Show SEEN end and HEARD around the th National Capital Capitali i By Di C CARTER FIELD FIELD The Washington The now new n v plan for tor government aid for tor financially cia II sick sic railroads to bo made possible II by bills Just Introduced with the tho al ap approval pro a of ot the tho administration In both and senate Is 13 a n combInation ot of scaling down own the be capital structure ture tune and government guarantee ot of bond Interest Originally as ns told in these dIspatches lost last year the plan was to have o the government guarantee the Interest and principal In return for or a concession b by the thebo bo bondholders both as to amount ot of the principal and rate of or Interest The new plan Is n a variation ot of thIs not actually In the fundamental Involved but In the method ot of approach As s In the first place Ilace It Itis itIs ItIs is Intended to be lIe applied only to railroads for tor which there Is la really some Iome economic hope It Is admitted that there are arc quite a few f w which are simply Imply beyond saving econom economically All the proposed legislation does Is to give ghe the the right to pur purchase chase railroad bonds regardless ot of theIr maturity date at the market prIce Thereupon the regards the amount paid for the bonds aa ns a debt of or the railroad to the and charges the railroad the regular rate This rate Is now 1 1 per percent percent percent cent ThIs Tills would not probably enable the UFO to get anywhere nn where with the situation were It not for another J law V already on the books the new bankruptcy law Under Section S 77 ot of the bankruptcy act net any rl federal court may direct a n 11 scaling down ot of aU all classes of security of an any rail rail- railroad railroad road It If two-thirds two of ot the holders ot of each class of bonds and preferred stocks approve e Were It not for tor the lie bankruptcy net a small group of or bondholders by refusing to sell BeU nt t what had been lIeen market prices might either prevent nn anything being done or force the government or the railroad company to buy them oft off Thus a r fi per cent railroad bond might be selling for 20 O but the plan could not be applied because 5 per percent percent cent of the holders Insisted on being paid par Many a railroad merger in the past has lias been blocked h by such attempted holdups and many an- an another an another other has hns been overcapitalized be be- because because because cause the promoters paid too much to minorities Hits Sharpshooters The new proposal strikes hard hardat hardat nt at these be would-be sharpshooters It t would work worl something like this The New v York Cripple Creek Creel to take an on Imaginary name Is a fairly sound railroad except that It Is overcapitalized It cannot possibly lIay pay the coupons on Its general mort mart mortgage gage 7 per cent bonds or Its 5 per percent percent percent cent first mortgage bonds So that for tor the time being the bondholders are getting nothIng As AS a a result the me first mortgage fis to 40 and nud the general 1 mort mortgage ge bonds sell down to 20 It Ithe f the 11 rood company could buy In aU all those bonds at those prices with money borrowed at 4 per cent It 1 could then emerge from receIver receiver- receivership ship and anit earn enough to pay the 4 per cent Assuming a total of or on each bond Issue Issue the In in- interest I terest on the general mortgage B I bonds would be a year and on the firsts a n year n total of or a 8 year Whereas the Interest at 4 per cent on the B market value of or the bonds would be only a n year ear So appeal Is made to the bond bond- bondholders holders to agree on tills this plan It If thirds two two thirds thirds of ot them will consent the will buy their bonds They will get something Instead of or nothing In Inthe inthe the way of or Interest and from one one- firth fifth to two fifths of ot their principal at maturity Instead of or probably nothing Not only that but It If they act promptly they will get practically cally government bonds so that ac- ac a i actually they need not worry In the e future about whether their railroad makes money or not DOt For another r section of ot the bill authorizes the to exchange Its own bonds bond which In effect are arc government bon bonds s for the securities so token taken All of or which Is apt to Induce the bondholders to approve and as only thirds two thirds need approve e to have a acourt acourt court order the plan In effect the e path ath to reorganization on a sound basis has at least been smoothed Cummings on Spot Attorney General Homer s Cum Cum- has lias Jumped from No 10 to No toNo 1 In the list of ot most criticized d cabInet members since he argued before the Supreme court the tho con con- of or what the govern went ment had done about the gold d clauses He lie Is not only being criticized by T lawyers outside the administration but by New Deal Insiders The cri tr as usually is the case come comes s from two extremes those extremes those who k he be did did 1 not Dot make the case strong stron g enough and those who think 4 Imade he e made It too strong I Instancing the latter vIewpoint a 8 I Ivery very prominent diplomat at a r ra- ra o- o cent dinner party was ras asked what who t he be thought would be the effect If It th the t 0 Supreme court should rule t the government I would rather ask that n than answer It It he began In true tru diplomatic fashion but then sud- sud sad denly seeing a perfect out to ex claimed but I 1 agil am Inclined to agree agre 0 with frith your four Attorney General Cum Cumi Cu m i that that It would mean chaos That Is exactly the kind of or talk the administration does docs s 's not want going on 1 Especially 8 as ns It docs does not Dot belle believe the effect of ot an nn adverse de cle- decision vision cIslon would be he anything like chaos A representative o of Important financial Interests In Washington liar lIaE just completed a n canvass of or n a large larg number of or prominent constitutional lawyers who hare havo been practicing for years Jears before the Supreme court courlas as to their opinion of or the outcome A very large e majority thought the th court would uphold the government What chat was appraised as ns a R very In In- Intelligent minority did not But ut here Is the Interesting point about this minority view It held that the court would probably uphold up up- uphold uphold hold the right of ot the government nt to change the terms of at private contracts con contracts tracts but not to change the term terms of government bonds Just Supposing Now V assume for the moment that thai the court will rule this tills way and consIder the results The govern govern- government government ment would have to pay gold for tor Its gold clause bonds on maturity nut But the Supreme court has hns upheld the rJ right ht of or the government to com com- commandeer commandeer gold at the old price So that nn anyone one holding such a n bond hond could demand the gold receive It and then have ha It taken right awny by the government at nt the old price The net effect of or which so far as American holders ot of the bonds are concerned would be precisely b zer zere Forel Foreign n holders of ot such bonds however howe would not nor DC be subject to having their gold commandeered nt at atthe the old price So that the net effect effect assuming all foreign holders hoMers do- do e- e and received gold at theold the theold old rate for their bonds would cost the government It Is estimated Ie less than Not so good but hardly chaos What gives that worried look to toI I the treasury tax c experts trying to figure out the next taxes fixes to be all all- advocated ad advocated toward 1 the end of this tills ses ses- session ses- ses session session sion Is not tine the difficulty of or devising taxes which will raise the monc money In Inthe inthe Inthe the least painful manner but the tho as as they see them them them- of of ol senators and members of ot the house on this point Reciprocity Treaties Protracted delay In obtaining the recIprocity treaties that were to liven lI up American exports and per per- permit permit permit mit entry Into this country at lower tariff duties of ot goods which would not do ver very much harm to American workers Is being b widely criticIzed especIally In view of the hl high h hopes with which Geor George e Peek Peck and Secret Secre- Secretary wry tary of at State aate Hull Bull embarked on the Ole enterprIse The chief If It not the whole trou- trou trouble ble has hns been the most favored na- na nation na nation tion Uon tion clause existing In nearly ne all American treaties with other coun coun- countries countries countries tries Which means menns to say that It if AmerIca reduces the tariff on brandy as a concession to France rance for example America would also have re to admit Italian Spanish Greek and South American brandies at the same reduced rates Whereas none one or of the other countrIes might e appropriate concessIons 3 to take more American goods At the Ole present moment negotiations with Spain have bave virtually bogged down TIle The whole trouble Is 1 that It ft has been found next to im- im impossible possible to define sherry wine In li lisuch such a n way that only Spanish sherry would be meant The The Spanish negotiators say with some point that they cheap cheap they call them sherries Imitation Imitation sherries are pro pro- produced produced In n many ninny countries notably Italy Haly Portugal and Australia Australla not notto notto no noto to mention South America they rhey e e i willing to reduce duties on imeri merl- can goods which would result In to i ivery a avery avery fair Increase In very our exports Indeed according to experts but bu only If It this tills country makes a special concession to sherry produced In 1 Spain only Which the most favored natIon clause makes It Impossible to do as our Department of State views the thi situation Causes Mirth All of ot which however Is causing gales of laughter In most of or the for They say eay vcr very privately of or course that no nation In the world Is s so utterly squeamish about such things as the United States of or America But ut they do n not say that to the State department It seems to be a sort of ot gentlemen's agreement among amon 5 the other cOLIn countries tries of ot the world that not DOt even en for tor the selfish advantage I ot of any one of ot them may that one tip off of Uncle Sam to what Is going on lest the effects of ot that Upping tipping off of recoil on them all an I otI But nut just as an Illustration ot of what Is being done Britain has special vial cial trade a agreements with both Spain and Portugal In those agre agree agree- agreements agreements ments curiously enough sherry fig fig- figares ares ures for Spain and port for PortugaL gaL gat The agreement with respect to t sherry Is so drawn that no sherry type wine Ine from any other country Is affected It Is done by the simple expedient of or defining sherry as far as the terms of ot that agreement are concerned as wine produced In the district of or Spain and exported to Britain from the port of ot Cadia I In the agreement with Portugal the same technique Is followed the U district of ot Portugal being specified and the port port of ot Oporto And Avid yet Britain has bas most favored nation clause visage In her treaties N Nor has any nation gotten anywhere pro pro- pr protesting testing against this discrimination against her In 10 favor ta of Spain oa 01 Portugal Con rl hL Bervie J |