The Montgomery advertiser., 1907-04-04
MIR. FINLEY SPEAKS
SOUTHERN PRESIDENT DISCUSSES
 THE RAILROAD PROBLEM.
Declares af Banquet that Idea that the Systems are Controlled BV Capi-
 talisation is Entirely With out Foundation.

Greensboro, W. c., April 3.-At the annual banquet of the @ Mer- chants and Manufacturers Club to- night, W. w. Finley. President of the Southern Railway. responded to the toast. North Carolina and Its Relations to the Railroad Problem" He said
 'The interests of a railway and of people dependent on 1t for transporta- tion are so completely identical that I have no hesitation in saying that every legislative proposition that is inimical to the railroads will be found on careful examination, to be equally inimical in Its ultimate effects to the interests of the people of the territo- ries served by their lines"
 Mir. Finley said that, while the capi- talization of each railroad must be con- sidered on it's merits. he was convinced that there was serious popular error in supposition that there is any consider able over-capitalization of railroads in the United States.
 Leaving aside the question as to whether the railroads of this country are over- capitalized" he said, " wish to say to you that the idea that rail roads are controlled by capitalization Is entirely without Justification. Capital ization may affect the intrinsic value of company's securities and thus af- rect the investing public. It cannot control carriers rates. and. hence. cannot affect the shipping public" He supported this statement by uuo- tations from President Hadley of Yale aud from Chairman Knapp of the In- terstate Commerce Commission.
 MT. Finley gave examples of the com petition of producing localities of mar kets. of carriers and of commodities to show that railway charges are the outgrowth of economic laws and com mercial conditions.
 NO rate" he said, can ever, with proper consideration for the business or the country or of the carriers, be adopted independent of these economic interests-by Legislation, arbitrarily fixing the rate and by capitaliza- tion of the carrier likewise arbitrarily nxing the rate. In a broad sense. therefore. the management of a rail- road is powerless to fix it's rates. It must accept the rates that are the re- sultant of economic and commercial forces. which are as absolutely beyond the control of its managers as are the tides of the ocean.
 That this is true. Is further shown by the fact that many railroads have never been able to pay any dividends on all of their capital stock while oth- CTS are unable to pay any dividends at all. and still others are not able to pay interest on their bonded indebt- edness. If a railway could adjust it's rates to it's capitalization there would be no reason why any road should not even earn dividends on its capitaliza- ton and thus forever abolish receiver ships and bakruptcy. In all the dis cussion about the supposed relation be- tween railway capitalization and rates have been unable to find that any one has attempted to formulate a comprehensive and practicable scheme for basing rates on capitalization am convinced that if any one should seriously undertake to work out such n scheme, he would soon find 1t to be absolutely impossible. Take the case of two railroads competing for business between two common points. One of them may be a line constructed through comparatively level country at rela- lively small cost and the other may be constructed through mountainous country at very heavy cost. The cap italization of the mountain lines may very properly be two or three times as great as that of the low grade. If rates should be used On capitalization the rates on the mountain line would be two or three times those on the other and the mounain line because of it's high rates would be put out of busi- ness between the competitive points The loss of Its business between these opints would probably make 1t impossi- ble to earn from non competitive busi- ness alone enough to pay the interest on its bonds.
 Referring to the argument that rates are kept up in order to pay dividends on watered stock. if these payments are not made. earnings could go to im- provements, MT. Finley said that this
 
 nancial situation and he greatly feared that an exaggerated idea of the earn ings and wealth of the carriers was at the bottom of much of the sxasperated public sentiment and hostile legislat- ion.
 "The Southern Railway, since it's or ganization twelve years ago. he said, "spent or contracted to spend and is in the act of spending more than $26, 900 900 for it's additions to its fa- cilities and for capitalized betterments and improvements. This means that on it's present mileage 1t has spout or thus has contracted to spend within fraction of fourteen thousand dol lars per mile whereas if every cent of it's net earnings after the payment of interest and without paying ore penny of dividends or carrying one penny to the surplus had been expended for these purposes it would have amounted to only about thirty-six hundred dol- lars per mile upon its present mileage The fact is that proper dividends should he paid in order to create the credit on which a carrier can provide it' self. in the money market with tho means to add to It's facilities in those particulars which are essential. not on- iy to it's own interest as carrier. but to the interest of the public at large.