Evening journal., 1921-05-07
Association of RaiIlUay Executives
Makes Categorical and Spirited Reply To Lauck

fusion and beclouds the whole issue
respecting just and reasonable
wages
II was also pointed out that the
rights of the railroads to apply sur
plus earnings to betterments and
subsequently capitalize them Is a
method of financing that has been
universally approved in this coun-
try, and has been largely RESPONSE
BILE for the efficient transportation
system that the country enjoys, that
it has stood the test OF the Public
Service Commission, the Interstate
Commerce Commission and the Su-
preme Court Of the United States,
that there is no possible danger in
the future OF over-capitalizing in,this
method of financing. and that the
valuation work undertaken by the
Interstate Commerce Commission
even now proves conclusively that
the value Of the assets of the road
far exceeds capitalization.
Continuing. Mr.. Seneff said:
THE respondents criticised many
OF the railroads because they have
sold their stock for par value in
stead OF market value. Again we
insist that this specific argument
really has no place in this hearing.
Suffice Il to say, however, that the
principle OF attempting to issue new
stock in any amount at the existing
market price is unsound. The effect
OF a new issue on the market is gem
orally an immediate depreciation in
price and the governments OF the
world and municipalities cannot es-
cape this law of supply and de-
mand.
"What has been said respecting
the sale of stock applies generally
to the sale OF bonds. Bonds are
sold to best advantage after careful
consideration OF all factors after as
certaining what the public is willing
to pay. 1t IS barely possible that
/ the difference between par and what
| is realized from the sale OF bonds
is represented by commissions paid
underwriters. but there can be no
criticism of this means OF disposing
| Of securities as It has met the uni
versal approval of courts and COM
missions in fact the laws as they
now stand do not permit the pay
ment Of commissions to underwrit-
ers without first obtaining the APP
proval OF regulating bodies.
"A great deal is said in respon-
dents exhibits about interlocking di-
rectorates OF the railroads and cor
porations with which they have busi-
ness transactions Respondents are
attempting to create the impression
that because OF these interlockine
directorates some great wrong is be-
ing done to the public and to the
railroads themselves, which claim
cannot be supported.
I'm fact it has not been showr
that such transactions have resulted
in any injury to the public or to the
railroads However that may be
the contention is completely answer.
ed by the fact that such transaction;
are now governed by the provisions
of the so-called Clayton Act, so thai
paraphrasing Mr.. Lauck, this IA
water over the dam, and may bt
dismissed at this time without any
further discussion as wholly irrele
want and immaterial in so far as thii
hearing is concerned"
Referring to contracts made OF
certain railroads for repair of carr
and locomotives in outside shops, i
was pointed out that the question o.
these contracts is now subject TO in
vestigation by the Interstate Com
merce Commission, and that th'
railroads will, at the hearing befor'
the Interstate Commerce Commits
sion, prove the necessity for sucl
contracts and show the comparative
costs in railroad and outside shops
In this connection, a recent state
ment by Mr.. Samuel Rea, Presiden
Of the Pennsylvania System wa
read into the record as showing tn
situation which necessitated the re
pair OF equipment in outside shops.