Evening journal. [volume] (Wilmington, Del.) 1888-1932, 1922-01-23

ferred or common shares. II is
many years since any new issues
Of shares have been sold. Few COM
panies could today sell any large
amount OF Common stock and not
many more could sell Preferred
stock and. Of course, these are those
Companies that have the least need
Of new capital.
And yet If our transportation sys-
tenn is to be enlarged and improv-
ed, IL outlying sections OF the coun-
try are to have railroads, II branch
lines are to be built to the farming
districts, to factories and to mines.
much Of the needed capital should
be, probably will have to be, found
by the issuance of new shares.
In some quarters it seems to be
expected that railroad companies
can go on increasing their debt for
ever without increasing the equity
behind 1t. yet how generally 1t is
understood that little encourage
ment would be given to the owner
of a house or a factory by the
holder of his mortgage II he sug-
gested that the mortgage should in
crease his loan for the purpose Of
making additions and improve
ments, without the owner establish
ing an additional equity by provid-
ing say one-third Of the new money
required.
! Investors in railroad securities, as
in fact in any securities. do not con-
slider them as a class; they study
the situation OF the particular Sc
curity in which they are asked to
invest. Unless the margin of earn
/ ings is sufficiently ample to safe
guard that security during the lean
/ periods, the security is discrimin.
ated against
During the War the Government
recognized the necessity of being
very liberal with manufacturers and
others engaged in providing neces-
sary war supplies. All such were
permitted to earn large profits, the
/ Government relying upon the in
come and excess profits taxes to
cover part OF these profits into the
Treasury. But all those engaged in
these occupations were quite prop
erly permitted, and did charge OF
out of profits before such taxei
were figured, large amounts for thu
depreciation of their facilities du,
to the customary charges for sde'
probation and depletion. These in
dustrial concerns we're thus enabled
to set aside large reserves to tidi
over the difficult times which havl
come TO them in the last year. No
So unfortunately, with the rail
} roads.
b While the Government spent grea
sums to provide other war facilities
all capital expenditures on the rail
roads were charged TO the compan
les. In particular, there were pur
J chased at inflated war prices, loco
motives and cars costing almos
S4O0, 1000, 900, which could today b
produced for a much lesser amour
and from which the railroads couli
, obtain no financial benefit unit
! after the close of the guarant
} period soon after which the bushes
} depression set in. No part of thi
! cost was assumed by the Govern
iutnl as WIT COsl anu, lHtTtIOIt
. the same must be borne by the road
: and passed on eventually to tn
2 public.
{ These conditions have resulted
] the railroads being in a poor situa
ton to meet the depression whic
a ensued after the boom period follow
n ing the armistice. In order to main
= tain their solvency. they were com
3 PEELED TO reduce maintenance to
{ minimum a policy which would,
? persisted in for a longer period
; place the properties in such a posi-
p ton as to be unable to meet the re
quirements Of Commerce when nor
NAL conditions return.
Not alone this, but the absence
from the market Of large purchase
: by railroads, the discharge OF labo
5 employed in railroad maintenance
and in the production Of railwa
, supplies further greatly depresse
: business, causes much unemploy
ment in other lines, and results il
b an endless chain OF stagnation.