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Show : i : : - tV1 r : - - I i Popular Economics Series f" ' Copyright, Bank of the Manhattan Company, New York City I ! 1 "The American Ways" , 1' 1 I Railroad Valuation Facts Face value of outstanding railroad C stocks and bonds at time of "valuation," $19,028,535,973 a Interstate Commerce Commission's 9 "Tentative Valuation" of railroad 3 property, based on pre-war level of S vaiues, (only 610 of 1 less) 18,900,000,000 G Estimated cost to Government of val- S nation work, as prophesied in 1913 by . . S sponsors of "Valuation Act" 2,500,000 3 Actual cost to Government of valua- K tion work (though not completed), as g reported by Interstate Commerce Com- 3 mission in 1923 24,351,824 S Estimated cost to railroads of valua- 3 tion work, as prophesied in 1913 by G sponsors of "Valuation Act" 2,500,000 D 'Actual cost to railroads as reported in S 1923 by Interstate Commerce Com- jO mission 66,882,264 Total cost of valuation work for ten K years, with work and expense still g , , j continuing '. 1 ., 91,234,088 S BZ5H5H5H525Z52SS5HS2SZ5ZSE5ESeSZSZ5Z5ZS2SZSKS'Jr? T? W T? W 1 J f FACTS VS. THEORIES - i I 1 L-jj'HE "Valuation Act," passed ' f 1 M 'n. 13 providing for a valu- t( " 1 j Jj.iJation of the physical property V . ' the railroads, was the result of i ; mixed motives. In the first place, it ;i was realized that the earlier rate 1 1, ! , laws lacked one important factor. ;. .r ; How could it be determined whether i , the Government's rates really were . I M fiT? ; .v lj 1 t While shippers and the traveling ' ' U : : public natural desired the lowest rates at which they still could be as- J 1 ! ' ured of adequate transportation, i ! jthey also recognized that the rail- f. iji't jroad owners were entitled to a faiir h ( , "p'n their investment. But, 'I-, ' ' -i ise the"Jr rate retUrn on ' sent evcrvould be excessive if tin V- , tools to Yf onIyhaIf as large , i the time Slb!y sma11 lf 11 Wcre r'F The Fnl" ar6e- Furthermore, it ' I '.' when ho real vaIue, not a fictitious; ( t Haws yas therefore, decided that 1 ' (( LJritative appraisal of the 'l : j f jTdiucof the American railroads 1 !( tnust be made in order to provide a ' 1 j basis for intelligent rate-making. J' ' i ! r It was the advocates of govern- f ; ,t , j tnent ownership, however, who wer I . f v I ne most active in urging the pas- ' ' , " 4 sage of the Valuation Act. In fact, w they were its' chief sponsors. They I i : 'fl contended that the $19,028,535,973 , ;' i '. i( jface value of outstanding railroad im '. -Ii securities consisted largely of "wa- I .1: 'j 'tered stock" and were supremely 1 - i'l' , confident that the real values when 1 i; j ' determined would support their con- ;t ' !, S ; tentions. They desired, particularly, )'' 'W 1 to demonstrate that the Government "' ' . I i could acquire the roads at a rela- . ; I;-; ' I tively small cost. It was realized t -1 tnat tne appraisal would be a la- ' 1 ! ' I 1 borious process, but they insisted 1 l'J : ' ', that its cost would not exceed $2,- i i: ji i 500,000 to the Government and a like ' ; j I 1 i amount to the railroads. . ' j , The appraisal was undertaken by 1 ' ' j' I the Interstate Commerce Commis- , l : i sion in 1913 and is still in process. ! 1 i 'At the end of ten years it had cost . '. ! ! the Government $24,351,824.00, and , :':;! the railroads $66.SS2.24and the . i end is not yet. In 1910 the Com- "1 ! mission announced a "tentative val- ' '' : nation" of $13,900,000,000 based on ' f' I I a pre-war level of prices, which obviously ob-viously has since increased. This at once aroused vehement protest from the very men who had sponsored the legislation and who had assumed that the valuation figure fig-ure would be very much lower. Their contention now appeared to be in the sad predicament defined as Huxley's "idea of a tragedy," namely, ua hypothesis slain by a fact." In order to extricate themselves them-selves from the dilemma of their own making, they now propose that the entire valuation worked out by the Government be cast aside and that the valuation of the railroads be determined on an entirely new and largely theoretical basis. This period of punitive and repressive re-pressive legislation produced several sev-eral outstanding results : lit A determination by a Government Govern-ment body that the physical value of the railroads was practically prac-tically equal to the face value of all their stocks and bonds j In other Words that there wat no evidence of ''water." -2nd Complete projection of the public pub-lic against any conceivable abuses such as those that had prevailed during the period of self-seeking, and, 3rd A mass of complicated state and national legislation of a restrictive restric-tive and punitive character, to. (Tether with the threat of possible pos-sible government ownership. 4th Diminished earnings, due to a constant lowering of the level of rates and to the hesitancy of the Interstate Commerce j Commission to grant rate in- i creases while at the same time all expenditure levels were ris- ing, thus resulting in i 5th A growing number of roads being be-ing forced into receivership, fol- I lowed by 1 6th The withdrawal of support by investors because of dwindling dividends, defaulted interest and fear of the future, and, consequently, conse-quently, , 7th The virtual cessation of railroad rail-road expansion. Now, indeed, had the common carrier car-rier been shorn of much of its power to serve. It was bound, helpless, "hog-tied." The old ideal of adequate ade-quate transportation had become a naif-forgotten memory, when suddenly sud-denly we were rudely awakened by the greatest emergency of our national na-tional history the outbreak of the European War. Or "r |