Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-11-10
PARMELEE TALKS
ON RAIL WAY BONDS
Expert Emphasizes Impor-
lance of Maintaining
Credit of Carriers.
BY EDWARD C. STONE.


Before a large attendance Of the
members of the Washington Bond Club
at the Carlton Hotel this noon. Julius
H. Parmelee, director Of the Bureau OF
Railway Economics and one Of the lead
ing authorities Of the country on rail-
way securities and earnings, wildly pic
tured the Importance to investment
bankers that railway credit shall be
maintained in full degree and how i'm
pelling were the motives which led the
railways to file an application for in
creased freight rates.
Turning at once to the importance OF
railway securities, MIR. Parmelee SAID
that more than 60 per cent Of the out
standing net capitalization of the rail-
ways consists of funded debt, while less
than 40 per cent is made up of capital
stock The investment value OF railway
bonds is so fully and widely recognized
that they are held in large BLOCKS by
banks and trust companies, by savings
banks. by life and other insurance CON-
panies, by trustees of beneficiary FUNDS,
and by philanthropic institutions, sucn
as universities, hospitals, churches, ano
the like.
Immense Sums Involved.
The outstanding funded debt OF the
railways Of class !, at the end OF 1880,
exclusive of equipment trust obligations,
which are retired on an inStallment
basis, amounted to nearly 10 billions OF
dollars More than five and one-halt
billions of dollars of this amount, or
more than one-haf, is in the hands OF
life insurance companies and mutual
savings banks, other banks and lnsur-
ance companies, in trust funds, IN uni
VerSity endowmentS and in the hands
of other investors who are trustees Tor
large groups of individuals Consider
ably more than half of the outstand-
ing railway bonds, therefore, are held
in trust for the benefit of depoSltors In
savings banks, holders of life inSur-
ance policies and other similar groups
Of individuals. There is not man in
this room who is not indirectly affected
by the maintenance of railway credit,
either as a bank depositor or as the
holder of an insurance policy, whether
he owns any railway bonds directly or
not Mr.. Parmelee declared.
Forced to Seek Higher Rates.
Taking the railways as whole, they
earned their fixed charges more than
twice during the five years preceding
1890. In 1880 the ratio dropped to one
and three-quartsrs times and in 1881
it will drop to less than one and one
quarter times fixed charges.
But this average does not tell the
whole story. At the present time about
seven and one-half billions OF railway
bonds are legal investments for savings
banks in the State CT New York. Pres
ent indications are that five and three
quarters billions Of this amount will be
removed from the legal list on January
/. 1882. because of failure to earn one
and one-half their fixed charges in 1881.
There will be left on the legal list only
one and three quarter billions out OF a
present total of seven and one-half bill
lions, or hardly more than 20 per cent.
II need not emphasize the seriousness
of this situation, which the railways
fully realized as the returns for the
first few months of 1891 came into their
hands" the speaker added.
Plan VIII Aid Securities.
AS the roads had cut expenses to
the bone, they were given the only
alternative, of seeking higher rates
from the Interstate Commission, ask
ing an increase which would have net
about 400 million additional yearly
revenue. The rate was denied, but the
commission offered compromise which
the members estimated would add 100
to 125 million year TO revenue. The
idea to set up pool like that OF the
National Credit Association for the
banks, to aid the weaker roads tempo
rarily. Any plan that is set up, the
speaker concluded, will assist the rail-
way industry to meet its interest pay
ments and maturing funded obligations
promptly and fully The effect will
hearten public confidence in all invest
ments nd improve the market for rail
securities.
Larner Death Shocks District.
The local financial district was
shocked today by the death last night
of John B Larner, president and one
of the founders Of the Washington
Loan g. Trust Co. His passing, how
ever. was not a surprise to his closest
friends. as they had realized for sew
eral weeks that he could not recover
His death takes an outstanding leader
from the banking district, man of
remarkable ability, sterling character
standing at the very top of his profess
sion.
While he gave up his law Office to
become bank president, his conserva-
tive judgment in the management Of
estates was of great benefit to his
banks clients up to his last illness.
He was one of the first local bankers
to see the future for trust departments
and early turned his attention to build
ing up such an organization in his own
institution. Eve. body liked Mr.. Lar
ner and he Will b. missed as much for
his friendlness as III other ways, pos
Sibly more so.
AS noted elsewhere in The Star. Pres
ident E. J McQuade of the District
Bankers Association, has appointed
several OF the city's leading bankers
to act as honorary pallbearers at Mr..
Larner's funeral.
ding Active on Exchange.
Tr2trlg was the most active on the
Washington Stock Exchange than it
has been for several sessions. Bonds
were in best demand the largest turn
over being in Washington Railway g.
Electric Is. Washington Gas and Poto-
mas Electric Power also being favored
The largest stock sales were in Lanston
Monotype at rs
AT the conclusion of trading, the
exchange members passed resolutions
OF deep regret and sympathy on the
death Of John B. Larner