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

and they- would constitute obstacles TO
the effective enforcement OF a federal
statute Before such a statute 10 enact
ed, IL should be clearer than IL now 10
that public opinion would support ~
Under such circumstances the imme-
date assertion OF exclusive federal
iuri sdiCtion under one general railroad
law appears unWise
Until such exclusive jurisdiction can
be established. the creation OF a sep
arate administrative body subiecting
the railroads OF the country 10 anew
system ~ concurrent supervision. IN
addition TO the many old ones which
now exist. does not seem Just eNpedi-
ent or economical
Enforced Publicity Immediately
Needed.
In place OF any added federal re-
auiremeutS concerning payment for
capital stock your Commission recon-
mends the adoption OF provisions re-
gdrding publicity which Will show the
actual facts Regarding stock and bond
issCes In the several states. and the
consideration received therefor ANY
railroad doing interstate business
which issues bonds or stocks should
be required by statute 20 furnish the
Interstate Commerce Commission, at
the time OF the issue with full state
ment OF the details OF the issue. the
amount OF the proceeds. and the pur-
poses for which the proceeds are 20
be used. followed in due time by an
accounting for such proceeds. as more
fully hereinafter set forth.
An Act OF this kind does not limit
the freedom Of the. several states TO
make any kind OF laws which they
please regarding their own corpora
lions II they want them stringent they
may make them stringent III they
think they can encourage the invest
ment Of capital by permitting the is
sue 81 stock for less than par, they
can allow such issues IL the result OF
enforcing existing laws interferes with
local reeds they may change the. laws.
But the companies must indicate pre-
cisely what they are doing. They
must not attract the bondholders'
money by representing that there has
been a payment or one hundred cents,
when there has been a payment OF only
fifty cents They may. II they please.
direct the treasurer 10 set down their
partly paid stock in the balance sheet
as liability in full. but they must
make IL plain TO the investor today
and 10 the public tomorrow how much
o. that liability was represented by
cash assets contributed and how much
consisted OF what is called in English
balance sheets nominal additions 10
capital Such liability is OF the cor
poration TO It's stock holders and not
OF the public 10 either.
Mode OF Procedure.
Two courses lie open before US in
our effort TO secure publicity regard
ing railroad securities. Either 10 re-
quire the express sanction OF some adj
mnistrative body presumably the In
terstate Commerce Commission before
such securities are issued. or to rely
on general statutory provisions under
which the directors may issue such
securities and be held responsible for
their proper use = -
OF these alternatives, the accounting
required must be full and adequate in
every request. and the Interstate Com
merCe Commission or other admins
tratiye authority must be empowered
Ia do whatever may be necessary in it's
Judgment 10 secure, compliance with
the statute and TO prevent injury 10
thu public ,It her- altaEnailXe- Would
involve the valuation OF property and
services whenever such valuation may
become necessary in establishing the
integrity OF the financial transactions
involved.
The first alternative insures reason
ably fun publicity before the fact or
fetal inquiry following the formal APP
plication would tend 10 discourage at
tempts at evasion; and would prob
ably In many instances prevent the
fling OF applications for issues which
are questionable either because OF
their financial unsoundness or because
they duplicate existing lines instead
OF adding TO public convenience.
fers the second alternative and doubts
the expediency under present condt-
lions OF a general law forbtdding rail-
roads to sell securities without speci-
nc authc riZation In advance, IL being
understood that the face value OF these
ecurities is not 10 be construed as an
obi gation on the public. AuthcriZa-
in advance would tend to create an im-
preston on the part of the invest
ing public OF n guaranty or official
n a l.
/ strative authority can safely give. The
absence OF such recommendation by
this Commission Is intended to make
1t clear that no such guaranty should
be gwen. A growing railroad has con-
slant need of money. and its officers
and directors are the best judges OF
the amount Of it's annual requirements
IL is manlfestly 10 the interest OF the
should get It's money as cheaply as III
can. The policy OF allowing a floating
debt TO accumulate with a view TO It's
extinction by the sale OF permanent
securities upon the completion OF Its
improvements Is not a good one, and
should be avoided wherever possible.
An administrative body whose APPROX
al was required In advance for the
sale OF securities would have great dtf-
fculty in always acting promptly
enough 10 enable the roads 10 avail
themselves OF favorable money mar
kets and avoid the creation of foating
debt and might do it's work 80 care
lessly as TO result in shielding the
directors from responsibility. instead
of acting as a safeguard to the public
We are disposed 10 leave for the
present 20 state commissions the re-
sponsibility OF passing upon the dues-
lions OF public convenience and neces-
Sity involved in the building OF lines
TO be constructed within the limits OF
their several states. and TO rely on full
publicity AS to the use OF the proceeds
OF the sale OF securities and OF other
assets as a safeguard against financial
abuses.
Facts To Re DISCLOSED.
With this end in view, every COM
psny should he required to furnish TO
the Interstate Commerce Commission
at specified dates n full statement, In
Guiding the names OF the parties con-
cerned OF al financial transactions
that have taken place during the
periods covered by the report. whether
IN cash. H. securities, or in other val
liable considerations. and whether en-
braced in income account or outside
OF II. This statement should also In
clude the disposition OF surplus Every
company should be further required
to Oklpile for the information OF its
shareholders facts in regard TO the
financial transactions OF the company
for It's fiscal year OF such a character