Evening journal., 1914-10-29
From the New York Sun.

To the Editor of The Sun.
Sir To the layman who has
neither the time nor the technical
knowledge to follow the details of
the struggle for increased rates by
the railroads the following quota
tions, which strike to the root of the
present trouble, may be OF interest.
They are from the report Of the COM
mission appointed by President Taft
in 1910.
The members of this commission
we're President Hadley, of Yale; Wal
ter l.. Fisher, eX-Secretary of the In
terror; Frederick Strauss, Frederick
A. JudsOn and Balthasar Meyer. the
latter being one of the present Inter-
state Commerce Commissioners. The
standing of these men assures the inn
I partiality and accuracy Of their
| judgment. Under the heading RE
storation of Public Confidence" their
report says:
THE necessary development of
railroad facilities is now endangered
! by the reluctance Of investors to
purchase new issues of railroad Sc
curities in the amounts required This
/
the American public understands the
essential community of interest be-
tween shipper and investor and the
folly Of attempting to protect the one
by taking away the rewards of good
management from the other.
Neither the rate of return actually re-
ceived on the par value of American
railroad bonds and stocks today nor
the security which can be offered for
additional railroad investments in the
future will make it easy to raise the
needed amount of capital
"The ratio of interest and dividends
to outstanding bonds and stocks OF
American railroads is not quite four
and a half per cent. I'm each case
The average ratio of dividends to tho
capital Of national banks is between
10 and II per cent. II il be objected
that the value of the stocks of oul
railroads is in considerable measure
due to the growth of the communit,
rather than TO the cash originally in
vested and that the bonds and stocks
of railroads should therefore be com
pared with the combined capital anC
surplus Of the national banks We
find that these banks have for TIN
last three years maintained an aver
age ratio of dividends to capital ant
! surplus combined of over 1-2 pc
cent. II we look not at the sum
divided but at the sums earned W
find the same difference Of profit il
favor of the banks.
! I'VE hear much about a reasonabl
return on capital. A reasonable re
= turn is one which under honest aC
= counting and responsible manage
ment will attract the amount of in
vestors' money needed for the devel
opment of our railroad facilities
Y More than this is an unnecessar
o public burden. Less than this mean
a check to railroad construction an
= to the development of traffic. Wher
Is the investment is secure a reasonabl
81 return is a rate which approximate
n the rate of interest which prevails i
=, other lines of industry. Where tn
r future is uncertain the investor dc
= mands, and is justified in demanding
Il chance Of added profit to cOmpen
n safe him for his risk. We cannot 50
IA cure the immense amount Of capita
l. needed unless we make profits an
v risks commensurate. If rates are sc
wi ing to be reduced whenever dividend
is exceed current rates of interest, II
It vestors will seek other fields wher
& the hazard is less or the opportunit