CHAPTER I 
THE EVOLUTION OF SECURITIES 
The Two Main Sources of Securities.—The many indis- 
pensable services performed for American business and society 
by the New York Stock Exchange cannot be adequately ex- 
plained until the real nature of the securities which find their 
market on its floor is first understood. 
Securities, in the Stock Exchange meaning of the term, 
may be broadly classified as either governmental or corporate, 
according to whether they are created by public and political, 
or private business organizations. In consequence, a brief pre- 
liminary sketch is called for here of the development of govern- 
ment financing on the one hand, and of the origin and present 
economic significance of the modern stock corporation on the 
other. Inasmuch as political stability has always been a neces- 
sary prerequisite to the higher organization and expression of 
business enterprise, it is only natural that as a rule the exten- 
sive issue of government securities should have occurred the 
earlier in point of historical evolution. To this topic of govern- 
mental financing by means of security issues, then, we should 
first give our attention. 
Need of Government Financing.—The administrators of 
governmental organizations, which in most instances are not 
designed to be run for a profit, must in the absence of earnings 
necessarily look to the levying of taxes upon the governed as 
their normal source of financial support. 
From the financial and economic standpoint the ideal and 
perfect government—which has never yet in human history 
been actually realized, and probably never will be—would be 
nne whose income from taxation exactly equaled its expendi-