A check is drawn by a subsidiary corporation to its dividend account, and deposited; a check on this dividend account[425] is then deposited in the general account of the parent corporation; a third deposit, of the same funds, is then made in the dividend account of the parent corporation; a fourth deposit of the same funds is made in a trust fund which holds stock in the parent corporation; a fifth deposit in the personal account of the beneficiary of the trust fund; a sixth deposit may be made of a check on this fund in the personal account of the beneficiary's wife. The first three of these deposits, at least, will be made of the total dividend of the subsidiary corporation. _Not one_ of these six deposits represents _trade_. Payments of wages and rents should count as trade, but payments of interest and dividends stand on a separate footing. When a man has bought a stock or a bond, he has already bought all the income which is to come from them, and to count the interest and dividends as separate items is double counting. They are _payments_, but not _trade_. Even if the dividend payment be counted as trade, however, it is counted _six_ times.
There is enormous overcounting as a consequence of the combinations of corporations, each of which retains its own numerous bank accounts. The Interstate Commerce Commission calls attention to great duplications from this cause in connection with railway income accounts.[426] Even within single corporations the duplications[427] are very great. Thus, the local agent of a railroad deposits his receipts in a local bank. His check, or, more usually, the draft of the bank, is subsequently deposited in a bank at headquarters. Subsequent disbursements, in places away from headquarters, particularly of wages, will frequently be preceded by deposits in other local banks. This duplication will be true of telegraph, telephone, insurance and other companies which have scattered agencies, including the wholesale trade. Advertising agencies will illustrate it. _All_ checks between agent and principal, customer and broker, etc., will illustrate it. There is a great deal of double counting in stock transactions from this source. Thus, a Boston broker takes orders, with a check for margin, for execution in New York. The order is executed by a New York broker, who deals with another New York broker, who represents a Louisville broker, who represents a Louisville client. Now to the extent that any checks at all pass between the Boston broker and his client, the Boston broker and the New York broker, the other New York broker and the Louisville broker, or the Louisville broker and his client, we have overcounting. Only the check between the two New York brokers is properly counted. It is, of course, well known that a small percentage of the dealings of a customer of a brokerage house is represented by checks between broker and customer. Professor Fisher states this to be about 5%.[428] It is, however, 5% of overcounting! Moreover, through keeping "open accounts," with irregular settlements of "margins" only, the Boston broker and the New York broker reduce markedly the checks passing between them. There is a back and forth flow of items which in large degree cancel one another, since the Boston broker sells in New York as well as buys there, and the New York broker, to a less degree, both buys and sells Boston securities, through his Boston correspondent. But not all by any means is canceled, and _all_ the checks that pass in this way represent double counting. The total is large.