The Detroit times. [volume] (Detroit, Mich.) 1903-1920, 1911-12-12

which We have prepared and attach
10 this report more defnite susses-
ton.
Physical Valuation.
Physical valuation" OF railroads
In it's bearing on capitallLauoh mas
been 10 some extent advocated. and 10
a greater extent opposed. upon the
idea that N undertaken by the Uhlteo
States Government, II Will De uaue
justification, for reducing the amount
OF the outstanding securities or the
railroads 10 the nRure thus acsertain-
ed or for preventing them from is
suing new securities when the amount
of their outstanding stocks and bonus
exceeds the physical value or their
properties as so determir ed. Should
a valuation OF the physical property
OF railroads be made, II ought not, II
-eFlY applied, TO involve either OF
those dangers
ties is clearly out OF the question:
.AEsrt from the obvious constitutional
difficulties OF such a course, consider
atoms OF public expediency OF them
selves forbid IL The direct loss from
the unsettiement OF legal and equit-
able relations would be very great
Tn. Indirect loss from me wfrnur1wH
OF confidence In American railroad In
vestments would be immeasuraple-
Such a readjustment would become
archaic almost from the outset be-
cause an adjustment of securities
be- sed upon the values OF today might
be totally erroneous tomorrow IL
would be equally inadvisable. IN cases
where outstanding securities were in
excess OF the physical valuation, TO
prohibit the issue OF new securities
until physical value had become equal
10 the amount OF securities outstand-
ing because this principle. IL general
~ applied. would prevent roads so sit
uated from securing the capital need
ed for the service OF the community.
w henever a railroad company ac-
quIres new property In return for the
issue OF it's securities. or in expanding
the proceeds or such securities. every
means should be placed at the disposal
OF the interstate commerce commission
10 ascertain the value OF such property
as accurately as possible. funda-
mental. though not necessarily con-
trolling. element in value, 10 cost OF re-
production. This Is true or property
flrmed OF railroad property by the SUI
preme court OF the United States Emil
nent railroad men who Nave appeared
before this commi ssion have stated
that in their opinion cost OF reproduc-
tion or physical value was the most
important single element in determin-
ing the true value Of the railroad as a
whole Indeed we believe IL to be In
the interest OF railroads. no less than
Of those Svho use them. that the inter-
state commerce commission should be
given broad powers and adequate
means for valuation OF the physician
property OF railroads as one element In
determining fair value, whenever, In
the Judgment OF that commission, this
is of sufficient importance TO warrant
such action This will give the public
information which ~ Is entitled to de-
mand. and which can, in our Judgment.
be better and more economically OBJ
tanned in this way than in any other.
The attempt TO oppose system or
=. -. l. ID L. a..
physical valuation OF TINS knd tehus 10
give countenance to exaggerated estl-
mates OF the amount OF water In rail-
road stocks
Results To he Expected.
We believe that the powers granted
TO the interstate commerce commission
by the preceding recommendations may
be found large enough TO protect the
public without the necessity OF pass
ing a law that should require specific
approval in advance OF the amount and
purpose OF stock and bond issues.
II full publicity be given 10 the
facts. we shall also lessen the fraud
ulent creation of debt. IL is the de-
gree Of publicity az TO the facts, rath-
er than the stringency OF the law.
which gives the people any real pro-
lection. stringent law inadequately
enforced and secretly evaded Is the
worst thing that can possibly be Of
fercd the public, because IL gives color
to claims which have no foundation
In fact
Couhicts of Jurisdiction.
While we dc not think that the time
Is ripe for sudden and quasi COM
pulsory transfer Of the direct control
of the stock and bond issues OF Inter-
state railroads from the states to the
federal government. We cannot help
recognizing that there are conflicts OF
Jurisdiction In the construction, oper-
alton and financing OF iterstate rail-
roads which NAV more and more en-
cessitate a larger degree OF federal
control. or even result In federal In
corporation
A road organized by an individual
state Is subject 20 state Jurisdiction re-
gardinR certain rates and facilities and
purposes for which securities may be
Issued. and is responsible TO the state
courts for the performance Of it's func-
lions The instant that It's cars pass
across the state line or that It's ship
ments are routed 20 points In other
states IL becomes responsible to the In
terstate commerce commission and the
federal courts Constitutionally con-
gress has paramount authority over In
terstate commerce and by its action
can abrogafe. any previous action or
the states which may prove inconsist-
cnt therewfth. Practically IL 10 easy TO
see how conflict may arise between
local and national requirements re-
Rarding facilities or methods. The
state may prescribe one way OF doing
bhsLitsSs the hAtlonsl kONeFnfneIN nlhN
prescribe another, and forbid the one
ordered by the state. IL Is only by
the care OF our railroad commissio ners.
state and national. that serious diff
culties OF this kind have been avoided
In the past
Some states have laws compelling
railroads within their borders 10 be
organized under the laws OF the states
IN which they are located and forbid
ding foreign corporations. so-called.
from constructing. owning and opeTat-
Ing tines thus located. The effect Of
these and other similar statutes have
been largely avoided by a system OF
intercotporate holdings, under which
n corporation organised in one state
which owns the stock OF, major part OF
the stock % road In another state
can seruYe the capital necessary for
construction or betterment without
subtectine itself TO the restrictive laws
OF the state where he money II &C
tually spent
or the total amount OF railroad CAPT .
tai outstanding on June 20. 1910, 81
a5z. 900 600, or more than 90 per cent
of the whole. was held by railroad
companies themselves About one-thtT1
OF this was bonds. and two-thirds
stock There In also a large additional
amount Of railroad securities owned nv
various holding companies" which are
NOT feohulcalll apeaking railroad oore