where, with ordinary caution, they are safe from bankruptcy. A man who is out of debt cannot become a bankrupt. This again inclines to the opinion that the trusts will powerfully contribute to insure the financial stability of American industry.

At present, it must be admitted, they contain a great deal of dead material,-antiquated machinery and worn-out plants, purchased perhaps at an excessive value. These will be weeded out, as they would have been, only more quickly, under the old system of competition. This done, there will remain a number of strong companies, which will exercise the same wholesome control over manufacturing industry that the railroads do over the business of transportation. Their securities will offer as safe investment as any now held by the savings banks. With increasing stability of value and the growth of a settled investment interest in their securities, greater frankness will characterize their reports. The railroads themselves have been a long time in learning that frankness is the wise policy, and the trusts may be expected, in the same way, to enlarge their annual reports, and to publish weekly and monthly statements of net earnings. So long as the stocks are wanted for speculation, however, secrecy of management will be the rule, and it would be unkind to the margin speculators to do them good "whether they will or not" by settling the value of the shares with which they wish to gamble, and so confiscating, as it were, the tools of the trade. It may indeed happen that competition will arise and that competitors may have to be bought or crushed out; but this necessity is only a slight cloud in the sky of promise.

One measure only is necessary before the conditions of stability can be secured. The common stock capitalization must be reduced. Its low value is a constant menace to the financial stability of the industrials. There is danger lest some enterprising financier may buy up enough stock to give him a majority in the board of directors. He might then proceed

to use up the surplus in paying dividends on the common stock; incur floating debt if necessary; run the stock up to a high value, and sell out, leaving the company to the creditors and the receiver. This was done repeatedly in the case of the stock of reorganized railroads before the voting trust was devised to secure the stock until the payment of dividends should so raise its value, that it could be released without danger to the property. The trusts are just now in the same condition. The low priced stock is a constant temptation to the wrecker, and the capitalization must be reduced or in some way protected. The voting trust has been suggested. The common stock of the Distilling Company of America has been placed in such control, "in order to solidify the different interests and to insure conservative management," but a safer plan will be to reduce the common stock. By no possibility can dividends be paid upon its present amount, and a voting trust is only warranted when the early payment of dividends may be expected. It is not intended by instituting a voting trust to hold the stock in perpetual durance. A movement has already begun in this direction of reducing the capitalization. The directors of the Distilling Company of America have recommended the cancellation of unissued common and preferred stock to the amount of $20,000,000. American Smelting and Refining has reduced the preferred to a similar amount. American Steel and Wire has placed its common stock on a 7 per cent basis. It will probably not be difficult to arrange for these reductions. Common stockholders, many of them, have purchased on the decline and a reduction of 50 per cent in the holdings, provided that dividends were paid on what remained, would still give them a good return on the actual investment. Then with the removal of the cumulative feature from the preferred and the assurance of legal security to the companies, the industrials will be firmly placed upon an investment basis. By that time, however, colonial enterprises will be ready for sale, and the

speculative investor will once more be called upon to bear the burden of another industrial advance, by turning over his savings, without much prospect of return, to the same men who have repeatedly mishandled him in the past. EDWARD SHERWOOD MEADE.

University of Pennsylvania.

LAW AND PRACTICE OF THE UNITED STATES IN THE ACQUISITION AND GOVERNMENT OF DEPENDENT TERRITORY.

In the following paper I wish to consider two questions: (1) What is the basis in constitutional law for the acquisition and government of dependent territory by the United States? (2) Has the federal government, as a matter of practice, conformed to the law in these two respects?

1. Law: (a) acquisition. There is no clause in the constitution which directly refers to the acquisition of territory by the United States; the right to acquire territory is neither expressly given nor expressly denied. It has generally been assumed, nevertheless, that the right exists because it is one of the rights inherent in a sovereign state, and the framers of the constitution, therefore, had they intended to deny the power to the government which they created, would have inserted in the constitution a specific statement to that effect. No one but Jefferson apparently, ever thought it necessary to resort to a constitutional amendment for the purpose of legalizing acquisitions of territory, and even he gave up the idea after vainly urging its necessity, during the summer of 1803. The theory which the leaders of Jefferson's party put forward to justify the acquisition of Louisiana was that the constitution, though it did not directly give the right to acquire new territory, did so indirectly, through the treaty making power and the war power. Twenty-five years later the supreme court, speaking through Justice Marshall, took exactly the same view, in the case of the American Insurance Co. v. Canter.' "The constitution confers absolutely on the government of the Union the powers of making war and of making treaties;

11 Pet. 542.

consequently that government possesses the power of acquiring territory either by conquest or by treaty." This decision has never been reversed. A modification of it was attempted in the case of Dred Scott, but as that portion of the opinion is generally agreed to have been an obiter dictum, it will be better to omit the case of Dred Scott from further consideration, spite of the fact that it contains the most exhaustive discussion of the whole subject of the acquisition and government of territory to be found in the entire range of judicial decisions. On the other hand the decision of Justice Marshall has been repeatedly confirmed by decisions before and since the time of Dred Scott. It may be confidently asserted therefore, with little fear of contradiction, that the law of the acquisition of territory by the United States is this: The federal government may acquire territory by treaty or by conquest.

(b) Government. The question of the right to govern dependent territory does not arise, because this right is granted to the federal government, in terms, by the constitution.' "Congress shall have power to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States." The question here is not may Congress govern the territories, but how may it govern them.

This on the face of it would seem, perhaps, an easy question to decide. The grant of power to Congress seems to be plenary. Shall we not answer, therefore, that Congress may govern the territory which has been acquired, in any manner it desires, absolutely and without limit? But the question is not so simple. There are in the constitution certain specified things which Congress is not permitted to do Congress may not pass an ex post facto law, or a bill of attainder, or authorize the trial of a person accused of crime, except by a jury. There are many other things which Con

1 19 How. 393.

* Constitution, IV, 3.