The New York herald., 1921-12-14

y -
the witness. "And then. 4 am inclined
to think, people will wait until they see
this barometer fund work before they
are certain it is going to have this
automatic effect that is planned, to put
the fare up"
Shearn, that there would be difficulty
in getting working capital with which
to launch this enterprise and bring the
deferred maintenance up to date ana
provide for proper service. What is
your Judgment with respect to the abil-
ity of the consolidated company TO OBJ
tain working capital by the sale OF short
term notes, assuming that the valuations
are proper and conservative and that
the contract we propose is good con-
tract"
Matter OF Confidence.
"I do not feel" the banker replied,
that the issuance of bond against
working capital for one of these COM
panies Is any more Objectionable than
issuing bonds for the full valuation. and
/ do not think either of them is objec-
uonable. assuming that the real security
here is the contract with the provisions
for flexible fare.
That is. it is not going to be bond
that Is secunad by property so per cent.
in excess of the outstanding bonds. 1t
is going to be bond whose real Sc
curity consists in the obligation to raise
this fare automatically. If necessary. to
take care OF the bonds because Of the
| valuation that has besn placed upon
them by this commission. So the issu-
| ing of additional bonds for working cap
ital that actually goes In does not seem
-. IL =
sell those bonds now. before the barom-
pendent upon how much confidence in
advance the investor could have In the
| working OF the barometer fund"
Now. l have taken you over all the
essential features of the plan and 1t
would seem to me you approach It In
cooperative spirit: that you approve
of the aims Of the commission. and thai
the various steps to achieve those aims
with such explanations as you have
made, appear to you to be sound. Is
that correct? asked Mr.. Shearn
Il think so I feel that it will be. ]
would very much rather express opin-
ions on the plan after the valuations
have been made and it Is shaped up in
a detailed way"
With Arthur NJ. Anderson. head of the
bond department of the Morgan banking
house. in the witness chair earlier In the
day. and with Mr.. Morrow also in cor
roboration. the examiner demonstrated
from the Morgan letter files seme new
facts about Interborough finance These
proved that as far back as 1914 the Nor
gan firm had advised against starting
dividends on the preferred stock OF the
Interborough Consolidated Corporation,
then under formation to succeed the In
terborough Metropolitan. The bankers
advice, however. was disregarGed for
three years, although it had been given
only after there had been a careful
study made OF the situation from the
standpoint OF the bankers as represen-
tatives fthe I. r. T. per cent. bond
holders.
Mr.. Shonts admitted. according to Mr..
Anderson. the study indicated that when
the new subway lines were opened there
was going to be a dip" in Interborough
earnings. Mr. Shonts, however, regarded
his reserve as sufficient to care for any
approaching lean times. In this respect
the bankers differed with him so radi-
cally that J. p. Morgan & Co.. refused
to sanction the reorganization OF the
Inter-Met. into the Interborough Con-
solidated Corporation and declined to
permit even the reorganization papers
In 1917 there had been verbal agree
ment between Messrs. J. p. Morgan.
e. J. Berwind, chairman of the I. r. T.
executive committee, and T. r. Shonts,
It's president that no further big divi-
dends on the stock of the T. r. T. should
be paid into the Golfers OF the Consoli-
dated. the holding company. The agree
ment was violated by the payment of
January 1, 1918. According to Mr..
Anderson's testimony, the verbal pact
had antedated the dividend payment.
William b. Yearance. general man
ager and chief engineer of the Eighth
Avenue Railroad Company. held the
witness stand in the afternoon. He told
of the vile condition" in which rails.
cars and all equipment on his line were
found when 1t was turned back to its
owners by the insolvent New York
Railways Company, on August I. 1919.
Replying to q question asked by Gen.
Organ, the witness said: II have
yet to be convinced IN "A rather wide
experience that the bus will serve any
useful purpose in city like New York.
/ do not know OF a location where. IL
I were designing transportation service.
1 should seriously consider a bus on
any New York route either at present
operated or suggested"
On the Ninth avenue line, which he
also operates. Mr.. Yearance reported g.
32.S per cent gain I'm traffic for the
twelve months ending with November
so last On both the avenue lines rev.
enues were improving rapidly, he said.
because OF moro short haul passengers.
1T has been a hard fight" said the
witness. but begin to see the end
(Which end?" inquired Mr.. Shearn,
laconically.
THE right end" replied the witness,
joining in the laugh.
The examination will be continued
this morning, when other representa-
tives of bond and stockholders protec-