The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1896-09-27
SUCKING THE SOUTH
j. Pierpont Morgan and His
Railroad Syndicate.
CRUSHING COMPETITION
The Organ and Progress OF the
Southern Railway.
DESTROYING SOUTHERN TOWNS
The System Comprises Ten Thousand
Miles South of the Potomac and
Ohio and East of the Mis-
sissiupi Rivers,
sissippi Rivers.

*titES SOubH VI At'C
Ohio and East of the Mis-
sissippi Rivers.
The remarkable changes which have
taken place in the railroad situation IN
the South within the last two yaers
have been cause for much anxiety to
many Northern people having money
invested in this section, while South
ern merchants and manufacturers as
well as planters have reason to view
the present state of things with alarm
The consolidation of various lines into
what is termed the Southern Railway
system has really assumed startling
proportions. Never before in the his
tory of this country has railroad or
Canization pursued the absorption
policy on such a scale, and apparent
w the end is not yet. Consequently
those who are following the manoeu-
vers of the master hand which seems
to be shaping matters from New York
fear that the result is to be anything
beneficial to the Southern States.
To go back little into history is a
necessity at this point. Three years
ago the old Richmond Terminal sys-
tenn was a financial wreck, its stock
tossed about in Wall street at any price
which could be obtained. Originally
good property like the Georgia Central,
East Tennessee, Virginia and Georgia
and other Southern railroads, it had
fallen into the hands of spectators,
and, like the others, went into bank
ruptcy. Then it was that Pierpont
Morgan conceived gigantic plan. Qul-
etlv Drexel Morgan Il Co, procured
enough stock in the Terminal to OBJ
tain control.
1t is unnecessary to prove that
equitable freight and passenger tar
ifs are essential to the life of any COM
munity. Unless the manufacturers,
tradesmen and planters can ship and
receive products at rates equal to those
in competing sections the margin of
profit is so small in these days of COM
petition that they must suspend oper-
ations entirely or become hope1essly
involved in debt.
Bitsar experience has taught the
Southern people that their principal
safeguard to their business interests
is competition in railroad lines. How
ever, the company which is now DOM
mated by j. Pierpont Morgan has sue
cessfully done away with competition
alerady in a territory covering seYeral
hundred miles, and has more than
doubled its mileage since organized.
Next the East Tennessee, Virginia
and Georgia was manipulated and
enough securities in both obtained 10
plan a reorganization. 1t was made
public and amazed the financial world.
Much of the old stock was wiped out
entirely. and bond-holders who had
received 6, and per cent interest
were offered from to per cent Many
refused and threatened TO go into
court. The reply was: we are IN con-
troll; take what we give you or stay
out of it, the latter meaning that the
dissenting security holders would get
nothing. Half a loaf was better than
no loaf, and the majority turned IN
their bonds and accepted the new IS
sues, To show how the knife was put
into the investments of these unfor-
tunates every share of the old Rich
mond Terminal was assessed at $40
and that of East Tennessee, Virginia
and Georgia at 1920, making this stock
in some cases worth less than nothing.
Although but 4,600 miles of railroad
were included under the re-organiza-
tion the issues of new securities were
S1O1 .0O0,0 in bonds and $168,OO0,0OO
in stock. The only income allowed was
about $450O,000 on the bonds-only
about Az per cent on the average. AS
TO dividends the stockholders might
get them if enough was earned above
interest charges to declare one on
s168, 100000, but there is little danger
of this. BY this plan the southern
Railway" as the new combination was
called. was bonded to the extent OF
S22. 900 per mile and it's stock watered
to the extent of $4,000 per mile, or
nearly so per cent more than the deot
of similar systems in the North
At the outset there was m1lhons IN
IL for Mr.. Morgan and his associates.
They only asked $750,000 for thelr
ssseryices' as re-organizers, but organ
lied a syndicate which guaranteed 10
rake all securities not sold 10 the pun
lie. They obtained very large pioch
,of nreferred stock and bonds at 10"
figure. and then began DOOM nu
Southern paper IN wan stree0 Gnu - :,
rope. This was mystery 70 many
neonle who did not know that DreAei'
Morgan & Co, were quilting" the mar
ket so as to unload their holdinss'
which they did at from 10 to ~ points
advance. How many millions they
made in this deal viii probably never
be known. After they had unloaded
the market suffered decline, the pre-
ferred stock now ranging between 20
and 80. against AZ in June, 1895, when
much of the syndicate holdings were
placed on the market. The security
holders, however, believed that the
lines were now on a better financial
basis. and as they formed a route reach
ing from Washington to many of the
principal Southern cities it was gener-
allv hoped that the change was for the
I.affer and that both the company and
4he section of which it formed an out
Ia world be mutually benefited. But