The Ocala evening star., 1908-05-06
Appendix No. 2.


Appendix No. 2,
(Senate Document No. f6S, Fifty
ninth Congress, first SESSION. II
Letter from William D. Marks, con-
sulting engineer and statistician, of
Philadelphia, Pa, regarding the
overcapitalization of the steam
railway corporations Of the United
States.
4 December II, 1905
Hon. Wharton Barker,
Philadelphia, Pa.
Dear Sir: Referring to our verbal
interviews regarding the overcapitali-
zation of the steam railway corpora
items of the United States, and more
particularly in reply to your query OF
the 9Th. current, LET me know what
you think fair capitalization Of the
railroads or capitalization the public
should pay for" I would say that in
my experience of late years as con-
sulting engineer have been struck
by the deplorable and almost univer-
sal watering" of securities in railway
corporations practiced by our promot-
ers of these enterprises.
Not only are our railways often
Mastefully built wholly upon the pro-
ceeds of the sale Of bonds at figures
far below par, but the promoters fire.
auently add to the burden Of the earn
ings of their enterprises by issuing as
a bonus (to go with the bonds or ap-
propriated by themselves) an equal or
greater amount of stock representing
speculative profit in the future.
So invariably have l found this to
be the case that I felt justified, after
numerous individual experiences, in
saying to you that more than one half
OF the railway securities issued repre-
sented no real property or investment
Cf cash.
Besides the water injected into
securities by the original builders OF
new railway, other and often larger
percentages of 1t are poured in by
fnanciers who have found their profit
| in combining a number of individual
railways into a System" by means
of a holding and operating corpora
| tion.
AS a result we frequently find stra-
| tum of securities piled upon stratum
CT securities, until chart of the Sc
curities of a system of some railway
systems very closely resembles geo
| logical section.
There can Gf my statement is cor
| rect) be but one of two results OF
these manipulations.
i Either the public is robbed by over
charging to render these watered Sc
curities valuable to their owners, Oh
| innocent purchasers of them lose al
CT a portion of their investments il
| they have been led to believe that
their securities represent real prop
| crty.
Tersely, either the traveller and
| shipper is robbed or the purchaser o1
securities, is swindled if he buys be-
lieving them to have been honestly
issued.
| The purchaser of water" securities
Is either helping thieves to rob the
| public or is himself the victim OF
| thieves
| But probably my general experience
and feeling in these matters will moi
serve to convince you or others, and
II will ask your careful attention to ar
analysis Of the Massachusetts, railroad
| commissioners report, 1904:
Returns Of Year Ending June 80, 100;
Mass. railways: Miles owned
total length of line ....3,794
Total length of single track ....7,601
| The cost of construction OF these
lines, excluding equipment, land ane
buildings, securities Of other compa-
nfes, cash, and miscellaneous assets
is given as $293,236,332. In roune
figures, $73.S00 per mile Of roadbed
S3S.600 per mile of single track.
This single track valuation Is ths
important item, for 1t includes every