The Washington times., 1922-03-15


ton for vcracity.
-
remarkable and a very significant
| event.
The railroads are here demanding
that precisely the same valuation OF
their properties and the same rate Of
return which were adopted in 1924
shall also be adopted at this time
Since that case was submitted Il
the commission In June, 1920. the
prevailing interest rates on money
have declined from one to two points
equivalent TO a % per cent reduc
tom. and the wholesale prices Of
commodities have dropped more
than 90 per cent.
Demands Of Carriers.
The two arguments advanced by
the railroads In this case that appeal
most strongly to the public are that
the carriers are not financially able
to properly maintain their facilities
and that their credit In SO seriously
impaired that they cannot obtain the
necessary funds for the rehabiliment
and the improvement OF their prop
critics, therefore no substantial re-
auctions can be made.
During the past year American
railroads earned net above all Oper-
ating expenses (which do not include
interest on debit and above taxes.
approximately 1914, 900. 900. or at
the rate of 3.3l per cent upon their
properties. The bulk Of this was
earned during the latter half OF
1921, during which their net oper-
ating income was three times as
large as during the first half Of
that year. or at the rate OF more
than $500. 10000 annually, above
expenses ana taxes. ~.
Allowing for the increases in
traffic and declines in unit costs
Of labor and materials that have
actually occurred, II Is conservative
to State that the carriers during
the past few months have been
earning at the rate OF more than
one billion dollars annually, produc-
ing a return above all expenses and
taxes Of substantially more than 3
per cent upon the tentative valua-
ton fixed by the commission. with
all additions and betterments up
to September 80 of last year. which
is more than two billion dollars
greater than the par value OF all
the stocks and bonds outstanding in
the hands Of the pubic.
II has been suggested by some
that the large earnings OF the~latter
half Of 1921 were secured at the
sacrifice Of maintenance which had
to be deferred. The President Of
the American Railway Association
admitted that the carriers as a
whole in the country have kept up
current maintenance during the
- IL
was conceded by Mr.. Hoover.
The maintenance allowances OF
our railroads during six months were
twice as great as during the test
period, which marked the peak of
which period they set aside severa,
unappropriated surplus.
Tho surplus accumulations OF our
railroads above expenses. taxes, In
terest and dividend requirements ex.
coed three billion dollars. This sur.
plus has doubled since 1915.
There were fewer miles OF railroad
in the hands of receivers last wear
than during any other year since
of 1910 miles in the hands OF receiv.
decline of 3,1s5 miles.
Value Of Securities. q
Some have stated that railroad
securities are not attractive. On
this issue the testimony Of Mr..
Hanaucr, a partner OF the firm Of
Kuhn, Loeb 4 Co.. of New York city,
Is directly in point. He was the
leading witness offered by the car.
examination occurred the following:
Q. Have you attempted to make
any analysis OF the relative ability Of
the railroads to dispose OF new securi.
ties compared to the ability Of other
industries? What is the test, in your
judgment. of the relative credit OF
the companies engaged in any line
of industry?
A. VI course-answering your first
question, i have rot made any
analysis. Naturally I have a gen.
eral knowledge on that subject. The
railroad securities have always been,
next to government and municipal
securities. most popular among the
American investors, and 1t Is of the
greatest importance that they
should be kept SO. Railroad securi.
ties have always sold on somewhat
better terms-that is, lower rates Of
interest-than industrial corpora
lions.
This testimony by Mr.. Hanauer
confirms the evidence offered by
Mr.. Robert f. Maddox before the
Commission in 1917, as the leading
witness for the railroad security
holders. Mr.. Maddox testified on
cross examination that his own ex.
hibit proved the credit Of the rail-
roads for every year during the pre-.
ceding fifteen years down to that
date had been better than that of