The San Francisco call., 1907-02-14
THE FINANCIAL SITUATION
Railroads, Currency, Stocks and For
cign Prejudice


ciEn Prejudice
J. S Bache & Co OF New York thus review
the financial situation:
The railroads last year prepared plans fol
most extensive additions and Improvements
made urgent by the enormous percentage N
crease of freight and passenger business, over
mileage They now ind that means are not
available. The country is short on cash and
new development must be carefully revised and
expenditures scaled down TO only the most
immediate necessities. Every road In the coun-
Try viii follow the action Of the New York
Central, just taken in this direction.
The important causes by reason of which the
present situation was developed, are Two IN
FIRST: EFFECT OF CURRENCY SYSTEM
'-In the summer OF 1906 business throughout
the country Lad grown 10 enormous proportions
A. rule al Legitimate business enterprises.
including railroads. were at their highest point
sdfncicncy % capital had not then made itself
markedly felt. Then began the withdrawal
OF cssa reserves for the crop moving period.
This inv0Fed taking out from under the struc-
tuTe OF credit Sl50U00 OC0: not all at Unce, but
cumuatng. A Withdrawal u $50 000OOO re
serve means curtaiment of four times the
amount of credit. OF $500 800 600. With a vast
business extending everywhere and using even
rheu me lfmtr of credit tie consequence of
this wlthdra wal may be imagined. Its first
effect was To- cause operations for importing
suldi but Europe, too was doing d great busi-
ness, aud could il spare its cash. The ulti-
mate result was TO create stringeucy through
world. and bring down upon
. ~fl-lt extent L-e OPPOSITION OF loLElsA uuali-
,isl interests A. tne importation continued
tDa shipments OF currency 10 the interior pro-
-eedcd the situation became more and more
lcule continuing until early in January.
90 All adequate currency system would nave
rovded easily ISSUED banknotes at the time
vhen needed. and instead Of contraction of
sou. 100000 in credit would have had no
0nIracli0l at ali and the money market would
worked easily all through the months Ul
-tress which were compelled 70 endure. The
Vh0e European situation also would have been
alieyed and left normal because the 100000,
20 ~ gold would have stayed Oh the other side,
here u belonged
SECOND: EFFECT OF INVESTIGATION
--Ear-seeing railroad mana gers, anticips ting
needs Tor new capital IN supplying equipment
OF yur euorm0us business, had early last
4pring begun TO arrange IN the Paris market
oT Jle financing Of their needs. At this moment
ailroad investigation this side commenced
ID assume an ugly and threatening aspect. I'm
specially In new ventures thdrew. We We're
.ert o. nnance our own propositions. The out
0ne of all this IS now being realized
SITUATION SOUND
There Is no question that the prejudice
e foreigners will ie gradually dissipated as
rley come 10 realize that our securities are
Jund prosperity real. and TO appreciate
nat the purge Of investigation viii in the long
ID tend 70 make American securities all the
more desirable. notw outstanding the unneces-
sary atmosphere Of popular opposition and dis
lcntent created around corporations.
The fact Is that many OF our securities are
low very reasonable ia price, and that purchase
or investment is going on daily in odd lots,
which ls always the commencement Of s reversal
- the tide. When foreign buying begins again
IL viii probably take place in large volume