Evening star. [volume] (Washington, D.C.) 1854-1972, 1894-11-16
American Railroad Securities Dis
trusted in the Frankfort Market.
REASONS FOR A GREAT REACTION
The investments Formerly Sought
forAre Now Considered Dangerous.
CONCLUSIONS OF A CONSUL

general at Frankfort in a special report
to the State Department, states that
American railway securities have fallen
into bad odor in Germany, and he en-
deavors to point out the reasons therefor,
ard suggests measures for rehablitating
them in the financial world.
He says that in Frankfort, which was
the first European money market to accept
United States bonds during the dark days
Of our war, and where American invest
ments had been popular, not only are our
new securities refused because Of Ameri-
can origin, but those railroad bonds and
stocks held for years have been returned
to America and their proceeds invested in
less remunerative Prussian consols and
other standard securities backed by gov
ernment credit and supervision. The con-
sui general says:
Had management of American Roads.
THE cloud which overshadows Ameri-
can railway securities in Germany has
been raised mainly by the revelations of
the past two years concerning the manage
ment Of several leading railway properties
German investors were heavy losers, and
their losses served to call the attention of
the people and press more sharply than
ever before to the usurpations of power
and evasions Of the responsibility which,
American railway management European
bond and shareholders have been Informed
that the power of the president and d.
rectors In many important railway COM
pa1ies mas become practically omnipotent
and irresponsible.
Ihey have sent over protests and proxies
70 pe useo at elections for the purpose of
wrestling the control of corporate prop
ertles from the hands of officers who were
said to be abusing their trusts. and thev
nave seen these and every other effort
toward change easily and hopelessly de-
feated. N
security Holders Poorly Protected,
THAT railway presidents and directors
enjoyed large prerogatives and immunities,
and that the rights of security holders
were but partly protected by American
laws has been, of course, we'll known to
European investors for years. but that a
president or director who has abused Lis
trust may be appointed as receiver of the
same property and, under such new man.
aate' continue his previous COURSE and
that the accounts of an entire railway
system may be falsified and its securities
sustained in the market by fictitious state
ments of earnings and concealment of 1e-
pates-aii or which is believed here-are
discoveries OF comparatively recent date"
me consul general speaks approvingly
OF an able monograph by Dr. Alfred Won
der Leyden, an expert official Of high rank
on the financial and operative management
or American railways, in which the defects
and weaknesses of the present system are
probed with skillful hand, and says it
would be national misfortune to further
deprive our legitimate enterprises Of the
aid OF foreign capital, which is likely to
happen unless remedy is applied. Con-
tnuing, he says:
Remedy Suggested for the Evil,
THE uniform reply of German financiers
when asked what is requisite to restore
European confidence in American railway
securities, is that such corporations should
be brought under the control of a oompre-
hensive federal law. Tradition, education
and experience have alike taught the Ger
man that, whatever may be the existing
form Of government In any country, the
one sure source of protection and safety
In the presence of danger or conflicting
interests Is the supreme authority Of ma
tional control
Consul General Mason says that the Ger
man railroad license system is not appli-
cable In its entirety to America, but adds
In conclusions:
1T is believed by many, whose expe-
rience and interests in both countries en-
titls their opinions to respect, that it
should be possible to frame and adopt a
statute applicable to at least all railway
companies of the class now subject to the
interstate commerce law, and which shall
be clear. precise and inexorable upon the
following topics:
Rules That Would BE BencGciaL
Il. Regulations of the elections of rail-
way officers so that sucn elections shall
be free and open, and represent directly
and fairly the wishes and interests of Sc
curity holders.
80. Creation of a national bureau Of pub
licity, inspection and control providing for
the regular publication at stated periods of
certified reports, showing fully and accu-
rately the earnings, expenses acts of di-
rectorS and all business results which af-
feet the value of corporate property.
3. Making eacn violation of the law by
any act of usurpation or willful misman-
agement a crime, entailing Imprisonment,
and requiring federal prosecuting officers
to institute and conduct prosecutions for
such offenses.
~. Providing a thorough revision of the
system Of proceedings under which courts
of justice now appoint receivers to man
age railroads, and making the president or
director OF a defaulting corporation ineli-
gible for appointment as a receiver of the
same property.
Until some general measure can be
adopted and enforced, and foreign inves-
tors can have the assurance they ask for
that the published statements of American
railway companies are correct and true
and that such maladministration as has
been revealed in the affairs of certain sys-
TENS is no longer possible, all such invest
ments In United States securities will be
more or less discredited and county mu-
nicipal and industrial securities of Ameri-
can origin Will suffer-"