New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-11-17
Tells |. c. c. Higher Rates
Are Not Cure for Finan-
cial Troubles
Warburg Endorses
Carriers Demands
Thinks That Rate Increase
Would Have Good Effect
on Securities

WASHINGTON, Nov. 16.-Frank A.
Vanderlip, New York banker and chair
man of the governments War Savings
Committee, and Paul NJ. Wsrburg, vice
governor Of the Federal Reserve Board,
called by the Interstate Commerce
Commission to-day as expert witnesses
in the IS per cent advance rate case,
testified that radical action was neces-
sary TO remedy the railroad financial
situation.
Mr. Vanderlip was Of the opinion
that the proposed rate increase only
touched the surface of the situation,
while Mr.. Warburg declared that
should it be granted its effect from a
psychological standpoint in restoring
confidence among investors would be a
greater advantage than the immediate
monetary gain it might mean to the
roads.
Rate Increase Only Poultice
One of two things must be done to
meet the situation, either the govern
ment must acquire ownership or some
action be taken TO restore confidence
in their securities, said Mr.. Vanderbilt.
Granting the increase the roads re
quest, he insisted, would act only as
a poultice and not effect a real cure.
In their arguments for the increase
Mr.. Vanderlip said railroad men them
selves failed to see below the surface
and realize what he believed to be
fundamentally wrong-the effort to
force the two regulatory principles,
prevention of combinations and fix
ing of rates, to work smoothly together.
EITHER one may be all right, but not
both together" he declared "As long
as rates are regulated. the railroads
should have the right to form combi-
nations"
Mr.. Vanderhp added that the rail
roads faced expenditures of one billion
dollars annually to maintain their
property, and that this must come from
the investor. Whatever we may think,
the investor must have confidence" he
added
The question of confidence was the
principal thought in the statement of
Mr Warburg. He maintained that
railroad stocks had reached such
stage that the roads only method OF
obtaining money was through bond is
sues which could not be made on
SdN4SL dCLOlS udo4s iONs
1t had been testified in the hearing
that the railroads showed increased
earnings recently and the properties
generally were in good condition. and
when this was called to Mr.. Warburg's
attention with the question as to why
he believed there was lack of confidence
among investors, he said the investors
were looking to the future"
"If the Dublic does not feel the rail-
roads are receiving generous treat
ment," he added, "the money will he
withheld
Bond Deals Impossible
Mr.. Warburg stated he would con-
slider a railroad having an equal amount
of stock and bonds in tn ideal financial
condition. provided the stock was at,
or above, par, but that generally rail
road stocks now were so low that only
bond issues were left as means to get
money. He pointed to the sale by the
Pennsylvania Railroad last March of
s60,000,00 in bonds to net 4.8 per cent
as an advantageous deal for the rafl-
road, which would be impossible for
any company now.
Both Mr. Vanderlip and Mr.. War
burg. answering questions of counsel
for the shippers, said they we're not
prepared to give data to bear out their
statement, but had .ecited their i'm
pressions of the situation after being
called BY the commission only two days
ago.