The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1915-05-11
RAILROAD
CREDIT
IS 0. K.

Chicago, May 1.-THE credit of the
forty -one western railroads now seek
ing freight rate advances has been in
creaslng in recent years faster than
government and municipal bonds and
more rapidly than public utility and
industrial credits. according to the
testimony of ]. Pease Norton, bond ex-
pert and formerly a member of the
facuitytof Yale university, who testi-
ned In the western freight rate ad-
vance hearing before w, M. Daniels.
interstate commerce commissioner.
A group of exhibits containing a
summary of an extended study of
pond yields was presented by Mr..
Norton IN support OF his testimony.
Ia explanation of his tabulation Mr..
Norton said /: = - -
THE true test of the effect of the
general financial situation would be
the pure money rate on long term Sc
eurities. that is the yield when the ele-
ment of risk is eliminated, were that
ngure obtainable. The next best test
1s the closest approach we have to
the pure money rate, represented hv
government securities and the bonds
OF the highest class of municipalities
Where the innumerable personal fac
tors OF hazard and risk in the business
itself are eliminated to the largest
possible extent" -
The average advance in the yields
OF the government securities of Eng
land. France. Germany and the Unit
ed States from 1900 to 1914, was TT
per cent, against 1913 per cent for the
western and S.5 per cent for the south
western railroads. In other words.
government secuities of the leading
nations of the world have advanced az
TO 4S per cent more than the yields of
these western railroads" said Mr..
Norton. The government bonds have
advanced 1868 points. against 1o.4
points for the western and 6.6 points
for the southwestern railroads. There
can hardly be more than one conclus-
lon in the matter. These railroads
have improved in credit, in comparis-
ion with the government bonds Of alf
four nations. Railway credit COM
menced to improve in 1895 and reach
ed the highest point in 1914"
Analyzing the credit question fur
ther, Mr. Norton said: -.
''If the yield upon the bond ot a
company increases greater than the
pure money rate, then that Is evidence
that the credit Of the company has &C.
clined during the period of time cover
ed. On the other hand, if the yield cf
the company has increased at a iess
proportion than the pure money rate.
then that shows that the credit Of the
latter portion of the period covered
Between 1900 and 1914, one hundred
bonds of western and southwestern
roads advanced lis per cent, as
against 31.3 per cent for the bonds of
the twenty largest cities in the coUn-
try and 24.S per cent for the pur3
money rate approximation"
Issue was taken by Mr., Norton with
Testimony OF one Of the witnesses for
the, Crnf1FAaAn -rzEfhrf
municipal Nonds had been about
steady and that the Valuation in them
had not been one-tenth in, price as
against railroad pok.is. rg II s 81
"We have demonstrated" said Mr.
Norton, that all bonds by all methods
of computation had advanced in yield
81 per cent during the past fourteen
years. In the case of ST.. Louis. the
price of which the railroad witness
claimed was about the same as ten
years ago, the advance is. 0.9 per cent,
the, average moving v9 from 81 to
40, or 29 per cent, which is an al
vance, approximately, 2 Ia times as
great as in the consolidated advance
of W stern and sou western rcaiG"
j. M. Chaplin, accouat:tnt for swift
& Co. testified that the profit ot his
on pacing hoIse products
was $40 a ton after the freight
charges were paid. The net yearly
profit he estimated at S9,45o, ,0o0,, vnich
he said would be reduced by approx
mately $30O,Jo0 If the freight rate
advances were sustained.
A. w. Anderson. office manager for
Cudahy & Co., testified that the yearly
profit of the company was $1,400,000.
or about IA cents on every one hum
dred pounds Of meat and products
sold.