New-York tribune., 1919-01-17
Otherwise Credits Cannot Be
Re-estabiished, He Tells
the Senate Committee
Confidence Has Declined
"Revenue and Expenditures
Are Beyond Control of the
Investor" He Asserts
New York TribMc
WdShin QtOn Bureau

Congress devises some legislative
means to centralize regulative control
of railroad expenditures and revenues
it will be impossible to reestablish
railroad credits and attract capital to
invest, Alfred P. Thorn, general coun-
sci of the Association of Railroad
Executives, told the Senate Interstate
Commerce Committee to-day.
Stating his testimony was based on
the assumption the government pro-
posed TO turn the railroad properties
back to private ownership, Mr. Thorn,
who was the only witness at the hear
ing, devoted the entire morning seS
sion to a discussion of the economic
facts underlying the lack of confidence
in railroad securities and the neces-
sity of rcestablishing this confidence
if Congress hoped to achieve any per
manent solution of the present rail
road tange.
Income Has Been Inadequate
''ft cannot longer be said that money
is waiting for investment in railroads."
said Mr.. Thorn. "Our belief is that
capital now has to be attracted or it
will not come. Unless Congress legis-
lates on this basis it will not be meet
ing the actualities. The flow of capital
into railroad securities has come to a
standstill."
Mr.. Thorn then laid before the COM
mittee statistics which he declared
showed that in the period between
1910 and 1915 the aggregate operating
income of the railroads of the country
each year except 1913 had been IN
adequate to meet the interest and
dividend charges which actually had
been paid In response to a question
by Senator Watson regarding how the
roads obtained the money to paw their
interest and dividends Mr.. Thorn stated
that this had come from investments.
rentals and other sources apart from
earnings.
Figures Are Analyzed
Analyzing the figures presented to
the committee, he drew the following
conclusions:
i. With the exception of 1913 each
year af.er 1910 and up to 1916 showed
reduction in operating income or
earnings.
2. During each year from 1910 to
1916 there was a large increase in
property investments Investments
grew while income declined
b In no year after 1910, except 1913,
were earnings sufficient to pay inter
est and dividends.
4. Aggregate operating income dur
ing the period 1910 to 1916. DESPITE
banner railroad year in 1916, fell short
ny sl34,663,5IS of meeting the aggre-
gate interest and dividend charges
In l. j
ing this period had to come out of
surplus earnings, investments by the
roads or other sources apart from
earnings
s. During this period the bonded
debt OF the roads increased three times
as fast as the stocks. Between 1910
and 1916 the bonded debt of the roads
increased $500, 10000 while the
stocks increased only s733,000,00O.
Z. During no year between 1910 and
1918 did the railroads earn as much
as the o.33 per cent OH their stock
whicn the Interstate Commerce Com
mission had officially declared "inade-
, quase and not in the public interest"
as an investment return.
o. Inc average net operating income
auring the period 1919 to 1876 was
vhiy 4.94 per cent, considerably less
man the 80 per cent figure declared
inadequate by the Interstate Commerce
Comr1lss ION
Seeks Permanent Policy 4
Unless you can show a permanency
VI poilcy which Will assure an ade-
quacy OF income to meet railway obli-
gatlons, said Mr.. Thorn, you have
not solved the question of railroad
credits. Public confidence in these Sc
euritles has declined because the in
sestor has had no control over ex-
pehses or revenues. The scale of ex-
tensions has been made for him, not
py MN They have been further
suected by the demands of labor, cur !.
.ea. prices and the exactions of public ,
atthority"
Postponing the discussion of the la
nor Phase Of railroad expenditures and !
.he question OF current prices to later
>.ssHmony, Mr. Thorn then emphasized
sae variety Of authorities, Federal and
sIste, which exercise control over rail +
soso outlay. Questioned regarding the /
spsclhc ways IN which state and local !
sutnorities controlled railroads ex-
hc''ures, ne pointed out that this (
lsFgely was a matter of station con-
aruesion and crossing and grade
snanges, but aided that local police /
EQUATIONS imposed substantial {
sm1unt sn OF expense upon the roads ,
a. revenue as we'll as expenditures"
. ihorn continued, "are beyou. the |
sS'hssoi OF the investor. This is also I
aAed BY governmental authority. If |
iis,ehue at the moment is adequate the 1
,i.ssss.or has never any assurance that I
!. WI continue adequate to meet out
~ and pay interest and dividends.
ny me opening of to-day's hearing
81 ~. ihorn finished the argument he had i
ss.Mamaenced ut adjournment yesterday |
ssa'nst the delegation of powers OF |
AZ as.sload control to the President for I
e. yesrs, as proposed in the McAdoo /
;;se-year' plan. He declared he be- |
NO tssd y not only unwise but unconsti |
is,'nai in.. for Congress to delegate abso- (
~ power 70 the President to over I.
tss.N ss.W Dy Executive order at will the
- sIci over interstate commerce vest /
eo.ln 10 Congress. N''
ahh would be an abandonment by !