THE DISTRIBUTION OF SECURITIES 87 
carry on and expand their business. Their frequent need for 
small sums for short periods can of course be supplied by the 
banks on their notes and commercial paper, although there has 
been in recent years a strong tendency to obtain permanent 
funds by the sale of securities rather than to depend upon short- 
term banking accommodation. Reorganizations, extensions, 
or large permanent improvements and the like, usually call for 
large sums and over long periods, which can be supplied only 
through the sale of the corporation’s stocks or bonds. 
Small corporations under exceptionally favorable circum- 
stances are sometimes able themselves to dispose gradually of 
small issues of their stocks or bonds direct to their stockholders 
or to purchasers of their products. Such a procedure, however, 
is impossible with large security issues, and is usually imprac- 
ticable even with small ones. The large sums needed by cor- 
porations must usually be had all at one time rather than in 
small successive payments over a period of time. Moreover, 
the average railroad or industrial corporation is apt to lack 
the long experience and necessary facilities to engage in the 
security business on its own account. In most cases, therefore, 
it becomes necessary for the corporation needing extensive and 
long-term financing to have some investment house underwrite 
and market its securities. 
The Security Underwriting Business.—This business of 
underwriting and marketing new security issues is to some 
extent carried on in every large city in the country. But the 
national headquarters of the business—so to speak—is centered 
in the financial district of New York City, where the great 
underwriting houses and the Stock Exchange are located. Most 
of the larger issues of securities, representing industries of 
national scope and significance, are in consequence “brought 
out” in that city, while the smaller and more localized banking 
and brokerage groups in Boston, Chicago, Philadelphia, and 
lesser centers, for the most part underwrite smaller and more 
localized enterprises. In addition, as we shall presently observe,