The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1904-04-06
FIGHT ON RI. BONDS.
New York Legislature Asked to Act
Against Them.

Against 1nen.
Few recent measures of financial
legislation have caused more contro-
versy than the campaign of the Saw
ings Bank association to have the pro-
jected Chicago, Rock Island and Pa
cific railway bonds stricken from the
authorized list Of New York Savings
bank investments, says the New York
Post The question arising in many
minds has been, why should the Rock
Island be Disseminated against2 The
companyfs counsel urged on the as
semhly the unfairness OF such q policy
Addressing the assembly committee on
banks last Thursday. the counsel set
forth that while he realized that saw
ings banks might not purchase the
bonds, he wished II still TO remain Ie-
gal for them TO do so because it would
then be easier 70 sell the bonds in
other states.
In other words. the company cared
less for the patronage of the banks
than it did for the prestige that the
bonds would enjoy from being listed
as a savings bank security. The com
pany also raised the plea of unjust
discrimination, arguing that it did not
seek to have the law amended in IA
vor of admitting their bonds TO the
list, but that since 1t had been so
amended, their bonds ought not TO be
stricken of when other issues open to
similar objections were allowed to re-
main. This plea was rather generally
regard in Wall street as at least rea-
sonabIe.
Tie first question raised by this ar
gument IS, when and under what cir
cumstances were the Rock Island
privileges2 Did they come in under
a general law, and were conditions as
regards the cOmpany's capital the
same then as they are now? These
are questions of fact
Rock Island bonds were admitted by
a special act.
This act became law on April 10.
1902. The Chicago, Rock Island and
Pacific was then railway with a
highly conservative financial record,
its stock held by investors, who for
three years had been receiving 5 per
cent annual dividends. Less than three
months after the above act was pass
ed, the railways stock was exchanged
for collateral trust bonds Of another
company, organized to issue them and
owned by still another corporation
The status of the property was com
plerely changed, the capital based up
on it being inflated by s145, 009, 009-the
amount Of the stock issued by the
company whose bonds were exchanged
for the old Rock Island stock
By an exceedingly shrewd device,
control of the whole property was
ract1caIIy ensured to a group of cap
italists who might keep It even with a
small minority investment This crea-
ted Situa ton which neither existed
land bonds We're placed on the saw
ings baak list It is now contended
that it is incOnceivable that any as
senbIy committee would have admit
ted to savings bank privileges the Sc
curities of a company thus constitu-
ted. Hence the pressure applied by the
Savings Bank association to have the
Rock Island clause OF that law re-
yoked.
The bond issue has been made as
large as could possibly be done with
out encountering another limitation
Of the savings bank act. That law
stipulates that the capital stock Of
companies whose bonds are admitted
for such investment must equal or
exceed in amount one-third of the
par value of all bonded indebtedness =
Eliminating such bonds as are to be
retired by the s163. COO. 900 issue. these
new bonds will bring the railways to-
tai bonded debt to 1924. 500, Goo One
third of that is S74. S33. COO or an amount
just equal to the STA. SIT, GOO issue OF
capital stock