machine upon a machine, one fictitious person within another. And the process may even be repeated indefinitely, one-half the trusted stock being sold, i.e., the certificates for it, and a new trust created of the other half, plus one share to ensure a majority; so that, as long as the public continue to accept these trust certificates for stock, we may, by a sort of system of Chinese boxes, one within the other, see finally the absolute control of a corporation vested in a sixteenth or a thirty-second interest in its actual capital. And the peculiar profit to the insiders in these is, that they require little expenditure of money to give enormous power. For the so-called trust-certificates, which carry no voting power, may be sold in the exchanges as readily as the stock they represent; and the trustees having sold half the company’s actual stock, and trust-certificates representing the other half, have got back all their money, and are left with half the stock of the original corporation to ensure their own control, besides being parties-trustees to an irrevocable trust-deed.
The consideration of this subject falls naturally into two branches: first, the relation of such trusts to public policy, and herewith of their legality and probable future treatment by courts and legislatures; second, the effect of them upon persons or parties entering into them, and herewith of their general advisability and safety to the persons concerned.
The objection that such trusts tend to create a monopoly applies equally to both classes,—the simple and the corporate trust. But this, until the legislatures have made enactments to that effect, and except, perhaps, in those States which have constitutional provisions forbidding monopolies, must be deemed a merely sentimental objection. The following States and one territory, as I have noted in my book on American Statute Law, section 404, have such a constitutional provision: Maryland, North Carolina, Tennessee, Arkansas, Texas, New Mexico. It might also be urged against both classes of trusts that they may be void as creating a perpetuity. On careful consideration, however, it does not appear that this is the case. For, in the first place, no such perpetuity could be created where, as is usually the case, the trustees or managers of the trust have full power to convey all or any part of the property put in the trust; and, in the second place, the better