The sun. [volume] (New York [N.Y.]) 1833-1916, 1910-03-29
Tho Interstate Commerce Commits
sion and the Market Value
OF Railroad Bonds.

The Interstate Commerce Commits
sion and the Market Value
OF Railroad Bonds.
The paternalistic tendency Of our
1e9islnti0n is clearly evidenced in the
Commerce Commission authority TO say
Wisnt shah be tho market value Of bonds
Issued by n railroad company in case
Sk&g must be sold for less than par.
When the chairman Of The commits
Hion appeared before the COMMITTEES on
Interstate and Foreign Commerce Of
the House OF Representatives on Feb
Fuary Is me chairman OF che commit
Zee said 70 him: Il drew this provision
Of this hill. and whnt do not know
about the s'ibiect-Of issuing stocks and
bonds would ill many Libraries and
what do know could be put in the space
Of a very small book" The chairman
ofthe commission replied: -Iwould not
be vain enough 20 claim superiority
over the chairman OF this committee In
any respect. but IL there is any II Is In
my greater ignorance Of this subject =
Laughter.
In the early nineteenth century there
wasa railway mania in the United States.
N in every other country OF Christen-
dom. Promoters resorted to all sorts
Of devices TO obtain money and many an
honest investor was cheated out OF his
oil Subsequent reorganizations like
wise often bore heavily upon the honest
investor. The result has been that the
L..
thoroughly ground out Of the American
railway system, while in many other
countries IL has been retained. notably
IN England, where the capitalization is
about $4,000 a mile. and in France,
where as crisis followed crisis the
Government came Co the rescue and
assumed the burden. relieving the I'm
fortunate and the guIlible alike.
For many years the excessive capital
issues 81 the Erie in the early seventies
were the oft quoted horrible example.
but Of late the manipulation Of the
Chicago and Alton in 1902 has been the
more frequently cited instance Of evil
doing in this respect One IL these events
occurred forty wears and the other eight
years ago.
Tho American people dearly love q
bargain: the chance 10 buy a certificate
with one hundred dollars printed on
its face for a much smaller outlay has
always been attractive. The market
value Of certificate il what can be
obtained for it, II that is fifty dollars
It's value is fifty dollars and not the one
hundred in printed or engraved figures.
But hope springs eternal To spend
atty dollars to-day in the hope Of OBJ
tanning one hundred dollars NJ some
future time is Of the motive which has
led to that display OF enterprise and
energy which has covered the earth
with the appliances OF civilization. A
man keen 10 make money will not in
vest I'm railroad stocNs NJ par without
expectation other than Of a limited divi-
dend return 4 man with surplus funds
may invest in such stock It par or even
at a premium. but il will . in an estab-
tished stock nf railroad at has proved
its earning p, Scr. not n new is-rIe
ofstOck nfaI posed line whose earning
power can-o be- est imatcd
Il IL 20 b opposed thnt tho price
which the u state Commerce Com
mission savsi-s itisfac1Ory for railroad
bond Issu" will induC" great banking
firms 10 take IN issue - bonds M that
price without further Iuvesti legation or
their security The value ~ n railroad
bond depends in part upon the physical
value Of the security. but in FAR creator
measure upon the earning power. It's
market valu" ~ any particular time de
ponds also upon th" amount Of money
seeking Investment. and that valuo
NAV change from time 10 time Il thu
dictum Of tho Interstate Commerce
Commission 10 suPcrscdc any of these
factors in determining bond values? IL
il. " hen a bond ISSUE oi a railroad ~ con-
templated. 20 receive the bids from the
bankers instead 81 the railroad company
and then certify 20 the railroad oorn-
pany tho price at which these bonds
can bs sold? Is The Interstate Com
merce Commission 10 be provided with
. stat Of economic and financial eK-
ports whose Judgment will outweigh
that % trained investors?
II the Interstate Commerce Commits
ribu y 20 ueteTIl4He tDe prlre NJ WhiCh
a railroad may iss'Ie bonds to-day IL Il
also 10 say what their price shall DO in
the market a year from today
IL u 10 prohibit their Increasing IN
price? Il II 70 guarantee against their
decreasing in price, II i, cannot guar
anfee against \ decrease in price Of what
value j. i's certificate 20 the INVESTOR
StOcks and bonds arc issTcd bv al
SORTS 81 companies for all sorfS of pur-
poses. Nhv should not the Government
certify a. ~" value ~ these "a well ~
% the value Of railway issues In this
country a man - supposed 20 90 al
bowed 70 spend his money a. he pleases
Gnioas he = adjudged an incompetent.