Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1919-07-14

Venlent, but any that deprlYeS the
owner of the value of his property as
reflected by its earnings is unjust and
ought not to be adopted
But the earnings of the property
depend in large measure upon the
rates the owner is allowed to charge,
and it is suggested that these rates in
turn may be fixed ~ the government
and that is true. Let us apply this
TO the present situation. Railroad
rates have been under congressional
regulation since 1897 True, that for
a number of years the regulation was
little more than nominal, and there
were rebates and secret rates and
rate cutting in various forms. But ali
will agree that rebates and secret
rates stopped in 1906 Since 1906, at
least, railroad earnings have been open
TO the public, and the commission has
had power ever since that year, and
has effectively exercised the power,
to reduce rates when found too high.
Every one seems to be estopped,
therefore, to claim that the railroad
rates in this country or in any substan-
tlal territory, or on any important
line, have been too high The fact is
that they have been TOO low.
Under this system of rates railroad
values worked themselves out Roads
that had earning capacity demonstrate
ed 1t, and those that had little earn
ing capacity also demonstrated that,
and under rates for which the govern
ment was responsible.
The securities Of the good roads
were bought and sold at high levels
of prices, and the securities of the in
ferior roads We're bought and sold at
lower levels; and thus they are helu
by investors today.
The prices of the securities are the
evidence of the popular Judgment of
the relative value of these railroads,
and are the best evidence of such
value.
How can the government consist
emily with fair dealing. question the
value of the railroads as demonstrate
ed through many years by rates estaE-
llshed by or under the regulation of
its own agencies?
Proposed Government Guaranty.
many financierS and railroad mon
belleVe that guaranty Of dividends
or some definite return on the money
invested in railroads is necessary in
order to re-establish faith in the rail
road securities now constituting such
an important part Of our financial
structure, and induce the investment
or the additional capital necessary TO
provide the railroad facilities which
are required.
Undoubtedly the guaranty by the
government Of a reasonable return
upon the full value of railroad prop
efty would be satisfactory to those
ha
the standpoint of the investor
But that is impracticable. because
1t is not believed that the government.
as permanent policy, would guaran-
tee the railroad owners a fair return
upon the fun value of their property
ana leaNe the management in their
hands, taking all of the risk and none
or the profits; whereas, if the govern
lnent should take the excess above the
guaranty, then it would cease TO be
a guaranty, and all incentive to com
petition and economy by the private
would be eliminated
l fancy that the people would pre-
fer to come directly to government
ownership, unpopular though it is.
1t has been urged however, that
small return-something less than the
full yalue-shOuld be guaranteed in
order to furnish the company finan-
cial credit, while stil leaving the in
centVe to competition and economy.
l am afraid that plan would not ac-
compllsh the object The guaranty of
a return of 2 or 3 or per cent upon
the value of railroad might be COM |
forting to the first mortgage bond |
holders, or the holders of other bonds
now outstanding, who would have the |
first claim uDOn he fun1
But how would it helm the corpora
ton to raise more money, which is the |
object desired? OF what benefit would |
a government guaranty of or or |
even four per cent upon the value of |
the Pennsylvania railroad, or the New !
Y Ork Central railroad, or the Ralti- |
more q Ohio railroad. or the Rock |
Island railroad, or most other rail
roads, be to those companies?
How would it assist them in raising |
money since the guaranty would not |
be sufficient to pay the interest on |
bonds already outstanding and secured |
by prior liens?
1t would make dOubly secure what |
IS already abundantly secured.
But it would afford no collateral for
new issues nor secure new loans. On
he contrary, | believe it would be
ii''ill'hly NttI lliitllldl W lllt COinU dHy
n securing new money, because of the
Inevitable tendency that such guar
lnty would have to prompt govern
nent officials to interfere and en-
ieavor to shape the policy of the
to extreme conservatism, in
order Ia guard against the possibility
If the government being called upon
o meet the guaranty.
Moreover, as time passed, the public
would be more and more inclined to
'egard the amount of the guaranty as
he measure of the return to which
he railroad company was entitled,
md in ever rate hearing the govern
nent guaranty would be dwelt upon
" those opposing increases or seek
ng reductions in rates as the govern
nents judgment of what the company :
vas entitled to earn.
The Importance of re-establishing
abroad credit cannot be overesti- .
mated; but. nevertheless, / am per-
uaded that no guaranty short of I
eturn upon the full value of railroad
property will be helpful to that end,
nd that guaranty of full value is !
ot practicable without government
peratloh; and. as indicated at the ;
utSpt. | regard that beVOpd | +