Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1920-02-21

each group with one half of one per
cent additional allowed for additions,
betterments and improvements charged
to capital account. The specific guar
antee of such return extends only over
the six months to September l next.
The percentage of return prescribed
will remain in effect for a period of two
years from March 1, but this is guar
antee only in the sense that the inter-
state commerce commission is empow-
cred to establish rate level which will
Weld a return as nearly as may be OF
5h per cent on the aggregate fair value
of the grouped lines. There is no gov
ernment obligation to make good a def
cit should the rates established not
prove adequate.
Excess of earnings over 9 per cent
will be divided half and half between
the road earning it and the government,
to be expended In the interest OF the
simmer. The government fund is to be
utilized for transportation facilities to
be leased to all the roads. Although 1t
has been reported that preparations are
in the making by the larger and more
prosperous lines to test the validity Of
the law after it has been enacted on
the score Of its being confiscatory, 1t
would appear that railroad securities
owners were, in general, pleased with
Its provisions.
The National Association Of Owners
Of Railroad Securities, with head :
quarters in Baltimore, was authority
for the assertion that railroad investors
regard the pending bill as "the most
satisfactory program Of business legis-
lation ever devised by a law making
body" and in brochure, prepared by
that oranization, has this to say ON the
necessity for the regulation OF excess
earnings:
Shareholders Apparently Satisfied
Certain individual roads are, earn
ing and will always earn excessive re-
turns on any rate structure which is
essential to the life Of the majority of
the railroads. A very large number of
railroads cannot possibly survive un-
der present conditions. Many are not
paying operating expenses. AS a whole
they are earning about half their stand
ard rental. To enable the commission to
adjust rates so that they can live after
the surrender of federal control this
excess must be dealt with. There is no
other way. A 10 per cent increase IN
the western district, where the roads as
whole are earning only GO per cent OF
their standard rental, would give one
road 1S0 per cent of its standard rental,
whereas others would not receive the
half of it; 20 per cent increase would
give it 215 per cent. Hence rates cannot
be adjusted to these circumstances with
out the regulation Of excess earnings. y
If this view is held by railroad in
vestors, that IS to say by the real own
ers of the roads, and if the speculative
public is concerned mainly that some
sort Of legislation shall go through by
March 1, it was no wonder that the
professional element on the floor of the
stock exchange should suddenly shift its
attention from the industrial issues to
the rails.
But it was none too easy going for
them. They were confronted at the be-
ginning with the fact that but a limited
supply of stock was available. 1t was
not propitious time, in short, to- in :
duce the withdrawal of stocks from
strong boxes where they have reposed
for so long time. Those who felt i'm :
PEELED to sell their holdings last fall
in order to establish losses against the
federal tax returns comprised most OF
those who were likely to sell at all prior
to the return of the roads to their own
ers.
In other words It was held that those
who had kept their stock through the
long, trying period of inertia or in some
instances of actual, though gradual, de
probation of values, would still retain
them on the theory that the fortunes OF
the carriers in the hands of their own
ers could not well be more precarious
than in the hands of the government,
and might be much better.
Wide Diversity Of Views
Price movements this week seemed to
confirm this viewpoint more or less. The
minor rails enjoyed the broadest ad
vances, since they were the ones which
were to be expected to gain more than
they could lose by the transition from
government control under the terms OF
the bill, also because most of them are
of more highly speculative character
and in consequence less restricted as tc
floating supply.
Is the movement precursor of sus
tanned improvement? Views differed
widely. Some regarded it merely as in
the nature of discounting the date OF
change of control, professional forestall
ing of the event. Those who approyed
unreservedly the pending legislation were
not so sure that such was the case and
they, for the most part, were content
to await developments in the next week
ro two.
There is no particular short interes,
in the rails. The relatively small vol
ume Of transactions suggested that
buying was divided, perhaps, because a
limited amount of short covering and
speculation for the long account on the
one hand, and reacquisition by those
who had previously sold for taxes.