Evening star. [volume] (Washington, D.C.) 1854-1972, 1908-07-28

tlce, ana change In the jurisdiction OF
the interstate commerce commission. 1t
does not assist matters to prescribe new
duties for the interstate commerce COM
mission which 1t Is practically impossible
for It to perform, or to denounce new Of
| lenses with drastic punishment, unless
subordinate and ancillary legislation shall
be passed making possible the quick en-
forcement in the great variety Of cases
which are constantly arising of the prin-
ciples laid down by Mr.. Roosevelt and
with respect to which only typical in
stances of prosecution with the present
machinery are possible. Such legislation
should and would greatly promote legiti-
mate business by enabling those anxious
what are the bounds of their lawful
| action. The practical constructive and
difficult work, therefore. of those who
follow Mr.. Roosevelt Is to devise the ways
and means by which the high level of
| business integrity and obedience to law
which he has established may be main
tanned and departures from 1t restrained
| without undue interference with legiti-
mate business.
1t is agreeable to note in this regard
that the republican platform expressly
and the democratic platform implicitly,
approve an amendment to the interstate
commerce law by which interstate rail-
roads may make useful traffic agreements
If approved by the commission. This has
been strongly recommended by President
Roosevelt and will make for the benefit of
the business.
Physical Valuation Of Railways.
Some of the suggestions Of the demo-
cratic platform relate really to this sub
ordinate and ancillary machinery to which
I have referred. Take. for instance, the
so-called physical valuation Of railways
1t is clear that the sum Of all rates or
receipts Of a railway. less proper ex-
penses. should be limited to a fair profit
upon the reasonable value of its property
and that II the sum exceeds this measure,
1t ought to be reduced. The difficulty in
enforcing the principle is in ascertaining
what is the reasonable value of the COM
pany's property. and In fixing what Is
fair profit 1t IL clear that the physical
value Of railroad and its plant is an
element to be given weight In determining
its full value: but as President Roosevelt
In his Indianapolis speech and the Su-
preme Court have in effect pointed out
the value of the railroad as q going con-
Germ, including its good will. due to efflci-
ency Of service and many other circum-
stances, may be much greater than the
! value Of its tangible property, and 1t Is
the former that measures the investment
on which a fair profit must be allowed
profit Is one involving not only the rate
of interest usually earned on normally
safe investments, but also a sufficient
allowance to maze up for the risk Of loss
both Of capital and interest in the origi-
nal outlay. These considerations will
have justified the company in imposing
charges high enough to secure fair in
come on the enterprise as q whole. The
securities at market prices will have pass
ed into the hands of subsequent pur-
chasers from the original investors. Such
circumstances should properly affect the
decision of the tribunal engaged in deter
mining whether the totality Of rates
charged is reasonable or excessive; To
Justly impair settled values as to destroy
all hope Of restoring confidence and for
ever to end the inducement for invest
ment In new railroad construction which,
In returning prosperous times, is sure to
be essential to our material progress. AS
Mr.. Roosevelt has said in speaking OF this
very subject:
1.-The effect of such valuation and
supervision Of securities cannot be re-
troactive. Existing securities should be
tested by laws in existence at the time
| Of their issue. This nation would no more
injure securities which have become an
important part OF the national wealth
| than 1t would consider a proposition to
repudiate the national debt.
THE question OF rates and the treat
ment Of railways Is one that has two
sides. The shippers are certainly entitled
| to reasonable rates; but less Is an 1n1us-
| tice to the carriers. Good business for the
railroads is essential to general pros
| Justice to stockholders and capitalists.
whose further investments may be neces-
| sary for the good Of the whole country.
| but it directly affects and reduces the
| wages of railway employees, and indeed
| may deprive them Of their places entirely.
| From what has been said the proper
| conclusion would seem to be that IN at
tempting to determine whether the entire
schedule Of rates Of a railway is excessive
the physical valuation OF the road is a
relevant and important but not neces-
sarily a controlling factor.
Physical Valuation Properly Used.
IT am confident that the fixing Of rates
on the principles suggested above would
not materially impair the present market
values Of railroad securities in most
cases, for l believe that the normal in
crease in the value Of railroad properties,
especially in their terminals. will more
than make up for the possible overcapital-
| ization In earlier years In some cases,
| doubtless. It will be found that over
| capitalization is made an excuse for ex-
| cessive rates, and then they should be re-
to be that the railroad rates generally in
| this country are reasonably low. This is
! why, doubtless, the complaints filed
| with the interstate commerce commission
against excessive rates are 80 few as
| compared with those against unlawful
discrimination in rates between shippers
| and between places or course, In the
| determination Of the question whether
| discrimination Is unlawful or not the
physical valuation Of the whole road is Of
little weight.
There Should Be Physical Valuation.
II have discussed this. with some de-
gree Of detail. merely to point out that
the valuation by the interstate commerce
commission OF the tangible property Of a
railroad is proper and may from time to
time be necessary in settling certain is
sues which may come before 1t. and
that no evil or injustice can come from
valuation in such cases, II 1t be under
| stood that the result 10 to be used for a
Just purpose and the right to a fair profit
under all the circumstances Of the in
vestment Is recognized. The interstate
commerce commission has now the power
| to ascertain the value Of the physical
railroad property. II necessary, in deter
| mining the reasonableness OF rates. II
the machinery for doing SO is not ade-
quate, as is probable. 1t should be made
SO.
THE republican platform recommends
legislation forbidding the issue in the
future Of interstate railway stocks and
bonds without federal authority. 1t NAV
occur in such cases that the full value
OF the railway. and. as an element there
of. the value OF the tangible property OF
the railway. would be a relevant and i'm
portant factor In assisting the proper
l'authority to determine whether the stocks
and bonds to be issued were to have
proper security behind them, and In such