New-York tribune., 1919-10-29
Rail Freight
Increase of 20
Per Cent Urged
Pierpont V. Davis Declares
This Is Necessary if the
Roads Regain Credit
and Faith of Investors
Cummins Bill Satisfactory
U. S. Should Extend Guar
antee ON Returns for Six
Months, Club Is Told

The present state Of the railroads
demands an increase in freight rates
OF at least 20 per cent, if the credit
of the railroads and the faith OF in
vestors in the nations carriers are to
be restored, Pierpont V. Davis, vice
president of the National City Com
pany. told the members of the Traffic
Cub, at their regular monthly meet
ing in the Waldorf-Astoria last night.
Mr.. Davis spoke on 1.-The Forgotten
Partner in the Railway Business by
which he meant credit. This partner,
he said, is about ready to quit, and if
he does the only alternative will be
government ownership. "And I don's
think there are many who would look
forward with pleasure to the nationali-
zation of railroads. in the light of our
government control experience" he
said.
Mr.. Davis praised the Cummins rail-
road bill now before Congress, espe~
cially that feature of it which guar
antees the railroads a return of five
and half per cent, but ne feared that
in view of tue mass of business before
Congress 1t will be impossible for it
to act on the bill before January /,
when the railroads are to be returned
to their private owners.
Guarantee on Returns Urged Extended
MIR. Davis urged. therefore, that the
present government guarantee on re-
turns be extended for another six
months to reassure the mind of the
investor. He made the point that the
increase in wages given TO the railway
brot' erhoods during the period of gov
ernment control have been about $780,
OOU,UU0 in excess of the standard re-
turn, which is $900,000,0 900.
hco -
president of the National City Com
pany," Mr.. Davis said. "to sell railroad
bonds, and it has been an uphill job
There have been about 50 200 100000
worth Of cndbs issued in the last year.
Of this $i.750, 100000 has been in in
dustrial bonds. The rest Of the amount
was in railroad securities, which shows
railroad bonds are not in great de-
mand, in view of the lack of faith on
the part of the investors. To be sure
the government has expended consid
crab-e money in improving the rail
roads during the period Of government
control. but there still remains gre at
deal to be done before we can bring
the railroads to the point where we
would like to see them.
Rate Of Wage Increases High
"lf the railroad issues remain with
3.
the public continues to refuse to buy
railroad securities bankers wi refuse
to sell them and the railroads will run
short of needed finances. About $5,-
800, 100000 has gone into railroad Sc
curities since 1910. This has beer
translated into about 25.OO0 les OF
railroads and increased facilities. But
railroad equipment wears out rapidly
In 1907 we were short 1000 900 cars
One hundred thousand freight cars arc
scrapped every year. On the Chicago
North Western they estimate they ose
eleven cars day. plant ike this, il
it is not kept going, is soon destroyed
According to Mr.. Davis, labor now
receives 81 cents out fcvery dollar OF
income and capital only 13 cents.
Investors nave reached tne limit
of their patience" Mr.. Davis said eve
must assure the roads a return that
will not be at The mercy of the Inter
state Commerce Commission or the
brotherhoods. | use the word assure
purposely, in order to distinguish it
from 'guarantee.'
Satisfied With Valuation
"A government guaranty would be
tantamount to government ownership
and would make for decreased eff
cheney and enterprise"
MT. DGVlS pointed out Lnar there are
two unknown quantities on when the
fate of the railroads depend lua-
tion and return. On the first he ex-
pressed no fear, saying the valuation
now being conducted by the Interstate
Commerce Commission has shown that
many of the railroads are worth more
than the amount for which they are
capitalized. Among these he named
the Pennsylvania and the New York
Central.
AS far as return is concerned, he
believed the return assured by the
Cummins bill is acceptable and tha,
under it it would be possible to OBJ
tain that 20 per cent increase which
he said the railroads reed He urged
shippers not to fight the desired in
crease. as it was the only way of re-
storing the faith of the invester and
of putting the railroads on a sound
foundation. The forgotten partner
Mr.. Davis said, Cannot be forgotten
any longer"
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