The Birmingham age-herald., 1914-05-03
A Question of Economy

not be justified in exchanging bonds which had years to run and whose rate of in terest was 31s per cent for a new issue bearing per cent interest. These 31a per cent bonds have S4 years to run. But there were behind this proposition other considerations. The fundamental purpose of the New York Central management was to wipe out the Lake Shore Rail- road company as an independent organi- zation, so that 1t could be completely ab- sorbed by the New York Central in name as well as in fact.
 The experts were therefore called upon to figure upon the prospective economies which will follow the consolidation of the two systems. That was long-continued work involving the most careful compu- tations and the most accurate estimates. Some of the younger financial experts of the Wall street district were engaged upon this work in cooperation with the finance department of the New York Central. At last there was excellent demonstration that consolidation would result in perfectfng economies in the op- eration of the consildated system which would be considerably greater than the increase of one-half of l per cent in the rate of interest which a new issue of bonds will bear, compared with the rate maintained in the present issue. That was the vital thing to be done. es- pecially if the public service commissions of New York, Pennsylvania, Ohio h. diana, Michigan and Illinois were to give the necessary, consent These commis- sions would not approve an issue of bonds bearing per cent interest unless 1t were proved that the increase of in terest would be more than made good by the benefit which would follow consolida- tion.
 It used to be said that the contracts which represented the agreement between the city of New YorlAand the original subway company were, as whole and in the labor which was devoted to draft ing them, unsurpassed in the difficulties which were overcome and in the details which were perfected by any other con- tracts ever executed in the United States But the work done by the financial ex- perts upon the New York Central and Lake Shore propositions was even more difficult, and it involved a very much larger amount of money
 The total amount of bonds which the New York Central purposes issuing is in round numbers $l67,00000O.
 Consolidation and the Sherman Law
 Since the sherman law has been in- voked to dissolve railway combinations like those made by the Union Pacific url- der MT. Hartman and by the New Haven under C. s. Mellen, the comments have been many respecting the attitude of the department of justice toward other rail- way systems which have secured paraIlel and, naturally, competing line The New York Central company has through stock ownership secured the control of many railroad corporations. The West Shore railroad paralleled the New York Gen. trai from New York city to Buffalo fre- quently for miles almost within gun snot. It was absorbed by the New York Central
 The Nickelplate paralleled the New York Central from Buffalo to Chicago. in many places the two lines being not much more than stones throw apart The Michi- gan Central is natural competitor of the Lake Shore; in fact, the Lake Shore was first promoted with intent to compete with the Michigan Central. But nearly all of the New York Central acquisitions were made before the Sherman law was passed and before the interstate commerce com mission was established. That is true of many of the lines secured by the Penn sylvan1a. It has been the professional opinion of competent counsel that the sherman antitrust law is not retroactive. Apparently that has been the view of the department of justice at Washington, or the department would have insisted mat the New Haven railroad divest itself of the Naugatuck and the Housatonic railroad lines, both of which are naturally competing and throughout the state of Connecticut parallel with the New Haven line. Railway managers in this city have not failed to observe that the interstate commerce commission in its approving re- port upon the New York Central proposi- tion practically intimates that such con- solidatfon as Is now contemplated was practically effected long ago. and that this question, in its view, should not enter into any discussion respecting the pro- priety of permitting the New York Gen. tral to issue bonds aggregatinR s1e7. GOO. coo so that 1t may in that way be able absolutely to complete the absorption of the Lake Shore with the New York Gen.