The Washington herald., 1920-01-29
NEW FINANCING

The investment public which bought
nearly 5000. OO1.O00 of Liberty bonds
in less than two years has been Of
fered since the aEmistice HIS. COZ coo
OF railroad. public utility and indus
trial securities. These securities have
been grouped i'm three sections: Rail-
roads, 62.00o. go; public utilities. $751;
-ooo."oo; industrials, S77io0OCoG. In ad-
dItion to the above issues. which cover
bonds. notes and preferred stocks
only. there were marketed approXi-
mately s3-6,0o0otO par value of COM
mon stocks. The financing for indus
trial concerns has been prepOnderant.
with total issue of S1.EI 900 200 of
public utilities ard industrials aGsinst
s262 coo. COO of railroads. The fiotation
OF this substantial volume OF secu
rifles, week after week since the
armistice, naturally provokes the
Question whether these firancirgs are
in excess OF the legitimate needs Of
business.
AS a partial answer to this oues-
ton, the Bankers Trust Company OF
New York presents some conclusions
based on information compiled for
special studies of American financing.
Probably the most unexpected OF
these conclusions is the deduction that
productive units are represented to-
day by Il lesser amount OF corporate
securities than were productive units
before the war.
Examination shows tha. from 1915
through 1918 industry in this country
increased its productivity under the
stimulus of war out of all proportion
to any normal requirement. IT aIso
indicates the surprising fact that tho
amount of corporate financing during
the four years. 191I to 1918 inclusive.
was less than the amount done in the
preceding four years and, of course,
quite substantially less than what
might have been normally anticipated
from a study Of the trend of business
for many years previous.
The explanation of this apparent
contradiction says the Bankers
Trust Company. presumably can be
found by analysis of the amount o.
surplus of our industI ial enterprises
which was available for Teinvestmeut
in business and. OF course. the money
contributed by TIE government to in
creased productive capacity for war
materials. The undistributed surplus
during the four years. 1915 to 1918 in
olusire. allowing Si0oO,He.OOJ for cor
ppittioH ana eAcSSS-pTCntS taxes, az
greSates s1i.soo, ,eGO.0oo. against S}.S35.-
C0coc0 for the preceding four years.
We find. therefore, that corporations
had undistributed surplus available
Tor reinvestInent in plant and invcn-
tories in the war years approximately
slc.HO.OO.t50 in excess OF the amounts
available in the preceding four-ye lr
period. The significance Of this state
nent becomes apparent when we dis
cover that the aggregate par vaiu, CI
securities issued in the four years.
isll TO 1914 inclusive. was $s.591. .O0c, 600.
Add to this unusual source of cap
itai investable in plant capacity and
inventories the large expenditures
made by the government for these
purposes-which has in but small
part been capitalized by issuance -of
corporate securities-and we come
upon the conclusion that, taking no
account Of the increased level of val
ues for plant properties, which is
llkeiy TO remain considerably above
the pre-war level of values, each pro-
ductve unit in the United States is
To-Day covered by a lesser outstanding
amount of corporate securities than
was each productive unit prior to the