The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1857-12-12


were the first, occasion Of the financial panic of
last fall, some curiosity is felt to inquire how
they have gone through it. and how they stand
at the present time. 1t Is regarded as some
what surprising that none of them have failed
and none been sold out. And as, Judging from
the stock board, the value Of most Of them mast
have considerably increased since last October,
pretty general desire is felt to know how that
increase took place, and to what it must be as-
cribed.
AT the time the panic began, say at the d,te
Of the failure of the Ohio Life and Trust Com
pany, very many of the railways of the United
States were actually insolvent. Many, such as
the Michigan Southern, Erie, New York Cen
trail Michigan Central, Cleveland and Toledo,
&c. were at the same time paying copious dvi-
dends and carrying crushing debts With one
hand they borrowed money; with theother they
paid it out, in the guise of profits. This system
had been practised for years and was well nigh
universal. There were of course some railways
such as the New Jersey roads, the Hartford and
New Haven, the Chicago and Rock Island, and
perhaps few Others which did not cheat the
public and their stockholders in this sys-
tematic half yearly method. But they
were the exceptions !; of our railroad
financiering in general, the corner stone and
foundation were the practice of paying divi-
dends out of borrowed money and the art of
classifying accounts And this was what brought
first the railways and next the merchants to the
brink Of universal bankruptcy.
1t need hardly be said that in community
where money is worth on the average nine per
cent all the year round, the rotten railways
could not borrow the money for their dividends
at low rate of interest, or get it easily at any
rate at all. They paid usually from eighteen
to thirty-six per cent for money in easy times /;
when the hank contraction of August came,
they could get none at all, and the leading
borrowers broke or suspended One or two,
We beieve, made assignments: great many
obtained extensions.
movement was then made to try fash of
honesty as a novel experiment in railroad
fnanciering. A number of excellent men, mer-
chants of integrity and character, volunteered
to take hold of two of the worst and most rot
ten concerns, the Michigan Southern and
the Cleveland and Toledo. They were elected
to the direction accordingly. They adopted
the astoundingly original idea of telling their
stockholders the truth about the road and its
finances; and followed this with the still
more amazing innovation of stopping all divi-
paid. This startling departure from time
honored customs caused no little CONSERVATION
in well bred railway circles, and led to much
denunciation of the graceless innovators We
are INDUCED to the hope, however, that the lat
ter have been enabled to survive ii. And we
believe that their system daring as it was, has
proved 50 far successful that the Cleveland and
Toledo is already out Of danger, and the Michi-
gan Southern not irretrievably gone. There is
hope left for the latter; the former Is actually
saved. Deeds less wonderful than these have
been accounted miracles.
In contrast with these cases we have several
in which the effort to infuse new blood into old
concerns, and to resort to honesty as last re-
source. has proved unsuccessful. Prominent
among these is the Erie Railroad, which is going
OF last, and will in all probability be brought
to the hammer early next year. Still nor con-
spicuous and valuable as a lesson IL the famous
New York Central Railroad, which aspres TO
govern the State. A number Of stockholders
in this concern tried to introduce new men and
a new system; they we're Indignantly resisted
by the direction, and outvoted by the rural
stockholders. Instead Of doing any good, the
effort has only riveted still closer on the con-
Germ the clasp Of the President-who, as Is
known. receives no salary, but sells the con-
Germ all the iron IL wants-and of the directors
who do his bidding The first fruits of
the victory are seen in the report just pub
lished, which certainly, 70 bold impotence
and unblushing deception, casts even the
former reports Of the same concern into the
shade. While il is known that. for three or four
years, the debt Of the company has increased,
each year. by the exact amount paid in divi-
dends, we are told that over ten per cent has
been earned: while ID is known that no such
road a. the Central can be operated under six
ty-iye to seventy per cent, we are told that
the cost Of operating was only fifty-fve; and, In
keeping with these, our old acquaintance, the
famous item Se,359,9I6 for culture income"
being the estimated future profits Of the road
for many years. bundled together), is again
made to do duty to balance the account. II Is
easy to tell what will become Of a road managed
like this.
The bulk Of the roads Of the North may be
classed under one Of these two heads. Either
they have gone into new hands, and under
honest management are preparing, at the cost
Of present dividends, to become good property;
or else, like the Erie and Central, they remain
in the old hands, arc managed as corruptly and
badly as ever, and are slowly but surely sinking
into ruin. The winter will test them, and will
divide the sheep from the goats; there are many,
we fear, which will not live to take advantage
Of the revival Of business in the spring.
LoSe JoHs WENTWORTH CosNs OVER TO THE