New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1913-10-12
FAR BELOW THEIR NEEDS
Railroads Failed to Borrow
Sufficient Funds Since 1900.


Railway News and Statistics II is std'eu
that the net funded debt on railways Y.
tho United States increased S2.3 per cent
between 1904 and 1911. simultaneously IN
terest paid on funded debt expanded 0'.'
per cent. That portion OF the oeoI pay
ing 10 4 per cent interest was cut !"
lass than half. falling 56.6 per cent pohus
ra,5,y ~ ; per cent almost trebled' IN
oraasing 174s per cent. and TO per
cent bonds more than doubled adVahciiis
All nor cent. Such readJustment' trace
able in figures of the Interstate CoHl-
roerce Commission, reflects striHihsS 'ha'
steady advance in cost OF capital as one
item of the cost OF living, when to-ua!
has left the railways with a heavier BUR
den Of financing than they have ever DE-
fore horne. To approximate IL one must
revert TO the early 9O's, preceding the
great era Of receivershps
What exactly represents the excess oe-
manded In fixed charges TO carry given
portion of the railroad funded dent as
compared with ten years ago is lli'pos-
sible 70 determine. Accessible hsureS
presenting par value OF bonds ana NOM
inal interest rates ignore the aH-impoI-
tant item Of discount. What borrower
paws for his money, as for any other
commodity. depends as much on what Is
received as on what is given. lhcresde
Of discount offered as allurement 10 cap
ital by contracting the money actuah!
reaching the Treasury. heightens he'es-
sarily the real cost to the borrower Yet
while this ignoring of actual prices re-
ceived for bonds making up the railway
funded debt thus creates a serious error
its effect is sure. In a rising money mar
ket, or. conversely. falling bond mar
ket such as that since 1900, disregard OF
increasing discounts must understate the
real advance in cost. So figures based on
par value and nominal interest rates well
may be too conservative.
Two features stand out in this comparl-
son: First. the decline in bonds paying
less than 4 per cent. second, the corre-
spending advance in those paying to .
and 8 TO 6 per cent. This growth between
4 and per cent has taken place almost
wholly at the expense of bonds paying
under 4 per cent. Furthermore, the bulk
Of this shift has occurred since lSJi
shown to be the turning point marking
inception of the present rise In capital
costs. In 1904 bonds paying to per
cent played only a slightly smaller part
in 1900 Those paying to per cent
reached their apex at SS.45 per cent
Those paying TO per cent were near
the lowest and those paying 10 per
cent were at the lowest for the entire
period.
From 1904. however. there is a steady
climb. By 1911 the to per cent bond
has almost disappeared and the to
per cents constitute only one-ninth of the
total, where in 1894 they had been over
one-third. The TO per cents beginning
an almost unbroken rise, climb by 1911
10 COOS per cent of the entire railway
funded debt. In seven years 10 per
cent money in railways has climbed from
$54OJO,o0O to $l.SS3,OO,OOO 4 to per cent
money has climbed from s2,146.OOO 900 TO
$3.50, oO0C coo. and to 4 per cent money has
fallen from $685. 10000 TO Sl.lI7,OOO.0OO.
a financial depression in the latter half
Of that year caused slump TO $27l, 900 000
in bond listngs. and railways again re-
sorted to temporary financing to cover
immediate needs. So IL was that 1904
again was year of refunding short term
notes, the Lake Shore alone issuing A0.-
0t00O0 10 replace notes sold in 1853 The
following year. 1896, was another oasis
in the desert. Prompt 10 seize the ad-
vantage Of cheaper money. large Issues
were put out on a wave Of improvements
and extensions to road. and the total at
S55SO00.OOO was exceeded only by the rec
ord year 1901
With sails thus furled, many roads in
1906 were on the point Of selling large
issues for needed expans on of facilities,
when development of strain in the
money market rendered it impossible to
float more than a small part. and the
voyage again halted Despite extraord-
nary growth in general business and in
creasing dividends which made 1895 a
stockholders year. bond listings, at $685.
10000, were below either Of the two prev-
Gus years.
New issues for railroad extensions. ad-
ditions and betterments In 1907 would have
exceeded any previous year in history had
sailing been favorable. Acute disturb
ance of confidence sent money soaring,
and in the closing months rates. touching
l6 per cent for 9O-day loans in November,
became absolutely proLibitye. Under the
STERN clouds the sails were tightly
reefed. Bond listings fell to the bottom
for the period under review; temporary
fnencing through short term notes vault
ed and then fell fiat, in the second half
year even these high interest bearing is
sues being cut off.
After effects of this disastrous year
were seen in 1908. Though temporary
financing continued for time, gradual
restore ton Of confidence and relaxing
rates were bound TO encourage numerous
loans which should have appeared earlier.
So 1903 again was largely year of pro-
vidng previous financing. Hardly short
term note was seen in the second half
year, but bond lstings jumped TO $685.
10000. against s26s, 10000 in 1907, the lars-
est. excepting one year, since 1911.
Notable as had been recent years Tor
new railway construction. financed before
the depression, much OF the 1893 listinss
was for further development Of facilities.
Remarkable ease of iotations in the
late months continued, and the hstngs
for 1893 were a striking proof OF the credit
revival which again carried the railways
under bulging sails. Their bonds. at
S770OoOO 900. touched the highest mark ever
recorded Rail securities embodied the
bulk of record listings for all classes OF
stocks and bonds All capital transactions
tbat restored confidence could inspire con-