done merely as an innocent measure of convenience. The device,
however, is a perversion of the corporate machine to uses not
contemplated by its inventors and fraught with danger. It is too
powerful a weapon in the hands of those alive to its possibilities,
enabling a small group of men with a relatively insignificant investment
of capital to control a country-wide industry. Take the simplest
possible illustration: The industry of manufacturing a particular
commodity is carried on by a number of corporations scattered throughout
the country with an aggregate capitalization of, say, $10,000,000. A, B,
and C form a holding company 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