The Birmingham age-herald., 1913-07-17

began in 1897 was well under way Mil
lions of gold were coming into the United
States. In 1899 little over $l00,o00,000 was
received from Europe, most of which was
deposited in the vaults of the clearing
house association.
Mr.. Speyer's venture proved a great sue
cess, and it induced the comptroller of
New York city, the late Ashbel Fitch. to
attempt to float an issue of New York
city bonds at a like rate of interest or
less, an effort which was only briefly sue
eessful.
The Lake Shore achievement increased
the reputation which the late II. Nick
Twombley had gained in certain financing
circles In New York. for 1t was well
known to an INNER circle that thet propo-
sition had been advocated and pushed by
Mr.. Twombley in cooperation with MI.
Speyer. 1t served also to increase the
high confidence Mr.. Twombley's brother
in-law, William X. Vanderbilt, had in his
judgment.
1t Was Too Soon
After a year or two the demonstration
was made that rate of 315 per cent for
high grade railroad bond like that OF
the Lake Shore was too low and not al
any time since that achievement has there
been similar success.
The Vanderbilt party and particularly
w L. were lOT years III
possession of gerat majority of the stock
of the Lake Shore Railroad company. The
dividend rate maintained by the Lake
Shore In good years and bad was per
cent. Occasionally the Lake Shore COM
pany was able to pay large extra divi-
dends, an achievement made possible by
its relatively low capitalization. For these
great BLOCKS of stock the New York Cen
trail Railroad company paid in collateral
haa ri s..4-
One thousand dollars worth of these
stock. Therefore, those who exchanged a
share OF stock for two bonds received ex-
actly the same interest as they had pre-
Viously received in the form of dividends.
All excepting about $4,000, 600 par value of
the Lake Shore stock is now In the pos
session of the Vanderbilt party or the
New York Central Therefore if the
bonds bearing 31s per cent interest are
now exchanged for bonds bearing per
cent interest the Vanderbilt party and the
New York Central seem to all intents and
purposes to be making bargain with
themselves. What the precise reason may
be for offering a 4 per cent bond in ex-
change for a Sh per cent will of course,
be very interesting point for the inter-
state commerce commission to investi-
gate. But the men of finance who have
been working out this somewhat difficult
proposition profess to be assured that the
reasons, when explained, will be found to
be entirely justifable.
1t is year and a half since the holders
of the Lake Shore and Michigan Centra !
collateral trust bonds were asked to sur
render their lien upon Lake Shore and
Michigan central stock which was the Sc
curity of these bonds, and to accept a new
mortgage bond covering the entire sys-
tenn. This step was preliminary to the
unification of the system. year later in
pursuance of this general plan for con-
solidation, the New York Central company
acquired a great majority of the shares
of the common. and preferred stock of the
Harlem Railroad company practically all
of the shares of the Rome, Watertown
and Ogdensburg company and issued Az
per cent debenture bonds so that these
purposes could be financed. Stockholders
of these various companies voted in favor,
little over year ago, of complet mer-
ger with the present company. As a part
of the plan of consolidation the New York
Central sold one-half of its holdings of
the Rutland preferred stock to the New
Haven Railroad company and subsequent
ly the New York public service commits
sion authorized the sale of the balance
of the Rutland stock to the New Haven
a transaction which was approved by the
courts. These brief statistics illustrate
the magnitude of the undertaking by
which the New York Central COMPANY
purposes complete merger of the railroad
companies of which it has been for some
years in control An investiga tion bv the
interstate commerce commission will, ac-
cording to opinion of railroad men in this
city, be welcomed by the New York Gem
trail management. and. as was said at the
BEGINNING OF this article. the report which
will be made by the commission is likely
to furnish an excellent object lesson show
ing that sometimes financing and merg-
ing involving very great transactions can
be justified by reason of economy. expe-
diency, systematic management and ade-
quate Capitalization of authority