St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1895-03-18
LIQUIDATION INEVITABLE.

George Gould, in his report to the
directors Of the Gould system, said
that if the pooling bill did not pass,
SO that the railways could make and
maintain remunerative rates, wreck
would follow wreck until the entire
| railway system of the country would
| be involved in bankruptcy" Mr.
| Gould views the situation, very nat
urally, from the point of his per-
! sonal interests. There is another
point Of view, that of the public
served by the railways. From this
| point some things are seen and taken
into account that the class repre-
sented by Mr.. Gould prefer to ig-
more, and whose effects they hope
to obviate by the passage of. the
pooling bill by the incoming con-
gress.
1t did not need the publication of
the report of the German admin
istrator of railways to inform our
public how railways had been con-
structed and capitalized. It has long
been known that the bonds and stock
or nearly every road in the coun-
try represent not the cost of con-
struction, but twice and more times
that cost. The earlier roads, like
the Erie and Central, whose earn
lngs were a very large percentage
on the cost, met the pleasant con-
dltlon by simply capitalizing the road
to make the earnings pay the current
interest, pouring millions of water
into the stock. Others, costing say
St2,OOO mile to construct. were
stocked and bonded for twice that
amount, made to represent cap
1tal of $4,000 mile. Some in
stances exceeded this, others fell be-
low it, but there is probably no road
IN the country whose actual cost
was % per cent of it's capitalization.
Inc traffic of these roads was made.
as far as it was possible to compel
1t, to pay the interest on the fixed
charges and dividend on the stock.
AS the roads multiplied, each sue
ceed1ng one more cheaply construct
ed, because Of the reducing cost of
material; this became more and
more difficult to do. Defaults, fore
closures, reorganiZationS followed
with rarely reduced capitalization.
The new owners were as rapacious
as the old. To get dividends traffic
agreements were made by the man
ayers. Competition, distrust of each
other, made these agreements short
lived. Then the presidents got to-
40
agreements" which proved as fra
BILE as the others. The interstate
commerce act came to prevent pool
ing earnings, but it did not stop
traffic agreements.
In spite of these efforts to come
to an understanding by means of
which rates could be maintained that
would enable the companies to earn
interest and dividends on the fic-
tltious capital, the competition was
too strong, the selfish interests of
each oVercame the common interest,
and over go per cent of the railway
capital is now operating under di-
rection of the courts by their re-
ceiVerS. Mr.. Gould is correct in say
ing that, unless contracts sanctioned
by law and capable of enforcement
can be made by which earnings can
be pooled and rates maintained.
every road with capitalization COM
posed largely Of water will go into
the receivers hands. 1t is to prevent
this, to enable them to earn divi-
dendS on their watered stock, that
the railways want the pooling bill
passed.
But the present condition is one
that might have been anticipated
from the inception of the wildcat
hnanciering of the companies. 1t is
exactly the result that would
sooner have come that has come to
thousands of private enterprises sim
ilarly financed. In flush times. when
every industrial energy was at pro-
ductlve work and speculation kept
| apparent values swelling, such meth
| odS might float these enterprises. but
| when the inevitable subsistence of
the fever came, bringing cooler iudg-
ment, greater caution, more con-
servatism of investment, saner bust
ness methods, it was absolutely I'M
avoidable that bankruptcy should
| ensue.
| The fact is, and Mr.. Gould and
his fellows might as well recognize
and ADJUST themselves to it, the era
OF boom has passed, the day of SET
tlement has come, and RAILWAYS. as
Well as other properties, must m
dergo a process of liquidation. No
relief need be hoped for from con-
| gress. The people of this country
VIII never permit the railways to he
legally enabled to make the traffic
pay dividends on water. They must
go through the same process that
every other commodity, wages, real
", personality, is undergoing. The
water must be eliminated from their
stocks and bonds, land the capitaliza-
ton put on the present value of their
properties. Manufacturers. land
lords, workingmen are all doing it
compulsorily, and no divinity hedges