The Idaho recorder. [volume] (Salmon City, Idaho) 1886-1927, 1907-04-18

Hon. Henry NJ. Whitney, 247 Allan.
tic Avenue Boston, Mass. My Dear
Sir: | am In receipt OF your letter
as follows: "As you are known to
be an advocate OF regulation of rail-
roads, both by the national and state
governments, and as you have also
announced it as your belief that gov
eminent ownership furnishes the ul-
innate solution of the railroad ques-
tion, ] write to ask you whether in
your judgment there Is any danger
that regulation will be carlieo TO tile
point OF preventing reasonable re-
turn on money invested i'm the rail.
roads of the country, and whether in
case OF the adoption CT government
ownership by the nation OF by the
several states the stockholders could
expect 10 receive price equal TO the
value of the physical railroad proper
| ties?n
In reply would say that am In
favor OF both national and state reg.
ulations, and that also believe that
public ownership is the ultimate So
luton OF the railroad question. In
any discussions o" this subject l have
pointed out that because OF the dan
ger Of Capitalization in ownership by
the federal government of all the
lines, l prefer system in which the
federal government will be confined
to the necessary trunk lines, and the
ownership OF the rest OF the lines be
left to the states. This, however, is
not an immediate question, at least
| am not sure that the people are
ready TO consider the question of
public ownership, and until they are
ready to consider that question the
interest is conferred In regulation.
AS an advocate Of regulation of the
strictest sort, | can say to you that
there Is no danger whatever that this
regulation will be carried to the
point of preventing a reasonable re-
turn on money invested in the rail-
roads Of the country. And | can also
assure you that whenever public own
ership is adopted by the states or by
the nation, the stockholders may ex.
pect to receive price at least equal
to the value OF the physical proper
ties Of the road; but no such assur-
ance ought to be necessary for two
reasons: First, because the public
has shown no disposition TO reduce
railroad earnings to point which
would deny reasonable return.
There Is sense OF Justice In the
public that can be appealed TO and
that sense OF justice will prevent leg
islation which is unfair. IL is not
necessary for the railroads to bride
Legislators either with passes or with
other favors to protect themselves
against legislation II the railroads
are satisfied with reasonable re-
turn. The trouble is that the rail-.
roads have watered the stock and
have compelled the public to pay div.
idends and interest upon fictitious
capitalization. This is resented by
the public, and very properly so, but
their resentment will not be carried
to the point Of doing injustice to the
owners OF stock.
When, however, we come to consid-
er the question OF investment there
may be difference Of opinion as to
what is just. ! have commended that
the present value OF the railroad
should be ascertained 10y the inter
state commerce commission and the
commissions Of the various states, In
order that investors may know when
they are buying stock Of intrinsic
value and when they are being cheat
d. AS long as promoters are per-
mitted to issue stock that does not
represent real value there must be
fluctuation In the stock market, for
every disclosure of bad railroad man.
agement necessarily affects the value
of stock. The stockholders, there
fore, who desire to purchase for legiti-
mate investment, should have as
much interest as the patrons In re-
ducing the railroad business to an
honest basis. but the railroads have
thus far prevented the passage OF
law authorizing the interstate CON-
merce commission TO fix the value OF
the roa Is.
When the value OF the roads Is as
certained. ] am satisfied that public
sentiment will insist that the returns
shall he sufficient 10 pay reasonable
dividend upon the money invested.
What this dividend should be IL
might be difficult TO fix arbitrarily.
believe the statutes OF Massachus-
etts and Connecticut fix minimum
dividend, but as these laws were
passed some years ago when the in
terest rates were higher, the rates
fixed are probably too high at this
time. ! should say that any max
hmm rate fixed by the people should
be little higher than the rate fixed
by competition IN the purchase OF
stock. If, for instance, stock which
pays -four per cent dividend can be
sold at par maximum dividend