Postal Riders and Raiders

by W. H. Gantz

Since this article was written (Mr. Benson adds in a footnote) the Interstate Commerce Commission has issued a report in which railroad holdings in express stock are given at $14,124,000. The same report says the “total book value of property and equipment of 13 express companies is $22,313,575.53.” The figures furnished by the express companies are evidently somewhat bewildering to the commission, which, having found the total value of the express companies’ assets to be $186,221,380.54, remarks: “It is evident that the capital stock of these companies bears no relation to the amount invested in the express business.” On the face of the Interstate Commerce Commission’s report, the railroads have disposed of more than $6,000,000 worth of express stock since the United States Senate investigated the matter during the life of the Sixtieth Congress. Yet there is no mention of such a transaction, and it seems exceedingly unlikely that the railroads have suddenly reversed their policies and become sellers instead of buyers of express stock. What seems more likely is that both the railroads and the express companies are continuing the policy to use figures to conceal facts. Gentlemen who can give $186,000,000 worth of assets a “book value” of $22,000,000 might have no difficulty in compelling figures to turn flip-flaps upon almost any occasion.

Please notice that railroad companies—not railroad men, railroad companies—own more than $20,000,000 of stock in express companies. The express companies are capitalized at only $48,000,000. Railroad companies therefore own almost half of the stock of the express companies. Railroad men like Mr. Gould, the Vanderbilts and Mr. Morgan also own stock in express companies. Railroad men presumably do not vote their private holdings of express stock in opposition to the manner in which they vote the express stock owned by the railways they control. But, even if railway men owned no express stock, the ownership by railways of a solid block of more than $20,000,000 of express stock would enable the railways to control the express companies. Mr. Morgan controls many corporations in which he holds only a minority interest. It is the way of big men to control more than they own.

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Let us assume that you attach no significance to the ownership by the railways of almost half of the stock of the express companies. You don’t believe the railroads would take the trouble to get control of $3,500,000 more stock and thus control the companies. You want to be shown.

All right. You don’t mind using your common sense? Good.

Wouldn’t railroad companies be incorporated fools if they didn’t control the express companies? Couldn’t the railroad companies, if they cared to, control the express companies, even though the railroad companies owned not a share of stock in any of the express companies? What is an express company?

An express company is a corporation that is engaged in transportation. Not a single express company owns a foot of railway track, a locomotive, a roundhouse or a water tank. Not a single express company employs an engineer, a fireman, a train dispatcher, or a section hand. Not a single express company could carry a bar of soap from New York to Albany without using all of the mentioned instruments of transportation, besides many others. In other words, an express company is an institution engaged in transportation without owning any of the means of transportation. It exists only by sufferance. So long as railroad companies are willing to haul the cars of an express company, the express company may do business—but no longer. An express company, if ill-treated, has no other place to go. It cannot hire a department store company to haul its cars, nor a dry-goods firm, nor a manufacturer of hats. An express company must go to railroads for its transportation facilities, accept the best terms it can get, or go out of business.

Is it not so? How comes it, then, that you never hear of rows between express companies and railroad companies? How comes it that the same railroads that are always trying to squeeze you on freight rates apparently never try to squeeze the express companies on rates for hauling cars? The express companies are exceedingly fat birds. They are absolutely in the power of the railroad companies. If you owned the only vacant house in the world and a wanderer must rent from you or die in the street, you would not have him more completely in your power than the railroad companies have the express companies.

Yet the railroad companies are frying the express companies to a frazzle. The New York Central Railroad Company takes 40 per cent of the gross receipts of the express company that operates over its lines. But the frying is entirely friendly, and therefore the express companies do not cry out against it. A station agent does not complain because the railroad company for which he works takes from him the money for the tickets he has sold. He expects to give up the money. The officers of express companies expect to give up the money they take in. That is what they are there for. If they were otherwise disposed they would not be there. The $20,000,000 block of express stock held by railroads would keep them out. Can you imagine an express company giving 40 per cent of its gross receipts to a railway company if the directors of the express company were not controlled by the railway company?

Please get the full meaning of that New York Central arrangement. It is not a mere matter of 40 per cent. It is a matter of 40 per cent of the gross receipts and then perhaps 50 per cent of what is left. In other words, the railroad company first takes, as a carrier, four-tenths of the express company’s receipts. As a stockholder in the express company, the railroad next takes almost half of the net profits.