Pullman herald. [volume] (Pullman, W.T. [Wash.]) 1888-1989, 1920-12-10
JUDGE GEORGE 7. REID
TALKS R. R. FINANCE
The Fruits of Honest Toll Should
Never Be Lightly Considered
BY Helen johnson

"A man helping to do the worlds
thinking" Judge Geo. T. Reid, vice
president OF the Northern Pacific
railway, addressed the students and
faculty last Tuesday morning during
chapel hour. The subject of his adj
dress was The Fundamental Princi-
pies of Railroad Finances.
There is nothing large and mys-
FERROUS about railroad finances said
Judge Reid at the beginning of his
instructive talk The fundamental
principles involved in large affairs is
the same as in small afafirs. To
build a railroad requires vast sums
of money; to keep it up requires the
constant use of large sums OF money.
That this large sum of money 81
not in the hands of few fabulously
wealthy men is derived from a large
number Of people holding bonds or
stocks was the theme of the intro
duction to railroad finances. There
are two main methods for acquiring
the needed money; the selling of
bonds and stocks. Bonds, because
they draw an annual stipulated inter
est whether concern is paying or
not, are sold largely to the conserva-
tive class who cannot afford to lose
In order not to come under the name
"watered bonds" they should not be
sold to exceed half of the total CAPT
tai
Stocks are sold to the speculative
class who are not afraid to take a
chance. They are of two kinds, pre-
ferred and common. Preferred stock
holders are entitled 10 a fixed divi-
dend if the railroad is paying, and
they get this return before the own
ers of common stock. The preferred
stockholders. however, forfeit the
right to divide the spois if the in
come is large. While not so sure
an investment, in many cases com
mon stock brings greater price.
Cannot Force Investment
In 1887 the interstate commerce
act, which was largely experimental
ard unimportant except as a forerun-
ner of other acts, was passed. Since
that time the legislature has been
patching up this act. In 1910 it was
given power to establish the rate for
goods and persons, and determine
how much the income should be
Nothing, however, stipulated what
the outgo should be. Rates went
down until investigators could see
that insufficient money was coming
in. This proved once more the one
weakness in attempts of legislature
tn regulate matters of this kind. No
man has yet devised a scheme to
make others invest money. They can
be induced to buy il fair return is
guaranteed, but they cannot be
forced, A mans own sense of self
preservation guides him in money in
vestment
People, after all, do not depart
very far from inherent fundamental
instincts of life" was Judge Reid
argument against communism or any
other theory that breaches the divi-
sion of the fruits of honest toll
representation is fundamental
instinct, as is also the desire to labor
for a reward
The Russians failed because they
disregarded their fundamental prin-
ciples, he pointed out They print
ed extra paper money, but with no
wealth back OF the paper. it was all
most worthless. In Russia TODAY
suit costs $4,000 dress shoes. $35.-
GEO; a pound of butter. S1.25O: a
pound OF bacon, $500. and a Loaf
OF bread, $500. A man going into
restaurant pays $500 for a break
fast of ham and eggs.
The amount of circulation has
nothing to do with money value. 1t
IS the clothes, mines, staples and food
back of the money that give it value.
Such is the end =" said Judge Reid.
when country leaves common
sense at home and speculates from
a false promise"
To return to the railroad problem
The investigators saw what was com
irg; they stopped buying securities
In 1920 the transportation act
gave the interstate commerce com
mission power to establish rates for
beth freight and passengers on
scale that should produce 5l2 per
cent upon the value of the property
devoted TO public use. This is the
financial scheme under which rail-
roads are operated today.
Up until November -, 1920, there
was noticeable car shortage in the
United States. Since that day there
has been an over supply. To offset