could only own stock in another corporation engaged in a similar business, or a business useful or subsidiary, or in a corporation (New York) with which it was legally entitled to consolidate; but the tendency of recent legislation is precisely opposite on this point, forbidding stockholding by all corporations in similar or competing companies, or more specifically forbidding stockholding in similar or competing companies, as well as stockholding by railroads in railroad companies.

[Footnote 1:  See below, chap. 16.]

[Footnote 2:  MacLeod, p. 203.]

The practice of permitting the free holding of stock by corporations, and especially by holding corporations, has been undoubtedly harmful to the public, and to the public morals, and has been the main cause making possible the speedy acquisition of immense private fortunes.  The stockholding trust or the device by which (as in the Rock Island Railway system) a corporation is created for the purpose of holding half the stock of the real corporation and then possibly a third corporation, still to hold half the stock in the second, each of them parting with the other half, obviously makes possible the control of immense properties by persons having a comparatively small real interest.  It is a mere arithmetical proposition, for instance, in the case mentioned, that whereas in one corporation it takes one-half of the stock to control it, the first holding company will enable it to be controlled by one-fourth and the second by one-eighth of the original stock.  Legislation should properly be much more drastic on this point; but indeed our whole corporation legislation seems rather to have been drawn by able lawyers with a view of protecting the corporation or the person who profits by the abuse thereof, than with a real desire to apply intelligent and practicable remedies to the situation.  Thus, until very recently, if now, there has been no legislation along this great line of preventing the holding and governing of corporations by such a system of Chinese boxes; nor has there been up to date any legislation whatever along the other great line of excluding objectionable corporations from doing business in the State, which any State has, except as to interstate commerce corporations, the unquestioned right to do.  This right will, of course, disappear entirely if the recommendation of the present administration for a general Federal corporation law be adopted.  The invention of the corporate share enables a clever few to control the many; a small minority to control the vast bulk of the real interest of all property in the country; the problem has obviously proved too great for popular intelligence, for so far little real legislation in the people’s interest has been effected.  Like most ancient popular prejudices, however, the blind instinct against corporations, common among our Populists, has a strong historical basis; it comes directly down from the prejudice against Mortmain, the dead hand, and from that against the Roman law; for corporations were unknown to the common law, and legislation against Mortmain dates from Magna Charta itself.[1]