The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1910-05-26
JUSTIFICATION FOR COUDREY
RESOLUTION.

Mr.. Richard Il. Goldsborough, the
sstute attorney for the gas companies,
gave himself a serious double-cross in
the recent gas hearings before the
House District Committee, and, Incl
dentauy, offered an excellent argument
for the passage of the Godfrey resolu-
ton, now pending before the House
It viii probably be recalled that
Mr.. GOldsborough propounded the
unique theory that the issuance of the
4 s2,6O0,OOO of certificates of indebted
ness didn't cut any more figure, so far
as stockholders profits are concerned,
than the process of depositing ones
own checks cuts in the size of his bank
balance. The following line of testi-
mony, brought out by Mr.. Colds
borough when Mr.. S. \. Whitwell, the
assistant secretary Of the gas COM
pany, was on the stand, gives Mr..
GOldsborough's views concerning those
same certificates:
NJ. GoIdsbOrough-The. certificate of
Indebtedness diminished the value OF the
stockholders property that amount, did
II not?
Mr.. WhitweIl-Yes. sir: it actually in
creased the value Of the liability that
much.
Mr.. Goldsborough-In other words, IL
the value Of all the shares Of stock was
100000 before that each share Of
stock having a certain value. the holder
would not make anything by the divi-
dend; he would simply get an evidence
Of the cOmpany's Indebtedness 10 him.
The property would be just that much
less valuable with the indebtedness en-
numbering it?
Mr.. Whity> eII-Yes, sir There IS Just
that much more liability against it
Mr.. GOldsbOrOugh-The property is
chargeable with that amount Of indebt-
edness, and IL has got to be paid some
time, and Il comes out Of the stock
holders ownership and 5:uI:nishes their
equity by that amount
Mr. Whitweu-Yes. sir.
Mr. COudrey-COuId YOU not lust as
well have sold some bonds?
Mr. GoldsbOUoUgh-That would have
amounted 10 the same thing.
Before proceeding to the doubIe-cross
proposition let US null that last state
ment of Mr.. Goldborough's over a
minute. He says that to issue a GER
tifeate Of Indebtedness, which the COM
pany promises TO redeem at face value,
and to receive nothing into the com
pany treasury in return, is the same
thing as to issue a bond, which the
company promises to redeem at face
value, out for which it received face
value 1T the time it is issued
In other words, Mr. Goldsborough
contends that if one gives away
promissOEy note, receiving nothing for
1t and paying it at maturity, his
pocketbOOk has been no more effected
than it would be if he made the note,
received its face value in cash, and
then paid it at maturity. How long
would a business man who gave notes
on Mr.. GoldsboroUgh's theory continue
in business?
As a matter of fact, that system is
the one observed by the gas company
in issuing certificates of indebtedness.
1t gave the certificates away for moth
ing. Unlike the private individual
who would indulge in such a practice,
however, the gas companies have some
body else holding the sack. They ex-
pect to get the money TO pay these
certifcates-and they are now getting
the money to pay the interest on
them-out Of the pockets of the COLI
sumers of gas in the District of Co
lumbia.
Observe now where Mr. GOldsborough
double crossed himself The final plea
Of his closing argument at the gas
hearings-strangely different from his
other conclusions quoted sbove-tells
the story
The fact is this: That the Immediate
result Of the passage Of this resolution
will be TO put a cloud upon the COM
pany's ability 70 refund its outstanding
6 per cent liabilities OTIS certificates of
indebtedness) now due and payable into
long term hves. This means that the
company will have to indefinitely con-
tinue TO pay $4,000 dnteresD annually
that might otherwise be saved for the
use and benefit of the consumers. In
effect IL is equivalent to your Saddiing
the people with $4,000 extra capital
upon which the company will have 70
earn the said extra interest. $4,000 an
nually from how on until the principal
becomes due-When the company will
have to go into bankruptcy unless II is
IN the meantime relieved OF the financial
imp0IenCy Imposed upon II by this
resolution.
Here we have the 9dmission Of the
gas monOpoly's attorney himself that
the certificates OF Indebtedness and the
interest on them must be paid by the
consumers Of gas. Here we have justi-
fcation for all That has beea charged
against the gas cOmpsHies-that
they've been exploiting their properties
for the benefit of stockholders and at
the expense of consumers.
The certificates were PIE, unadul
terated water when issued They viii
not decrease the value of the com
pany's other securities-if the com
pany can prevent it-because the con