The Washington times., 1907-03-15
Mr.. Harriman'S Defense.

There has been widely distributed
on behalf of the Hartman syndicate
which reOrganized the Alton rail
road a printed statement in eX-
pianation and defense of that finan-
cial operation. The case which Mr..
Hartman presents deserves atten-
ton 1t shows the Hartman atti-
tude toward financial and railroad
questions. 1t proves that between
the ideals of Hartman and those
now in the public mind there is an
impossible gulf fixed. If he has
been trying lately to get in line with
the genius of these times, heA has
sadly failed. Mr.. Hartman simply
doesn't understand; apparently he
can't.
Accepting everything Mr.. Harri-
man says for himself, the defense
which he considers complete must
be viewed by the public as a confes-
sion on all points. 1t is not even
candid, but misstates things about
which there could not be possibility
of fooling the public.
First, Mr. Hartman finds iustifica-
tion in the allegation that if he
hadn't done it the management
which he ousted from control of the
road would have reorganized the
property along similar lines. Of
course, this is no justification at all.
Then he compares the capitalization
before and after his reorganization:
total before reorganization, S76,-
se6,000; total after reorganization.
S105,090,0O0. This doesn't strike Mr..
Hartman as very large increase;
but he points out that it was not
really so large as it appears, be-
cause the new stocks sold far below
par-the common about 80, pre-
ferred about 20. He assumes that il
makes no difference how much the
nominal capitalization be. if the
total market value is not increased
In this Mr.. Hartman distinctly
disagrees with critics of excessive
capitalization. The issuance of a
great volume of stock is the earnest
of intention to make that stock
worth par or more. Mr.. Hartman
admits this was his intention. "Tl
common stock was created to repre-
sent the future of the property and
the increased earning capacity
which was expected 10 result from
progressive management"
This is just the point. CapitaIizing
the future, the expected" earnings,
the blue sky or the water in the
Pacific ocean. is the very thing
against which the voice of public
opinion is crying out in these days.
Mr.. Hartman frankly presents it as
proper finance. The people of the
United States don't think it proper.
This difference of opinion is causing
troubles in Wall Street right now.
People are wondering how much of
the securities they have bought
from Mr.. Hartman and others of
his kind represent "the future of the
property" or expected" increases
of earnings.
Manifestly, the first way TO turn
expected" revenues into actual
ones is to get more out of the public
for the service rendered. Mr.. Har-
riman confesses that he wasn't able
TO do that, and so the expected
injection of value into this food of
new securities didn't take place.
Now, taking the issue of per
cent bonds and their sale at 65 to
the stockholders. Mr.. Hartman saws
that was fair, because all the stock
holders got them at that price. Mr..
Hartman and his close associates
were "aII the stockholders" 1t will
hardly be denied that "all the stock
holders" did well; they got for 65
what they sold around 90. But who
must pay off those bonds when they
mature? The public, which pays all
obligations of railroads through the
rates eXacted from il. To run a
photographers press for an hour and
print S20.OOO,00 of additional value"
into a railroad means that YOU are
Rnposing $4,000, 900 additional bur-