The Mankato free press. [volume] (Mankato, Blue Earth County, Minn.) 1879-1924, 1906-08-03
Second Vice President Earring
ton "BlOviates" Some.
ERIC OLSON BUTTS INT0f GAME.
How the Surplus of Some Railroads
Used to Build Extensions
and New Lines.

l.
things developed at the merchandise
rate hearing before the state railway
and warehouse commission at the cap
ital today. r. L. harrington, second vice
president of the Great Northern, was
the witness. He made known the fact
that no matter what may be the real
earnings of the Great Northern road,
James j. Hill has laid down the law
that the dividends to stockholders shall
never exceed per cent.
Mr. Harrington also asserted that the
purchase of iron ore properties by the
Great Northern interest in northern
Minnesota was solely, to secure control of
the ore traffic from those properties.
Mr.. Harrington also made an interest
ing explanation relative to the use of
the Great Northern's surplus and the is
suance of new stock, an explanation
which is still more interesting when
read between the lines.
Mr. Harrington opened his testimony
today with a complaint against the lay
ing down of mileage rate for rail
roads, such as the Mankato merchants
asked for yesterday. I'm sparsely set
tied DISTRICTS" he said, "along newly
constructed lines of road, there is lit
tie business to be had and the road nat
urally costs much more to operate than
in other places, such as the southern
district of the state, where there are
many inhabitants with frequent towns
and large amount Of traffic. The un-
fairness of charging & fiat mileage rate
under such circumstances is self-evident."
Mr.. harrington also illustrated his
point in interstate traffic. Carryin,
freight over the western mountain
ranges is very costly. This must be kept
in mind in figuring the share of the cost
of coast traffic which necessarily passes
through Minnesota.
Mr.. Harrington then spoke of the
method of making improvements and
railroad extensions.
I'VE pay for improvements and ex-
tensions out of the surplus" he said.
in answer to a question from Commits
sioner c. +. Staples, until, a new issue of
stock becomes necessary. We only is
sue stock in blocks of $25,OOO,OOO."
What becomes of the S25,000,000
realized from the sale of the stock ~
asked Mr.. Staples.
This goes back into the treasury to
make good the expenditures for i'm
provements made from the surplus,
said Mr. Harrington, land to pay loans
which are frequently made for short
time"
IF you use the surplus for the con
struction of new lines" persued Mr.
Staples, 'where do the stockholders get
their money!"
''The stockholders don't get the money
back for their stock" was the answer
'Their money is an investment. They
only get the interest. James j. Hill has
always made it rule that not over 7
per cent shall be paid in interest on
stock. The use of surplus for new lines
is simply temporary use of treasury
assets, borrowing, as it were, from the
surplus till the stock is later sold.'
"If you were to build 800 miles of new
line in Minnesota, where would the mon
ey come from?" asked Mr.. Staples.
Eventually from subscribers for new
stock" was the answer.
Mr.. Staples gave it as his opinion that
the method testified to demonstrated
that profits were too large. Some dis
cussion as to accumulated surplus caus-
ed the matter to be looked up, and it was
shown the Great Northern now has on
hand surplus of over 100000.
"The profits should never permit of
the accumulation of $25,O0O,0O0 surplus, %
was Mr.. Staples parting shot on the
subject.
Mr.. Harrington was asked why it was
that when new stock is issued that it is
not sold at 100 or at it's real market
value instead of at par. Mr.. Earring
ton then let the cat out of the bag as to
the method of the present controlling
stockholders continuing to secure con-
troll of the new stock at small figure.
when stock is issued" he said, 'we
have rule that every stakeholder may
purchase one share of new stock at par