New-York tribune., 1918-09-10
J. P. Morgan & Co.
Reply to Criticism
BY Rail Director
Claim Chicago & West.
ern Indiana Financing
Terms Were Fair

Declaring that the attack made upon
them by the Director General of Rail-
roads in connection with the default
on September l of Sic, 5,OOO,O 900 one-year
collateral trust per cent notes of the
Chicago & Western Indiana Railroad
was unjustiied, j. P. Morgan & Co.
yesterday issued a vigorous defence
of their position in the negotiations
carried on with John Shelton Williams.
director of the division of finance of
the railroad administration.
Denial was made of the assertion of
Mr.. Williams that the Morgan firm de-
clined to renew the notes except on
terms which would cost the road ap-
proximately 9A per cent. This figure,
according to the statement of the
bankers, related exclusively to the ne
gotiations calling for the raising of
new money and not to an extension
which the bankers said they were will
ing to arrange at per cent without
compensation to themselves. The
statement in full said:
"The statement of the Director Cen
eral of Railroads, as published in Sat-
urday's papers, only gives portion
OF our correspondence with John Skel-
ton Williams, director of the Division Of
Finance, who is the only official of
the railroad administration with whom
wo have had any communication on
the subject of the Chicago & Western
Indiana Companys notes which fell
due on September I.
Refer to the Records
I'VE do not intend to enter into a
prolonged controversy on this matter,
but the records amply set forth the
following points, which, we believe,
should be made clear to the public:
"First-It is far from the case that
we disregard the fact that the Chicago
Western Indiana Railroad Company's
obligations matured on September /.
Last April we began negotiations with
this company and have followed them
ter and conference Since that date.
urging upon the company the wisdom
and necessity of making timely and
adequate provision for the September
1 maturities. We suggested to the
company that this could be done either
by concluding their terminal rental
contracts with the government, so that
we might successfully negotiate with
the public refunding note issue in
their behalf, or by the company's Sc
curing directly from the government
turing obligations.
"The railroad company was unable
to accomplish either of the alterna-
we were unable to render the service
which we were perfectly willing to do.
Furthermore, we might add, that
peared before the advisory committee
to the division of finance on August
21. This conference did not result in
any request for action on our part
until Mr.. Williams's telegram, which
was received by US on Saturday noon,
August "a.
"Second-Mr. Williams intimates
that our estimate of the cost for ex-
tending or renewing the notes of the
railroad company approXimated 10 per
cent.
"On the contrary, we offered to sub
NIT to the noteholders of the Chicago
& Western Indiana Railroad Company
any proposition for renewal or ex-
tension that he might request, making
such an offer at 6 per cent, if he
deemed it wise, and we asked no COM
pcnsation whatever for our services
in using our best endeavors to secure
such q renewal or extension.
Money Market Is Narrow
"Third-In regard to the high rate
of ga per cent, suggested by us, it
must be remembered that this rate was
proposed in order to procure S15,-
100000 of new investment money 1t
was necessary to obtain this money
in competition with the other demands
being made on the present narrow in
vestment money market. 1t was, and
still is, our opinion that it would not
be possible to form an underwriting
and distributing syndicate to buy and
sell, in times such as these, a note of
this character, running for one year,
if the note were to be offered to the
public at q rate less than 71a per cent:
it is also our opinion that such a syn
dicate would require, in compensation
for the underwriting risk and dis
tributing services involved in such a
transaction. fee of not less than IL
per cent, and that q fair compensation