Evening star., 1918-07-23
RAIL SECURITY HOLDERS
CALLFOR SHOWDOWN
Seek to Bring to a Head the Dis
agreement Over the Govern
ment's Program.

An acute issue has arisen between
the organized holders of railroad Sc
curities and the United States Rail-
road Administration over the terms
Of the contract between the govern
ment and the railroad companies for
the use of the roads while under fed
eral control.
The National Association of Own
ers Of Railroad Securities, which
comprises in its executive commit
tees representatives of important
trust companies. national banks. in
surance companies, trustees of uni
versity funds and estates, all holders
of railroad bonds, stocks and short
term notes. Is bringing the issue to a
head. At a meeting last week the
financial committee drew up a state
ment Of the grievances Of the secur-
ity holders against the form of con-
tract proposed by the railroad admin
istration.
Points Of Disagreement. a
Two main points Of disagreement
with the governments terms are pre-
sented: First, resistance to the de-
mand that the railroads must relin-
Quish any claim for damage to the
business of the roads, loss of traffic.
good will, etc. during the period of
government control: second, opposi-
tion to the governments requirement
that costs of improvements put upon
the roads in excess of what might
ordinarily be required for the normal
traffic shall first be deducted from
the standard return before dividends,
q arHd fn IL
Security Owners Argument.
Under the first bead the security
owners allege that the government
proposes to use the roads now re-
gardless Of the future, diverting busi-
ness that it has taken years to build
the war they may find themselves
with their property intact. 1t is true,
but with their business gone. The
property, 1t is claimed, may be beyond
the normal necessities of the lines, at
great expense, and after the war the
road left without business, that hav-
ing been diverted to other roads No
claim for this disruption of business
and connections can be hereafter
put in
ment the security holders allege that
the government proposes to deduct
from the standard return the costs
Of betterments before> the roads are
allowed for taxes, rentals and divi-
dends. They claim that they will be
hampered in financing, because the
banks will be uncertain what amount
may be left for dividends after the
government has first deducted for the
betterments upon the roads that 1t
may deem necessary. The security
holders have offered to compromise
by providing that the costs of bet
terments shall be deducted after the
dividends, rentals, taxes and fixed
charges have first been met.
Government's Claims.
The government claims that II the
roads do not suficiently maintain the
property, It IL deferred maintenance.
showing fictitious profit, and should
be deducted first In order to find .
standard return based upon actual
profits The government, therefore,
proposed to charge against the
STANDARD return what the mainte-
nance should have been during the
test period of three years
The governments argument in sup
port of the clause prohibiting claims
for loss OF business Is that when the
roads take the standard return. Fixed
by the law. It shall be in full COM
pensation, and that there can be but
one compensation under the law. The
gument with the assurtion that they
cannot know 1t this time what their
lo1a anay - and cannot contract ter
n