The Washington times., 1907-04-07
Our OvercapitaLizatiOn
Justified, Says Schvab
Great Business Always Going Ahead to Eat
Up Large Stock Issues, Steel Pro-
moter Believes.


NEW YORK. April e.-charIes NJ.
schwab now adds TO the controversy
regarding overcapitalization. which
has ragged throughout the country for
several weeks. so far as the railroads
are concerned.
The United States Steel trust, which
Is in part a monument TO Mr.. Schwab
own handiwork as A trust craftsman,
l4e declares, was overcapitalized. and
in a lengthy interview he stated frank
" his reasons for believing that over
capitalization IN the past has been
justified, and that 1t is likely 10 con-
tinue.
Mr.. Schwab was met at the home Of
an old friend OF his and talked freely
for something mere than half hour
concerning the general financial situa-
ton.
What Is your opinion as TO the sub
5ect Of overcapitalization2 20 was asked.
Briefly. I do not beieve in It at the
present time
But You did not always feel that
way. did your
mo. Conditions have changed. how
ever, AID the public must be convinced
that overcapitalization is not such a
bad thing. When we get to discussing
overcapitalization we must not forget
that this country Is going ahead with
gigantic strics Is. The American people
hardly realize what progress we are
making, and It is necessary 70 take that
into consideration"
do you believe the railroads are over
capstalized7' was asked.
Il am not familiar enough with the
railroad business to say anything about
it,
but how about The big Industrial con-
Germs, the trusts? Are they overcapi-
talized?"
They certainly are. he said.
A Trust Mans Version.
Schwab paused for a moment and then
continued. giving for the first time a
trust mans version of the situation
Il wonder If you realize" he said,
that many Of the so-caIled gilt-edged
railroad securities which are sought
after today were originally given away
as premiums with bonds. Today those
stocks have risen greatly in value and
the overcapitaIization has been wiped
out. That is the country's development
of the past
What has been done viii continue.
All the overcapitalfzation that exists to-
day win IN time be wiped out. only the
coming Increase in Industrial wortsl -yill
be far greater than IA the past"
You mean then. Mr. Sehwab, that
you promoters have been gambling on
the success OF the country, do you nOt2''
mo, IT was not gambling There was
no gamble to f. Observation was suffi-
Client 20 show that the industrial
growth was a certainty"
DO you mean to say that overca5,-
italization Is justified 10 the extent that
il is a good thing todsy?"
NO. It Is not proper now
You Say. Mr.. schwab. that IN the
past It has been justified because Of the
growth OF the country. and you say that
! the present outlook for the nation Is
/ brighter than ever. why. then, is not
overcapitalization az the present time a
good thiRg2'
Mr.. schwsb hesitated only the frac-
ton of a second and then he said:
Business Eats Up Stock Issues.
Corporations VIII in the future be
Overcapitalized. can point out in my
own business an indication Of how the
business is swinging; ahead to eat VI
great stock issues. In 1880 there were
about 10000 tons of steel used annual
" in this country 1t took several years
10 double this. and the development Of
business later began IN earnest, and
now we are using about 24.O00O00 tons a
year"
''What Is your opinion as to the safest
form Of capitalization? Do you not