The Washington times., 1913-07-10
NORRIS ASKS PROBE
. OF RAILROAD DEAL
Calls on |. C. C. for Inquiry Into
Proposed Bond Issue BY
New STk Central.
Continued from First Page.)

lation for the control by the Govern
ment of railroad capitalize ton.
Coming right on the heels OF the re-
port of the Interstate Commerce Com
mission severely criticising the financing
of the New Haven and the investigation
Of the Frisco receivership, the investisa-
ton proposed by Senator Norris is GER
tain to attract The widest attention In
financial and railroad circles.
Judge Norris does not understand
nor does any one in Interstate Com
merce Commission circles understand
the reasons that underlie the efforts
of the New York Central to saddle its
properties with per cent securities
to replace longtime S1a per cents
That there will be a heavily increased
interest charge, Judge Norris points
out, is obvious.
Wants To Know Reason.
The Nebraska Senator calculates that
the New York Centr4i plans to impose
on its properties in the next eighty-five
years an additional interest burden of
III, 6,I1S,T20 by substituting per cent Sc
scurities for 81 per cents. He wants to
know why the public should be called
on at this time to bear this additional
tax, and especially when the Eastern
railroads are demanding per cent
increase in freight rates, and are COM
planning of inadequate revenues.
The efforts of the New York Central
TO issue these securities is peculiarly
interesting right at this time raid
Il hlr.
stand, nor can anyone that l have
talked to. why road should be wiling
to assume higher interest charges
when it is asking for permission TO raise
freight rates 5 per cent 1t should be
looked into. 1t is peculiarly interesting
to me. 1t Is a sample of numerous ope-
rations in railroad financing which re
ceive little attention because the pubic
eye is not fastened on them. i am al
hopes the investigation will be ordered
and all of the facts brought to light
Senator Norris Resolution.
The resolution of Senator Norris is as
follows:
- Resolved, That the Interstate Com
rnerce Commission be instructed TO IN
yestigate If 1t has not the Information
now in hand, and report to the Senate
all the facts and circumstances con-
rected with the proposed issue by the
New York Central and Hudson River
railway of per cent mortgage bonds
for sl67, ,102, 400 for. the purpose OF taxing
up outstanding 3h per cent bonds no"
existing against said railroad and the
stock of the Lake Shore and MlchSah
Central railways
That the commission be instructed
10 furnish the Senate with the date and
nf oil
gage bonds, the reason for their issue,
when they mature, whether the issuing
of the said per cent bonds Tor the
said 81 per cent bonds will not be an
unwarranted and illegal capitalization
of said railroads, whether the proposed
consolidate of said railroads involved
in the said proposed issue of per cent
bonds would not be unwarranted ana
unlawful. and whsther the increase OF
the rate of interest thus proposed by
the issuing of said per cent oonds is
necessary, even though the consoiioa-
ton of said railroads is unoolection-
able
Before New York Commission.
The proposed flotation of securities
BY the New York Central is one which
is now being considered by the New
York public service commission The
company is seeking permission from
that commission to make the big issue
of per cents alluded to. In financial
circles, the subject has been under dis
cussion for some months
About a wear and a half ago, the New
York Central board. according TO the
facts in the possession Of Judge Nor
Tis. took preliminary steps toward the
reorganization Of its fiscal affairs with
a view to consolidating the Lake Shore
road and the Michigan Central road
with the New York Central property.
II was proposed to consolidate the Sc
curity issues, and recently application
was made 10 the New York public serv-
ice commission for authority TO issue
Sls7.l02. 400 per ceent bonds in exchange
for the following bonds: $685. 900 col
lateral trust bonds at 3 per cent. Sc
cured by deposit Of Michigan Contra!
stock: 9o57s, 400 collateral trust 3lz per
cent bonds. secured by deposit of one
half that amount of Lake Shore stock:
S4sO0HG91 TO be exchanged for ( per
cent Lake shore debentures, and s.. 9.lSS,-
0O0 10 be exchanged for other Lake
Shore debentures, bearing per cent
interest.
Will Run Until 1905.
The 3k per cent bonds to De called
In and for which per cents will be
issued. il the New York Central has
its way, were issued in 1928 for 100
years. For every $500 Of Lake Shore
stock deposited $1,000 of az per cent
bonds were issued. and for every s22.-
600 Of Michigan Central stock s23. 900
Of bonds were issued. The New York
Central as a result controls the great
majority Of the stock of both roads.
Now, II is proposed to substitute per
cent bonds which will run until Feb
Tuary !, 1898.
Pointing out that the interest charge
on the public in the aggregate will be
Increased over sac, 100000 by the pro-
posed operation, Judge Norris de
mands to know the reason for the
substitution. He asks why il is neces-
sary, when the " per cents are al
ready out and in the hands of the
public. that the more burdensome as
should be fioated. In short. he looks
on IL as a strange, unexplained, and
mysterious piece of financing. and he
will insist the light be turned on.
Judge Norris is the more insistent
because authoritative statistical re-
ports show that the New York Cen
tral fixed charges amount to 1913 per
cent Of net income availa BILE for such
payment. whereas like figures for the
Pennsylvania are 29.s per cent; for
the Union Pacific. 26.5 per cent and
Tor the Burlington, 1913 per cent-far
lower than the New York Central.
And Roger Babson comments that the
New York Centrars charges are so
high that the road ought TO do some
thing to have them reduced. All these
things, and more. Judge Norris pro-
poses to lay before the Senate in con-
~ for hn in