The sun., 1918-09-07
M'ADOO ATTACKS
J.P. MORGAN & co.
DirectOr-General Alleges Ex-
cessive Interest Demand for
Railway Financing.
Special Despatch 10 TIE SuN.

WASHINGTON, Sept. CIV. @. McAdoo,
Director General OF Railroads, issued a
| public statement tonight asserting that
j. =. Morgan & Co. asked excessive and
unwarranted interest and commission
charges for renewal Of the one year D
per cent. trust notes upon which the
| Chicago and Western Indiana Railroad
Company defaulted September l. The
statement sets forth that J. P. Morgan
& Co. asked a total of 0 81 per cent.
year on good security and with in
terest charges guaranteed by the Gov
eminent
BY inference 1t places at the door
OF ]. p. Morgan & Co. responsibility for
the default. The Director-General states
that the company failed to mako known
its position until noon Sunday, Sep
| TENDER /, the due date of the notes,
when 1t declined to provide for them.
! The statement issued from the Rail-
road Administration office follows:
Commenting upon the failure Of the
| Chicago and Western Indiana Railroad
| Company to meet at maturity Septem-
Der 1. s15.6oo,O0 one year collateral 9
! per cent. trust notes, a New York news
paper Stated that the Federal Railroad
Administration was to blame because 1t
had declined to advance the necessary
, funds and had refused the company per-
| mission to borrow at a rate higher than
| 6 per cent. Those statements are mis-
| leading.
THE facts are that some weeks ago
officers of that company sought the i'd
OF the Director General regarding this
| maturity note issue and stated that ne
gotiations for its renewal were pending
| with the company's bankers. The conf
pany was advised to pursue negotiations
with bankers and IL unable to renew
with them to try elsewhere. On August
% the company advised the Railroad
Administration that its bankers had
made no progress toward the renewal
of the loan. Telegraphic inquiry was
then addressed to the bankers, Messrs.
]. p. Morgan & Co. as to the prospect
Of renewal
Reply of Morgan & Co.
This inquiry developed on August %
the position of Messrs. Morgan & Co.
that IL the Drector-General in writing
would have the Government guarantee
rentals sufficient to pay interest on notes
and other charges they would try to re-
new the loan for one year at cost to
the company of approximately ga per
| cent. of which Z y per cent. was interest
and "a per cent commissions for syn
dcating. handling and selling. They
| indicated further that IL the commission
was increased to ga per cent. they
would attempt, II desired. to place the
loan for two years on the same basis.
ION August 20 the director of the
division of finance telegraphed Messrs.
J. =. Morgan & Co. that "he Director
General is willing to insure the Chicago
and Western Indiana Railroad Company
a rental. which added to its other cur
rent income. will be sufficient to enable
the company to pay the interest on its
present outstanding bonds and one year
notes and sinking fund requirements on
bonds and also taxes and other miscel-
laneous rentals and pointed out thai
this would enable the company during
the period OF Government control to pay
promptly interest upon the $4,000, 900
issue at the rate of per cent. per
annum.
The telegram further indicated that
the terms proposed by ]. p. Morgan &
Co. of approximately 10 per cent. per
annum for a one year well secured loan
whose interest they had stipulated should
be guaranteed by the Government were
excessive and unwarranted, and that the
Director General was not willing to APP
prove those terms. The telegram con-
cluded with the expression OF hope that
the bankers would be able to renew the
loan upon a per cent. basis, secured
on property claimed by them 70 be so
valuable, with the Government agreeing
under the lease to guarantee the interest
THE Director General communicate
by wire to AL the twelve railroad COM
panes using or interested in the Chicago
and Western Indiana terminals his will
ingness to guarantee the rental as in
dictated, to the end that they might be
definitely advised as to the basis upon
which they could aid in refunding the
notes If they chose to do so. The four
banking and bond houses which had
Joined Messrs. Morgan & Co. a year ago
in placing the notes were also duly ad-
ysed Of this telegram.
Replied Only After Maturity.
mo reply was received to this teie-
gram until midday. Sunday, September
!. when Messrs. Morgan & Co. declined
to provide for the notes on a per cent
basis and offered no counter suggestion
except one in effect necessitating the
Director-General himself providing for
the maturity OF the notes
1.-THE. result is that the only rate Of in
terest on which Messrs. Morgan & Co
suggested renewal was equivalent to
92 per cent. for the one year loan.
which terms both the Director-General
and the oflcers OF the Chicago and
Western Indiana Railroad Company re-
garded. and still regard, as excessive
and unwarranted."
The Chicago and Western Indiana is
a terminal railroad and is under Govern
ment control Action with respect to the
notes has not yet been taken. The mat
ter is under consideration by the Rail-
road Administration and the notes will
he taken UP. The method of financing
them probably will be announced in a
few days.
j, p Morgan, at his home in Glen
Cove, declined over the telephone last
night to reply to the statement issued
by Director-General of Railroads Nc
Adoo, but indicated that a statement
might be made from his offices to-day.
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