The Washington herald., 1914-11-02
EQUITY for The Railroads.

EQuIly f0f the kolHOa0Ss
We are deyotins considerable part of this ed-
toral column from day 10 day just now to the ques-
ton of ee freight rate increase now before the In
terstste Commerce Commission For long time
there has seemed tS be disposition on the part of
the Commissioners to be somewhat impatient of
newspaper comment upon the situation, and to feel
that those who favor an increase u rates ought to
keep their ideas to themselves The Commissioners
appear to believe that prior to the hearings six
months ago, the railroads attempted to arouse q
large amount of public opinion in their favor in this
matter
Nobody surpasses US in respect for the zeal and
integrity of the Interstate Commerce Commissioners
But in a question of national moment, such as we
believe this be- beg them most respectfully
not to resent expression the part of investor
in the street, manufacturer, newspaper editor.
And we think have nothing to apologize for when
we continue to give prominent attention to this
matter.
The other day we ventured to point out the
curious turn of mind which Mr.. Brandeis showed
when he suggested to President Willard of the Bal
timore and Ohio, that a reduction of the dividend
rate by the railroad company would result chiefly
in allowing the foreign holder of Baltimore and
Ohio stock to receive lower price for his security
when he tried sell it. and that this outcome would
not be an undesirable Neither Mr.. Brandeis
in his frequent remarks any of the Commission
ers in their inquiries, have apparently put their finger
on the sore spot respect the dividend question
This sore spot is just here:
If the railroad company, speaking generally, has
10 reduce its dividends that means that the shares
will have heavy fall in value, and that the railroad
company will be unable to finance any of its require
r,eute h. the issuanre of new stock he leading
railroad systems of this country have been in the
habit of furnishing large part of the new funds
which they require for improvements etc, through
the sales of their stock at above par the laws
of the several States under which they are ncorpo-
rated forbidding the sale of the stock below the
figure of par.
Now it is manifest that with dividends reduced
and the prices of railroad stocks falling below par
is out of the question for these railroads to
complish further financing by of stock issues
To this point Mr.. Brandeis may probably say-"very
we'll then let them do their financing by means of
additional bond issues" and here is where run
up against the point
The laws of all the leading investment States, such
as New York, Massachusetts, etc. provide that
bond is not a legal investment for the savings of
those States unless the companys total issue of such
bonds does not exceed onethrd of the total amount
companies have been able to comply with this
qurement by being able issue and sell their stock
from time to time Par PGsT with their bonds that is
pro rata on the ratio of three to one.
What, then, would the kindly suggestion of re-
ducing dividends result in
I. A falling of the shares below par.
z. Impossibilty of selling further stock.
3. Resulting impossibilty (because of the savings
bank laws) of selling further bonds.
4 Inability to do any financing.
5. Bankruptcy.
That he believed the Interstate Commerce Com
mission lacked the power to advance rates in order
to protect the credit of the railroads an intima
ton that came from of the commissioners at the
commencement of the rehearing. We submit that
not only has it the right and the power but that in its
exercise of these legally founded functions it will be
dealing with the chief issue presented at the rehear
ing. No one may deny the railways a fair rate of
for the service rendered rate yielding them
sufficient income to live and if equity for them does
not lie in the commission where does it lie?