Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-01-20
Financial News Letter

NEW YORK. January 19.-When a few
| weeks ago that eminent diagnostcian of
| railway ailments, Mr.. James J. Hill of st.
| Paul, told an amazed country in the course
| of a speech in Chicago, that freight traffic
| was growing so enormously that we should
| need in the course of the next few years
| 100000 miles more of railway tracks, and
| that the crying need of the railways at the
moment was hundreds of millions of capital
| to relieve the congestion of traffic coinci-
| dent to our unprecedented prosperity, it
was supposed that Mr.. Hill was only having
| one of his dreams. The curious thing about
| these dreams of Mr. Hill is that they usual
| ly come true. and come true long before
any of us expect. Since Mr. Hill made his
railway expansion speech in Chicago the
| big news in Wall street week after week
has been continuous demand from railway
corporations for new capital. Mr.. Hil's
own roads have asked for $4,000. 900. the
st. Paul has asked for $1oOO00,0O0 for its
Pacific coast extension; the Pennsylvania,
Immediately upon the death of Mr. Cassatt,
has announced it's intention of asking its
| stockholders for authority to issue $780,
100000 Of new securities; the Chicago and
Northwestern was asked for 10000. and
other railroads are at work on more or less
elaborate plans for new financing.
Mr.. Hill estimates that s.. 500 900 900 must
be spent in the next five years by Ameri
can railroads. The railroad financing of a
permanent character which has already
been announced may be divided into three
classes-the first, securities already offered
to the stockholders and in process of sale;
the second, securities authorized but not
yet offered to stockholders or otherwise
disposed of. and, third. issues for which
boards of directors have asked authority
The securities offered to stockholders and
in process of sale (nearly all stccks) amount
to StD0O.01D: those authorized but not
yet offered sold figure up $500 600, COO.
and securities for which authority has been
asked by directors amount to S200.000. O0).
This makes total of 81 coo, 900. 900 of rail-
road financing in sight now. This does not
include the well-known needs of various
roads that have plans for raising new capt.
tai now under consideration. The South
ern railway is one of these. President Fin
ley of the Southern has seen fit to issue a
letter to the public generally we'll as
| the company's stockholders. calling atten-
ton to the very rapid commercial growth
of the south in the past twelve years and
to the manifest need of the company for
new capital with which to provide facili
ties to handle the business offered. Mr..
Finley POINTS out that the Southern in the
past twelve years has spent or contracted
to spend nearly S1G0,G Oa.G0) to keep the
capacity of the road up to the demands of
the territory it serves. Mr. Finley admits
that the railroad service of the country in
general. and that of the Southern in par
ticular is far from satisfactory. Mr.. Fin
ley calls attention to the very large increase
in the cost of materials and labor in the
! past few years without any increase in
railroad rates. He says that this cannot
go on.
Mr.. Hill asserted in his Chicago speech
in November that the country. because Of
the inadequate transportation facilities, was
suffering from slow paralysis" This was
, his diagnosis of the disease He repeated
this this week The remarks of the presi-
dent Of the Southern railway are along the
same line. The Southern is suffering from
Mr.. Hills disease of slow paralysis. The
immediate effect of Mr.. Finleys diagnosis
YVES heavy selling of the shares of the
Southern in Wall street. This selling came
not only from purely speculative quarters
here but from what appeared to be foreign
investment quarters. The immediate eff
feet on the market of Mr.. Finley's diagnosis
was more violent in the preferred shares of
the Southern. The selling of Southern rail-
way shares for some days, especially the
liquidation in the preferred shares, leads
to the belief that it IS the intention to cut
the dividend on the preferred. Still, it is
not well to leap at conclusions. There
two ways of providing new capital for a
railway. After property has been bonded
and stocked until its securities are I'M
salable except at great sacrifice. as was
the case in the Rock Island. the way to
provide moro capital is to economic and
cut dividends. 1t takes a great deal of
courage to do this, for the cutting of dvi-
dends, while it speaks for economy, hurts
! a company's credit not only with it's stock
holders. but with banking interests. The
more popular method of getting new capital
these days is that employed by the Penn
sylvania and New York Central roads.
These two railroads, especially the Penn
Sylvania, are spending an enormous amount
of money in terminal work in New York.
Both of these roads have recently raised
their dividend rates, not because of in
nrOfitS their hnSipeSS bnf hn-
cause of their desire to raise their credit
and place themselves in better position
to raise more money. There is no queS-
ton that the increase in the Pennsylvania
dividend from per cent to per cent was
for the purpose of facilitating the sale of
its bonds to French investors.
Wall street has got Into the habit of shud-
dering every time it hears of a railroad in
need of money. The spectators in stocks,
who seldom get outside of Manhattan is
land, and who only know by what they
see in the newspapers of the marvellous
growth of the country from ocean to ocean,
say that the present prosperity is too cost
ly. Every time the spectators hear that
railroad is to issue new securities they i'm
mediately pounce upon its stocks in the
market and depreSS them When Congress
appropriations for the national government
first reached the $1,o00,OO0,OOO mark the
whole nation was aghast. The loud cry
went up that we were plungng into an
abyss of extravaganza, and going re!ght-
| way to the devil. Thomas Bracket Reed,
of criticism by the apt phrase: I'VE are
now a billion-dollar country Thereupon.
everybody got chesty and lamentaton and
alarm gave place to self-c ongratulation. At
first blush the announcement that Penn
sylvania is about to ask for another large
increase in It's already stupendous capt.
talization strikes people something as the
news of the 81 900 1000 appropriation re-
ferred to- When the first shock passes
away there will be a realization that Penn
sylvania is approaching that point in its
history when it can lay claim to being a
billion dollar proposition. The call for fresh
capital to complete its colossal improve
ments requires no apology. 1t should be
an occasion for congratulation. rather than
weak explanation attempts to placate
public opinion as expressed in Wall street
And what is true of the Pennsylvania is
more or less true of other leading railways
1t is unfortunate. of course, that railroads
are always forced to spend the most money
for extensions and improvements when
labor and materials are the highest, but
this is one of the penalties of prosperity,
and too, it is one of the checks over
expansion.
When the Pennsylvania made it's big in