The Williamson enterprise. [volume] (Williamson, W. Va.) 1907-1911, 1911-02-02
ROADS ARE WARNED.
JOHN MOODY TELLS SECURITIES
COMMISSION RAIL POWERS ARE
TRAVELLING RECKLESS PACE.
END IS MERELY DEFERRED
overcapitaIization Is Declared I'm
pending Breaker and Sound sys-
tenn Of Finance Is Very Much Need,
ed to place Roads on Firm BASIS

pending Breaker and a Sound Sys-
tenn Of Finance Is Very Much Need
ed to place Roads on Firm Basis.
Chicago. Jan. 27-Many railroads
and the shippers that their rates anece
are between the devil and the deep
sea and are getting into greater ana
greater danger as time goes on at
cording to John Moody, an expert on
TRANSPORTATION conditions, who maue
This statement in the course OF lhe
hearing before the railroad securl.ies
commission. The present system ~
accounting for the purchase of rolllng
stock was given by Mr.. Moody as tug
reason for the distress that he prophe-
sizes for shipper and carrier.
II look at the question from tue
standpoint of the investor he salo'
when he was asked to state the meth-
DDS of capitalizing railroad equipment
and to explain his view Of the dangers
that have grown up. Railroads haVe
heen in the habit of issuing equip
ment trusts, which are securities pas
ed ON the equipment and taken up py
a series of payments, SO that In the
DRY the liabilities are lifted when lhe
equipment is worn out. In the last
ten wears some roads have been retlr-
ing equipment trusts by issuing STOCK
or long time bonds. Thus they carry
an increasing capital issued for equip
IT 4. 4. arm
aLeads Roads Up Blind Alley"
1--WE heard great deal about stock
watering by giving bonuses to STOCK
holders or by selling stock at par
when it is worth $50 or by Issuing
two shares for one, but believe tnat
most Of the actual watering is done IN
the manner that / have explained. II
is leading the railroads up Dina
alley"
..That is very important point
said one commissioner.
II believe, continued Mr.. Moody,
.sthat if the roads had always peen
compelled to pay for equipment out
of current expenses instead of capi-
TALKING it many roads would not nave
been begun and others would nave
failed. / believe that II roads We're
to start in now to pay equipment
trusts some would 60 into bankruptcy
and others would pay less to tnelr
stockholders. Their present metnod
is merely putting off the reckoning.
They are between the devil and the
deep sea-"
why was inquired, does 1t hurt
the shipper at the present time to re-
lieve the operating account and trans
fer the expense Of buying equipment
Must Raise Shipping Rates.
"A railroad replied the witness,
has spent certain amount OF money
for new equipment to take the place OF
old equipment. It has new llaDlntles
and the charges on it are increased
A certain rate Of interest must be Kept
up. Therefore increased rates are nee
essary. If you pay for equipment OUT
of current expenses you must nave
some money, and SO rates are raised.
Then the shipper is called upon 70
pay
"The shipper has to bear the bur
den in the end It's a vicious busi.
ness commented one Of the commits
sioners.
Il don't see any way out of the sit
uation.o said Mr.. Moody. "The ship
per here is between the devil and
the deep sea as much as the road IS.
Mr.. Moody was asked concerning re-
ceiverships.
service has been generally good IN
receiyerships," he said. 1t is true
that roads usually come out or the
receivers hands with greater capltal-
ization to take care of, but their liked
charges are much less"
what would be the effect on bonds
il receivers should issue notes tnat
would be preferred to the bonds
TWO types Buy Securities,
aThe bonds would have to wait, put
the bondholders would not be IN
iured. There are two types OF rail-
road security-investment ana spec
Native. There are two types OF peo-
Me that buy securities-the investors
who buy bonds, and the SPECTATORS
who buy stock. The speculative cap
ital would be jeopardized in q way
but believe that the conservative
investors would be safe. II the re-
ceiyership were not successful. tne
bondholders might lose
.To what extent is there danger
in continuous overcapitalization o.
earned assets under proper system
of account
aThat would depend on the meaning
Of the word proper The process
now is to capitalize developed assets
Under the present system the ROADS
can't help doing that. There are some
roads that own valuable land, OIL wells
and other property that will In Time
be Of inestimable value. This prop
erty brings in an income which i
not properly railroad income, and \
seems to me an evil to capitalize It.
The questioning of Mr.. Moody occu
~ tba morning session. II