The citizen-Republican. (Scotland, Bon Homme County, S.D.) 1???-19??, 1911-12-14
CONTROL
OF SECURITIES IS
GIVEN HARD BLOW
Hadley Commission Reports Ad.
versely On Plan TO Regu-
late Railroad Capital.

poi ltu S3feN ~ NoeAN ~ 2Al1- i
possible at. this time to place Issues of .
railroad securities under federal con-
troll. The commission recommends that !
enforced publicity for all railroad
financing is the most effective weapon
against stock watering which the gov
has at its command.
The commissions report Is distinctly |
adverse to the legislation proposed in
the railroad bill. President Taft, in
transmitting the report to congress to-
day, declared that he heartily con-
Cured in the recommendations.
The commissions principal conclu- |
siOns are:
That any attempt by congress to
adopt the policy of federal regulation to
the exclusion of state regulation, would
be premature.
That for the present, state authorities |
should make a concerted effort to har-
moniZe existing requirements.
That congress should prepare for the
future by giving consideration to a fed
eral Incorporation act which would per.
NIT interstate railroads to exchange
their state charters for national ones.
The commission the ground
that constitutional questions involving
me scope and extent OF federal author
ity are unsettled and will remain so
for some time; n that while such a
condition exists, TO superimpose fed
eral regulations upon state regulation
would add to the conflicts and complex
tiles which in the public interest should
rather be diminished than increased.
Constitution a Bar.
Unless the constitutional power of
congress to regulate securities of inter-
state railroads is definitely established
as being exclusive of state control,
either the federal government and the
states will come to a general under
standing as to the principles to be
adopted in the control of security is
sues, OF the railroad systems will be
given the opportunity to exchange their
state charters for federal ones says
the report.
Until such exclusive jurisdiction can
be established the creation of a sep
arate administrative body subjecting
the railroads to a new system of con-
current supervision, in addition to the
many Did ones which now exist does
not seem just, e~Npcdient or econonl-
ical.''
For the present the commission rec
ommends that complete publicity be re-
quired to surround all issues Of securi-
ties and that any interstate railroad is
suing stocks and bonds be required to
furnish to the Interstate
commission q full statement of the de-
tails of the issue, the purposes for
which the proceeds are to be used. and
an accounting for the expenditures of
such proceeds.
Accurate knowledge of the facts
surrounding the issue Of securities, and
the expenditure of the proceeds is the
matter Of most Importance" the COM
mission says. ut is the one thing upon
which the federal government can eff
fectively insist today; it is the funda-
mental thing which must serve as a
basis for whatever regulation may be
desirable in the future"
"If full publicity be given we shall
also lesson the fraudulent creation of
lolk II TO tho laoo,Hn nf n1h)iEitv
rather than the ~stringency of the law
which gives to the people any real pro-
lection. A stringent law inadequately
enforced and secretly eyaded is the
worst thing that can be possibly of
fered to the public. because it gives
color to ain which have no founda-
ton in fact"
Against Physical Valuation.
In determining the physical value OF
railroads in relation to their securities
now outstanding, the commission puts
aside as entirely out Of the question
any attempt to scale down outstanding
securities on the ground that constitu-
tional difficulties. public expectancy
and confidence In American railroad
investments would forbit it.
The commission feels that railroad
development has gone so far and such
a volume of securities has already been
issued that the only questions of real
Importance are whether 1t Is desir-
able for the federal government to reg
ulate the issue of future securities. and,
IL so, to what extent and in what nan
ner. The complex relations between
securities already outstanding has
made it impossible to treat the ques-
ton of future regulation as it might
have been treated If those securities
were not already in existence.
In cases where it is found that the
issued securities exceed the physical
valuation, the commission is not in ia
vor of forbidding further issue until
the deficiency is made up, because tho
principle If generally applied might
prevent railroads from securing capital
necessary for the service of a commun-
ity.
Remedy Is Suggested.
BY empowering the Interstate Com
merce commission to enforce publicity
ard to make physical valuations, the
commission believes there viii be no
necessity for a law to require approval
in advance for issues Of securities. Ad1
vance authorization, the commission
holds. would tend to create on the part
of the investing public, an impression
Of a guaranty or official recognition
of values which nc administrative au-
thority could safely give. The com
missioners do not believe that the cost
Of reproducing railroad properties
however, carefully computed, is the
sole element to be considered In de-
termining the present value of a rail-
road, or that the outstanding securities
should be made to conform to any ar
bitrary standard.
The commission believes that thu
amount and face valu of outstanding
securities has only an indirect effec'
upon the actual making of rates anC
that it should ave little If any weight
in their regulation,
The commission does not approve g
any unqualified proposition to prohibi
other To do so. the report says, would
involve too much disturbance OF ex
listing relations whatever may be tn
evils attendant upon such holdings; |
is however, that wher
ever a group IF men or companies ha
bought a majority of stock in a roat
they may b. properly required to blu.
the minority at the same price.
FIRE AT COMFY ISLAND.
New York, Dec. 12.-Fire broke GU
today in Luna Park, one OF the grea