The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1910-10-13


cred statement today before the Inter
state Commerce Commission, President
Daniel Willard, OF the Baltimore and
Ohio railroad, declared that unless the
railroads were allowed to increase their
freight rates, as proposed. their credit
would suffer serious damage and the de-
velopment of their resources be arrested.
II was upon the subject Of the credit
Of railway securities that Mr. Willard
devoted most of his time at the hear
ing this morning. He said the country
was alarmed at the possibility OF stocks
and bonds depreciating in value by
reason of the present situation and at
the possibility of railroad development
coming TO a halt at a time when all
other industrials conditions point to
prosperity.
Yesterday was Pennsylvania railroad
day before the Interstate Commission.
President McCrea, Of that company, was
held on the witness stand until ad-
journment Today the Baltimore ana
Ohio had its inning
Accompanying President Willard was
General Consul Hugh L. Bond. Vice
Presidents Randolph and ShTiver. and
Traffic Manager Wight. A. E. Beck,
traffic manager of the Merchants and
Manufacturers Association Of Balti-
more, was also here again today
Questioned On Stand.
General Counsel Bond first examined
the witness, assisted by quest,o.s put
directly to Mt. Willard by the Com
missioners themselves. Later Attorney
Brandeis, representing the seaboard
shippers, cross-exainined the Baltimore
and Ohio head.
Mr.. willard declared the most i'm
portant element in railroads credit
was the maintenance OF an ample sur
plus, which could be put back Into the
property. This reinvestment of earn
tngs, he said, provided support for the
securities already issued upon a road.
Therefore, he added, the reinYestment
Of excess earnings should not be CAPT
talized
Without authority 10 increase its
rates at this time, Mr.. Willard said
the surplus Of the Baltimore and Ohio
for the present fiscal year would be
practically wiped out. This meant that
It's credit would be impaired. and that
the property would deteriOrate for the
reason that there would be little or TO
money left with which to maintain a
high standard OF usefulness.
The experience OF the Baltimore and
ONO was cited by MI Willard TO show
why more revenue was absolutely
necessary for the well-being of the
roads In the Eastern territory
When he came to the Baltimore and
Ohio last January. Mr.. Willard said that
ne found II necessary to raise $50 =
100000. with which to pay for new
equipment then ordered After con-
siderable negotiation the amount was
raised by sale Of notes at an interest
charge fairly favorable to his COM
pany. This. he said could not be re-
peated now, on account Of the uncer-
tainty in the security market, caused
by the inability Of the roads to increase
their freight rates.
Surplus Falls Of.
At present the Baltimore and Ohio
has a surplus of about 100000, said
Mr.. Willard. In 1907 it had a surplus
of $500, 900; in 1908 no surplus at all
and in 1909 a surplus Of $780, 900.
Against the surplus or this year, the
president said, his company would
have 20 charge Sl.635,000. the estimated
increase in expenses from the payroll
and the interest on the new securities
negotiated when he first came to the
company This, he said, would leave
only 10000 as margin, which was
not enough surplus with which to sus-
tain his roads credit in the financia
world
In answer to questions from Mr.
Bond, Mr.. Willard told the commits
sion what he regarded as the basis fo1
railway credit. He said that first the
history or the cOmpany's earnings wal
considered BY bankers. secondly. tn,
size Of the bonded Indebtedness and it.
relation TO stock issues was considered
Lastly, and the most important eie
ment of credit, was the size Of the sur,
plus earnings which a property was aoit
to produce.
Earns Millions.
Since its reorganization, in 1899. I'll,
Baltimore and Ohio has earned, said Mr.
Willard, about Sl25, 100000 over anC
above its operating costs. of this SUI.
S26. 100000 was paid to preefrred stock
holders in dividends at the rate of 4 pei
cent: 100000 to the common stock
holders at the rate Of per cent. 4nC
100000 WAS put back into the prop
eTty, having accumulated as a surplus.
II has been the policy of his com
pany, said President Willard, to inves
80 cents in the road out OF earnings FOL
every dollar which il has paid to III