miners' strike, which rendered it necessary to call out the militia in eight or ten States, and the resulting "coal famine." The event of June and July was the great and stormy strike of the American Railway Union to enforce the demands of the Pullman em- ployees. Government expenditures, for the fiscal year ending July 1st, 1894, were about $70,000,- 000 in excess of the revenue. On the 8th of August, the gold balance in the Treasury stood at $52,189,500, the lowest figure of the year. The enactment of the Tariff Bill, which went into effect on the 28th of August, at once increased the revenues of the Government, and imparted some life to business. In Septem- ber there was a better demand for goods, stimu- lated by needs for consumption, and some hope- ful signs of slowly returning prosperity. There were no new disturbing developments, and a de- creasing number of failures. Production was expanding. But again, in December, the outflow of gold was heavy, large shipments being made each week through the month, and the " bad year of 1894" closed with drooping markets. THE PANIC OF 1893. 185 It became painfully evident in January, 1895, that the gold reserve in the Treasury must again be replenished. Another issue of Government bonds was therefore sold, in February, to a syn- dicate of bankers, who contracted to import gold, and to maintain such rates for foreign exchange as to render further exports of the metal un- profitable. It proved a felicitous and mas- terful stroke of policy. It seems now to have been the turning-point in the great panic. The ebbing tide of gold was at once checked, and the general movement of affairs put to the right-about. Hope revived ; confidence grew. Depression gave way to en- thusiasm. Securities, iron, wheat, cotton, all the staples, advanced rapidly. It is impossible to predict what the future may bring, but up to this time, (August), noth- ing has transpired to hinder the full return of prosperity. The demand for labor increases; wages advance; business improves; crops promise fairly well. Money is abundant, and interest low, with every prospect that it will long remain so. Belief has become general that industrial interests are at last coming up 186 GIVING AND GETTING CREDIT. out of the wilderness of evil days, and now face toward piping times. The menacing clouds re- maining in the horizon are the scant revenue of the Government and the condition of the National Treasury, uncertainty regarding silver legislation, and the currency question. It is alleged that the Bland and Sherman laws have brought upon the Government a loss of nearly two hundred millions, and upon the peo- ple panic, deprivation, and distress. But they were circumscribed in their powers for evil, be- cause they authorized the issue of silver coin and currency only within certain limits. But it is to these limitations alone that the partisans of silver ascribe the mischief. We are asked to believe that if these enactments had but sanctioned unlimited silver coinage, they would have proved fountains of boundless prosperity, instead of panic-breeders. This is to say, that if we merely put our hands into the fire they may be burned, but if we plunge in all over we shall remain cool, comfortable, and happy. It is from texts like this that a multitude of mining colonels, politicians, populists, and THE PANIC OF 1893. 187 quibbling demagogues seeking to ride to power and plunder upon any specious fad that offers, have been preaching in the crusade for free silver coinage. They are, in reality, attempting to manufacture sufficient votes to force fifty cents' worth of silver upon the people, as the lawful equivalent of a dollar's worth of gold. Their success would banish gold from circula- tion, and the price of commodities would soon be adjusted to the value of silver as bullion. Two Mexican silver dollars can now be obtained in exchange for one stamped with the American Eagle, because our Government is pledged to redeem the latter in gold. But when the Gov- ernment shall no longer maintain parity be- tween its coinage of gold and silver, the Mexi- can dollar will be more valuable than ours, because it contains more silver. It were better that we call half-a-bushel a bushel, and half -a -yard a yard, than half-a-dol- lar's worth of silver a dollar. This nation must have an honest unit of value, first, last, and all the time. The campaign in behalf of " Free Silver" has been conducted with vigor and shrewdness, but, 188 GIVING AND GETTING CREDIT. thanks to the press and the platform, light is at last reaching the farmers who have grain to sell, the five million depositors in savings banks, the wage and salary earners, and all good citi- zens up and down the land who read and think. They are fast learning that free silver coinage is a delusion and a snare, and the danger that the nation may be plunged into its mad confu- sion is constantly decreasing. Silver is an old and faithful servant, but com- merce has outgrown its use, except as subsidiary coin. That the great nations will unite to rein- state it is altogether improbable. 1 Bimetallism has become a "back number." For the United 1 The first International Monetary Conference was that of June, 1867, held, on invitation of the French Government, in Paris, " to consider the question of uni- formity of coinage, and to seek for the basis of ulterior negotiations." The "United States, and eighteen of the principal countries of Europe, were represented. The conference voted unanimously against the adoption, by the countries, of the silver standard ; and unanimously, with the exception of the Netherlands, in favor of the single gold standard. The second International Monetary Conference was called by the United States, and held at Paris in 1878. Germany refused to send delegates, but twelve countries were represented. It was the opinion of the delegates, THE PANIC OF 1893. 189 States alone to sanction unlimited silver coinage at any ratio with gold which the friends of silver would approve, would be to open upon the country a Pandora's box of evils. The most enlightened opinion now holds that the world has reached a stage in its progress where gold and silver can no longer be forced to bear any fixed relation to each other as stan- dard measures and representatives of value, and that the best interests of mankind now require the adoption of the rarer, more valuable, and that the use of gold and silver as money should be left to the discretion of each state, or group of states. The third such conference, that of 1881, was called by France and the United States, " to examine and adopt, for the purpose of submitting the same to the govern- ments represented, a plan and a system for the re-estab- lishment of the use of gold and silver as bimetallic money, according to a settled value between those metals." Nineteen countries were represented, but the conference adjourned without practical results. The fourth, and last, International Monetary Confer- ence met at Brussels in 1892. It was called by the Gov- ernment of the United States, "for the purpose of con- ferring as to what measures, if any, can be taken to in- crease the use of silver as money in the currency system of nations." Twenty countries were represented at this conference, but it adjourned without definite practical conclusions. 190 GIVING AND GETTING CREDIT. more stable gold as the universal foundation money. t With the progress which is anticipated for the coming century, along all lines of thought and industry, will a way be found to prevent panics? We cannot, of course, foresee coming condi- tions, but, as the causes of panics and their remedies are in the keeping chiefly of those who suffer from them, it seems not unreason- able to expect that their prevention may be among the social and economic victories of the future. It may, at least, be confidently pre- dicted, that if their recurrence cannot be en- tirely obviated or suppressed, their power for mischief will be curbed that as the world gains experience and wisdom, panics will become less frequent, less severe, and of shorter duration. Yet there are those who contend that panics will continue to come and go as in times past, in virtue of some vast purpose, .some principle of rhythmic ebb and flow involved in the un- folding plan of evolution. They argue that, as the law that all must die rules over all causes of THE PANIC OF 1893. 191 death, so, under law, panics must inevitably accompany commercial activity, independently of desultory events held to be their proximate causes, such as good or bad crops, the policy of political parties, or even the caprices of hu- man nature. It may be so, but we, practical people, can hardly accept such theories. Yet we, too, be- lieve in the reign of absolute law, such, for ex- ample, as that which governs the running of a watch. If it is badly constructed, if there is sand among its cogs, or its wheels get askew, it will not keep time until it is repaired and ad- justed. In other words, we believe in the law that effect follows cause, and that the former will be differentiated as we modify the latter. If we may at all judge the future by the past, the panics that lie along the course of affairs will prove beacon-lights of warning and in- struction. They teach, among other things, that it is not law but labor that creates value, and that the dollar, the unit of value, must be rigorously measured by the average amount of intelli- 192 GIVING AND GETTING CREDIT. gence, capital, and labor required to produce its metal. And furthermore, that a baseless, or too much expanded paper currency, is sure to prove a treacherous stimulus, which will leave in its wake depression, disorder, and insolvency. They give grounds for the conclusion that the notion of a so-called "elastic currency," or one which will automatically expand and contract according to the needs of the people, is a fal- lacy, because the inherent force of money makes only for expansion. The kite must have a tail. A study of panics will suggest to the vigilant and cautious business man that he should be on the lookout for a sudden change of popular sen- timent after a lengthened period of general pros- perity and expansion of credit. He will observe that the conditions which have usually preceded a panic were something as follows: speculation active, labor well em- ployed, immigration heavy, stocks, commodi- ties, and especially iron and its products have advanced regularly in price, and become station- ary or top-heavy. Luxury and expenditure flourish, and the pace of everything is swift. THE PANIC OF 1893. 193 Bank statements show large amounts of loans and discounts, and decreasing deposits. When, on the other hand, the panic has passed, and the end of liquidation has come, when prices have touched bottom and begin to rebound, when idle workmen find employment, when bank statements show increasing de- posits and a healthy demand for discounts, and the general stringency of expenditure is relaxed, he will naturally conclude that conditions indi- cate a return of confidence, a rapid resumption of prosperous business, and an upward move- ment, which will probably last from two to four years, with comparative safety in extending credit. APPENDIX. ASSIGNMENT, INSOLVENT, EXEMPTION, AND OTHER LAWS OF ALL THE STATES AND TERRITORIES. ALABAMA. Has no distinct insolvent or assign- ment law, but assignments can be made at common law. There can be no preferences in a general assign- ment. Acceptance of a dividend under assignment does not discharge debtor. Twenty years bar actions upon judgments. Six years bar actions for money loaned, stated accounts, or promise in writing. Three years bar open accounts. LEGAL INTEREST, eight per cent. EXEMPTIONS i Homestead of house and lot in town, or one hundred and sixty acres in the country, in either case not to exceed two thousand dollars in value ; also personal property to the value of one thousand dollars, certain specified articles, and wages to the amount of twenty-five dollars per month. ARIZONA. Has no insolvent law. Five years bar actions on judgments ; four years bar contracts in writ- ing ; two years if not in writing. EXEMPTIONS : The homestead not exceeding in value five thousand dollars, and certain specified articles to the value of six hundred dollars. LEGAL INTEREST, ten per cent. 195 196 APPENDIX. ARKANSAS. Has an assignment law for the benefit of creditors which permits preferences. It does not dis- charge the debtor from his obligations without unani- mous consent of the creditors, nor does it affect the claims of those who do not come into the assignment. LIMITATIONS OF ACTIONS : On accounts, three years ; notes and sealed instruments, five years ; on judgments, ten years. LEGAL INTEREST, six per cent. EXEMPTIONS: For head of a family, outside of any town or city, one hundred and sixty acres of land, not to exceed twenty-five hundred dollars in value, or not less than eighty acres without regard to value. In city or town not exceeding one acre, of the value of twenty-five hundred dollars, or not less than one-fourth of an acre without regard to value ; also, for the head of a family, personal property to the value of five hundred dollars. For a single person, two hundred dollars' worth of personal property besides wearing apparel. CALIFORNIA. Has an insolvent law, which does not permit preferences, but under which the debtor may be discharged from obligations incurred in the State to citizens of the State. Non-resident creditors, who do not voluntarily become parties to the proceedings, can retain their claims against the debtor. LIMITATIONS: Actions must be commenced within five years on the judgment or decree of a court ; within four years on a promissory note, contract, or obligation in writing, executed in the State ; within two years upon any con- tract or obligation not in writing. Seven per cent is legal interest. Interest cannot be collected on open ac- counts. EXEMPTIONS: The homestead (under certain conditions) , not exceeding in value five thousand dol- lars ; the cabin or dwelling of a miner, not exceeding five hundred dollars in value, and a list of specified APPENDIX. 197 articles necessary, or applicable, to the trade or calling of the debtor. Days of grace are not allowed on bills of exchange or promissory notes. COLORADO. Has an assignment law, which does not permit preferences, and does not discharge the debtor without the unanimous consent of his creditors. The claims of creditors who do not come into an assign- ment are secondary to those filed within three months after assignee has mailed notice of assignment, unless creditors can show that they did not receive such notice. LIMITATIONS OP ACTIONS : Execution may issue on a judgment for ten years from its entry, but it is then considered as satisfied unless revived. Actions for debt founded upon contract or liability in action must be brought within six years. EXEMPTIONS : Tools and stock in trade, used in carrying on business, to the value of two hundred dollars ; library and implements of any professional man, not exceeding three hundred dollars. Wearing apparel, and specified articles. LEGAL INTER- EST, eight per cent. CONNECTICUT. Has an insolvent law, but the debtor is not permitted to make a preferential assign- ment. If his estate pays seventy per cent on all claims that have been proved, he will receive his discharge in full for such claims only ; all other claims hold good against his property after the expiration of two years from his discharge. EXEMPTIONS: Necessary wearing apparel, bedding, ..nd furniture. Implements of the debtor's trade, and certain specified articles ; the land and dwelling actually occupied by the owner, to the value of one thousand dollars, provided he has recorded his de- claration to the effect that it is his homestead. STATUTE OF LIMITATIONS bars action on contract under seal, or 198 APPENDIX. non- negotiable note, after seventeen years ; on account, book debt, simple contract, writing not under seal, or negotiable notes, six years ; express contracts, of which there is no written memorandum, three years. LEGAL INTEREST in the State, six per cent. DELAWARE. Has an assignment law, which does not permit preferences in cases of insolvency, nor does it permit the discharge of the debtor unless the credit- ors severally agree to release. The rights of creditors who do not come into an assignment are not affected by the assignment, but they will lose their dividends. LIMITATIONS OF ACTIONS : Accounts, three years ; notes, six years. Judgments presumed paid in twenty years unless rebutted. A verbal promise to pay a debt will, if proved, revive it. LEGAL INTEREST, six per cent ; penalty for usury, forfeiture of a sum equal to the amount loaned. EXEMPTIONS permitted in this State are small and they vary in the different counties. DISTRICT OF COLUMBIA. Preferences in anas- signment are void, and all debts are payable pro rata. EXEMPTIONS : Household furniture and wearing apparel of a householder are exempt except for servant's or laborer's wages due, to the amount of three hundred dol- lars ; provisions and fuel for three months ; mechanic's tools or implements, of any trade, to the value of two hundred dollars, with stock to the same amount ; library and implements of a professional man, to the value of three hundred dollars ; farmers' team and utensils to the value of one hundred dollars ; family pictures and library, to the value of four hundred dollars. LIMITA- TION, OF ACTIONS : Actions must be brought within three years on simple contracts, book accounts, notes, etc. Twelve years is the limit on specialties. LEGAL IN- TEREST, six per cent. % APPENDIX. 199 FLORIDA. A general assignment law exists, which does not permit preferences, but which expressly dis- charges the debtor if he complies with its provisions It is believed, however, that such discharge is void, if the creditor does not reside in the State, and the contract was neither made nor to be performed therein. Credit- ors who do not come into an assignment lose their divi- dends. EXEMPTIONS : Homestead of one hundred and sixty acres of land and improvements, if in the coun- try ; a residence and business house and one-half acre of ground, if in a town or city, together with a thousand dollars' worth of personal property. LIMITATIONS OF ACTIONS : Accounts, four years ; notes and other unsealed instruments, five years. Judgments, bonds, and notes under seal, twenty years. LEGAL INTEREST, eight per cent. GEORGIA. Has an assignment law (the act of 1880- 81), which permits preferences under conditions, but the unanimous consent of creditors is necessary to the insolvent's discharge. Creditors who do not come into the assignment simply lose the dividend that may be declared. EXEMPTIONS : Homestead of realty or person- ality, or both, to the value in the aggregate of sixteen hundred dollars. LIMITATIONS OF ACTIONS : Upon open accounts, four years ; notes, etc. , six years ; sealed in- struments, twenty years. Judgments must have execu- tion issued thereon within seven years, or they become dormant. Dormant judgment may be revived within three years. LEGAL INTEREST, eight per cent. IDAHO. LIMITATIONS OF ACTIONS: Instruments in writing, five years ; contract or liability, not founded in writing, including accounts, two years. EXEMP- TIONS : Homestead, consisting of dwelling-house thereon 200 APPENDIX. and its appurtenances, not exceeding in value five thou- sand dollars, to be selected by the husband and wife, or either of them, or other head of family (the usual declaration must be made and recorded) . A single per- son may claim a homestead, not to exceed one thousand dollars in value. There are, besides, many articles specified as exempt. LEGAL INTEREST, ten per cent. ILLINOIS. Has an assignment law, which permits no preferences. Acceptance of dividends does not dis- charge the debtor. Creditors who do not come in waive claim to the assets assigned. INTEREST : five per cent is allowed when no rate is specified. LIMITA- TIONS OF ACTIONS : Five years upon accounts, unwritten contracts, and for injury to property ; upon bonds, notes, bills of exchange, leases, and other written contracts, ten years. All other actions, including action on judg- ments of other States, five years. INDIANA. Has a distinct assignment law, which does not, in a general assignment, permit preferences, but a special assignment may be made to secure particu- lar creditors. Unanimous consent of creditors is neces- sary to discharge the debtor. Creditors who do not come into an assignment merely lose their share of the assets assigned. LIMITATIONS OF ACTIONS: On accounts and contracts not in writing, within six years. On prom- issory notes, bills of exchange, and other written con- tracts for the payment of money, within ten years. On judgments of a court of record, twenty years. EXEMP- TIONS : Any resident householder has an exemption from levy and sale, under execution or attachment, of real or personal property, or both, as he may select, to the value of six hundred dollars. The law further provides that no property shall be sold, by virtue of an execution, APPENDIX. 201 for less than two-thirds of its appraised cash value. This provision may, however, be waived, by inserting in the note or contract : " Payable without relief from valuation or appraisement laws. " But the right to ex- emption cannot be waived by contract. LEGAL INTER- EST, eight per cent. INDIAN TERRITORY. ASSIGNMENTS: By Act of Congress, the statute of Arkansas applies to this Ter- ritory. EXEMPTIONS and LIMITATIONS, as written in Mansfield's Digest of the State of Arkansas (1884), apply to this Territory. LEGAL INTEREST, on open accounts, made in the Territory, six per cent. If not made there, rate is fixed by the law of the State where made. Con- tracts draw rate contracted for, unless the rate is usuri- ous in the State where the contract is made. Land can- not be sold under executions. Judgments must be satis- fied from personal property. IOWA. Has a general assignment law, which does not permit preferences ; but independent of this law, and before assignment, preferences to creditors are al- lowed, if in good faith. The unanimous consent of creditors is required for the debtor's discharge. Credit- ors who do not come into the assignment do not receive a dividend from the assets. Their claims remain un- impaired. LIMITATIONS OF ACTIONS : Accounts, five years ; notes and written instruments, ten years ; judg- ments, twenty years. The failure to account for goods consigned is embezzlement. LEGAL INTEREST, six per cent. EXEMPTIONS : Homestead used as a residence by the owner, not exceeding half an acre in extent, if within a town plot (or if not, it must not embrace more than forty acres) with other specified personal property. APPENDIX. KANSAS. Has an assignment law, which operates only to distribute the debtor's property ratably among all his creditors who prove their claims, but it does not dis- charge him from his debts. Creditors who do not come it: do uot participate in the assigned property, but tlieir claims continue valid. LIMITATIONS OF ACTIONS : Upon actions not in writing, three years ; actions upon agreements, contracts, and promises in writing, five years. Judgments become dormant five years after the date of their rendition, or of the last execution issued thereon. A dormant judgment must be revived within one year after it has become dormant, or the right to revive is gone. LEGAL INTEREST, six per cent. EX- EMPTIONS : A homestead, to the extent of one hundred and sixty acres of farming land, or one acre within the limits of an incorporated town or city, occupied as a residence by the family of the owner, together with all improvements on the same, shall he exempt from forced sale under any process of law, and shall not be alienated except by joint consent of husband and wife, when that relation exists. Not exempt, however, for taxes, or purchase- money obligations, or liens for improvements. No value is affixed to the homestead. It may be worth a million dollars. Earnings necessary for the support of the debtor's family are also exempted, and certain specified articles. KENTUCKY. Voluntary assignments by debtors must be made for the benefit of all creditors. Any creditor not presenting his claim within due time will be barred, unless otherwise ordered by the court. LIMITATION OF ACTIONS : Actions upon merchant's ac- counts for goods sold to consumers shall be brought in two years, the time to be computed from the first day of January next after the goods are sold and charged. APPENDIX. 203 Actions upon contract, express or implied, not in writ- ing, or bills of exchange, drafts, or upon a promissory note placed on the footing of a bill of exchange, or upon accounts between merchants or their agents, must be brought within five years. Actions upon judgments or contracts in writing must be brought within fifteen years. EXEMPTIONS : There is a homestead exemption of $1,000 to an actual, bonafide, resident housekeeper; with certain articles of personal property, and wages not to exceed fifty dollars, to persons who work for wages, under certain conditions. LEGAL INTEREST, six per cent. LOUISIANA. This State does not permit assign- ments of any sort, but it has an insolvent law, under which, by consent of a majority in number and amount of his creditors, a debtor may obtain his discharge, ex- cept as to those out of the State, and to these the State courts are closed to suits against the insolvent debtor. EXEMPTIONS: Homestead under certain conditions, specified articles, laborers' wages, etc. LIMITATIONS OF ACTIONS : Prescription of three years on all accounts, money lent, etc. This prescription only ceases from the time there has been an account acknowledged in writing, a note or bond given, or an action commenced. Five years actions on bills of exchange and promissory notes, or rescission of contracts. Ten years all judg- ments for money ; may be revived at any time before prescription has run. Thirty years all actions for im- movable property. LEGAL INTEREST, five per cent. MAINE. Has an insolvency law, which does not permit preferences, but provides for the discharge of a debtor who is for the first time insolvent. Those who do not come into the assignment, should one be made, 204 APPENDIX. lose their dividends, but creditors who are not residents of the State may still enforce their claims. LIMITATIONS OF ACTIONS : All actions of debt, founded on contracts not under seal, must be commenced within six years after cause of action accrues ; judgments and witnessed promissory notes, twenty y^ars. EXEMPTIONS: By complying with certain statutory provisions (not often taken advantage of) , there is exempted a lot of land, dwelling-house, etc., not exceeding five hundred dollars in value besides specified articles. LEGAL IN- TEREST, six per cent. Any rate may be fixed by con- tract. MARYLAND. Has a State insolvency law, which permits an assignment with preferences, under certain conditions. The debtor may obtain his discharge under the provisions of this law, but it is a nullity against non-resident creditors, unless they waive their right by voluntarily becoming parties to, and claiming under the insolvency proceedings. LIMITATIONS OF ACTIONS : Accounts and notes are barred after three years. Sealed instruments and judgments after twelve years. A verbal promise will revive a debt barred by the Statute of Limitations. EXEMPTIONS : One hundred dollars' worth of property is exempt, and, in addition thereto, all wearing apparel, books, and the tools of mechanics, except books or tools kept for sale. LEGAL INTEREST, six per cent. MASSACHUSETTS. Has a separate and distinct in- solvent law. The debtor is not allowed to make a pref- erential assignment unless made six months before *he filing of the petition in insolvency. The debtor may obtain his discharge if his assets pay fifty per cent of the claims proved ; otherwise, assent in writing of ma- APPENDIX. 205 jority in number and value of creditors who have proved is necessary. Claims not proved are barred, unless creditors are non-residents. LIMITATIONS OF AC- TIONS : Accounts and actions of contract (excepting ac- tion brought upon a promissory note, signed in the presence of an attesting witness), six years. Judg- ments and actions, not specially otherwise limited, twenty years. EXEMPTIONS: Homestead of a house- holder having a family, to the value of eight hundred dollars, if he has duly declared his design to hold it as a homestead, and recorded it in compliance with the law ; besides other specified articles. LEGAL INTEREST, six per cent. MICHIGAN. There is in this State an assignment law. Preferences are forbidden. The debtor cannot obtain his discharge without unanimous consent of his creditors. Those who do not come into the assignment within ninety days, and prove their claims, lose their share of the assets assigned. LIMITATIONS OF ACTIONS : Six years on accounts and notes ; justices' judgments, six years. Sealed instruments, and judgments of courts of record, ten years. EXEMPTIONS : Land not exceeding forty acres, dwelling, and improvements in the country ; or land not exceeeding one lot in town or city, with dwelling, etc., owned and occupied by a resident of the State, to the value of fifteen hundred dollars; also specified articles. LEGAL INTEREST, six per cent. MINNESOTA. Has an assignment law, which does not permit preferences. LIMITATIONS : All actions on contracts, express or implied, must be commenced within six years. Judgments, ten years. EXEMPTIONS : Homestead, consisting of not to exceed eighty acres of land, with dwelling and appurtenances, in the country ; 14 206 APPENDIX. or one lot, with dwelling, in a town or city having over five thousand inhabitants, or one-half acre in a town or village having less than five thousand inhabitants, and dwelling, with appurtenances, owned and occupied by any resident of the State. LEGAL INTEREST^ ten per cent. MISSISSIPPI. A distinct assignment law exists, which went into operation with the adoption of the new code, in the fall of 1892. It permits preferences, but acceptance of a dividend from an estate under as- signment does not discharge the debtor. Those who do not come in get no distributive share. EXEMPTIONS : Homestead land, not to exceed one hundred and sixty acres, with buildings, owned and occupied as a residence, not exceeding two thousand dollars in value. This may be increased to three thousand dollars, by making and recording a homestead declaration. There are numer- ous other specified exemptions of implements and per- sonal property. LIMITATIONS OF ACTIONS : Accounts and all unwritten contracts, three years; notes, bonds, etc., six years; judgments, seven years. Partial payments do not stop the running of limitations. LEGAL INTER- EST, six per cent MISSOURI. Hasan assignment law, preferences not permitted. Debtor is not discharged without consent of his creditors. Acceptance of dividend does not pre- vent creditor from placing balance of his claim in judg- ment. LIMITATIONS OF ACTIONS : On accounts, five years ; notes and sealed instruments, ten years; judgments, ten years. EXEMPTIONS: Homestead of resident, mar- ried man, with varying quantity of land, according to locality in the country, or in town or city according to population, not to exceed in value fifteen hundred dol- APPENDIX. 207 lars. Personal property or real estate, to the amount of not less than three hundred dollars ; with tools, furni- ture, etc., as specified. LEGAL INTEREST, six per cent. MONTANA. Assignments may be made at common law, with preferences. Acceptance of a dividend from an estate under assignment does not discharge the debtor. Those who do not come in lose their dividends. LIMITATIONS OF ACTIONS: Upon accounts, five years; note, or written obligation, eight years; judgments, ten years. EXEMPTIONS : To married men, or the head of a family, homestead, not to exceed in value twenty-five hundred dollars, with other specified exemptions ; none of the personal property is exempt for the wages of any clerk, mechanic, laborer, or servant. LEGAL INTEREST, ten per cent. NEBRASKA. Has a distinct assignment law, which does not permit preferences, and acceptance of a divi- dend does not discharge the debtor. Those who do not come in merely lose their distributive share of the as- sets. LIMITATIONS OP ACTIONS : Actions upon specific written contracts, or foreign judgments, must be brought within five years ; actions upon contracts not in writing, four years. EXEMPTIONS : Homestead with dwelling thereon and its appurtenances, all not over two thousand dollars in value, to the head of a family. Heads of families, who have neither lands nor houses subject to exemption as a homestead, shall have exempt from forced sale on execution, the sum of five hundred dollars in personal property. Other exemptions of specified articles, etc. LEGAL INTEREST, seven per cent. NEVADA. Has "an act for the relief of insolvent debtors and protection of creditors" does not permit 208 APPENDIX. preferences. By giving up all his property, and men- tioning all his creditors, with amounts due them, etc. , in his schedule, the debtor may obtain his discharge. LIMITATIONS OF ACTIONS : Upon contract, obligation or liability not founded upon an instrument in writing, within four years ; if founded upon an instrument in writing, five years; judgments, six years. EXEMP- TIONS : Homestead, not exceeding five thousand dollars in value, for the head of a family, and other specified exemptions. LEGAL INTEREST, ten per cent. NEW HAMPSHIRE. Has assignment law; permits no preferences. If debtor's estate pays seventy per cent, he is entitled to a discharge. If less than seventy per cent, he can be discharged only on written consent of three-quarters in number and amount of his creditors. LIMITATIONS OP ACTIONS : Accounts and simple promis- sory notes, six years after maturity. Judgments, sealed instruments, and notes secured by mortgage of real estate, twenty years. EXEMPTIONS : Homestead, to the value of five hundred dollars, with specified articles. LEGAL INTEREST, six per cent. NEW JERSEY. Hasan insolvent law, which affects only persons imprisoned for debt under it ; the debtor's body may be released from imprisonment, but claims are not released. The debtor may make an assignment of his property for the benefit of his creditors, but without preferences. Claims not due receive dividends, less a reasonable rebate of interest ; failure of the creditor to file his claim before distribution of the assets bars him from receiving his share of the dividends. Creditors who have presented their claims are barred from after- ward bringing suit against the debtor upon them, unless fraud is proved. Outside of this law, a debtor may APPENDIX. 209 prefer any of his creditors by conveying his property to them. He may also, at any time before judgment and execution, sell, for a sufficient consideration, property which would otherwise be subject to the claims of his creditors. EXEMPTIONS: Property to the value of two hundred dollars, exclusive of wearing apparel. LIMI- TATIONS : Accounts, notes, and contracts, not under seal, six years ; bonds and other sealed instruments, sixteen years ; judgments, twenty years. LEGAL INTEREST, six per cent. NEW MEXICO. Has a voluntary assignment act. The proceedings are very elaborate. Preferences not allowed ; acceptance of a dividend does not discharge debtor. Those who do not come in lose their dividends. LIMITATIONS : Unwritten contracts, four years. Writ- ten instruments and judgments, seven years. EXEMP- TIONS : Homestead, to the value of one thousand dollars, furniture, and specified articles. LEGAL INTEREST, six per cent. NEW YORK. Has both an assignment and an in- solvent law ; The latter sometimes called the " Two-third Act. " The debtor may make a preferential assignment, under certain limitations and conditions, or he may obtain a discharge from certain classes of his obliga- tions under the insolvent law, without the unanimous consent of his creditors. Acceptance of a dividend under the assignment does not discharge the debtor. Creditors who do not come into the assignment lose their dividends, but retain their claims. EXEMPTIONS : The lot and buildings, not exceeding one thousand dollars in value, owned and occupied by a housekeeper, having a family, and recorded as homestead property ; with furniture and various articles, not exceeding two hun- 14 210 APPENDIX. dred and fifty dollars in value. LIMITATIONS : Actions upon a judgment of a court of record, or a sealed instru- ment, must be brought within twenty years after the cause of action accrued. And upon any other contract, obligation or liability, including a justice's judgment, within six years. LEGAL INTEREST, six per cent. NORTH CAROLINA. Assignments may be made, without preferences. All debts of assignor fall due and are payable on the date of assignment. EXEMPTIONS : Homestead, with buildings, etc., to the value of one thousand dollars, and personal property to the value of five hundred dollars. LIMITATIONS : Three years, on ac- counts and contracts, not under seal ; ten years, on a note under seal. LEGAL INTEREST, six per cent. NORTH DAKOTA. Insolvent debtor may make an assignment for the benefit of his creditors, but without preferences. EXEMPTIONS : Homestead, with dwelling and appurtenances, not exceeding in value five thousand dollars, is exempt, under certain conditions. A part- nership firm or an individual may also, in addition to wearing apparel, etc. , claim as exempt fifteen hundred dollars' worth of other personal property. LIMITATIONS : On judgments, or on sealed instruments, twenty years ; on a contract, obligation, or liability, express or implied, six years. LEGAL INTEREST, seven per cent. OHIO. Has a distinct assignment law, which does not permit preferences. Acceptance of a dividend does not discharge the debtor. Creditors who do not come in receive no dividend. LIMITATIONS : Actions upon a contract not in writing, six years ; upon a sealed in- strument, or an agreement, con tract, or promise in writ- ing, fifteen years ; judgment is dormant if no execu- APPENDIX. 211 tion is issued within five years after its date. An action to revive dormant judgment must be brought within twenty-one years after it becomes dormant. EXEMP- TIONS : To head of a family, homestead, not exceeding one thousand dollars in value, and chattel property. If cot the owner of a homestead personal property to the value of five hundred dollars, in addition to chattel property. LEGAL INTEREST, six per cent. OKLAHOMA TERRITORY. Assignments may be made for the benefit of creditors, without preferences. LIMITATIONS : Accounts and contracts, not in writing, three years ; agreement or contract in writing, five years. EXEMPTIONS : To head of a family, one hundred and sixty acres in one tract, with improvements, if out- side of a town or city. In a city or town, not to exceed one acre. Judgment debtor has a right to select six hundred dollars' worth of property, which shall be ex- empt from any levy. LEGAL INTEREST, seven per cent. OREGON. Assignments must be for the equal benefit of all creditors, without preferences. Debtor is entitled to a discharge, if his estate pays fifty per cent to his creditors. LIMITATIONS : Judgments, ten years. Action upon a contract or liability, express or implied, six years. EXEMPTIONS : Homestead, not exceeding in value fifteen hundred dollars, with chattels. LEGAL INTEREST, eight per cent. PENNSYLVANIA. Insolvent may make a voluntary general assignment for the benefit of his creditors, without preferences. But the debtor can do in other ways what substantially amounts to a preferential as signment, viz., before he makes his general assignment, he may assign part of his property to one or more credit- 212 APPENDIX. ors ; or he may confess judgment, under which the favored creditor may make a levy, and obtain priority. Creditors who do not come into the assignment simply fail to get their share, their claims remain intact. LIMITATIONS : Notes and accounts, six years ; judgments and instruments under seal, twenty years, by presump- tion, but this presumption may be rebutted. EXEMP- TIONS : Things of domestic use, to the value of three hundred dollars. LEGAL INTEREST, six per cent. RHODE ISLAND. Has no distinct assignment or insolvent law, but debtor may make an assignment ; preferences are forbid, except for the wages of labor, performed within six months previous. Judgment by default, or confession, cannot be made to defeat general creditors. Acceptance of a dividend does not discharge the debtor, nor does he obtain such discharge, without the unanimous consent of his creditors. Those who do not come into the assignment lose their share of the dividends. LIMITATIONS: Accounts, six years; simple promissory notes, six years ; sealed instruments and judgments, twenty years. Oral promise, or partial payment, will revive the debt. EXEMPTIONS : There is no homestead exemption. Household furniture and family stores of housekeeper are exempt, to the value of three hundred dollars, with wearing apparel, etc. Debts secured by promissory notes or bills of exchange are also exempt. LEGAL INTEREST, six per cent. SOUTH CAROLINA. There is in this State a law for the relief of persons arrested in civil actions ; undue preferences are forbidden. A discharge releases the insolvent from all suing creditors, and from all other creditors who shall corne in and accept a dividend of the assigned effects. The debt due to a creditor is not APPENDIX. 213 affected if he does not participate in the dividends. LIMITATIONS : Judgments and sealed instruments, twenty years ; other actions, six years. EXEMPTIONS : Family homestead of the head of family, to the value of one thousand dollars, and yearly produce thereof; also to head of family, certain goods and chattels, to the value of five hundred dollars. LEGAL INTEREST, seven per cent. SOUTH DAKOTA. An insolvent debtor may ex- ecute an assignment of property to one or more as- signees, in trust, toward the satisfaction of his credit- ors ; but such assignment shall not be valid, if it contain any trust or condition by which any creditor is to re- ceive a preference over any other creditor. LIMITATIONS : Sealed instruments, twenty years ; judgments, ten years ; notes and contracts, express or implied, six years. EXEMPTIONS: Homestead, with improvements thereon, not exceeding in value five thousand dollars ; domestic goods and chattels specified ; and, to head of family, the right to select seven hundred and fifty dollars' worth of other personal property, under certain conditions. If a single person, three hundred dollars' worth. LEGAL INTEREST, seven per cent. TENNESSEE. Has two general classes of assign- ments, namely : (1) General assignments, which are the creatures of statute, are very technical, and have been practically abandoned. Attempt to prefer creditors renders a general assignment fraudulent. (2) Partial assignments, which may include all of the debtor's prop- erty if it does not profess to do so. In this form of as- signment, preferences may be made. Creditors not included in partial or "special" assignments have no remedy, except by reaching property of the assignor 214 APPENDIX. not included in the instrument, or by having the as- signment set aside, provided, of course, there be grounds for such action. LIMITATIONS : Judgments, ten years. (There are no sealed instruments in Tennessee) . Notes and accounts, six years. EXEMPTIONS: Homestead, to the value of one thousand dollars, and a long list of specified articles. LEGAL INTEREST, six per cent. TEXAS. Has an assignment law, which does not permit preferences ; but these can be made under a deed of trust, which is now the course pursued by in- solvent debtors. Acceptance of a dividend from an estate under assignment discharges debtor if total divi* dends amount to one-third of creditor's claims. Those who do not come into an assignment lose their divi- dends, but preserve their claims. LIMITATIONS: Ac- counts, two years ; notes, four years ; judgments, ten years. EXEMPTIONS: Homestead occupied as a home, or as a place to exercise the calling or business of the head of a family, to the value of five thousand dollars without reference to the value of any improvements thereon ; also, specified goods and chattels. LEGAL IN- TEREST, six per cent. UTAH. No separate, distinct assignment, insolvency, or bankrupt law exists in this Territory ; but the debtor is permitted by law to make an assignment, with prefer- ences ; but he cannot obtain a discharge without the unanimous consent of creditors, who lose their divi- dends, but preserve their claims, if they do not come in. LIMITATIONS: Accounts, two years; notes and written obligations, four years ; judgments of a court of record, five years. EXEMPTIONS : (No property owned by non- residents is exempt.) If the debtor is the head of a family, there is exempt, homestead, valued at one thou- APPENDIX. 215 sand dollars, five hundred additional for wife, and two hundred and fifty for each other member of the family ; besides goods and chattels specified. LEGAL INTEREST, eight per cent. VERMONT. Has insolvency laws, both voluntary and involuntary. Insolvent debtor is not allowed to make preferential assignment. When his assets pay thirty per cent, or by vote of majority in number and amount of his creditors, debtor is discharged. Second discharge, only by payment of fifty per cent, or, by vote of three-fourths in number and amount, of his creditors. Foreign creditors, who do not submit to the jurisdiction of the insolvency court, may recover judg- ment against the debtor, notwithstanding his discharge in insolvency. LIMITATIONS : Accounts and simple promissory notes are barred in six years. Notes signed in presence of an attesting witness, fourteen years. Sealed instruments and judgments, eight years. EX- EMPTIONS : Homestead, to the value of five hundred dol- lars, and products, with specified goods and chattels. LEGAL INTEREST, six per cent. VIRGINIA. Has no separate and distinct assign- ment, insolvency, or bankrupt law. But the debtor can make a preferential assignment. The unanimous con- sent of creditors is required for the discharge of the debtor. Creditors who do not come into the assign- ment lose their dividends, but preserve their claims. LIMITATIONS : Five years on accounts, (except for articles charged in retail stores, which is two years) ; notes and contracts, five years ; sealed instruments, ten years. Judgments ten years (in some cases twenty years). EXEMPTIONS : Householder or head of a family may hold exempt his real and personal property, or either, in- 216 APPENDIX. eluding money or debts due him, to a value not exceed- ing two thousand dollars, to be selected by him, with certain specified articles. Intention to claim such homestead exemption must be declared and recorded. LEGAL INTEREST, six per cent. WASHINGTON. Has an insolvent law. General assignment of a debtor must be for the benefit of all his creditors, in proportion to the amount of their claims, and when the requirements of the law are complied with, the debtor is discharged from further liability. LIMITATIONS : Upon contracts not in writing, three years. Upon judgments, or contracts in writing, six years. EXEMPTIONS : Homestead, with numerous specified articles, and special exemptions. LEGAL IN- TEREST, seven per cent. WEST VIRGINIA. General assignments can be made, without preferences. Unanimous consent of creditors required for debtor's discharge. Acceptance of a dividend from the assignee does not discharge debtor. Creditors who do not come into an assignment do not impair their rights of action, and there is no reason why they should refuse to accept their dividends. LIMITATIONS: Accounts, five years (except articles charged in a store account, which is three years) ; con- tracts under seal, ten years; judgments, ten years. EXEMPTIONS : Homestead, to the value of one thousand dollars, to a husband or parent, if declaration is previ- ously made and recorded ; also to husband, parent, or married woman, personal property to the value of two hundred dollars ; also tools of a mechanic or laborer, to the value of fifty dollars. LEGAL INTEREST, six per cent. APPENDIX. 217 WISCONSIN. Has both an assignment and an in- solvency law. Preferences are not permitted, except for wages earned within six months. Under the insolvent law, all debts are discharged. LIMITATIONS : Accounts, six years ; notes, six years ; sealed instruments, ten years, when the cause of action accrued without the ' State and twenty years when it accrued within the State ; twenty years upon a judgment within the State, and ten years on a judgment recovered out of the State. EXEMPTIONS: Homestead in the country, used for agri- cultural purposes, with dwelling-house thereon, and appurtenances, or, at the option of the owner, land (with dwelling, etc.) not to exceed one-fourth of an acre, in a city or village ; with various other specified exemptions. LEGAL INTEREST, six per cent. WYOMING. Has an assignment law, which is void, if made with a view to preferring a creditor. Accep- tance of a dividend from an estate under assignment discharges the debtor. Creditors who do not come into an assignment lose their dividends, but preserve their rights of subsequent action. LIMITATIONS: Action on any agreement in writing, five years ; on actions on ac- counts, and contracts not in writing, eight years ; on all foreign claims, judgments, or contracts contracted or incurred before the debtor becomes a resident, action shall be commenced within two years after established residence. EXEMPTIONS : Homestead occupied by owner or his family, not exceeding in value fifteen hundred dollars ; household property, owned by the head of a family, to the value of five hundred dollars; other specified exemptions for mechanics, miners, etc. LEGAL INTEREST, eight per cent. A BOOK FOR ALL BUSINESS MEN. THE ART OF SELLING: WITH HINTS ON GOOD BUYING; ALSO CHANGES IN BUSINESS CONDITIONS AND METHODS ; SALESMEN'S COMPENSATION, OPPORTUNITIES, AND PROSPECTS; COM- MERCIAL TRAVELLERS ; RETAIL MERCHANTS AND SALESMEN ; SALESWOMEN ; How TO READ CHARACTER; AND THE MOST IMPORTANT LEGAL PRINCIPLES AND DECISIONS GOVERNING SALES. By FREDERICK B. GODDARD. l-2mo, Flexible Cloth, SO Cents. In this book the author lets the reader into the secrets of the accomplished and successful salesman, illustrates his tact and finesse, and tells how he masters men. But beyond this, the work embraces much information which will be instructive and useful to all classes of business men, discusses fully the characteristic methods of con- ducting business to-day, and makes an interesting application of character-reading to the work of business negotiations. CRITICAL* NOTICES. " 'The Art of Selling ' is much more than an ordinary book. It is ably and faithfully written, and will be cordially welcomed by business men everywhere. Its tone is elevating and its influence will be excellent. We bespeak for it an extensive sale." N. Y. Dry Goods Chronicle. " We doubt if anything better of its kind has ever been published than this little manual of Mr. Goddard. No salesman, whether on the road or behind the counter, can well afford to be without it. Nothing of interest to the subject appears to have been overlooked. To many, this little volume will be worth its weight in gold, and there are none so dull and inefficient but what they can gather from its pages much that will be of value to them, no matter what they may have to sell." Christian at Work. ' ' ' The Art of Selling ' deserves to be regarded as a vade mecum by persons desirous of educating themselves to become successful sales- men or saleswomen. The author's suggestions are copious and to the point." N. Y. Sun. Sent, post-paid, on receipt of the price, by F=\ TENNYSON 114 Fifth Avenue, New York. S BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. THE PENALTY WILL INCREASE TO SO CENTS ON THE FOURTH DAY AND TO $1.OO ON THE SEVENTH DAY OVERDUE. & 5 1954 LU ReTC'D LD JAN 5 1957 19Nov'59CR| 19 ' DEC1213SC LD 21-50m-l,'38 YB 18683 582977 UNIVERSITY OF CALIFORNIA LIBRARY