The Washington herald., 1917-07-21
HOLLAND LETTER
The Biggest Daily
Financial News Feature Of
the Counhy's Best Newspaper.

AthtNNcs IL - lAtseAAS1f
fully considered views Of Frank A.
vanderlip, president of the bank. there
occurs a paragraph referring TO the
railroad situation and intimating that
the railroad crisis Is much more
severe than Is commonly understood
to be the case. Cautious as Is this
statement yet II has been carefully
considered, SO that the meaning be-
hind It may be discovered. It has
been observed that in all conversations
with men Of finance and OF business
respecting the very great financing
operations now in progress and the
business activities which stagger the
Imagination there is usually one COM
ment which instead OF being optimistic
is more or less pessimistic. That is
based upon the situation In which
the railway companies of the United
States as a whole find themselves. The
government is not only permitting
but practically forcing pooling and
upon a scale which a few years ago
would have caused nationwide crit
icism and presums bly, many prosecu-
tions. The government has also
brought the railroad systems Of the
United States, or substantially all
of them into a single well co-ordinat-
ed unit which Is only another way of
stating that Daniel Willard, president
of the Baltimore and Ohio Railroad
Company, and chairman of the Rail-
way War Council said recently was
a fact. namely: That the railroads
Of the United States are now Fed
eralized.
But notwithstanding these unparal-
leled activities of the railroads by
government command in the direc-
ton Of coordination and unihcation
and pooling. they are nevertheless un-
able to secure the fresh capital which
Is in imperative need II the rail-
roads of the United States are to be
SO improved, so expanded. so abun-
dantly fortified with adequate termin-
ais as to be able to handle with speed
and accuracy the enormous value OF
transportation business which they
will be called upon to handle GER
tainly after the war is ended.
About fifteen years ago the late A.
]. Cassart, president of the Pennsyl-
vania Railroad Company. ventured the
view that unless there were within
ten years such expansions and i'm
provements as would substantially du-
plicate railway plants as they then
were, there would inevitably follow a
time OF congestion and almost paraly-
sis of the transportation business
which. harmful as that might be 10
the railroads themselves. would be Of
still greater detriment to the indus
tries and business of the United States.
A statement made by James ]. Hill
about that time, or a little later, has
been almost an automatic proverb so
frequently has IL been repeated. He
was sure that the railroads Of the
United States required some FIVE bill
lions with which to bring their various
lines and operating departments to so
high a standard that the business in
terests of the United States would
have no apprehension lest there be
congestion OF kind which would tend
greatly to paralyze business.
Still the railroads could not get, ex-
cepting for short periods of time and
by aging heavy rates Of interest, and
some bonuses, money enough to meet
the ordinary day by day increased
operating requirements. Capital is
bold enough TO take chances when it
sees a reasonable hope OF excellent
or even fair profit, but capital would
not take chances involving any long
time investment of money by invest
ing in securities offered by the rail-
road companies wherewith to obtain
fresh capital, because it saw rail-
way credit more and more impaired.
The presumption is that IL was this
reluctance OF capital due entirely to
certain legislative restrictions upon
the railroads to which Mr.. Wander
lip referred when he intimated that
the railroad crisis is even greater to-
day than the great mass OF people
believe to be the fact.
There is another point OF view Of
which only partial disclosure has been
made within a day or two. The pre-
sumption is strong that the Interstate
Commerce Commission, not at a pub
lie hearing. but at an informal or pri-
vate hearing. of which the public had
no knowledge, were instructed about
the relation OF the savings banks of
the United States to this grave rail-
road situation. Those who had some
part in framing the new and admir-
able savings bank law Of New York
State $50 good that II was speedily ini-
tated by Connecticut, Massachusetts,
and Vermont, and some of dts features
by other Statesl, brought to the at
tention of the Interstate Commerce
Commission the vital interest which
the savings banks have in the main
tenance of the credit of the railroads
of the United States.
The commissioners were told frankly
that the many thousands who had in
vested their savings by deposiing
them in the savings banks had a vital
interest in the maintenance Of the
credit of the railroads. The New
York law permitted savings banks to
invest in bonds of railroad companies
provided these bonds represented GER
tain well determined principles.
Three or four years ago the saw
ings banks of New York, Massachu-
setts and Connecticut carried nearly
six million open accounts, represent
ing deposits in round numbers of a
a little under three billion dollars, al
most exactly the amount of the lib
erty loan. These savings banks held
as investment for their depositors ap-
proximately five hundred and forty
millions of railroad securities.
If therefore the railroad companies