The Bemidji daily pioneer. [volume] (Bemidji, Minn.) 1904-1971, 1913-11-25
STOCK WATERING
RECEIVES BLOW
Congressman Sim Draws up Bill
Dealing With False Railroad Stock
Bill Guaranteed Consideration
MEMBER COMMERCE COMMITTEE
New Measure Will Require Rail
roads To Make Application Before
Issuing New Stocks or Bonds
By Congressman Clyde H. Tavenner

By Congressman Clyde H. Tavenner,
Washington, November 25-The
first legislative blow struck at stock
watering by railroads is a bill which
is being drawn by Congressman
Thetus W. Sims, of Tennessee. Mr..
Sums is ranking member of the
House Committee on Interstate and
Foreign Commerce, and the impor
tance Of his measure gains from that
fact, since the bill is thus guaranteed
consideration by the Committee.
I'm brief, the Sims bill will require
ali railroads to make application to
the Interstate Commerce Commission
before it can legally issue new stocks
OF bonds. The Commission will in
qnire carefully into the necessity of
such issue. If the issue is allowed,
then the bill prescribes certain regu-
lations governing the sale Of the Sc
curities, and directs that the Com
mission shall have power to see to it
that the money from the sale of the
securities be devoted to the better
ments and extensions for which the
ISSUE was permitted.
This bill seems to strike directly
at the root of many railroad abuses.
II has been clearly shown that the
fundamental cause of the New Haven
wrecks is the overcapitalization of
the road. Moreover, all rate making
is based on the railroad costs and the
necessity of paying dividends. If
stock is badly watered, then the rail-
road will attempt to maintain rates
which are unreasonably high.
III Congress has the right to regu-
Late everything on which theT rates
are based" said Mr.. Sims. Then he
turned to the paragraph in the Balti-
uore platform which reads: eve ia
vor. legislation preventing the
overissue of stocks and bonds by in
terestate railroads." etc., quoting
that as authority for such legislation
AS he proposes. ~
Various prominent financial stu
dents and authorities are responsible
for the statement, and their conclu-
sions are wholly sustained by reports
OF the United States Commission and
the published figures of the National
Corporation Tax Returns, that about
$30,000,000,000 of the stocks of our
industrial or tariff trusts, represent
only water.
On this stock, dividends of about
sl,50O,000,000 are being paid yearly,
amounting to approximately SIS a
person or nearly 500 an American
family.
There is not a dollar of "water'
or initiation in the capitalization of
corporations which deal in commodi-
ties, or in railroad or other public
service corporations, that does not
impose burdens upon the consumers
and producers of this country.
Watered stock is not only of the
prime causes for increased prices of
commodities, but it is also an impor-
tant cause of the present unsatisfac-
tory condition of labor. To pay these
dividends on watered stock, the trust
Inagnates must either hold down
wages abnormally low, or raise prices
artificially high. . -.
Over-capitalization, therefore, is
obviously one of the most important
problems confronting the American
people today. Politicians, for some
reason, refer to it less than they
should, The subject ought to be one
OF the foremost political issues.
The people are not going to forever
permit the Perkins and other fin
anciers to strap upon their backs the
burdens of these enormous over-cap-
italizations, which constitute one of
the principal causes OF the increase
sln the cost of living.