to acquire a bare majority of the stock of each corporation, say $5,100,000 in the aggregate.  They dispose of 49 per cent. of the holding company’s stock to the public, retaining a working majority.  At one step they have secured absolute control of a $10,000,000 industry with an investment of little more than one-quarter of that amount, and by pursuing the same process further they can reduce the investment necessary for controlling the industry almost to the vanishing point.

[Footnote 1:  Laws of New Jersey of 1913, chaps. 13-19.]

It is needless to enlarge on the possible abuses of the holding-company device.  They are coming to light more and more.  The remedy, however, is not so simple as it seems at first blush.  A summary abolition of the holding-company device would result in great injury and hardship to industry.  In the present condition of the corporation laws of certain of the states, the right of large corporations to operate through local subsidiary corporations is a practical necessity.  Otherwise they would be subjected to well-nigh intolerable exactions and interference.  It has been the policy in some states in dealing with foreign corporations to attempt to impose, under the guise of fees for the privilege of doing business in the state, a tax on all their property and business wherever situated.  Some of the attempts have been nullified by the Supreme Court as violative of the prohibition of the Fourteenth Amendment against taking property without due process of law, but these decisions have not wholly remedied the evil or checked the ingenuity of state legislators.  In some jurisdictions great corporations seem to be regarded as fair game for which there is no closed season.

Right here the scheme of federal incorporation brought forward during President Taft’s administration has many attractions to offer.  It would do away with the principal excuse for the holding-company device, and pave the way for its abolition.  It should satisfy the general public because it would clothe the Government with enormously increased powers of regulation and control; it should be attractive to the corporations because it would afford relief from many of the intolerable restrictions, not always fair or intelligent, imposed by state legislatures.  Under present conditions the right of a corporation of one state to do business in another (other than business of an interstate character) rests merely upon comity and may be granted or refused upon such terms as interest or prejudice may dictate.  The right of a federal corporation to do business in the several states, on the other hand, rests upon the powers conferred on Congress by the Constitution and is not subject to the whims of state lawmakers.  Such a corporation is not “foreign” in the states into which its activity extends and state laws aimed at foreign corporations will not hit it.  Moreover a corporation with a federal charter can always take its controversies into the federal courts (except when Congress expressly forbids)[1]—­a right of extreme practical value where anti-corporation feeling or local prejudice is strong.