Evening journal., 1920-03-29
MnL rnE nMLRoAps ArTRAcr CAprrALg

IN IsCUssING the probable future Of the railroads lne
~ Mechanics and Metals National Bank Of New YORK
VIII say in It's April letter that the new transportation act
Is probably better law than anyone had hoped Tor Weh
the subject was first considered The original provision
that tvo-hirds OF tho profits earned by any one system
above tho stautory=tsir rourn1 10 10 the gov
ernment was changed that one-baf OF such earnings
are now TO be recapiured This is probably tie largest
proportion that the government could take and sn leave
an incentive to private management for efficiency econ
omy and new development
we cannot afford however. the assumption that The
railroad problem Is solved rhoush the new law provides
that half OF the earnings OF any particular railroad above
the statutory average return TO railroads whole or
to any particular rate group shall be taken outright
from that railroad 70 does not provide that half Of amy
deficit suffered by any other particular railroad below
this average return shall be given outright 10 that other
railroad. such railroads may earn as little as ., or
per cent on their capital undergo losses SO Ions
as .hc average earnings Of an the railroads or Of h'
"faie group" equal 81 per cent
Railroads may borrow from the government fund
iabshed out OF the earnings Of the more prosperous
roads, but az terms apparently lille better Than
those ordinarily obiainable in the open markell
The Interstate Commerce Commission must have
reasonable assurance Of The applicants ability TO
repav;n adequate" security must be furnished.
All such loans shan bear interest at per cent While
The commission also authorized to build equipment out
OF this fund Il must consider when leasing the prospec
tive earning power Of The applicant" - must have
reasonable assurance Of the applicants ability TO pay
promptly The rental charges" which shall be "ai least
SUFFICIENT to pay return Of per cent per annum, plus
allowance for depreciation
How Congress can expect railroads to pay per cent
for loans aud rentals upon these loans and rentals
the roads are permitted only os per cent is not
clear The only roads which would nnd 70 profitable to
borrow money or equipment under such conditions would
be those earning above the ayoage-preclsey the roads
that would least need to borrow.
The effects OF a grudeng and penurlous policy with the
railroads do not make themselves felt Immediately but
accumulate over long period Pursued for the last de-
cade the result OF that policy has been to conne and
sometimes to strangle industry all sides For num-
Der Of years Investments railroads have not been as
attractive as other Investments railroads have therefore
not grown IN proportion 20 other industry. The rail-
roads are the channel through which nearly all goods
must now during production and before reaching the
consumer; today the channel Is too narrow In nearly
an basic lines there is a glut
II remains Ia be seen how much capital win be
attracted into he railroads Interest returns absolutely
assured n equal amounts what the railroads OFFER
can be obtained from investment government bonds,
While investments in other industries offer unrestricted
and high potential proA Congress has seen to l that
existing Investment the railroads shall not receive an
'excessyen return But st cannot compel new invest
ments 10 be made.
The present railway law in dealing with railway wages
provides that the labor board shall consider among other
things "the scales Of wages paid for similar kinds o
work in other industries and the hazards OF the en-
pioymentr Similar instructions might have been syen
10 the Interstate Commerce Commission as means OF
arriving at a fair wage for railway capital.