of 1910. In August the Liver- Financial Chronicle, "and one that pool Cotton Bill of Lading Confer- American banking interests are asked ence Committee, representing the carefully to consider, is that in which Liverpool Cotton Association and the it is urged that the plan, if adopted, banking interests of Europe, submit- may place upon American bankers ted a carefully considered plan buying foreign exchange certain rewhereby a central bureau was to be sponsibilities which cannot now be established in New York for the pur- defined, arising from a possible lack pose of verifying the genuineness of of diligence in having bills of lading all through bills of lading. This cen- promptly verified, and which, in actral bureau was opened in New York ceptance of bills, against a forged on Sept. 1, and was subsequently bill of lading, might lead to litigaapproved by the Committee on Bills tion and contention. Some contend of Lading of the American Bankers that the plan submitted by the forAssociation, which reported that the eign interests is in reality a guarBureau should at least be accorded anty scheme which conservative a fair trial. banking interests of this country Opposition to the Plan. Although frowned upon when the question was the Bureau is now in operation, oppo- first broached in this shape." Acsition has by no means ceased. While cording to reports on Sept. 23, 1911, some important cotton-carrying rail- Southern banking and cotton interroads have consented to sign the ests, assembled in a conference at agreement prepared by the Liverpool New Orleans called by the New OrCommittee, it is reported that the leans Cotton Exchange, "have indileading exchange buyers of New cated their intention to oppose the York have refused to recognize the plan not only by refusing to comply Bureau or agree to the plan. The with its requirements, but by organchief opposition directed against the izing among their several constituplan, however, came from the New encies a militant resistance to the Orleans Cotton Exchange, the New proposed reflection upon the honor Orleans Clearing House Association, of the southern cotton merchants and the Galveston Cotton Exchange. and upon the rights of the southern Many objections were advanced by cotton trade." (See also XIV, these Associations, but the strongest Banking, and XXV, Trade, Transobjection of all, as reported by the portation, and Communication.)

GOVERNMENT CONTROL OF COMBINATIONS

nite Sherman Anti-trust Law. Much of the uncertainty in the business conditions of the past two years has been attributed to these cases and the managers of our so-called trusts have hoped that these epochmaking decisions would define the limits to which capital can combine, and the legal basis on which their business can be operated. (See also IV, American History; and VII, Law and Jurisprudence.)

Dissolution of Trusts.-By far the binations of capital. The decisions most important event of 1911 affect-referred to have been anxiously ing the large corporate interests of awaited by the business comthe country, unless it proves to be munity, as affording a definite inthe refusal of the Interstate Com- terpretation of the hitherto indefimerce Commission to permit the railroads to apply a general increase in freight rates, has been the series of court decisions compelling (or relating to) the dissolution of the Standard Oil and American Tobacco Companies. Not only are these two large concerns vitally affected, but other corporations, like the International Harvester Company, have, in view of these decisions, proposed plans of reorganization for the approval of the Attorney-General of the United The Standard Oil Decision.-On States, and only recently the govern- May 15, 1911, the United States Sument brought suit for the dissolution preme Court rendered the first of the of the United States Steel Corpora- two so-called trust cases. It upheld tion, the largest of all the com- the decree of the Circuit Court of

Appeals providing for the dissolution tion was ordered, and the company of the Standard Oil Company of New was given eight months' time in Jersey, on the grounds that it is a which to effect it, permission being combination in restraint of trade in given to the company, however, to violation of the Sherman Act, and, work out a plan of reorganization, also, that its methods show it to be a under the immediate supervision of monopoly in restraint of trade in the Circuit Court of the Second New violation of the same act. The de- York District, whereby there may be cision, which was read by Chief Jus- created "out of the elements now tice White, and concurred in by all comprising it a new condition which the other judges, except Justice Har- shall be honestly in harmony with lan, who disagreed with that portion and not repugnant to the law." The of the decision relating to the con- main conclusions in the decision are struction of law, makes a distinction the following:* between "reasonable" and "unreasonable" restraint, and holds that the Sherman Anti-Trust Act should be so construed as to restrict its application to such acts as constitute an "undue" restraint of trade. The company was given six months' time to discontinue business, and was expressly forbidden to maintain its control over the production and transportation of petroleum and its products in interstate business, or over the subsidiary companies, by any trusteeship or other device.

The shares of the subsidiary companies will be distributed on a pro rata basis to the stockholders of the Standard Oil Co. of record Sept. 1, 1911. It is reported that there will be 35 separate companies. This will involve, according to reports, the distribution of 220,000 certificates representing 33 subsidiaries, on the basis of about 6,000 certificates of the parent company. All the separate companies will have separate officers and boards of directors, and will operate their business as independent lines. According to the Babson "Stock Records," it is believed that the possible results will be: "Competition will be more pronounced; markets for petroleum and by-products will be erratic; independent companies will apparently compete where formerly it was restraint of trade; and the conduct of Standard Oil will be more expensive."

The American Tobacco Decision. The final decision in the case of the American Tobacco Co. was rendered by the United States Supreme Court on May 29, 1911, and, as in the pre ceding case, the company was held to have violated the first two sections of the Sherman Act. Dissolu

1. That the combination in and of itself as well as each and all of the elements composing it, whether corporate or individual, whether considered collectively or separately, be decreed to be in restraint of trade and an attempt to monopolize and a monopolization within

the first and second sections of the

Anti-Trust Act.

2. That the court below, in order to

give effective force to our decree in this
regard, be directed to hear the parties,
by evidence or otherwise, as it may be
deemed proper, for the purpose of ascer-

taining and determining upon some plan
or method of dissolving the combina-
tion and of recreating out of the ele-
new condi-
ments now composing it a
with and not repugnant to the law.
tion which shall be honestly in harmony

3. That for the accomplishment of these purposes, taking into view the difficulty of the situation, a period of six months is allowed from the receipt of our mandate, with leave, however, in the event, in the judgment of the court below, the necessities of the situation require, to extend such period to a further time not to exceed sixty days.

4. That, in the event before the expiration of the period thus fixed a condition of disintegration in harmony with the law is not brought about, either as the consequences of the action of the court in determining an issue on the subject or in accepting a plan agreed upon, it shall be the duty of the court, either by way of an injunction restraining the movement of the products of the combination in the channels of interstate or foreign commerce, or by the appointment of a receiver, to give effect to the requirements of the statute.

In accordance with the permission granted, the company submitted a plan of reorganization which was vigorously opposed by independent

* See Babson's "Daily Stock Records."

interests and to which Attorney-General Wickersham, although concurring in the main, offered certain objections. The independent interests objected chiefly on the ground that the control of the new companies would, under the plan proposed, remain with the majority of voting stockholders of the American Tobacco Co., and contended, as stated in the petition to the court, that:

Business will be so divided that no company will have substantially over 40 per cent. in volume or value of any particular line.

As to the United Cigars Stores Co., it

is held that the Court has no power to seize its property.

There still remains the possibility of an appeal of this approval of the reorganization plan to the United States Supreme Court. This question, however, as stated on the bulletin card of the Babson System "will rest with the Attorney-General, as the government is the only party to pendent again. Unless this is done, and effectual safeguards provided to create the suit aside from the defendants, and permanently maintain such real who are not expected to object to separation and independence, conditions the minor changes specified by the may be made much worse in the future court."

Any plan of reorganization should be such as to make all of those companies that were once independent really inde

than they have been in the past for a U. S. Steel Corporation Suit.-The really independent organization, and it last important action taken by the may be impossible to continue in

business for any considerable period of

time.

Your petitioners cannot see how they or any other independent manufacturer of, or dealer in tobacco, can be in any way protected while one great corpora tion holds and controls $170,000,000 of assets, or why the American Tobacco Co. should not dispose of its legitimate holdings, pay off its obligations according to their priorities, and divide among its stockholders what is left.

The United States Circuit Court, however, on Nov. 8th, did not uphold the contentions of those who protested against the plan, and with certain modifications approved the plan. As summarized by the Journal of Commerce, the chief points made by the Court are as follows:

That the 29 individual defendants

shall not increase their holdings of

stock during the next three years.

That the Court will not prohibit the fourteen new companies when organized from adopting methods of business open to their many competitors.

That none of the fourteen corpora

tions shall during a period of five years acquire any stock in any of the other corporations or purchase or acquire their property or business.

Government, in its efforts to enforce
the Sherman act against large com-
binations, is the suit for the dissolu-
tion of the United States Steel Cor-
poration, filed in the Circuit Court
at Trenton, N. J., on Oct. 26, 1911.
Many prominent individuals, con-
nected with the formation of the
company, and a large number of cor-
porations are named as defendants.
The suit was long expected, especial-
ly in view of the Congressional in-
vestigation of the corporation, and
an exhaustive investigation by the
Bureau of Corporations.
and
pany

The com

its subsidiaries, it is charged in the petition, are maintaining or attempting to maintain a monopoly in the steel business. That the interests in the corporation were well aware of the government's action is generally believed, especially in view of the corporation's decision to cancel the Hill ore lease and reduce freight rates on iron ore on certain controlled lines with a view, it is believed, to rid itself of those objectionable features, which might be construed as a violation of the antitrust act.

It may also be stated here that the United States Supreme Court has That none of these corporations shall sustained the validity of the federal make any loans, or otherwise extend corporation tax which was attached credit to any of the other corporations. to and passed with the tariff law of The Court disapproves Attorney-General Wickersham's proposition that the 1909, and which is really a corporamatter of the disintegration be kept tion income tax. (See XIV, Public open for five years. Finance.)

XIV. PUBLIC FINANCE, BANKING, AND INSURANCE

PUBLIC FINANCE

HENRY B. GARDNER

appropriations, which are independ- cent. would have been admitted free, ent of the annual appropriation bills) and the duty reduced on 19.45 per showed a decrease as compared with cent. The United States would have the preceding year, the amount of remitted $4,849,933 of the $5,649,the decrease being about $20,000,000. 826 duties collected on Canadian This experience was repeated in the products, and Canada would have reappropriations for the fiscal year mitted $2,560,579 of the $7,776,236 1912 which, calculated on the same collected on American products. basis, amount to $589,814,624, about $5,000,000 less than the appropriations for 1911.

The rates contained in the agreement were embodied in a bill, introduced in the House, providing_that they should be applicable to Canadian products when the President should make proclamation that rates not in excess of those contained in the bill are applied by Canada to

The Tariff. While little was accomplished during 1911 in the way of tariff legislation a considerable portion of the time of the House during the regular session, and practically the whole time of both House and the products of the United States. Senate during the special session, was taken up by the discussion of this question. (For history of tariff legislation, see IV, Reciprocity and The Tariff.)

The proposed reciprocity agreement with Canada (see also V, International Relations) granted concessions to Canada by placing on the free list agricultural products, fish, timber, sawed lumber, wood pulp, paper and paper board worth not over four cents a pound, the concession in regard to wood pulp, paper and paper board being subject to the condition that no restrictions be placed on the exportation of these articles, or of the wood from which they are made. A considerable re

An exception was made in the case of wood pulp, paper and paper board, which, subject to the condition noted above, were placed on the free list when imported from Canada, regardless of the acceptance by that country of the rates provided for in the bill. This bill became law at the special session of Congress, but owing to the failure of Canada to take action, its provisions, with the exception of those dealing with wood pulp, paper and paper board, remain inoperative. The reciprocity feature being lacking, the question now arises whether other nations enjoying the most favored nation clause may not claim the same privilege for their wood pulp, paper and paper board that is granted to Canada.

duction was also made in the duties levied by the United States on Bills were also passed at the spealuminium, laths, shingles, planed cial session of Congress placing on lumber and iron ore. The most im- the free list agricultural implements, portant concessions to the United cotton bagging, cotton ties, leather, States were the placing on the free boots, shoes, fence wire, meats, prelist of cottonseed oil, tin plate, and pared cereals, flour, biscuit, timber, steel wire, and moderate reductions lumber, shingles, laths, sewing maof the Canadian rates on a variety chines and salt, and making extenof manufactured products, including sive reductions in the duties on wool meats (fresh, salted and canned), and woolens, manufactures of cotton, lard, canned vegetables, flour, meal, malt, confectionery, cutlery, watches, clocks, automobiles, agricultural machinery, and on cement and bituminous coal.

Of the dutiable imports into the United States from Canada during the year 1910, 76.4 per cent. would have been admitted free under the agreement, and the duty could have been reduced on 14.44 per cent., while of the dutiable imports into Canada from the United States 16.51 per

iron and steel products, and chemicals. The bill dealing with wool and woolens placed an ad valorem duty of 29 per cent. on wool, and duties, estimated to average 49 per cent. on manufactures of wool, as compared with duties amounting to 44.31 per cent. and 90.1 per cent. on wool and its manufactures, respectively, collected, under the existing law, in 1910. On manufactures of cotton the proposed reduction was from the equivalent of 48.12 per cent., collected