Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1908-12-07
Congress Will Make Another
Effort to Establish Basis For
Determination
is HEPBURN LAW lNADEouATE2
Valuation Of Lines Important in Fix
ing Traffic charses-varying Views
Of Present Needs-Less Water in
Rail Stocks Than Public Has Been
Led to Believe.
Especial Correspondence

w
to secure a valuation of the railroads
| of the country will be pressed from
the opening of the congress session
! Senator Newlands, of Nevada, will
introduce a bill to appropriate for the
great work, and later will try to have
| it inserted in the sundry civil bill as q
part of the paragraph making appro-
priation for the interstate commerce
commission.
Senator LaFolette will also press his
measure to the same effect.
Between the two bills there will be
fundamental difference, which is
considered of great Importance.
The Newlands measure assumes that
there is ample power in the commits
sion, under the Hepburn act to make
valuation of the railroads If the
commission deems 1t necessary. The
LaFollette measure on the other hand
assumes that If such a task is to be
undertaken, congress ought to outline
clearly the conditions and methods OF
determining the valuation. and so de-
fine what is wanted as to assure that
no injustice will be done to any In
terest, either the railroads. the security
holders. or the public.
Is Law Sufficient?
Ever since the Hepburn law passed
there has been sharp difference of
opinion as to whether it granted suf-
ficient power to enable the commission
to make a valuation. For time 1T
seemed to be the opinion of the COM
mission that additional and specific
legislation would be needed. But latter
ly the commission has come to the con-
ciusion that it has the power, if it only
had the money Accordingly the COM
mission will not recommend, in its an
on the subject. That a valuation ought
to be made, however, is the opinion
of at least highly influential group of
the commissions members. Messrs.
Clements, Prouty and Lane are de-
cidedly in favor of making valuation
or at least of making it for particular
systems whenever questions arise, In
connection with rate-making, which
involve the matter of valuation. This
class of questions is arising more and
more frequently as the commission UNI
dertakes to exercise it's rate-making
function The ultimate resort of the
railroad people is the argument that
reduction of rates is impossible, or
that their increase is made neces-
sary, because the company must earn
returns on it's investment. This raises
the issue, what is your investment? 2"
and answer is impossible without a
valuation.
Two Views Of Needs.
There are two views of what should
be done. One is that when such a sit
uation arises the valuation should be
made for the properties involved OBJ
lection is raised to this on the ground
that it is practically impossible to de-
eide rates for a railroad on considera-
tions of that roads property. alone. A
rate involving trans continental bust
ness. for instance, concerns not only
the Union Pacific (if that be the rail-
road named as defendant) but also ev-
cry other road competing with the I'm
ion Pacific for trans continental BUSH
ness: for obviously they must all make
the same rates. Therefore valuation
would have to be made Of all proper
ties engaged in competition for this
business; which would be much the
country. Manifestly, therefore, urge
the same as valuing the roads Of the
the LaFollette school of railroad
economists. the sane way is to make
the valuation of the whole national
system at once, and thus be assured
that the same general principles guild
ed in the entire task.
Less Water in Rail Stocks.
When railroad Naluation was first
proposed the railroads were bitterly
opposed because they thought DIT nee
out of their capitalization, and, ulti-
mately. reduction of rates. Some re-
cent studies in relation of valuation to
capitalization have largely dissipated
this fear, for it has been pretty con-
clusively shown that the railroads, on
the basis of present values for their
realty right of way, terminals, ETC., are
not much overcapitaized; at least, not
so much as extremists have ASSUME ed.
While the nominal capitalization of the
country's roads is around sixteen bill
lions, the actual capitalization. after
eliminating overlapping issues, is
placed nearer to eleven billions.
Take for Illustration the case of a
railroad with s10o,oOO,OOO capital is
sued. Suppose s51.OO0,OOO of that capt.
tai lies in the treasury of holding
company, which has issued s51 600 900
of its own shares against the holdings.
There is a total of s151 100000 of stock
in existence; but manifestly the value
is all represented in the original $780,
100000; and in getting at the real val
uation of the roads all such overlapping
issues would have to be Cancelled. Pro-