New-York tribune., 1908-04-22
UB Ry4y on THE BANKRUPTCY,

UP. RYAN on THE BANKRUPTCY.
Mr. Thomas f Ryan's statement regarding
the street railway financing goes so fatty
against the long current impression that 1t VIII
lee received with i gasp of surprise. II IL WIS
so easy TO show that there was no conslderahe
stock watering In the various moves through
which the ownership Of the local railways
passed. why should not the statement nave beeh
issued not three months ago as Mr.. Ryan de
sired but wears ago: For the public criticism
Of the financial methods of the street railway
c-ror1D has been long continued. His statement
is in effect that not stock imitation but the eX-
tension of the free transfer system. the increase
Of taxes. particularly the special franchise tax
the street congestion with resulting accident
Claims and the competition Of the subway
have caused the present bankruptcy
These causes of bankruptcy seem rather IN
convincing. The showing that the transfer Fys-
TEN results IN carrying passengers for about
three cents Is produced by counting the trans
+prred nassengpr twice. The increase in the
nercanrsgp Of operating expenses to gross in
como from 1897 70 1906 was only from ~ 70 %
ner cent When the advance in the cost Of labor
and other things in that period Is taken INTO
consideration II is not likely that even that
per cent is due TO the growth in transfer trafnc-
The franchise taxes. which are alleged as po-
tent cause Of bankruptcy. have never been palu-
s. 100000 a year-hut surely not all the
..clains" result in awards of full damages
Much of the street congestion complained OF as
Increasing oDera1ing expenses was shown IN q
recent investigation TO he due 10 the state Oh
had rpn9ir into which the street railway roluHS
stock had been permitted to get
J-1sr as Mr.. Rvan's causes Of bankruptcy VIII
hardly be accepted as sufficient. so his figures
10 nrove that stock watering was not lnduIseu
IN nv him and his associates will hardly dlSpel
the r-ev8lenr belief that the surface roads were
vastly overcapitalized. Mr.. Ryan 5 figures break
off AZ inst about the time when high finance
l,a-iDs He takes Us down TO 1900 with the
NferronoIi+an Street Railway Company with
-ariraI IF SO 600 600. representing ''S43.24pouo
actual cash investment That company was
leased in 1904 10 the New York City RallWay
Con7nonv. which owned about half a mile OF
track in The Bronx ana was capitalized at 81
GOO 600 This company in turn was sold 10 lhe
Hra+rono1i+9n Securities Company, with cap
f-al of S200o00N0 Though new capital was
n ha furnished by the securities company, that
,,o-7npr7v annsrarrlv failed 70 furnish it. When
tho D-asarr Observation-Disclosures COmbina-
I'M, 7ras formed the S52o00eG0 stock OF the
Narropolitan Street Railway Company was &C
. -ording 70 the plan. exchanged for SSoo0c'V'o
4 Of the ACKNOWLEDGEMENTS stock ana lhe
. $40 ODn 600 stock of the Metropolitan securities
for SOS 10000 Of the new stock. mus Win
Is--le or perhaps no additional cash the STOCK OF
. the surface roads rose from S52F'ooeo at the
. time Of Mr. Rvan's statement 10 S1pS63o"'p n
/ tho nrasenr merger. When the S52.Goh0p cap
iraIizarfon existed at the time Of Mr., Ryans
statement dividend on it was not n fixed
I charge Rv the lease 10 the New oTh til5
Railway Company the system was hurdehed
with a fixed charge of : per cent on the S9-."''--
4 600 The fixed charges Of the system have been
steadily increased, until with earnings ad-
. vaucIng only 102 per cent, fixed charges ad-
vanced 2J0 per cent. Most persons VIII reEaIu
the steady burdening Of the roads with fixed
! charges not the transfer system and the fran
/ chise tax. as the cause Of bankruptcy.
Nor will Nr Rvau's figures down To 1900 as
they are given be accepted as necessarily de-
rnonsrrating sound finance until that date. He
shows So. .00O0o0 stock. representing S43.24Oo@D
cash paid in-Dor bad proportion But the
+ real question Is. What was done with the cash
paid in IF Il went into stock and plant II was
. sound finance If il went partly TO pay fixed
/ charges guaranteed dividends on subsidiary
( COMPANIES and the like Il was not sound
finance and the proportion Of actual water al
ready in the stock was much larger than Mr.
. RIsn-s figures would indicate. In the later
years Of the company, II IS pretty well estab-
. IiSbed il was the custom 10 pay fixed
/ charges out Of borrowed money. If this Gus
tom prevailed before 1889. then. though S43.240,
. opo Of cash was paid in. the company did not
/ have that amount Of property 10 show for II.
/ In 1895 ana 1899 and 1900 S262o000O of cash
was paid into the company for stock issued,
and in Mr.. Ryau'7 statement only the eXpendi-
+ ture Of SG.0poeoo is accounted for. If the rest
was properly Invested and none Of it Went 10
pay fixed charges. then the amount OF water
I'm 1900 was low. Otherwise not. In other
words il is not the paying OUT Of cash that
j. a guarantee against stock watering. but its
actual investment in something Of value which
The stock represents ON this point Mr.. Ryan
is not clear. and his statement for this reason
and because Of the period ut which II ends. will
not be accepted as throwing much light on the
tangled history Of street railway finance