The Birmingham age-herald., 1910-10-15
BROWN CONTINUES
 HIS TESTIMONY Railroad President Shows Why Rates Are Too Low
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ROADS MUST IMPROVE
President Brown Says That Railroads Must Increase Rates in Order To Keep Up Efficiency and
 Pay All Their Expenses

c. Brown, of the New York Central lines, was on the witness stand throughout the day in the investigation being conducted by the interstate commerce commission into the proposed advance in freight rates in the eastern trunk line territory. At the conclusion of MT. Browns testimony before adjournment this evening the case of the railroads practically was com pletod, although J. c. Stewart. vice pres ident in charge of the operations of the Erie road. yet is to be heard.
 Under the law it Is incumbent upon the railroad to make 8 prima facie case of the reasonableness of any proposed gen eral advances in rates considered by the commission. Through the testimony of President James McCrea, of the Penn sylvania system, President Daniel Will lard, of the Baltimore and Ohio and President W. c. Brown, of the New York Central lines. coupled with the exhibits of statictics and statements of operating officials heretofore submitted in evidence the railroad officials express confidence that they have established their case.
 Browns Testimony
 President Browns testimony today frankly set out the industrial and finan- cial operations of the lines under his di- rection. He was cross-examined at great length particularly as to the financial op- erations of the roads and adhered close ly to his view that they were entitled to a fair return upon their investments in the properties in the hope of returns that apa la fa a>rtr dinary expenditures to which they have been subjected in addition to a mainte- nance of their dividend charges.
 The presidents of the three great Amer iean railway systems maintain that 1t Is not only the ambition of the railway officials but the desire of the American travelling and shipping public that the railroads of the United States should con- tinue the best in the world In order to maintain this admitted prestige for Amer ica it Is the opinion of President Brown as expressed at the hearing that the freight income of the roads should be greater than it is at present. He pointed out that the development of great railway systems is not merely a matter of nation al pride or personal ambition, but a pressing necessity upon the country as part of It's industrial and financial progress.
 Brown Resumes stand
 At the opening of today's proceedings President Brown resumed the witness stand for recross-examination.
 President Brown was asked by MT. Lyon of the commissions counsel whether the New York Central followed the principle adopted by the Pennsyl- vania railroad of applying dollar of surplus to improvements for every dollar of dividends paid.
 cai5 Mr "the New York Central has paid an av- craze of ATS per cent in dividends to it's stockholders, an average less than they could have realized if they had invested their money in first class mortgages. During that time they have taken out of earnings and applied to improvements 1.27 per cent, or just about 20 cents for each dollar of dividends. '"
 Commissioner Lane asked how it hap pencd that in such rich territory the New York Central had paid such small divi donds.
 Because MT. Brown replied. it has not been possible to earn any more Adverting to the proposed advances in rates, MT. Brown in response to inquiries by Attorney Lyon, declared: T think it is absolutely necessary for the railroads to earn more.
 Adverting to the proposed advances in rates, MT. Brown in response to in quiries by Attorney Lyon, declared: q think 1t Is absolutely necessary for the railroads to earn more money to sustain their credit, so that they may obtain suf- ficient funds to make necessary im- provements."
 Necessity of Increase
 Tn other words,'' suggested Attorney Lyon," if by it's increased volume of bus-i ness the earnings of the New York Cen tral should be enough to pay increased wages, you would not change your opin- ion about the necessity of this increase in the rates"
 ''No, sir." promptly replied MT. Brown. ''If the New York Central simply can earn enough to pay the dividends and make no provisions whatever for neces- sary improvements and betterments and for a surplus to meet the lean years. l do not think 1t possible in such circum- stances to maintain the credit of that road and obtain the money necessary to make the Improvements that must be made.
 q don't think the increases in rates asked are all that we should have, but they will enable us if granted to obtain money abroad. The sentimental effect of the allowance of the proposed rates would be worth as much as the practical ad- vance in sustaining our credit. It will convince the foreign investor that there is a tribunal in the United States that will permit fair increase in rates. The fact Is there is much doubt about that in Europe"
 Value of the Stock
 Continuing his testimony, President Brown in response to inquiries by Attor- ney James. declared:
 .'The New York Central stock, every dollar of 1t. has been paid for at $100 per share except such as was paid for at the rate of Sl25 to sl5S share, and the New York Central cannot be reproduced today for 200 per cent of it's total stock and bonds. 1 say that under oath"
 Louis D. Brandeis of counsel for the shippers then took up the cross examination of President Brown. He elicited the information that J. P. Nor gan was a member of the executive board of the New York Central and that the firm of J. P. Morgan & Co. was among the financial advisers of the road. It also was developed that cei- tain securities of the New York Gen. tral had been marketed through J. P. Morgan & Co., Such securities as had been sold, President Brown said, were not included in the bonded debt of the company.
 "Did MT. Morgan approve of the in- crease of the New York Central div idend from to 6 per cent in 1910?" Inquired MT. Brandeis.
 "I cannot answer because I do not know" responded the witness.
 "Did you and your directors not make this increase in dividend with full knowledge that the employees were
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