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preferred stock, and notes. So that, when And second, because they demonstrate so the road went into the hands of receivers clearly that the investor can obtain nothing because of certain legal difficulties, the first like real protection in the long run unless he mortgage bondholders felt well protected. diversifies his holding of securities in such a It became necessary, however, for them to way and to such an extent that, if any one form a protective committee to protest or more goes wrong, he can depend upon against the issuance of receivers' certificates the others. to such an amount that the actual equity In studying the various phases of the for the first mortgage seemed in great dan- principle of diversification, the man who ger of being largely decreased, and the real referred to the foregoing cases as demonsecurity of the bonds seriously impaired. strating the necessity for its practical Two years had been spent by the protective application had turned eventually to the committee in trying to defeat the action of field of mortgage investment. Continuing the junior security holders, and although it the story of his experiences, he said his had met with at least temporary success in interest in that type of securities had first procuring payment of past-due interest, the been aroused through having noticed the bondholders had had to pay out of their statement repeatedly made by certain own pockets an assessment for the com- houses in the farm mortgage business that mittee's services, and the market price of no investor had ever suffered loss on any of the bonds had become greatly depressed their offerings. It seemed likely, moreover, that the diffi- In the light of his experience up to that culty might come up again at any moment. time, he said, such a statement had at first

For the fourth illustration, the investor appeared so surprising as to lead him to distook the case of a drainage district bond. credit the houses making it. But he had This was one of an issue authorized by found upon investigation that there were a statute in one of the Middle Western states, good many that could rightly lay claim to and the protection for the bondholders had such a record—and for a reason which he been vouched for by eminent counsel. But ventured to say was, perhaps, not fully it had been discovered later that there was appreciated. He explained, for example, a flaw in that part of the statute making that he had discovered this was not beprovision for the taxing power, and the bond cause farm mortgages did not go wrong in had defaulted and had been finally repudi- some cases, just as other investments; but ated by the district, not at all because of any rather because the unit of the farm mortdeficiency in intrinsic security but merely gage was so small on the average that in because of the legal technicality.

cases of trouble the responsible houses were

able to step in and themselves assume the It must, of course, be emphasized, as this “nursing” with little or no risk of loss. investor was careful to point out, that such The result was, as he had observed it, cases as these are much too isolated to be that investors who were clients of such weighty considerations in connection with houses were usually relieved of any mortthe average bond offering. But they have gages that happened to default, and were an abundance of genuine significance for not as a rule subjected to the experience of two reasons: First, because they illustrate having actually to deal with embarrassed or very concretely the kind of hidden dangers procrastinating debtors. for which the strong, conservative banking It is undoubtedly due to the growing houses make it their business to hunt with appreciation of this fact that mortgages are skill and patience before offering their being included nowadays so much more securities to the public, and against which often than formerly in almost every comthey succeed, fortunately, in guarding their bination of securities by individual inclients with a degree of effectiveness difficult vestors who seek, as they should, to carry to appreciate, even in the light of the vast out the idea of distribution of risks to its extent of their investment transactions. most effective limits.

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THE NAVY DEPARTMENT THE NHE WORLD's Work publishes each month one or more editorial articles about the

activities of the Federal Government. These articles are written by a member of the editorial staff in Wasbington who keeps in close and constant touch with the men and measures of which he writes.

The Washington Office (in the Munsey Building) will also answer readers' questions about the work of any department of the Government.


HE Navy Department is or- Admiral Blue, who heads the Bureau of ganized on a system of checks Navigation, has a good deal more under his and balances. Before Secre- charge than would appear from his title. tary Meyer's time--that is, up For example, he looks after the upkeep and

to 1909—the department con- operation of the Naval Academy at Ansisted of eight bureaus of equal precedence, napolis and the Naval War College at the only coördinating head being the Secre- Newport; enlistments, assignments to duty, tary. In making decisions the latter was and discharge of all enlisted persons; and often unable to discriminate between good the operation of the radio service and the and bad advice, while at the same time naval militia. If an officer wants to go on unable himself to initiate constructive tech- leave he has to make application therefor nical measures which concern the Navy as a through the Bureau of Navigation, and whole. Since no bureau is charged with every officer in the service gets the orders responsibility for the efficiency of the of the Secretary through the same source. whole department none, accordingly, had The Bureau of Supplies and Accounts a comprehensive vision, and the tendency corresponds to the Quartermaster Corps was to build up eight small, semi- in the Army, and Paymaster-General independent Navy Departments, all re- Samuel McGowan is the General Aleshire garding each other apprehensively when of the Navy, having under his charge the not actually at loggerheads.

purchase, storage, and issue of all supplies Until the incoming of the present Ad- for the naval establishment. The other ministration there had been eight of these bureaus make requisitions, but General semi-independent little kingdoms, but now McGowan does most of the buying. that the Bureau of Equipment has been Under Secretary Daniels the department done away with seven remain, with self- has recently been reorganized so as to do evident jurisdictions as follows: Yards and away with the four divisions. And with Docks, Navigation, Ordnance, Construction the divisions have passed away Mr. and Repair, Steam Engineering, Supplies Meyer's four “Aides," although a portion of and Accounts, and Medicine and Surgery. the former duties of the Aides for personnel

The chiefs of these bureaus are free to and material is still perpetuated in the issue orders concerning the work in their offices of the two captains serving under separate spheres provided only such work Admiral Benson, the Chief of Operais not of a character to “alter the military tions. characteristics of any ship.” When such This is more than a change in termincharacteristics are affected the matter must ology: it is a change in system. All the be referred to the recently created Chief bureaus are now directly under the Secreof Operations and by him brought to the tary or Acting Secretary in all matters attention of the Secretary.

pertaining to their respective bureau

activities. But when it comes to a ques- Overlapping as it now does upon the tion affecting the typical material, the proper functions of the Naval War College character of ships, or any matters affecting and the administrative capacity of the the strategic disposition or use of the Fleet, Division of Operations, it is not a necessary in whole or in part, then the single remain- body. Serving upon it are three of the ing division, that of Operations, reëstab- ablest officers in our service, all of them lished on an entirely new basis by an act War College men, Captains Oliver, W. L. of the last Congress, takes a directing and Rodgers, and Knapp. coördinating hand in the proceedings. The same character of service which

The creation of the Division of Opera- affects the Departments of State and of tions "under the Chief of Naval Opera- War also pervades the adjoining corridors tions" constitutes the nearest approach of the Navy Department. All three are the Navy has ever reached to its much- keyed to the same slow movement. If the desired General Staff. Admiral Benson Chief of Operations or the Assistant Secis charged with responsibility for the effi- retary, keen on his day's work, stays over ciency of the Fleet and, acting in conjunc- until after four-thirty in the afternoon or

ion with the General Board, with the arrives before nine-fifteen in the morning, preparation of plans for its use. Next he cannot get anything done outside of his after Assistant Secretary Roosevelt, he is own office. Similarly between one and also clothed with administrative authority; two o'clock, no matter what is going on in when Mr. Daniels and his assistant are the world the machinery of Departmental both away, Admiral Benson becomes Act- Government shuts down for lunch. When ing Secretary, this succession in office some energetic chief tries to keep his civmaking him senior to all bureau chiefs and ilian employees overtime, they promptly providing the way, for the first time, for ask for transfer to another department. a coördinating authority with professional This has actually happened several times, knowledge and training, who is practically to the extent that it is difficult, at a critialone responsible to the Secretary for the cal period for the Navy Department to efficiency of the Navy as a whole.

keep its employees on the job in response Secretary Daniels has interpreted the to an emergency. act of Congress creating the Board of Lately, responding perhaps to the greatly Operations very liberally. Instead of plac- increased efficiency of the Naval War Coling restrictions upon its chief, which he lege at Newport, the General Board has might very well have done, he has vested been bestirring itself. Within the last six him with many duties and responsibilities months, that is, since the appointment of not specifically mentioned by Congress, but the Chief of Operations, the reanimated which are highly desirable for him to have. Board has sent a confidential letter to every For example, the duties of the former bureau in the department, stating in effect Aide for Material, who directed the Bureaus and in detail something like this: "In case of Ordnance, Construction and Repair, of war with nation X --you would have Steam Engineering, and Yards and Docks, to do thus and so -: provide definite have been transferred to the Chief of supplies, accomplish definite results in a Naval Operations.

definite time and at a specific place." And,

the case being thus stated, each bureau THE GENERAL BOARD

was called on to report back whether or Superimposed on this present system of not it could make good on this order and if bureaus, Division of Operations, and not, just wherein it specifically fell short of Secretaryship, is the General Board, com- the performance expected of it. The anposed, by regulation, of the Admiral of the swers promptly provided by each bureau Navy, the Chief of Operations, the Direc- to the General Board, now in the Secretor of Naval Intelligence, the president of tary's hands, form the basis of his recomthe Naval War College, and “such addi- mendations to Congress. tional officers as the Secretary of the Navy Another departmental device for the may designate."

direction of the Navy begun in this Administration is the Advisory Council, a body of to get the same kind of formal and uncomabout a dozen men which meets with the promising reception as his written replies, Secretary once a week and is intended merely following precedent, seemed to give thus to bring together regularly, on an equal to the average Congressional letter. When and informal footing, the Chief of Oper- Mr. Daniels goes up to the Capitol he gets ations, representing the General Board, a warm hand and an open-minded hearing the Assistant Secretary, the seven bureau and unquestionably his democratic methchiefs, the commanding officer of the ods, whatever they may lack in dignity, Marine Corps (now for the first time have produced results. He has got more recognized in general Navy direction), and money out of Congress than either of his the Judge-Advocate-General.

two immediate predecessors did and he has This potentially very useful body is in- succeed in getting through Congress more tended to accomplish weekly the following constructive legislation than they. things: To advise the Secretary; to outline In the old days before Secretary Meyer's officially and unofficially to the various time the Assistant Secretary had a definite heads of divisions the policy of the Govern- sphere of usefulness. He looked after the ment; to serve as an opportunity for the Marine Corps, the Naval Militia, and the airing of all differences of opinion and Navy Yard, and was generally expected conflicting interests in the service.

to keep his hands off everything else. Unquestionably Mr. Daniels has ac- Mr. Daniels and his assistant conceived complished much in popularizing the the latter's job differently. The Assistant Navy. Just recently he stopped the regu- Secretary now is literally an Assistant lar autumn manœuvres off the Virginia Secretary, capable of acting in his chief's capes to bring eight or nine vessels of the absence. Mr. Roosevelt's big job is in necessary light draught of less than 22 feet keeping advised of all the various activities up the Potomac for the Grand Army re- of the department with the exception of union at Washington during the last week the matter of personnel. All considerof September. In August, while the ations under the latter head, in conformity North Atlantic fleet was at target practice with long established usage in the service, off Newport, the Secretary, hearing that a go directly to the Secretary or await his conference of governors from many states home-coming. was being held in Boston, called off the One of the practical changes in the shooting while he dispatched the entire present administration of the department Fleet, destroyers and all, around the Cape to has been the matter of bidding on Navy show it to these important personages. contracts. The number of bidders, for

The Secretary, by his own peculiar example, has increased 26 per cent., during methods, has also accomplished another 1915, and the prices of naval commodities result of a more obviously useful character. have decreased during the same time on an Previous Secretaries addressed letters to average of 4 or 5 per cent. Navy contracts Senators and Congressmen beginning “Sir:” have always been let by competition, but and wound up a stratified, formal letter a great deal of bad business has been done with “Whitney,” or “Long,” or “Meyer," in recent years in following out the custom, as the case might be, "Secretary of the sometimes justified on the basis of speed, Navy.” Mr. Daniels and Mr. Roosevelt of letting contracts over the telephone. begin: “My dear Senator,” and, using the new system requiring public adverthe first person all through a cordial docu- tisement is slower but it saves a lot of ment, wind up with, “Very sincerely money, and at the same time avoids the yours, Josephus Daniels,” or “Franklin piling up of dead stock due to occasional D. Roosevelt."

contracts let in excess of demand. During And as a result of this affability Mr. the last two years the value of dead Daniels has made himself persona grata stock in the Government Navy Yards at the other end of Pennsylvania Avenue. has been decreased, by sale or adaptabilWhen Mr. Meyer went up to the Capitol, as ity to other use, from $15,000,000 to he very often had to do, he was very apt $5,000,000.








HE most important duty con- chairmanship of the House Committee on fronting Congress, at the Military Affairs the very person who has forthcoming session, will be most distinguished himself as an opponent the reorganization of our mili- of military preparedness. Mr. William J.

tary and naval defenses. This Bryan as commander-in-chief of our Army popular demand has reached a point where and Miss Jane Addams as admiral of the it has become almost a political issue. Navy would be no more absurd than Mr. What will be the attitude of the Demo- James Hay has been as the Congressional cratic majority on the matter of military custodian of our military interest. Conpreparedness? That Congress has ne- gressman Hay, who comes from Virginia, glected our Army and Navy chiefly in the has fought the Army almost from the first search for pensions, river and harbor bills, day he arrived at Washington. Mr. Hay public buildings, and other miscellaneous was a member of Congress during the forms of “pork” is now generally under- Spanish War, and thus had excellent opporstood; has the trend of public opinion tunities to observe the penalties of military during the last few months, and especially unpreparedness. This experience, howthe international crisis in which we find ever, taught him nothing. In 1899, as a ourselves, produced any change of heart? result of that lesson, a bill was introduced

Four men at Washington—two in the increasing the standing Army from 25,000 House and two in the Senate-assume a to 100,000 men. Mr. Hay led the opposinational importance in this connection. tion to this bill.

tion to this bill. “A more vicious piece The chairmen of the military affairs and of legislation," he said, referring to the naval committees more than any other proposed increase, “was never introduced men can facilitate or impede progress in into this House. It inaugurates a policy this direction. Mr. James Hay, of Vir- which will bring everlasting shame and ruin ginia, chairman of the House Military upon this great Republic.” It was proAffairs Committee, Mr. Lemuel P. Padgett, posed, he said, merely as a protection to the chairman of the Naval Committee, and corporate interests of the country-a Messrs. George E. Chamberlain and scheme to put down exhibitions of the Benjamin R. Tillman, who occupy the popular will, "to desecrate the ballot boxes corresponding positions in the Senate, are and suppress liberty of speech and liberty the men to whom the Nation looks for of action among American citizens.” That military and naval reforms.

was sixteen years ago; the modest increase Unfortunately, those who, as chairmen in our Army became the law and, for all the of committees, have been intrusted with Virginian Congressman's direful prophecies, this responsibility, too frequently have little the Republic still endures. He fought inenthusiasm for it. Only the peculiarities creasing the Army from 25,000 to its of American politics could elevate to the present strength-actually about 80,000; in

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