AFTERNOON SESSION

Traction inquiry resumed at 2:25 p. m.

The Chairman.—I want to say to the gentlemen of the Board that there are some enterprising photographers in the back there that want to take a picture, and I suppose that there is no objection. I want to be sure that we will have the Presidents of the Borough of the Bronx and the Borough of Richmond in the picture.

Mr. Curran.- Well, how about Manhattan?

The Chairman. Well, all right, Manhattan.

Of course, we

will want Manhattan. We are all ready if Mr. Quackenbush will look around once.

Mr. Quackenbush.-I am not handsome enough to get in with the group.

Mr. Curran. You mean that you are ashamed of the crowd. Is that it?

The Photographer.-Gentlemen, all ready. I will take the picture.

(Photograph taken.)

HORACE M. FISHER resumes the stand.

Mr. Burr.- Suppose the stenographer reads the last question. Mr. Quackenbush.-I do not think we need it. Well, if you have it there read it.

The Stenographer. The last thing on the record this morning was a long discussion.

Mr. Quackenbush.— All right.

By Mr. Quackenbush:

Q. Mr. Fisher, will you proceed with the development of the financial history? A. I left off with the issuance of $35,000,000 of capital stock by the Interborough Rapid Transit Company.

As previously testified, that was $21,400,000 for cash, $2,500,000 for the McDonald one-quarter interest, $1,500,000 for the Pelham Park and City Island Railroad and services of Mr. Belmont, and $9,600,000 for the stock of the Rapid Transit Subway Construction Company, 60,000 shares at $160 per share, $60 paid in. Following the investment of that money into equipment and construction, the contract, No. 2, then being under way, as we needed money from time to time notes were issued, short term notes. On May 1, 1905, there were $15,000,000 of three-year 4 per cent. notes issued. They were sold on June 30, 1905, and on June 19, 1906, the discount on that $15,000,000 amounted to $450,000.

By Mr. Burr:

Q. Who got that discount? A. The bankers.

Q. Who were the bankers? A. Reed & Company and Lee, Higginson & Company; William A. Reed-and

Q. William A. Reed was one of the original

A. Reed was one of the original incorporators.

A. William

Q. He was one of the incorporators? A. Yes, he was one of the incorporators.

By Mr. Quackenbush:

Q. Have you got the subdivisions of it between Lee, Higginson & Company and William A. Reed & Company? A. No, I have not. The next issue of notes was on March 1, 1907, three-year 5 per cent. notes, to the extent of $10,000,000. The discount on that was $500,000. We received $9,500,000 cash for those $10,000,000 notes.

By Mr. Burr:

Q. It was more expensive to float the $10,000,000 than the $15,000,000? A. A little more so because market conditions were not quite as favorable. On May 1, 1908, there were $25,000,000 of three-year 6 per cent. notes issued, on which the commission amounted to $1,250,000. We received $23,750,000 in cash.

Q. Who got that commission? A. I do not recollect who the bankers were, but they were regular bankers in the street.

Q. Who got the $500,000 for the $10,000,000? A. I think that was the same firms as got the original commission.

Q. Reed & Company and- A. Reed & Company and Lee, Higginson & Company.

Q. And Lee, Higginson?

A. Yes. On April 29, 1911, there were $10,000,000 of 42 per cent. notes issued, on which the commission or discount amounted to $100,000. We received $9,900,000 for that.

Q. $100,000 you say? A. $100,000. By that time the subway had demonstrated that it had a good earning capacity and the credit of the company was better and the commission was less, of course. On September 6, 1911, there were 5 per cent. notes issued to the amount of $5,000,000, which were taken without any commission. We received $5,000,000 cash for them. I think those notes were taken by Morgan & Company. There were $15,000,000 of 5 per cent. notes issued on April 29, 1912, for which we received $14,437,500 in cash, the discount and expenses amounting to $562,500.

Q. Who took that? A. I think those were taken by Morgan & Company. In the meantime we had issued $33,959,000 of forty-five-year 5 per cent. gold mortgage bonds dated November 1, 1907, of which $10,000,000 were sold for cash to Morgan & Company, and on that issue we received a premium of $129,166.67. That money was used to pay the three-year 5 per cent. notes of March 1, 1907, three months before maturity. The notes were called at 101.

The Chairman.-I am just looking for information. What is meant by "gold mortgage bonds?"

The Witness.—Well, they call nearly all the bonds gold mortgage bonds. I do not know what their idea is. That is a banking term.

Mr. Quackenbush.-Because they are payable in gold of the then standard of weight and fineness; upon maturity in gold at the standard of weight and fineness of gold at the time of the

making of the bond, insuring to the purchaser of the bond the return in value of the amount that he pays for it.

Mr. Burr.-The bankers insisted upon that being put on the bonds at the time of Mr. Bryan?

Mr. Quackenbush.-I think historically that is correct; yes, sir; although I think it went even back of that, to the Civil War. The Chairman.-I thought at first it was where they put a gold seal on a gold colored bond, that is all.

A. (Continued.) These various note issues from time to time were made as we required money for construction or equipment. The construction money consisted of the excess cost of the Brooklyn extension. We bid $2,000,000 for that extension and it cost about twelve.

By Mr. Burr:

Q. At this point could you give us the total of the note issues and the total of the discounts paid? A. No; I have not added the figures, because the total of the note issues does not mean anything, inasmuch as subsequent note issues were made to redeem previous note issues.

Mr. Quackenbush.- Mr. Gaynor will give you the figures. Mr. Burr.-I see. We want to get the total of the outstanding issues.

The Witness.—I am getting to the final total; that is what I am coming to. These various issues of notes and bonds finally resolved itself into an issue of $33,959,000 of 5 per cent. bonds dated November 1, 1907, and $15,000,000 of nine-months 5 per cent. notes dated May 1, 1913. These bonds and notes were exchanged for the present refunding 5 per cent. mortgage bonds of the company, and amounted to $52,615,000. That figure was arrived at in this manner: There were $33,959,000 of forty-fiveyear bonds; we held in the sinking fund $1,009,000, making a net amount outstanding of $32,950,000. These bonds were redeemed at 105, costing $34,597,500. The $15,000,000 notes were exchanged for bonds at par, making a total of $49,597,500

in money, for which bonds were issued on the basis of 9312, making $52,615,000 in bonds. That brings you down to the Refunding Bond Issue, as shown in the annual report.

Mr. Quackenbush. If your honors please, you will see that on the second page of the sheet that was handed up, at the top is this item of $52,615,000 in addition to this purchase of $35,000,000 of stock, making the securities prior to the new contract $87,835,000.

Mr. LaGuardia.-May I just get cleared up on that?

Mr. Quackenbush. Yes, sir.

By Mr. LaGuardia:

Q. Let us see if I have this right. If I have not, please correct me. First, you issued these series of notes at $15,000,000, $10,000,000 and $5,000,000. That was afterward exchanged into your so-called forty-five-year 5 per cent. gold bonds. A. Some of them; yes, sir.

Q. Some of them. Then that again was exchanged for your so-called mortgage bonds? A. That is correct.

Q. Each one of these operations costing money? A. It finally resolved itself into the present outstanding $52,615,000 or refunding bonds.

Q. That is the fourth operation, or fifth? A. That is the third operation.

Q. No; first you have your notes, then you have your 5 per cent. gold bonds, then you have your mortgage bonds, and now you have what? A. No, then we have the mortgage bond, which is the present bond.

The Chairman.-And each time there is an additional cost. The Witness. Not always; sometimes we had a premium. Q. Well, only once I have here. A. Well, we had a premium in 1907, when we sold $10,000,000 of forty-five-year bonds. Q. Yes, you had $100,000 premium? A. We had a premium of $129,000.

Q. Yes, but those last mortgage bonds, the 5 per cent. gold