New-York tribune., 1908-02-06
LETTERS TOTHE EDITOR
"WATERED STOCKS"
Fiescs of Justice Hinsdale and
President JoHne.

| lowing statement:
The talk about watered railroad stock Is I un. =.
| the railroad stocks of the country II would be
impossible replace the railroads for the par value
| OF the railroad stocks of the country
| If this were candid and true statement OF the
| situation in every aspect Of the question II "oulo
| and should soon put end to all discussion as
to excessive issues of railroad securities Is SO
far from truth and candor that 1t ought not 10 go
! unchallenged. The great discussion is on and Will
| continue until some result is reached and the pain
| truth of past corporate nismsnagenlehI VIII
and must come out. 1t may be true that the rail-
roads of the country could not be replaced Win
| the money apparently represented by the stocks
| and securities outstanding. and yet Presioehe
| Eiott's statement would be very Tar from 'he
truth
| Those of us who have lived through the develop
| ment period of the railroads of the country know
| perfectly well that the government maze land
grants various railroad corporations In the Wesl'
that in the East citizens and public spirited men
| granted thousands of miles of right OF way TOT
nothing; also that fixing and establishing the
stations and facilities in cities, the lands
were bought at very low figure at the time 'hey
! were acquired by the corporations. These grants
and gifts were made for benefit of the corpora
tons and not for the benefit of promoters ana
schen1ers who went TO the head Of these orsanlza-
tons
When the roads were built their right of way
through the lands that were granted the land Tor
railway stations and other facilities cost them
nothing. 1t expected that the accrelloh anu
advance in value would accrue to the beneHI VI
the corporations It not the intent or the
gifts that all of that accreton should go INTO the
private pockets of officers and managers II GER
tainly would cost enormous sum OF money now
after the country has been developed ana I'M
proved acquire that which was given W liI0
railroad corporations
The gravamen of the charge against railroad
managers and the point of the public criticisms o!
the same that by one method or enothel dii
this advantage by growth has been flched away
and NOR
and had no legal right do so have amasseo
enormous fortunes out of that Whlch shouiu oe
long TO the railroads The result to-day Is thaC
the railroad corporations overloaded with
stocks and bonds, and compelled to pay IN
terest and dividends upon enormous amount
of such securities. the proceeds of which are not
of the slightest benefit TO the Corporations tlidI
issued them.
The charge is not that the management mas
been wholly bad and that the railroads receive
no benefit from these issues. The charge Is 'iat
large percentage Of these issues. enough 10 GRIP
ple the railroads has been taken from them by
men who through various schemes and devices
have secured the securities and deprived the raI-
roads of the proceeds of the same
TrPresident Elliott would establish the PROPOSE
ton that there has been no substantial roDoery
of railroads in the manner I have indicated II
would at once restore public confidence in railroad
management The public antlpathy would DC a'
once aIayed and the common effort OF the puoilo
and OF the railroad managers would al once DC
TT is the deep rooted belief of colossal ROBBERY
Of corporations by promoters and managers that |
has so greatly disturbed the pubic over thls Ques
ton Remove that belief and all trouble VIII De (!
over do not claim nor does anybody that kno"
of claim that all railroad managers are Charge |
able with dereIiction of duty in the matter Oh ao-
nlinistering the trust committed TO thelr charse
No country has abler or more honest pous ot
managers than can be found in this country 1t |
&c in vain to charge the laws or TO any man re-
sponsibiity for the present condition or rallroao
securities. and at the same tune ho4o Tree oi
hlarne those who have acquired unjustly and IN |
violation of the ordinary canons OF honesty SO
large part of the securities OF the seveIal Coil-
panies Yours truly, T. B. hlN0D-AAI1'
New York Feb 4, 1908
When asked about ex-Justice Hnsdale's refec-
-ions on President Elliotts statements about rail-
rosd stocks Adrian H Joline. president and chalr-
man Of the board of directors OF the missouri Kan
sas & Texas Railway Company, had this to say;
."The loose talk about 'watered stock which Is SO
common in these days is the result OF imperfect
information and lack Of knowledge of the facts
The evils of so-called 'watered stock are greatly
overestimated. In the first place, deny that the
RAILWAYS of this country are, as a general RUE,
overcs pitalized I believe 1t can be demonstrated
b, nroof that they could not be rebuilt and recon-
stituted for the amount of their stocks and oonds
at par But suppose the value Of their assets Is
less than the par Of their securities AS nave
said publicly before, If have piece OF property
thousand shares of 800 par value each. and 1t is
really worth $4,000, one is injured II call II
two thousand shares of 800 each, nobody is in
iured unless he buys it under the mistaken I'M
pression that each share is actually worth 800
.oTbere is a very wise and ancient maxim OF law, |
caveat ernptor If a man goes in the stock market
and buys-say at 5o-a share of stock on the idea
that il is actually worth 500 he takes his chances.
Everybody knows that no 500 share of stock is
worth lust 500 except in very rare cases. Only
nersons of feeble minds seduced into buying on
the idea that the par value OF share is its actual
value In the case I put the increase means only
that the holder of a share is entitled to one-two
+bo,ssndth of the property instead of oneone thou
sandth It is true if 1 extort money from the
nav be wrong But, in fact, the railways do no
s1Ich thing and such a man the President, |
who cannot be accused Of undue partiality for rail-
complaint of excessive rates. but only of dscrim
nation in rates All this nonsense about watering
stock would be sienced if people only reflected
little.
The statement that men have secured securi-
Ties so as to cripple the railroads is absurd
No one can point a railroad which has been
crippIed by robbery The idea is delusion
AS to Justice Hnsdales statement about the
aid extended railroad corporations TO build lines
need only say that government and states have
often been eager to offer inducements for the build
ing of railroads When they are built and in sue
cessful operation this eagerness has at times been
forgotten and the railroads have not infrequenuy
come in for unnlerited and unthhking censure.'
cCY TT