New-York tribune., 1907-06-22
VANDERBILT TO BANKERS
HAS NO FEAR OF PANIC.
But Urges Conservatism an Business
and Legislation.

Norfolk, Va, June 21-The feature of the
second days session of the Virginia State Bank
ers' Association, at the jamestown exposition,
was an address on the business situation by
Frank y. Vanderlip, vice e-president of the Ma
tional City Bank of New York. and formerly an
Assistant Secretary of the Treasury. Mr.. Van
derlip took a conservative view Of the outlook.
saying that there was nothing in business con-
ditions to Justify fear of panic but in the
period ahead commercial activities are likely
to be curtaed. The extent of the recession,
however, he said. would depend wholly on the
public mind and temper. But he said, in
conclusion, 'ff We are to have legislation based
upon political advantage; If we are to adopt
soCiaiistic theories which will amount to ths
coEscation of property rights; if we are to have
reprisal for past wrongs matter how real; If
action is the one thing wanted first, and the
consideration of the intelligence and fairness of
such action is to come afterward then l believe
it is possible that the whole business structure
may be facing a danger the proportion of which
will be measured by the same vast figures as
have been the totals that have marked the eX-
tent Of prosperity"
MR.. VANDERLIP's ADDRESS
Mr.. VarderIip's address was as follows:
To an unusual degree the business outlook at
the present time is dominated by the tendencies or
political sentiment and by the conditions surround
Ing the railway properties of this country. We are
still in the midst of evidences of aboundng pros
perity. although have passed through OF
the drastic declines ever witnessed in stock
market values. The stock market decline has been
in itself of a most unusual character, particularly
IN far that in spite of fall in prices that cut
a third off market values OF securities, failure
OF Importance resulted from the disturbance. The
absence of failures has perhaps led people distant
from the centre of the disturbance TO minimize it's
Importance and to argue that in any event Its
effects not likely to be extended into lines or
business not directly related to the security mar
kets. This has given a sense OF independence and
usual after so severe a decline IN quotations.
The further fact that up to the present time
there has been no marked recession IN business
has reinforced the opinion or those VINO oeieVo
that the country has grown so strong financially
that the general business situation can be divorced
from the conditions that are reflected In wal
Street prices and who hope. therefore, that the
Incidents of the stock market for the last three
months be largely, If not wholly, isolated IoTn
the general business outlook.
This hopeful opinion IS strengthened. for IN
stance, by the situation of affairs IN the steer
trade Steel we used TO say. IS the barometer
Of the business situation; find up 70 the pres
ent day that the booking OF orders in the steel
that too by a considerable amount. the record
for the same period Of last year When we re
member that last year was banner year IN the
industry. the record Of the present ST uStcal po-
siton the steel business strongly reinforces the
view that we may have continued business ac-
tivity.
CAUSES OF DEPRESSION
Ii one should attempt 10 analyze whether or
parent than at present between the general 6usl-
ness situation and the depressed security markets.
would first perhaps. be useful 10 endeavor 10
trace. in q general way the influences that nave
led 10 the present state Of affairs in regard 20
investment values In the main, the factors which
led the recent decline are, without doubt, clear
in your mind. But must not forget that tho
Of the present situation run back directly
to conditions created some years ago
With the beginning of that period of great pros
perity which started in 1898. railroads we're soon
taxed beyond the capacity OF the scant equipment
.-r 4fFr.rRL
nomlcal administration OF the preceding years IN
railway practice there u tendency toward
heavier and heavier equipment and toward greater
speed As soon as some progress had oeeA i'aoo
in the direction Of heavy equipment and nigh speed
the necessity for a heavier roadbed became appar-
ent- In placing the orders for new equipment ana
In tho expenditures FOR rebuilding roadheds. the
railroads contributed most important part 20 the
general prosperity Of the time. Their own Gctlvi-
ties reacted upon the situation and further in
creased their traffic. and that increase again made
necessary further expenditures by the railroads on
betterments and improvements.
Tho circle continued to revolve in this way In n
wider and wider until another character Of
expenditures became necessary. Terminals which
had been adequate and had even been Planned with
what seemed good foresight became utterly iusuf-
hcent. and 4 vast expenditure in that quarter was
forced upon the roads. That expenditure; although
absolutely necessary for the continuance Of bust
ness upon the scale that business had grown 10.
really added nothing to the production OF income,
at least directly and Immediately
Our railroads. in providing tina money FOR the
complete rehabilitation which in progress. en-
COuntered more and more unfavOrable conditions
IN the markets IN which they must hoat their OBJ
legations The usual European outlets for
curltes became Clogged. The marvellous indus
trial development and the commercial prosperity
that ruling the situation at home. however.
accumulated wealth rapidly that tho railroads
able float securities sometimes a hundred
millions at single operation. That money
poured into stream that further viviiied existing
activity. An altogether unprecedented production
OF gold helped 10 obscure our view of the rapidty
with which liquid capital was being absorbed into
fixed forms Of investment Stil the interest rates
advanced. ana the outlook for floating long
term obligations grew more unfavorable. The
panes then Tesorted TO what for a time
extremely popular form Of investment-short time
notes Hundreds of millions OF these short
obligations created and absorbed by
banks and investors. The rate at which they were
put out rose steadily from 41a per cent per
cent, to 8 per cent, and a time when really
secure obligations OF strong companies offered
on a basis to net materially above even the latter
figure.
Stu. with large provision OF capital for rail-
way improvements, industry given added I'M
petus, and with every added impetus 10 industry
the demand upon the transportation facilities grew
more severe and made more pressing the necessity
for railway penditures. The circle Of expansion
seemed Indefinite but for the steadily hardening
interest rates. At last even the short time notes
began 10 lose their popularity, and then railroads
whose stock sold sufficiently above par forced
loans by the issue of stock which existing stock
to accept the tempting investment opportunity they
had to sell other securities.
We only beginning TO recognize that the
railway system OF the United States has in the
last eight nine years. been In large measure
rebuilt; that on many sections Of important rail-
ways much has been expended in that brief
period as had before been expended altogether
from the time ground first broken for the en-
terprise two or three generations ago.
This rebuilding OF the railway system of the coun-
try doubling and more than doubling It's capacity
for service. this provision of enormously expensive
terminals. and the almost complete replacement
OF equipment have been part OF the physical prob
railroad managers