1. Orders, or suggestions having practically the force of orders, requiring changes in the classification of freight.

2. Orders, or suggestions having practically the force of orders, requiring reductions in rates.

3. Statutory reduction in the rates of compensation for carrying the mail.

4. Reduction of compensation for carrying the mail made by executive order.

A painstaking effort to secure accurate statistics concerning recent increases in these expenditures and losses has been made and data for that purpose have been supplied by many of the railways operating east of the Mississippi river. These data are necessarily incomplete and fragmentary, the accounts of many of the companies not being kept in such form as fully to disclose the items desired. In few cases were the data which could be obtained for any line complete—some companies were able to report particular items while other companies could not give these, but could supply others. Generally speaking, it should be realized that the tabulation of these reports makes a showing which is incomplete mainly in the form of omissions. A conservative computation discloses that the costs due to increases in expenses or reductions in revenue imposed by statutes or by Commissions acting under Federal and State regulatory laws costs the railways of the United States approximately $200,000,000 in two years. That this is not an exaggerated estimate will be appreciated by reference to the principal general items of expenditures as enumerated on the preceding pages. Until these items shall have been assigned a proper classification in the accounts of the railroads the accurate results may not be ascertained, but it will at once occur to those in any measure informed that there has been an enormous increase of work and expense placed upon the carriers to conform to the innumerable requirements of State and Federal laws and the rulings of the Commissions thereunder, and that this burden has extended to all departments of the carriers. Litigation and miscellaneous expenses appear as a large part of these new costs, and in addition the carriers' revenues have been greatly depleted either directly by the laws, orders of Commissions or suggestions having practically the force of orders, resulting in reductions of freight and passenger charges.

COST OF OBTAINING NEW CAPITAL.

In the matter of interest on the capital employed the railways have apparently enjoyed an advantage which would seem to offset the natural tendency of interest rates to rise in response to the stimulus of augmented cost, in dollars and cents, of the commodities entering into the budget of expenditures of the average recipient of interest—that is to say, the advantage growing out of the fact that a large proportion of railway capital is secured under long-time contracts and that many of the contracts now in force unquestionably run back to a time before the extensive depreciation of the American dollar began. This advantage is a real one, but its extent is easily exaggerated. For the purpose of throwing light upon the effect upon the cost of railway transportation of the rise in interest rates which has characterized recent years an analytical study of railway indebtedness (including guaranteed dividends) amounting, in the aggregate, to $9,499,099,065 has been made. This sum represents indebtedness now outstanding and includes some duplication owing to the fact that certain of the securities represented in the aggregate are themselves based upon other securities deposited as collateral or held in the treasuries of the corporations making the secondary issues; duplication which could not be eliminated without adding vastly to the difficulty of the inquiry with no corresponding gain in the accuracy of the result. These data are also subject to the qualification necessarily due to the fact that all of the issues included were not sold at par. In some cases a small premium was doubtless obtained and in other cases a slight discount was required, but, nevertheless, it is believed that the data fairly indicate the general change in interest rates on capital loaned to railways. Of the total outstanding indebtedness of $9,499,099,065 the portion incurred during the years 1897 to 1908, inclusive, amounts to $5,466,340,252, or 57.55 per cent. The following table shows the amounts incurred at the different rates during each of the years named:

Rate of Interest and Amount Incurred During Year and Outstanding.
Year.6½ per cent.6 per cent.5 per cent.4½ per cent.
1897—$11,039,000$42,126,000$7,700,000
1898—487,0007,486,700207,000
1899—13,094,00029,197,00015,896,000
1900—1,133,00015,926,3517,979,000
1901—1,777,77538,840,00037,845,378
1902——44,949,50819,949,600
1903—1,552,00053,592,03022,092,500
1904—256,00061,191,56130,241,729
1905—1,810,00066,346,00073,996,100
1906$350,0001,180,579141,786,51140,922,181
1907—30,325,000289,458,892177,805,962
1908(a)—114,504,97047,546,3852,850,000
——————————————————————
Total$350,000$177,159,324$838,446,938$437,485,450
Rate of Interest and Amount Incurred During Year and Outstanding.
Year.4 per cent.3¾ per cent.3½ per cent.3 per cent.
1897$205,882,500—$221,663,000$4,998,275
1898187,898,000—194,724,325—
1899277,784,400—126,734,00043,231,272
190083,735,500—62,577,00043,689,000
1901382,131,250330,00051,635,000—
1902348,038,050—58,641,500—
1903317,948,000—22,308,0009,866,435
1904193,499,500—39,890,000—
1905364,507,404—112,645,15516,000,000
1906251,037,68148,262,54831,098,670—
1907210,399,075—423,000—
1908(a)101,380,000———
———————————————————————
Total$2,924,181,360$48,592,548$922,339,650$117,784,982
(a) January to July, only.

Even a cursory examination of the foregoing statement shows that the average rate of interest demanded by those who supply railway capital has greatly increased. In 1897 and 1898 the largest aggregate of new indebtedness was incurred at the rate of three and one-half per cent. per annum; in 1899, 1900, 1902, 1903, 1904, 1905 and 1906 the preponderating portion was at four per cent.; in 1907 the largest aggregate was at five per cent., while in the months of 1908 for which data are available the greater portion was obtained at six per cent. Loans at three and three and one-half per cent., which supplied a considerable aggregate during all of the years to and including 1906 and particularly in the earlier years of the period, had substantially disappeared before 1907 and no funds were procured at less than four per cent. during the portion of 1908 which is included. The increased volume of loans at five and six per cent. is equally marked. The following table makes this analysis clearer by showing the total borrowings of each year and the percentage at each rate: