Fitzgerald leader enterprise and press., 1923-11-01
Removal Of Esch- Cummins Act Is
First Step Toward Lower Freight
And Passenger Rates So State Rail
Laws Can Operate Again; Why
Should Public Guarantee Interest
Returns on Privately Owned Rail-
road Stocks?
Written Specially for The Leader
By WILLIAM B. SHEARER
(Thru Autocaster Service)

What is the real financial condition
OF the railroads, with unfunded debt
included? On the face of their capital
1zatlon as a whole they are gross1v
ver-capitalized.
This process has been going on for
years and is continually progressing.
Statistics show that the breaking
point has been reached. If so. it IS
certainly not the funeral of the public.
The public, 1913 per cent of our pop
ulatlon, the producers and consumers,
have now and have had during the past
three years its own funeral, due to the
grossly excessive freight and other
rates under the Esch- Cummins Act,
AS further evidence that practically
all OF the railroads have exhausted,
through gross overcapitalization their
credit and ability to issue new bonds.
they. are now purchasing equipment
on the installment plan, by the issu-
ance OF car trust certificates.
Such car trust certificates grew out of
the necessity of weak railroads to Sc
cure funds by other methods than
those ordinarily used in floating fixed
obligations
Under the handicap of large debt,
embarrassed railroads could not secure
funds for the purchase of equipment
through the use of general mortgages
No investor was willing to purchase a
weak railroads bonds or notes, whose
tangible security deprecated in fift-
cen years or less and was junior to- all
existing funded debt outstanding at
the time of issue. This condition neces-
STATED the creation of an equipment
obligation which could be separated
from the other funded Indebtedness of
the railroad
The plan under which the car trust
certificates, commonly known as the
Philadelphia plan, are issued. has be-
come quite we'll standardized The
railroad enters into contract for
equipment with the manufacturer and
makes an initial payment on the stin-
ulated equipment without receiving
other evidence than receipt for such
payment.
:. When the equipment is ready for de-
livery, formal agreement is drawn
between the manufacturer and an in
diVidual or trust company. Then one
of the latter leases the equipment to
railroad % ~'-' "
g. ihe lease is then assigned by the
individual, association, corporation or
trust company, through trustee. and
interest bearing certificates of 'bene-
t1cial interest in the association" are
issued and sold to the public. The pro-
ceeds are used to pay the man,fac-
turer The title to the equipment re-
mains with the trustee for the benefit
of the shareholders until all ohl;oa-
tions of the issue have been paid
This method can be compared with
newly-wed couple. buying furniture
on the nstallment plan. There is this
difference, however. The newly-wed
couple, as rule, has youth, earning
capacity and its future as assets, where
as the railroad or railroads buvine
equipment on the installment plan
have impaired credit and bad past
OF gross overcapitalization and exhibit
alton.
Railroads Are Artists
At Withholding Facts
1t is difficult without much effort to
get the facts before the public. the
99.3 per cent of our population. the
producers and consumers, who are be-
ing mulcted by the excessive rates un-
der the Esch- Cummins Act. +
The railroad stock owners, seven
tenths of one per cent of our popula-
tion, control directly or indirectly
large part of the press and other pub
lications, which are prohibited from
publishing articles, written by men
understanding the railroad business, in
which the full facts are given.
To confuse and camaflouge the issue
articles by professional writer's and
others with no understanding or
knowledge of the railroad business are
given full and complete publicity.
An article of this character, entitled
The Future of the Railroads ap-
peared this summer in the Saturday
Evening Post, written by Isaac F.
Marcosson. Mr.. Marcosson is an ex-
cellent professional writer. Writing is
his profession. He writes and has writ
ten on many subjects. An article by
the late Robert Louis Stevenson, great
writer that he was on the railroad sit
uation. would be of not more prac-
Continued on Page ~