Show keep railroads moving by CALEB JOHNSON everybody in america Is concerned in one way or another with the situation ot of the railroads daniel willard Wll lard president ot of the baltimore and ohio railroad as chairman ot of the presidents committee ot of nine on railroad reorganization has proposed to the railway unions that they accept a reduction ot of ten per cent in wages the proposal tor for a wage reduction which would cut the railroads operating expenses by about a year Is the last effort ot of the railroads to keep out ot of bankruptcy and to reduce their costs to a point commensurate with the tailing falling off in business and income railroad earnings in 1931 were a third less than they were la in 1929 and in the case ot of 72 ot of the railroads the revenue after paying operating costs was not sumal ent to pay the interest on their bonds these fixed charges consisting ot of interest on money borrowed from the public with which to build equip and extend railroad lines must be paid or roads no chance but to go into the hands of receivers and the first point at which the financial position 0 neatter of the railroads touches everybody in this matter of interest on railroad bonds comparatively few individuals own railroad ral road bonds or are dependent upon them for direct income but more than three thousand million dollars of railroad bonds are owned by the insurance companies who are in turn responsible to more than fifty million policy holders whose money they have invested insurance companies are allowed by law to invest inver t the money they receive as premiums only in certain types of sound securities railroad bonds in normal times are regarded as next to the U S government bonds and first morl mortgages trages on improved real estate in the matter of security but it if a situation should develop as it has been rapidly developing in the past year in which the railroads railroad a could not continue to pay the interest on these bonds and the market value of the bonds should decline to a point where they could not be realized realize d upon except at a terrific lobs of the insurance companies there undoubtedly would arise a situation in which the companies apan could not promptly pay clarmo claims under insurance policies it Is easy to see therefore that unless the railroads are enabled by one means meane or another or a combination of methods to continue to pay interest on thel their bonded debts very widespread financial distress and disaster affecting probably more than half of all the people in the united states would follow the mutual savings banks are in much tha same position that the insurance 1 I 1 companies are they own among them on ong billion seven hundred million dollars of railroad bonds in which they have invested a considerable part of the savings ravings of twelve and one halt half million depositors because so many of the railroads whose bonds are held by savings banks in new york state failed to earn their interest in 1931 the new york legislature recently passed a special act for the relief of savings banks permitting them to hold bonds on which the interest was not earned last year otherwise they would have been compelled to sell these bonds at their present low loar market price at a heavy loss to their depositors and what I 1 have just set down Is only one of the angles of the importance to the whole aiho c people of putting the railroads in a position where they can continue to function and to earn at least the interest on their debts it is of secondary importance for them to earn dividends on their shares it Is of the highest importance however that the railroads should be able to maintain their rights of way rolling stock and motive power in first rate condition for regardless gard less of whether one approves of some of the Metho methods cS and policies that ha have ve prevailed in railroad management it Is tho railroads and the railroads almont att vin d pa or sible bible over the largest area in the world within which trade la is absolutely tree free without taxes or duties between tho the states the history of the development of american industry and business busar ess Is the history of the development ot of rail communication muni cation once let the railroads get into a position where they cannot promptly and completely supply the demand tor for transportation as aa that demand increases then all business Is slowed down the motor truck competing over good roads with the railroad on short hauls and providing door to door delivery has unquestionably cut into railroad earnings in many classes ot of freight and those the classes on which the rate Is highest but the motor truck has not replaced and can never replace the railroad on long distance haulage tor for the transportation ol of such basic raw materials as coal steel lumber grain and the hundreds ot of other kinds ot of low grade bulk freight the difficulties ot of the railroads are to be sure in large part ot of their own suat in making aking B but the high banded and overhearing overbearing policies which led many years ago to the regulation ot of the railroads through the creation ot of the inderst interstate a te commerce commission are dead a and n d gone history every fa fair ir minded pe person rs on familiar with railroading agrees that I 1 there Is a much better spirit in railroad managing today than existed at the time when their control by the government was a major item of political agitation there Is still an active sentiment to be sure in favor of government ownership it if not government operation of railroads we had an exper inece with government control and operation of railroads during the war and for a short time thereafter which Is not looked back upon with any great satisfaction by anybody and a good deal of the railroads present financial difficulties can undoubtedly be laid at the door of governmental re regulation aaion in good times when the railroads are earning large profits they are not permitted under the interstate com ceres cerce law to retain those profits and build up a reserve fund to use in paying lor for repairs maintenance and interest in hard times railroad rates are regulated by law the amount that may be charged for the transportation ot of freight and passengers if the earnings run above live five and three quarters per cent a year on oil the stock they are required either to reduce rates or to get rid of the surplus earnings by redeeming their bonds or otherwise taking the money out of the railroad treasury the government has the right udder the interstate commerce law to step in and take from the railroads all their earnings above that limited rate of dividends all other industries are permitted to build up reserves which they can draw on freely when necessary no railroad can borrow a dollar without first getting the consent of the interstate commerce commission these governmental ern mental regulations frequently put railroad owners in a position where they have to choose between low rates and good service since they canno cannot t raise the rates they have to reduce the quality of the service or go into bankruptcy the proposal to reduce railroad wages Is only one of many measures which the railroads are trying to put into force in the effort to continue to give service and keep out of bankruptcy some of the roads of course are a great deal worse off than others but all of them are in serious difficulties and as I 1 pointed out their troubles react directly upon almost everybody in the country railroad re would mean beyond doubt the dismissal of many more men from railroad service and would add to thel the burden of unemployment economic conditions generally are such today that practically everybody has to choose between getting less money for his work or getting no money at all losing his job the brightest ray of hope in the whole situation of the railroads Is the auth arity given to the reconstruction finance corporation to come to the assistance of railroads which are in difficult difficulties les by taking over their maturing obligations which they would otherwise be unable to meet and so giving them a chance to keep everything rolling on schedule |