CHAPTER IV

It borrows the $5,000,000 and an additional $5,000,000, which represents its own first profit, from the trust company through irresponsible dummies, depositing the industrial stock as collateral. The "trust" next causes the trust company to issue bonds for $15,000,000. These bonds are based upon and secured by nothing of worth but the stock. The trust company offers these bonds for sale. The insurance company buys $7,500,000 of the bonds, and the trust company, through dummies, the other $7,500,000. By the operation so far the "trust" shows a profit of $10,000,000. After making this profit and the true worth of the bonds becoming known, these decline back to the original worth of the stock upon which they are based, $5,000,000, and there is the tremendous loss of $10,000,000 made. The trust company "busts," and there is a loss to its depositors of $10,000,000. This loss is divided as follows: $3,333,000 to the savings-bank, $3,333,000 to the insurance company, and $3,333,000 directly to the people, less the small amount which will be recovered from the stockholders. (These losses will be affected in an unimportant way by the $1,000,000 original capital.)