New-York tribune., 1918-05-06

of the commission), nor the risk Incl
dent to depressed or subnormal gen
eral business conditions. The risk
that can and should be eliminated,
however, is that due to insufficient
rates for service to provide FOR oper
atng expenses, fixed charges and divi
dends; or, in other words, for the
maintenance Of the normally prosper
Gus financial condition Of the corpora
tiou in times Of normal or expanding
business. When operating expenses
increase, owing to increased cost Of
materials and wages, the rates for
service should increase in commen-
surate degree.
Is 1t To Be Gamble?
If the purchase of public utility
stock is to become a gamble on the
part of investors, then the chance Of
obtaining adequate service must be-
come a gamble on the part of the
consumers.
In so far as the risk Of loss in in.
come to the inve stor is minimized will
the risk of inadequate service to the
consumer be minimized Additional
capital in large amounts must be at
tracted to the utility each year to
meet the growing demands Of the con-
sumner. and in order to attract the cap
ital of the investor a record must be
established and maintained for regu-
larity and suhiciency in income-pro-
ducng dividends. which will not only
hold the investor, but will induce him,
under money market conditions exist
ing at the time, to buy more stock
when it is offered.
Credit and borrowing power are not
necessarily equivalent terms. While
it is necessary to have good credit in
order to negotiate loans satisfactorily
there are shines when it is difficult or
next to impossible to borrow money
even with good credit. When money
is plentiful almost any concern with
ordinarily good credit can obtain it.
! When, however, there is an unusual
demand for money, and for more
money than there is available, then
only extraordinarily good credit will
F., command it.
At the present time, the demand Of
the United States government for
money has strained all our resources,
and only those public service corpora
tions which can show far better
credit than would be considered neces-
sary in normal times can hope to OBJ
tain money, even at the prevailing
higher rates of interest. Rates of in
terest are far higher than in normal
times, and those undertakings which
need money must not only prove their
ability to pay the higher rates of in
terest demanded, but must also show an
earning capacity to provide a higher
margin above their fixed interest obli-
cations than in usual times.
Dangers of Decline in Earning Power
In these times any corporation
which must admit its inability to
pay its usual rate of dividends will
get small consideration in the money
market. The banks and trust compa-
MES throughout the country must, di-
rectly or indirectly, supply such money
as the public service companies are
able to obtain, and these same finan-
cial institutions are interested, in one
way or another in the shares of such
companies, and, conseq quently, in the
dividends paid. Even where banks or
trust companies may not have invested
directly in such shares, they are quite
generally carrying loans which have
been made by borrowers, with such
shares as collateral Shrinkage in the
value of such securities. particularly
when it becomes general, creates q
financial situation which not only en-
harnesses the investing public, but
the banks themselves. 1t is, no doubt,
for this reason that John Shelton
, Williams, Controller of the Currency,
in his last annual report to Congress,
I lOOk OCCdSlOu " Vail dCCGutIOH W lHS
danger of the situation being brought
about by the decline of the earning
capacity of public utilities.
The public utility corporations in
the United States have an aggregate
capitalization of more than $1O,OOO,-
100000. Their annual operating reve-
nues, combined. amount to more than
00,0OO,000. The combined funded
obligations of these utilities matur-
ing in 1918 approximate 1925 900 900.
1t is estimated that they are carrying.
in addition, about s3oO,ooo,0oo of short
term notes which must be refunded
within from one to four years hence.
These obligations cannot be met with
impaired credit.