Postal Riders and Raiders

by W. H. Gantz

Well, he was right for the period in which he spoke. But twenty years is a long time in a swift, governmentally aided get-rich-quick age or country like ours. There are some dozen or more express companies now—a dozen or more on paper—quasi-express companies.

The railroad companies and railroad officials control the express companies and the express business of this country today.

A departmental report of the government showed, as stated in the Saturday Evening Post of May 27, 1911, “that the four principal express companies have thirty-seven directors, of whom thirty-two are residents of New York, two are residents of Chicago and three of San Francisco. These express directors are also directors in twenty-five of the leading railroad systems of the United States.”

So, today, if Mr. Wanamaker were inclined to do so, he would probably revise his statement of twenty or more years ago. He would probably say that the railroads of this country stood as the insuperable objection or obstruction to the establishment and operation of an efficient, cheap and serviceable parcels post—the failure or neglect to do which is running one of the greatest raids into postal revenues this or any other nation has ever known.

Mr. Albert W. Atwood in writing to this point under the general caption “The Great Express Companies,” in the American Magazine, February, 1911, issue, says:

Perhaps you have thought of all this before, but do you also know that the six largest express companies are among our greatest bankers? With them, in one year, the public has deposited $352,590,814 and their transactions in money orders, travelers’ checks, letters of credit and bills of exchange rival those of the most powerful banks. This business, unlike any other form of banking is under no governmental jurisdiction and goes untaxed. It is made possible only by using the machinery of the regular banks, although to these the express companies pay no revenue. In the money-order line, express companies compete with the postoffice and do about one-third as much business as the government. The American Express alone has handled nearly 17,000,000 money orders in one year. That the public has confidence in the safety of the express companies as banks admits of no doubt, and it has been credibly reported that in the panic of 1907 money was withdrawn from banks, which the people did not trust, and invested in express money orders.

Transportation in a multitude of forms and branch banking do not comprise the sum total of express activities. The surplus funds of these huge institutions have grown large enough to require constant investment, and the express companies form a close second to the savings banks and insurance companies as the most dependable, regular and important class of investors in railroad securities. Diversified as the functions of the express companies have become, success has more than kept pace with their extension into varied fields, and a keen, wideawake public interest in the express business is demanded, not alone by the public and necessary character of the business itself, but still more by the extraordinary return which the companies receive for service performed.

Six companies control more than 90% of the country’s express business, and of these the Adams is one of the oldest and most powerful. Organized more than fifty-six years ago, its capital stock had grown to $10,000,000 by 1866, in which year the members of the association, as the shareholders are called, received a stock dividend of $2,000,000. The $10,000,000 of stock itself did not represent shares issued for cash. According to the company’s own reports, no shares were ever issued for cash. The 100,000 shares were given to members of the association to represent each member’s pro rata ownership in the assets which had accumulated from earnings. As late as 1890, according to the census figures, the company had an actual investment in property employed in its business of but $1,128,195. Yet it had been paying 8% dividends for many years, or 80% on the actual value of the property in use. In 1898 it distributed $12,000,000 of its own bonds to stockholders, these bonds to be secured by the deposit in trust of the surplus funds not used in the express business. At this time the company reduced its dividend rate to 4%, but as 4% was also paid on the bonds, the stockholders did not suffer any loss of income. By 1904 the dividend rate had mounted to 10%, the bond interest remaining at 4%. In 1907, $24,000,000 additional bonds were given to the stockholders, likewise secured by another fat surplus, and like the first issue, paying 4% in interest. Dividends on the stock have since been maintained at 12% and there has grown up another surplus of nearly $25,000,000 which must soon be disbursed. Meanwhile the property actually employed for express purposes has grown to but something more than $6,000,000.