Probably it is a fair generalization to say that, with the exception of the very largest corporations which are limited for the rea son just given, any corporation has at least several entirely independent and competi tive banking houses to which it may appeal for financial support. The business of financ ing our medium-sized corporations is an open field and no favors. Our smaller indus trial enterprises find difficulty in getting capital on account of their very smallness. A banking house must do a large amount of work in making a corporation well enough known to capitalists for them even to give consideration to its securities. It takes even more work to make the small corporation known than the large one. The large cor poration has already advertised itself. It is impracticable to build up a course of deal ings in the securities of small corporations which will give them the valuable element of marketability. With all the work involved the possible profits in providing $100,000 of capital for a small corporation will not com pensate a banking house for its preliminary labor: especially if the banking house is or ganized to handle issues of a larger size.
Banking houses have overcome much of the difficulty of financing small corporations in the case of public service enterprises. Be cause of the more nearly uniform nature of the business the bankers do not have to do as much "educating" of the capitalist. He knows the general nature of the business and the kind of risks involved. Each industrial enterprise is more nearly a law unto itself. Banking houses have developed some spe cial methods of financing the public service corporations. The holding company and the engineer bankers operating a series of prop erties all help in the financing of the rela tively small public service corporation. So the small public utility gets financed and the small industrial enterprise goes begging.
We have wandered somewhat away from the matter of the accusations of the existence of a money trust. Some of the accusations doubtless originate with those in control of enterprises, either under way or in the course of promotion, who have had no experience with the demands of capitalists. Many peo ple of this kind come to the "street" to raise capital and do not succeed. They charge their failure to the money trust, which for some reason does not wish them to succeed. As a matter of fact their proposals are prob ably of a kind no banking house could han dle. Many come with promotion projects and these, however meritorious, do not interest most banking houses. Some actually are meritorious yet, because they are in the pro motion stage, cannot get a hearing. Many are not meritorious, yet the promoter feels confident of his judgment and charges up to the malevolence of the money trust a failure which results from the class of his business and its demerits within that class.
Managers of going concerns, who have not had occasion before to appeal to the banking houses, come to the street with proposals impossible of acceptance. Until they are educated in the requirements of the bankers, — which means, in the last analysis, the re quirements of capitalists who will ultimately advance the funds, — these managers will blame the money trust for the non-acceptance of their proposals. The most important and
the most general reason for the inability of many of these corporation managers to get funds is the simple fact that there is not money enough to go round.
For every dollar of capital in existence a multitude of people are seeking a dollar to further their interests. The demand for capital is unlimited, provided the terms are not too unfavorable, and the supply of capi tal is strictly limited on any terms what ever. An insistence that the risk be not too great is most likely to be that part of the terms which the seeker for capital cannot meet. Out of a hundred people seeking capi tal the capitalist will supply it to that one who will offer the most favorable terms, the best bargain in risk, income, and control. The investment banker acts for the capital ist, and will commit himself to that enter prise which he believes most likely, under existing conditions, to meet with the favor of the capitalist, in view of other opportuni ties for commitment which other banking houses are offering. The man who comes to the street for funds, however, does not see the pressure of all the other enterprises seek ing capital. If he did see the pressure, he probably would consider the enterprises all inferior to his own. He even regards those enterprises which are financed as inferior to the one dear to him. His preference for his own is natural. But it leaves him with no reason for the banker's rejection but the machinations of the money trust.
Some get confirmed in their impression of monopoly by certain aspects of the ethics of the investment banking business, which are unfamiliar to them. It is a general prin ciple of investment bankers to decline to consider a proposal for financing while it is before another house. As soon as one house rejects it, then another house feels free to take it up. This aspect of the business has something in it of the ethics of the lawyer and the physician, in refusing to take away the client or patient of another member of the profession. It does not, however, have the full foundation of injury to the client's interests and to professional reputation ex isting in the case of the lawyer and phy sician. Besides this matter of professional feeling, a banking house does not want to spend its time considering a piece of busi ness which, before it can arrive at a conclu sion, may be taken care of elsewhere. The ethics of the situation serves to protect the banker's time. To be sure, it equally serves to cause delay to the man seeking capital. But in determining which one is to occupy the better position in this respect, the banker has the advantage in the number of enterprises which are constantly pressed upon his atten tion. Besides, the existing disposition of the situation settles it the right way in the end. If several people are considering a piece of business at the same time, all but one of them are bound to do their work fruitlessly. Though the limitation to one at a time delays the seeker for capital, it greatly lessens the amount of useless work in the world.