The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1910-07-31
By JOHN GRANT DATER.

ing one system here TO another there,
would require, according to one member
Of the present salvage corps, an amount
upwards OF 500, 100000 20 $3.50, 10000.
Credit, Not Capital Provided.
The megartheriap aggregation did not
get that far. but It did acquire upwards
OF S50s000.000 IN securities representing
holdings in Lehigh Valley, Wabash,
Rock Island, Missouri Pacific, Denver
and RiO Grande, and other properties,
and here comes the amazing part Of the
scheme II was arranged on temporary
credits without an adequate provision
FOR capital The shares were bought,
some by private treaty and some in the
open market. partly on margins with
brokers'. a6 a Spectator buys, and
partly on time loans, negotiated with
banks in this country and in Europe.
NOn-dividend paying securities formed
e large portion OF the holdings acquired
and the negotiation OF loans upon such
WAS both difficult and cnStly- Natural
lyfras stocks declined, more margin was
rsss Iired on the loans and as loans fell
due they were difficult TO renew In
their efforts to eztTfCate themselves the
group initiated the man on the limb OF
a tree saving at a point between him
self and the trunk They attempted TO
sell part OF their securities TO main
tain margins. or keep their loans good
on another portion OF the same secuTi-
ties OF cor rse, the operation depressed
the securities they sought TO hold or
protect, auC 50 what they did with one
hand they undid with another. This
vas Strtkin.,iy the case with Lehigh
Valley when that stock was increased
from go, 600 70 an authorization II
81, Uo0.O0o- The syndicate could not take
Up the vast quantity OF stock allotted
on their holdings. and so they began to
sell some portion OF the stock or the
warrants. and brought about q demon
a - rr-Nf 10 =
OF the end for the financial aCrobatS-
How much stock was actually taken
over from the group has not been def
InlfelE announced, and II IS known that
the more responsible members OF the
syndicate retain some Of the securities
malicious Wall Street says these are
the least desirable OF the lot Current
TurnOr has II that $3.50 shares OF l1ehlgh
Valley was taken over at 81. and tina
20, 600 shares Of Rock Island preferred
was acquired al so Messrs. Kuhn. Loeb
& Co, who negotiated the entire trans
action. invited various European fnan-
Ciers and American banking groups az
hliated with the various properties TO
share in the deal. and SO II Is inferred
back 70 the interests directly concerned
in the properties I'D TO the present
time the operation Is a simple banking
trssnEa Ction. carried out on a basis Of a
SUBSTANTIAL profit 10 the banking syndi-
cate which also deserves praise FOR
coming TO the assistance Of the over
extended spectators when others held
alOOf
This Transcontinentai Impossible.
There is no intention Of welding these
dissimiIar parts into a transC0nCuental
railway system The various properties
are controlled by men not wholly haT-
uonious. such an arrangement would
conflict with existing arrangements; il
could not be carried out for less than
-. ~ -
bankers would not entertain such a pro-
Ject in view Of the railway rate situa-
ton and the possibility OF the scheme
being halted by Government interven-
ton. That the Kuhn. Loeb & Co. syn
dictate has an interest In the Rock Is
!. land Company sufficiently large to give
it a representation on the board OF cirec-
tors is probably true, but the Hartman
system completes with Rock Island, over
an extensive territory. and the Govern
ment suit against the Union and South
ernerD Pacific as a combination IN re-
stTaint Of trade Is not yet determined.
Il IS wholly unlikely. therefore, that the
Union Pacific interests would add fuel
To the flame By seeking representation
in the Rock Island Board EnS-ely
aside from that however. the Rock Is
land Company IS a mere holding Com
pauv It's common stock has no voting
classified and 50 elected by the preferred
shareholders that IL requires an actual
rEo-f birds ownership Of the preferred
stock to elect a ma jOTity of the diTec-
tors And. furthermore. the ownership
Of TIE original Chicago. Rock Island.
and Pacific Railway Company, Of III
noiS IS really vested not in the stock
Of the Rock Island Company OF New
jersey. the holding company but in the
sc. COCOA 4 per cent collateral trust
bonds OF the Chica go, Rock Island and
Pacific Railroad Company Of Iowa. the
shares % the old company forming the
security for the bond issue
Problems and difficulties. such as
present themselves In the case Of Rock
Island in the event OF any attempt 70
change the status Of the holding COM
panv exist with other properties OF
The group. and these are Of such COM
mon knowledge that one IS amazed TO
hear the project Of a transcOntinental
railway system. built upon any such
plan as that suggested. seriously dis
Cussed IN financial circles II some OF
the railways figuring in the Arabian
Nights project. particularly those Of
the Central Western and Southwestern
territory were in the hands Of re-
ceivsrs when the properties could be
acquired cheaply and arrangements
could be made to readjust their enOr-
nous debts. cut OF expensive guar
anteess and drop useless and costly
branches and feeders, Why something
might be done, but, when one recalls
that all these stocks were bought at
boom prices. that the best property Of
the lot, Lehigh Valley, has recently