New-York tribune., 1907-06-06
RAILROAD DISCUSSION.
FISH DEFENDS POLICY.
Tells Economics Club Lines Are
Not OUercapitalized.

|
ganized Economic Club of New York at the Ho-
tel Astor last night on the subject rs the Over
capitalization Of Railroads an Evil?"
some OF the speakers Jumped" the subject
IN their academic dscourses. Only ten minutes
| was allowed each. because of the long list If
! speakers The divergence of opinion that de-
| reloped wide
! Stuyvesant Fish consumed most Of b,s al
| lotted time in reading paper by H T New
| comb, of Washington He said however on his
! own account that there was considerable un-
necessary acclaim against the decentralization
! OF railroads. which he said We're really under
| capitalized. The voluminous statistics which
| Mr.. Fish read from the article by Mr. Newcomb,
VINO is corporation lawyer, showed that the
! European railroads generally We're more heavily
capitalized thar the American railroads
Henry Clews placed himself firmly on record
as opposed TO overcapitalization, and recon-
mended imprisonment for persons who watered
| railroad stocks which he said affected the inno-
cent stock and bond holders.
Mr.. Clews Condemned the overcapitalization
of railroads and the declaration of unearncd
dividends. saying that they should he stopped,
otherwise the country would drift into a period
Of railroad reorganization like that OF 1893. He
pointed out the evils of overproduction, and said
that under the modern system of financing rail
roads and industrial corporations, overcapitali-
cation had in many cases run riot and had pro-
duced overplus of undigested securities He
thought this system would lead to disaster II
not curbed. and he suggested that managers Of
corporations he compelled in asking for sub
scriptions 10 new securities to state definitely
the purpose for which the proceeds neeled.
The question regarding the best remedies to be
adopted to prevent a repetition OF stock water
ing Mr.. Clews answered as follows:
My plan IS for the government TO appoint sala-
RED director in each of the interstate roads, this
n on Fha fg,.a ,,g.+-- ,FE,
His duty should be 10 a Watchdog and he
Snerne Si, Se 20 m 'eLort 20 ,he InteStat ON
any; besides which, the interstate roads should be
their exact condition semi-annuaiiy 0ficiaIs Of
railroad companies found guilty Of any Illegal acts
whatsoever should be punished by imprisonment
Money penalties are OF no use in stopping wrongs
made him such a power was 10 buy up two poor
apadS 5 put mem INTO one infuse plenty Of water
good: then he generously unloaded upon the con
days he was appreciated for What he ' ala in his
ta lime howeTer numerous other masnates h2r"
against eKcesses in corporation methods has been
Roosevelt for his initiative in calling halt fo fode
watering and other corporation abuses
adopted, confidence would at once be restored
which is now sadly lacking, and our railroad So,
curities would be sought for permanent Investment
by investors in all parts Of the world and thereby
one end OF the nation, TO the other.
Professor Edwin r A. Seligrnan presided and
in his Introduction Of the subject he went deeply
into the physical values Of railroads and their
capitalization. Being the chairman he was not
restricted TO ten minutes and he took up twenty
five. He said there was no doubt that there had
been instances OF overcapItaIization bur AZ Tho
present time he doubted II there was anydircr-
ence in the physical value and the capitalization
OF railroads. Professor Seligman said some Of
the best students-in which class he placed
President Roosevelt-asserted there was no gen
eTal overcapitalization. He added:
bo ns res man 1b who The risk The
there have been examples I'm this countr,. ,.be-a
have taken shares without any risks. The tme Pirs
and the railroad bI3ness he's PASSED away
basis 'u"S Is on Sounder |
Ex-Mayor Josiah Quincy Of Boston. and y
member OF the Boston Economic Club was ir
troduced and extended the greetings OF that |
organization to the new club, He said that the /
class or questions that held the greatest public
interest were those Of an economic character
and that the most interesting Of all question,
was the relation between economies and morale
Francis Lynde Stetson took as his taxt prost /
dent Roosevelt's speech IN INDIANAPOLIS 4 few,
days ago. He said that decentralization Of !
railroads could be an evil only II II resulted y,
extorttonate and excessive rates or fare and |
then the question the same whether fl was
a railroad or a corporation of any other char
acter. If there any real evil in overceri-
real injury to the public in rates There was in
this country. he said, too much competition be-
tween railroads
Joseph French Johnson, dean of tho New York
University School Of Commerce. said:
q. Fifteen years ago the railroads or the United
States were capitalized at about ten billion dollars
half stock and half bonds and the stock was com,
monty said to be pure water. the bondholders hav-
ins paid In the money which built the roads A.
the present time the capitalization is much larger
but we have II on high authority TINT # does not
much exceed the actual value Of railroad proper
ties. The water that has been boiled down or
squeezed out has been solidfed into real value
Fifteen years ago the railroad capitalized
the future and then accused OF overcaptaliza-
ton The future has made good and they nov
stand acquitted OF the charge. In the 7O's and
early sos. great the Juror for rail-
road building and so rose colored the glasses of
with water soaked bonds, as well as stocks That
was time OF railing prices, falling rates and de-
d endhe net eaIhlnSs ,E Inc tut4re dld not make
cations resulted. From the stockholders point Of
view overcapitalization is evidently not an evil.
increasing business and larger net income.
When a private business is incorporated the
power and its expectations Why should this
method be deemed an evil when practised by a
for no connection be discovered between rates |
and capitalization. Rates are determined by what
for the law of demand and supply. Nor does ex-
cessiye capitalization in itself work any injury to
the investor, for stock markets instantly
The evils connected with the hnanciering Of
American railroads are not the product Of over
requirng that capital stock sha represent dollars
actually invested. The greatest evil connected with
tho management OF corporations is stock and bond
juggling and this is made possible by the law
which permits set Of men as stockholders TO
or stockholders Of another corporation. SO |
secret the investor can never be certain about the
les he here Is