New-York tribune., 1907-09-25
THE TRACTION RECETTERSHIP.

IHE IRAfIfbA REtEfl EHNHIf-
The appointment of receivers of the New
York City Railway Company is the mere burSl-
ing of a bubble that has been blown too Dig
The New York City Railway Company Is Il
combination of the oldf Metropolitan Traction
Company and the Third Avenue Railway Com
pany and ii controls and operates all the sur
face roads in Manhattan and The Bronx 1t
has not earned Il dividend its outstanding
stock this wear: but deficits have been nothing
extraordinary iii the big traction companies
with their inflated capitalization, operating the
surface railways. Hitherto il has been the
custom 10 find in some way the money 10 pay
the dividends when they came due. ana thuS
present brave face 10 TIRE stock buying puhiic-
Money raised a few years ago by bona SAFE
for elet.trifying horse lines is reported 20
have gone thus in part to pay the uhelTheh
dividends This practice of borrowing from
Peter 10 pay Paul had 10 end somewhere ana
il has ended in the receivership-
The changed attitude Of the people toward
public service corporations has probably has
tened the end. Under the public service com
missions law il is no longer possible 10 operate
street railways solely in the interests of high
finance. II is, no longer possible To operate
them so as to give the minimum service ana
extract the maximum return in order 10 come
as near as possible to earning dividends on
enormous issues of watered stock And il Is
no longer possible under that law to borrow
money 10 pay dividends. Faced by inns
changed condition. a public insIstence upon
reasonable service and public scrutiny OF the
uses 10 which bond issues are put, the man
ayers of the street railway system have prom
ably realized that the old mysterious methods
of having dividends. in spite Of deficits, were
near an end and that new and sound finance
must be the order Of the future.
No one can Justly charge the state or the
i,ublic Service Commission with causing this
raceivprShip The blame of ii falls directly
upon the financiers who have organized the
successive companies in this vast network ol
concerns that make up the lnterhorouch-Me'-
ropolitan. who have built corporation dpon
cornoratiCm each time adding 4 liberal amount
of water to the stocks on which dividends hhd
10 he paid and who have taken their profits out
of the credulous investing public. leaving to the
managers of the roads the impossible task Of
earning dividends on the ever increasing vol
ume Of securities Every one can recall how
merger followed merger and corporation fol
lowed corporation. In few years there were
the METROPOLITAN Traction Company. the New
York CITY Railway Company. the Metropolitan
Securities Company and finally the INTERIOR
olgh- Metropolitan. Each new incorporation IN
volved a guarantee of the dividend of the
previous company and a flood OF new securities
on which dividends must be earned. until,
when the Interborough- Metropolitan was or
ganzed with Iarge1supPiy of water. 1t was
openlv said by conservative financial critics
that at last the bubble had been blown TO
bursting That prediction Of less than TWO
wears ago is now realized. The waterlogged
Netropolitan system could not be carried by
tho conservatively managed Interborough. The
rOuld been
long postponed.
The evil results of this wildcat finance in pub
liz service corporations are not confined to the
comnanes themselves and their shareholders.
Much as may be said about the physical Difficult
ties OF the traction problem in this city, on ac-
count of the length of the island and the lack Of
sufficient north Nnd south streets it still remains
true that the financial methods of the public
service company promoters have been the chief
cause of New YOrk's sufferings from an made
ouate and indecent service. Stranlng TO earn
dividends meant infrequent and overcrowded
cars. 1t used to be said that 'the dividends
were in the straps" but that was In the days Of
conservative street railroading. before manage
ments became grasping. Latterly they have not
been even in the straps
As we believe the receiverShip has been inev-
liable for a long time, so we believe il is the
first step toward betterment- The street rail
roads must be got down 10 sound basis. Some
of the water must go out. 1t is preposterous
that the roads should he capitalized as to
be unable to earn dividends. One consideration
makes this obvious: The subway, literally cap
italized but not extravagantly, earns a good
dividend though il cost vastly more to build
and is more expensive TO operate than the sur
face roads and though it gets much more long
haul" and much less short haul" traffic than
they Reasonably financed they should pay
handsomely. A receiversbip is common result
of unsound finance and a common introduction
10 sound finance. 4 large number of this cOun-
trys steam railways have had TO go through
receivership to be cured Of the results of unwse,
extravagant overambitious or speculative man
agement. They now paying properties,
soundly conducted.