The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1923-12-12
BY JOHN CARSON
Times Stnn Correapondent

Times staff Correspondent
I'D ASHINGTON, Dec. 12.-Daniel
MI Willard and Julius krutt-
- schnitt, railroad executives who
always represent the railroads, insist
the roads did not break down" at
the outset Of the war
The answer is had in testimony of
railroad executives.
President Rea OF the Pennsylvania,
in 1917 testified his passenger cars
were only retired for repairs neces-
.sary for safety"
''The railroads are operating with
insufficient and necessarily inefficient
labor. Que largely to inexperience," he
added.
Locomotives, improperly prepared
for road service. break down en- route
involving delays to traffic."
Commissioner Aitchison of the In.
ter state Commerce Commission, said
after a study Of the situation, "the
conclusion which we all reached was
existing conditions were intolerable
and constituted a menace to the pub
lie safety"
dlHU GICCure OF NFLSIS
Quotations from other railroad exec
uIves could be given without end. In
every instance they paint picture of
railroads faced with a crisis and I'M
able to meet it. The demand on
transportation, at that time, was ex-
treme, of course, and the railroads
had permitted their equipment to run
down and their labor forces to be de-
moralized.
The cause IS also shown.
The railroads were forced ito pay
interest on bonds. In addition. thew
had to pay dividends on certain stocks
to support certain bonds. Those bonds
were known as collateral trust
bonds" a source Of much railroad
financial iniquity.
Ordinarily, n railroad bond is a di
rect lien on the railroad property.
The collateral trust bond is another
thing. One road gets control Of the
stock Of another. The stock is put in
strong box and bonds are issued
against that stock. The bonds are
sold to the public.
The roads must pay interest on
those bonds. The only way the in
terest can be paid is from dividends
on the stock offered as collateral II
the stock fails TO pay dividends the
bond interest fails, and the roads face
bankruptcy.
Net Profits Declined
Take the Boston Maine. It
was prosperous road. couservativeIy
financed and efficiently managed. 1t
had paid per cent on its stock. The
stock was quoted at 800. Then the
New Haven got control. The next
year the gross revenue 10 the Boston
& Maine increased. but the profits
declined. The net income dropped to
l per cent and the stock went down
TO $40 share.
The Cincinnati. Hamilton & Dayton
story is as bad. The road went into
the hands Of q receiver In 1905. after
years Of exploitation. Subsequently
J. p. Morgan got control Of It and
it was understood he was going to
sell It to the Erie. The Erie refused
TO take II on. But by some other
method, never adequately explained,
Morgan forced the road on the Balu-
AtAptt - OiAAt- ANOL lOUB thereafter the
Baltimore & Ohio had TO get rid Of it
probably after Morgan's purpose was
served. 1t has been charged the Bal
timore & Ohio lost some $25 900 600
for its stockholders In that deal
The Chicago & Alton story was so
bad President Roosevelt classed one of
the financiers as an undesirable cit-
zen"
Throughout railroad history Of the
past is found one financial orgy after
another Happily. II seems that day
IS gone. But mos tot that paper
and 1t is little else--is still represented
in the railroads and dividends or IN
terest must be paid on it. That Is
why the roads slipped until they could
not pay wages and could not maintain
equipment, and, hence, could not meet
the war emergency when 1t came.
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