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Mr. THORNE. Yes. The fact that railroad credit, as a whole, is better than industrial credit was practically conceded this past year in the record. Mr. Oldham was the leading witness among the experts offered by the railroads last spring, and I have here an extract from his testimony. This illustrates general conclusions derived from statistical analyses made by people on the other side as well as ourselves. There is no substantial dispute between us on that conclusion. Here is the testimony of Mr. Oldham :

In normal times I should say the credit of all of those railroads is such that they could borrow considerable amounts of money.

Mr. THORNE. At rates as low as or lower than other industrials generally? Mr. OLDHAM. Why, certainly. Railroads borrow money better than industrial concerns. That is perfectly true. I do not think that admits of any

argument.

Mr. THORNE, That is all.

Again, Mr. Robert F. Maddox introduced a statement showing the yield of the securities of 20 representative railroads and 10 industrials. On cross examination he admitted that the list of railroads was representative, including both strong and weak roads. He further admitted that he had left out all weak industrials and that those he used were the stronger companies, the majority of them being aided by the war by reason of their manufacture of munitions and war supplies. He further testified that these yields fairly represented the credit of the companies, but finally stated that his own exhibit proved the credit of the railroads for every year during the past 15 years down to the present time has been better than that of the industrials.

That can be found in a transcript of the record, page 5478. The quotation from Mr. Oldham's testimony is found in the transcript of the record, page 5541. The record to which I refer is Ex Parte 57.

Senator KELLOGG. I would like to ask you a question there. What tables do you use in your comparison of decline of stocks and bonds?

Mr. THORNE. The two tables are not the same. The decline in bonds is taken from the New York Commercial and Financial Chronicle, which makes the comparison from the 1st or 2d of January with October 31. The table introduced from the Wall Street Journal covers the week ending November 15, 1917, compared with the same period in 1916.

Senator KELLOGG. During the period of the war there has been enormous increase in the price of most industrials in the country, has there not, in stock?

Mr. THORNE. I should say that many of them have; yes, sir. Senator KELLOGG. Generally throughout the country in manufacturing industrials there was a tremendous increase in the price of their stocks.

Senator GORE. Do you mean since we went into the war or since the war started?

Senator KELLOGG. Since the war started. Mr. THORNE, I would say "yes yes" as to those industries connected with the manufacture of munitions and war supplies generally, but I would not say "all."

Senator KELLOGG. But other manufacturers not manufacturing munitions of war, iron and steel of various kinds, not manufacturing munitions of war, have increased enormously.

Mr. THORNE. Yes, iron and steel have.

Senator KELLOGG. Many other manufacturers have increased enormously in their prices?

Mr. THORNE. Yes.

Senator KELLOGG. Some of them five and six hundred per cent, like the Bethlehem Steel Co., of course.

Mr. THORNE. I do not know whether the figures are correct, Senator.

Senator KELLOGG. Bethlehem Steel went up from something like $35 a share to something like $600, did it not?

Mr. THORNE. If you desire a statement about munitions
Senator KELLOGG (interposing). In a general way.

Mr. THORNE. Munitions have gone up very much.

Senator KELLOGG. And other manufacturers have gone up very much.

Mr. THORNE. The stocks have not, as a whole. All but 9 or 11 out of 160 some odd have gone down.

Senator KELLOGG. I am talking about from the beginning of the European war.

Mr. THORNE. Oh, 1914?

Senator KELLOGG. Yes; they have enormously increased during the period of the European war up to January, have they not?

Mr. THORNE. There is no question but what prices have increased very largely.

Senator KELLOGG. They increased a great deal more than railroads increased, did they not, during those years?

Mr. THORNE. You are now speaking of stocks or articles? We were speaking of articles a while ago.

Senator KELLOGG. Well, you have been speaking of stocks, too. Mr. THORNE. If you are making your statement as to stocks, I can not accept the statement.

Senator KELLOGG. Have not industrial stocks on the market from 1914 up to January 1 last increased much more than railroad stocks on the market?

Mr. THORNE. I think not.

Senator KELLOGG. You think not? Have you compared them to see?

Mr. THORNE. No, sir.

Senator KELLOGG. Then how do you know?

Mr. THORNE. I say, "I think not." I will be very glad to make an analysis of that character if it is desired.

Senator CUMMINS. Assuming that conclusion is correct, what is its application to the question in this bill, or the questions in this bill, so that we may have the application before adjournment?

Senator KELLOGG. Exactly the same application that he makes. He is undertaking to show that railroad stocks and bonds have not declined any more than other stocks and bonds.

Senator CUMMINS. I am not asking about the application of your question. I am asking Mr. Thorne about the application of his conclusion.

Senator KELLOGG. Oh, I thought you were asking me a question. I beg your pardon, Senator.

Senator CUMMINS. Oh, no. We have here the question of compensation and the question of control over rates. What is the application of your conclusion to the matters in this bill?

Mr. THORNE. The showing that I have made, and the admissions of railroad officials on the stand go to show that railroad credit has not declined, that the decline in the market prices of their securities has been surpassed in the decline of the market prices of Government securities, independent of circulation and deposit privileges, and it has been exceeded by the decline of municipal securities. Therefore, the earnings which the carriers have received as reflected in their credit must have been adequate; that the decline of the market prices is due not to railroad credit but is due to war conditions, to the general financial situation throughout the war.

The decline in values during the further progress of the war will be continued. James H. Oliphant & Co., of New York City, has made an elaborate analysis of the decline in values of English securities. I have here a statement showing that.

(The statement referred to is here printed in full, as follows:)

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1 Estimated. Bank of England rate was reduced to 5 per cent Apr. 5, 1917, at about the time of the entrance of the United States into the war.

(From War's Effect on British Securities, James H. Oliphant & Co., New York, p. 23.)

War-time dividends of British railways—A selected list of the common, or ordinary, stocks of several of the most important British railways, together with their dividend records, 1913 to 1916, inclusive.

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(From "War's Effect on British Securities "-James H. Oliphant & Co., New York, p. 25.)

The total par value of all securities listed in London, including American securities, but excluding all excepting the earlier war loans, is approximately $58,000,000,000. Omitting American securities from the list the following estimated advances and declines have resulted:

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The approximate net decline, as above, is $11,292,000,000, equal to approximately 23.1 per cent of the total par value of all securities listed, excluding Americans. At what exact aggregate figure these securities were selling before the war it would be difficult to ascertain. It is, however, safe to say that the average would not be so high as par; British funds, municipals, colonials, home railways, colonial railways, and foreign Governments usually sold at a discount; bank, insurance, and a fair proportion of commercial and industrial securities were at a premium.

American rails listed in London amounted to more than $8,000,000,000. These were mostly, however, listed on the New York Stock Exchange also. Other Americans listed, but also quoted on the New York Stock Exchange, including United States Steel, would probably amount to nearly $2,000,000,000. Owing to the fact that a vast percentage of British holdings in American securities were sold in early war days, it is probable that losses have also been realized in this class of securities.

A portion of the $16,000,000,000 foreign Government and municipals is certainly not held in Great Britain. This estimated aggregate total includes Russian and Latin American bonds, a portion of which are held in France and Holland. It also includes certain French, German, and Hungarian bonds and $62,000,000 American bonds. It is possible that fully $4,000,000,000 of these bonds are not held in Great Britain. (From War's Effect on British Securities, James H. Oliphant & Co., New York, pp. 22–23.)

On English railroad securities the decline has been something like 32 per cent since Great Britain entered the war. The decline has been greater than that on industrials, although their income has been absolutely guaranteed.

Senator GORE. You say the decline has been greater than on industrials?

Mr. THORNE. Yes, sir.

Senator LA FOLLETTE. You say you have a statement or table showing all that?

Mr. THORNE. Yes, sir.

Senator LA FOLLETTE. And you have put it in in connection with your testimony?

Mr. THORNE. Yes; that shows the decline in values in English securities.

Senator POMERENE. So that I understand you there, when you speak of the declines in the railway securities, did you mean the stocks or the bonds, or both?

Mr. THORNE. I was speaking generally of both. The decline in values of English securities has been, as estimated by this statistical department of James H. Oliphant & Co., over $10,000,000,000 since the beginning of the war, and just as fast as you increase the rate at which people can get money you will find a decline in values. It is an inevitable consequence that none of us can avoid.

If the Government of the United States has to pay 5 per cent or 6 per cent, or more, as other Governments have after they have been in the war quite a time, you will find a further large decrease in the values of railroad securities as well as in all other classes of securities, generally speaking.

The CHAIRMAN. The hour for recess having now arrived, the committee will stand adjourned until 2 o'clock.

(Thereupon, at 12.30 o'clock p. m., recess was taken until 2 o'clock p. m. of the same day.)

AFTERNOON SESSION.

The committee met, pursuant to the taking of recess, Senator Joseph Robinson presiding.

STATEMENT OF C. A. PROUTY, OF THE INTERSTATE COMMERCE COMMISSION.

Senator ROBINSON. The committee will please come to order. The chairman has been detained for a few minutes and has asked that the committee proceed with its business. Some time ago the committee requested Mr. Prouty to be present at this hour, and Mr. Thorne has consented to suspend his examination for the moment, the understanding being that some of the members of the committee wanted to ask Mr. Prouty some questions.

Mr. Prouty, some testimony has been introduced during the course of the hearings, relating, of course, to the just basis of compensation for the railroads that have been taken over by the Government during war times, and it has been suggested by some that a proper basis would be the value, the actual value of the property, as ascertained by the Interstate Commerce Commission. It is understood and generally known that you have been in charge of that division of the Interstate Commerce Commission which has been intrusted with the physical valuation of properties.

Can you state generally about how far that work has proceeded in the commission?

Mr. PROUTY. Mr. Chairman, what you want to know is, I suppose, how long it would be before that work would be available for this purpose, and I can state it better that way.

Senator ROBINSON. I wish you would state it.

Mr. PROUTY. We expect to complete our inventories as of about two years from the first of last January. That is, it will take us about. two years more on the average to complete it.

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