The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1911-12-11
ADVISE PUBLICITY
FOR THE RAILWAYS
Railroads Securities Com
mission Makes Report
to Congress.
National News Association)


mending greater publicity OF finan'
cisl affairs OF railroads and that pow
er be given the Interstate Commerce
Commission to demand information in
all matters concerning railway stocks
and bonds, rather than drastic legisla-
ton by congress. to remedy existing
evils. the report of the Railroad Securi-
ties Commission was submitted to con-
gress today by the President. The Sc
curities commission has been busy col
lecting data and drawing up it's report
since August, 1910, when it was ap-
pointed by President Taft In accord.
ance with the act of congress ap-
proved two months before.
The commission, composed Of Presi-
dent Arthur Hadley, Of Yale (chair-
man), Frederick N. Judson, Frederick
Strauss. Walter L. Fisher and Bal
thasar H. Meyer, presented great
volume OF facts in it's report. discuss
ing in it, pro and con, every scheme
that has been advanced for solution
OF the problems of railroad capitaliza-
tion and what constitutes a reason
able return
A Bill Outlined.
The report declares the commission
has not considered it proper to pre-
sent q formal draft Of a statute" but
1t includes. in an appendix, the ap-
proximate text of what it believes
should 20 into bill providing power
for the Interstate Commerce Commits
sion to get the information it believes
necessary.
The recommendation continues: 1T
shall be the duty OF the Commission
to enforce these provisions, and to
make public by appropriate means the
information received, as, in its discre-
ton, 1t may deem proper; and such
certificates of notification shall at all
times be deemed public records and
open to inspection. Appropriate pen
alties, including fine and imprison.
ment. should be provided for violation
OF these provisions"
The report, in part, follows:
1.-THE railroad companies Of the Uni
ted States with only one important
exception, owe their present corporate
existence to state charters and are
subject to state laws regarding their
issue OF stocks and bonds. But a
large and brewing proportion of their
business is interstate commerce, regu'
lated by federal authority. There is
widespread belief that the rates
charged on this business are affect
ed by the amount Of stocks and bonds
outstanding: that much stock has been
issued without being fully paid; and
that the dividends ON this stock rep
resent an unnecessary tax on inter-
state commerce. II capitalization has
an actual effect in interstate rates.
the federal government is interested
in its control.
Still Another Way.
There is still another way in which
the issue of stock for less than par
may affect the conduct Of interstate
commerce. The bondholders who loan
money to the corporation may be led
to believe that there is real security
behind the bonds equal to the face
value of the stock, when in fact por-
ton OF this value represents nothing
more substantial than the expectation
OF the promoters.
So far as this deception affects only
the individual bondholder, we may
leave 1t to state law to protect him.
But II such receptions become preva-
lent they inevitably affect the conf.
dence of investors as a body. and our
American railroad systems fail to get
the full amount of capital needed for
their development and for the proper
conduct Of their interstate business
1t is a matter Of direct concern to the
federal government that the facilities
for handling commerce between the
states should not be impaired.
These facilities embrace not only
steam railroads. but the other agen-
cies Of communication and transpor-
tation enumerated in the Act to Regu-
late Commerce. While for brevity the
language OF this report is largely con-
f,ned to railroads. the discussion and
recommendations apply generally to
these other agencies.
Starting from different points. inves.
tors and shippers. and through them
the general public. have come to feel
that state legislation has provided in
adequate security for their interests
in this matter. The question is there.
fore asked with increasing frequency
whether the United States Govern
ment should not undertake to regu-
late the issues Of securities by the
roads engaged in interstate commerce
as a necessary means to its effective
control. This question naturally di.
vides itself into two parts: First, what
immediate action by Congress will be
best to meet the existing situation:
and second, what general principles
should guide the federal government
in its future legislation on this sub
sect.
As far az concerns the immediate
action Of Congress. We believe that
stringent provisions regarding publ.
city OF stock and bond issues, which
will show how far the laws are obey.
ed, and will enable the federal gov.
>rnun>ut n hold tho railroad o1c,o,s