The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1907-07-14

L
and the Santa Fe have joined and ANAL
gamated their interests in the North
western Pacific Railroad. and that a Joint
control has been inauguTated similar to
/ that of the Alton.
/ Prior to the acquisition OF the South
eru Pacific by the Union Pacific. the
/ Denver and Rio Grande System. ex-
! tending from Denver. where it connects
with various lines 10 the East, 10 Salt
/ Lake and Ogden, was given equal facii-
ties over the Central Pacific and thereby
practically formed another trausconti-
mental line Since the amalgamation Of
/ the Union Pacific and Southern Pacific
! and the construction OF the san Pedro
/ road this llne has been denied equal
/ facilities IN the receipt and transportation
/ Of freight over the Central Pacific and
the San Pedro lines. It's business. there
! fore. has decreased, and its ability 20
compete with the Union Pacific and
Southern Pacific impaired On this ac-
count The Gould lines are aiding the
construction of another line from ogden
/ 10 San Francisco.
Effect of joint Control.
THE joint control Of the Alton Railway
( by the Union Pacific and the Chicago.
Rock Island and Pacific Railway Com
/ pany has undoubtedly eliminated compe-
/ titio~ between the Alton and the Rock
Island between Chicago. ST Louis. and
Kansas City.
These are conspicuous illustrations OF
| the development of the theory OF com
4 munity OF interest" and harmony Of
management which Mr.. Hartman sug-
gested when he demanded representation
upon the Santa Fe board
If the policy of purchasing and con
trolling stocks in competing lines is per-
mitted TO continue. ii must mean sup
/ preston OF competition
Recommendations Of general policy are
made as follows;
/ The function OF a railroad corporation
should De confined 70 the furnishing az
/ transportation. Railroads should not be
permitted to invest generally in the
stocks, bonds and securities OF other
railway and steamship companies. EXCEPT
connecting lines for the purpose of
( forming through routes OF transp1rta-
I ton, including branches and feeders
Mast Facilitate Connections.
1T IS in the interest Of the public to
/ facilitate the consolidation OF connecting
1 lines The credit of a railway company
is founded upon the resources and pros
/ perity Of the country through which il
I runs. It's surplus funds and credit should
/ be used for the betterment Of its lines
and in extensions and branches 10 de-
/ velop the country contiguous 10 II. The
/ testimony taken upon this hearing shows
/ that about 500o0 square miles Of territory
/ In the State Of Oregon. surrounded by
the lines Of the oregon Short Line Rail
road Company, the Oregon Railroad and
Navigation Company. and the Southern
Pacific Company. is not developed: while
the funds OF those companies which
could be used for that purpose are being
! invested IN stocks Ike the New York
Central and other lines having only a
remote relation TO the territory in which
| the Union Pacific system is located
Railroad securities should be safe and
conservative investments for the people
| To this end the risks cf the railroad
should be reduced 20 a minimum Every
one knows that railway securities fuctu-
ate more or less. according 70 the pros
perity OF the times and also by reason OF
the wide speculation in such securities.
Adds 10 the Hazard.
1T therefore adds an element of haz-
ard TO a railroads capital and creolt 70
have its funds invested in the stocks Of
other companies. thereby endangering Us
solvency and its ability 20 pay reasonable
dividends upon its own capital stock. 1t
| is a serious menace 10 the financial con-
dition OF the country 10 have large rail
way systems fail TO meet their obligations
or go into TIE hands Of receivers, and the
object of legislation and administration
should be to lessen the risks of railway
investments.
ut is contrary to public policy, as well
as unlawful. for railways to acquire con-
trcl of parallel and competing lines. This
policy is expressed in the Federal laws
and in the constitutions and laws Of
nearly every State in the Union. We
have examined the constitutions and
laws of all the States. and find in about
forty of them prohibitions against ccnsoJi-
dation of capital stock or franchises of
competing railways, or the purchase and
acquisition by a railway Of competing
lines.
Competition Necessity.
Competition between railways as well
as between other industries is the estsb-
lished policy Of the nation And while the
acquisition Of small minority of the
stock Of a competing line might not de-
crease the competition. yet the acquisition
of any considerable amount of stock. with
representation On the board Of directors OF
such railway, unquestionably has the ef
feet of diminishing competition and less
ening to that extent its effectiveness. So
long as it is the policy Of the general gov
eminent and of the States to maintain
competition between naturally competing
lines, the ownership of any stock by one
railway in competing railway shou.,.
not be permitted. and such lines OF rail
way should be prohibited from having any
common directors or officers.
THE time has come when some rea-
sonable regulation should be imposed
upon the issuance of securities by railways
engaged in interstate commerce. We are
aware that In the construction of new
lines OF railways developing new territory
it has been necessary in many instances
to sell railway securities at large dis
count. and to sell bonds with stock
bonuses. and even in such cases # has
many times been difficult 10 raise the
necessary capital. Men will not invest
their money and take the risk for small
rates Of interest"