Los Angeles herald. [microfilm reel] (Los Angeles [Calif.]) 1900-1911, 1908-02-07
RAILROAD FINANCES

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of "close money" which has been pro-
duced by the recent stringency, than
any other of our large business inter
ests. The railroad managers have en-
deavored to make 1t very prominent
that the financial depression, which
they attempt to charge to legislation,
recently enacted or threatened, will
prevent them securing money to make
betterments and improvements in their
tracks and equipment necessary to the
proper accommodation of the business
of the public.
In this connection the following care
fully considered and excellently ex-
pressed editorial utterance from the
current number of the Review of Re-
views is very timely and appropriate:
"The most serious difficulty that
looms up in the near future concerns
the railroads. 1t is impossible to see
where they are going to obtain money
enough to go on with their necessary
| improvements. The era of combina-
ton forming in railroads has been &C
complished by reckless financiering
and overcapitalization. Where the traf-
fic demands of the country have in
creased 100 per cent the railroad facili-
ties have not increased more than %
per cent In some mysterious way the
private fortunes of the men who have
managed to get themselves at the head
of great railroad enterprises have be-
rry11f AZ Vo {Itnu n n
panies are not in fortunate plight
When the investing public would no
longer buy fresh bond issues. the rail-
roads sold short-time notes at high
rates of interest in order to provide
themselves with equipment or to make
necessary improvements. AS these OBJ
legations begin to mature the roads
are in much perplexity as to the way
to tide along. A difficulty of this kind
has thrown the Chicago Great Western
system into a temporary receivership.
and the Seaboard Air Line system has
also gone into the hands of the courts.
There were rumors last month that the
Southern Railroad system might have
to seek a receivership and undergo re-
organization, although this was denied
in we'll informed quarters. Several
other roads are undoubtedly shaky in
their financial position and if the pres
ent shrinkage in earnings should be
long protracted they would not be able
to meet their maturing obligations. 1t
is not at all creditable to American
railroad management that after long
period of uneXampled prosperity the
companies should disclose themselves
as so near the bankruptcy line at the
first approach of a business recession.
eff capitalization had been kept
small from the beginning and earnings
had been properly applied to the main
tenance and development of the lines,
we should have seen no such piling up
of obligations as now hampers almost
every mile of railway in the United
States. The situation calls impera-
lively for governmental regulation of
issues of stocks and bonds. The new
legislation that the president called
for in his message is greatly to be de-
sired from all standpoints. Railroads
now especially need supervision for the
protection OF the holders of their stocks
and bonds. The interstate commerce
commission makes a very favorable re-
port upon the working of the amended
rate law for the period of fifteen
months during which it has been in
operation. The point of view OF the
administration and of the interstate
commerce commissioners is by no
means hostile TO railroad prosperity.
Amendments to existing laws as asked
for by the administration would en-
nance the value of railroad invest
ments. The railroads should be al
lowed, for example. to make reasonable
agreements. particularly as regards the
fixing and maintaining of rates. On the
other hand they should be prevented
from speculative investment in the
stocks of other companies and should
be held strictly to their duties as COM
mon carriers"
Suppose, for example, that the Union
Pacific and/Southern Pacific systems
had in their treasures the huge sums
which have been made out of manipu-
lating their finances by Hartman and
the coterie of f1nanciers which have
dominated those great properties dur
ing the past ten years. Does any one
think for a moment that those COM
panies would have to go into the money
market as borrowers in order to obtain
the money with which to make neces-
sary improvements in their plants?
Most business enterprises of the
world find it possible in prosperous
times, to make improvements and bet
terments out of the surplus of their
incomes over and above operating eX-
penses and fair dividend rate. The
railroads of the United States have
never in all their history passed
through such a period of unbounded
prosperity as has favored their bust
ness in the last ten years. In truth,
there is hardly an important railroad
system in the country but has had
more business than it has been able
to attend to.
1t is a known fact that the Southern
Pacific company in its handling of Cali
fornia business has found 1t necessary
to refuse business which would have
produced a great addition to it's al