By the term securities we usually mean stocks or bonds of corporations, either public or private, and mortgages upon real estate. These are evidences of property, and in the eyes of the law are regarded as personal property. Being negotiable or assignable by mere delivery, and readily convertible, they are extensively used as collateral security for loans and other contracts, and have gradually taken the name of se- ; curities. The value of any security depends upon the character of the property which it represents, and the rate of income which it is reasonably certain to produce. The more secure the investment is regarded, the higher its market price is apt to be, and therefore the lower the rate of income which it yields. Investors who are willing to assume risks are comparatively few, and those who wish to be certain of the return of their capital are satisfied with smaller dividends. United States government bonds may be classed as the highest order of securities before the public. Our faith in the integrity and stability of the government is such that we do not hesitate to invest in its bonds at very low rates of interest.* During the great Civil War our government issued large amounts of bonds for war purposes, but the amount has been gradually reduced, by payment

•The lowest rate which any of the government bond Issues draw is 2 per cent, of the public debt, and the rate of interest lowered, while the price has advanced until they are no longer a profitable class of investments. The national banks now absorb a large portion of our government bonds in compliance with the National Banking Law. The remainder of them are mostly taken as investments for trust and other funds where safety and facility of conversion are greater considerations than a high rate of interest. They are considered absolutely safe and always marketable.

State and municipal bonds are in some instances high class securities, and in others of a very low grade. Unfortunately many of the states have not preserved their credit in financial markets. Swayed by popular impulse, they have, in times of stress been led into the suicidal error of repudiating their just obligations. A lack of patriotism and state pride combined with a knowledge of the fact that a "state cannot be sued" has in several instances resulted in dishonest legislation. Even where bonds have been issued with an honest purpose, there have come political disturbances leading to a revulsion of sentiment, or affording an opportunity to demagogues to assail public creditors and perhaps secure a majority of votes against the payment of just debts.* For these reasons, state securities are not usually regarded favorably by investors.

"Whoever buys the paper of a state should do so with the distinct understanding that he has nothing but its honor to rely upon, unless the commercial relations of its citizens should be of such a character as to make its financial credit important to their business interests. There is for that reason little likelihood of such states as New York and Massachusetts ever repudiating their obligations." These states contain the two greatest money centers of the country, and being the chief lenders, they could not afford to set an example of repudiation to other

•Twelve states of the union have broken faith with their creditors at different times, and either openly repudiated or ignored their outstanding obligations in whole or in part.

Unreliability of State Obligations states. What has been said in regard to the uncertain value of state securities applies to some extent to county, town and municipal obligations. The same people compose the state and the local organization, and the same moral sentiments exist concerning both obligations. There is this important distinction, however, that municipal obligations can be enforced in the courts, provided they are properly created. There are many points which go to determine the value and reliability of municipal securities. The first of these is the legality of issue. If the bonds have been in litigation their legal status has probably been fixed by the courts, but unless this is the case, their legality should be investigated by a competent lawyer. Besides the legal points involved and the disposition of the municipality to pay, there is also the question of its ability to meet its obligations. The laws in many of the states limit the power of municipalities to issue bonds to a small percentage of the taxable property,* thus aiming to protect both creditors and taxpayers, but since the bonds must be paid out of the taxes, and taxes are dependent upon the value of property, it follows that the payment of a bond issue is contingent upon the general prosperity of the town or business community. As our cities and other municipalities grow in wealth and population, they become better able to meet outstanding obligations, especially where bond issues have not kept pace with population, and hence the tendency of this class of securities is to gradually improve in the estimation of investors. One disadvantage in the case of bonds issued by small municipalities is that not being widely known the market for them is a limited one. This makes them to some extent undesirable investments, except for people who do not regard ready negotiability as important. With such investors they are favorite securities. The bonds of some of the larger cities are only slightly less esteemed than those issued by the general government.

♦In Illinois the limit is 5 per cent.