Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1919-10-01

transportation purposes. They are
leased or operated, wholly owned, or
owned in part by the parent company,
he said, adding -
Therefore, an absorption law to
clear up the barriers in the existing
charters and divergent state laws that
prevent the absorption of such affiliated
companies. to round out single system
and leave the name and securities Of
the parent companies unchanged, seems
desirable. No such absorption of small
companies by the large systems can
proceed on any large scale without
reasonable earnings to enable that
course to be pursued. and thereafter
leave the system in a strong position
to do its financing on reasonable terms.
THE big systems have absorbed many
weak lines. and are now supporting
other weak lines. and they have about
reached the limit in that respect"
"The Cummins bin as it stands,
was Mr.. Rea's conclusion, gives us
no definite or prompt assurance Of ade
ouate rates. nor does it get us away
from conflicting state regulations. To
make it truly constructive measure it
must be strengthened and amended
Against Communicating Earnings
The provisions relative to com
mandecring and using for other railroad
companies and for railroad employees
the so called excess earnings of in
dividual companies. Mr.. Rea said. :.
would throw many railroad invest
ments again into condition of unccr
tainty. because fair return is not
prescribed or defined. There will be
no incentive to any carrier to earn any
money in excess of the payment of an
ordinary dividend If the system is
once established for the railroads, he
it will in time be applied
to all public utility companies at the
outset. and later to industrial and
concerns, because their
products are just as essential for the
daily life of the citizen as railroad
THE Pennsylvania system is a fair
example. Its property cost and market
able securities. not including holdings
of securities of companies forming part
Of the system. exceeds the total out
securities in the hands of the
public to the extent of more than $500,
OOO. 900.
'lf the company instead of following
that practice had distributed all its
yearly surplus in dividends. and had
sold securities for all additions and
betterments to its property and equip
ment, it would now require $50. 900 900
per annum of additional net income to
pay its 6 per cent dividends. or the
stock would have been re-
duced to 4 per cent dividend, and its
bonds would have had to carry a much
higher rate of interest because of weak
er credit.
1T would have been impossible for il
to have sold it's stock on the market.
and that would have been to the dctri-
ment of the country and industry, as
we'll as tho compauy's security holders
and owners.
What ] object to is: 1st) the rep
rehcnsible feature that what a company
earns under fair and uniform rates
through good management and efficient
transportation can be taken from it and
given to others. thereby sapping the
spirit of initiative and competition, and
(2d) federal regulation that ultimately
will create situation in which no sur.
plus earnings over fair return can
exist, and that absolutely penalties the
railroads il they invest any surplus
earnings in the property for the bene-
fit of the public. If these provisions
are allowed to stand then the least |
can ask is that an allowance Of some
surplus over fair return in good years
should be made mandatory and not per >
missiye, to assist in lean years. Other
wise in bad years rates would have to
be increased when the shippers could
least afford to pay them.
"1f the Pennsylvania Railroad Com
pany after paying its fair, dividends is
not to have a surplus to sustain the
credit and operations of weak roads in
its system then several hundred miles of
railroads must stop operations and i'm
provemcnts and communities must suf
fer.
THE railroad problem has moi