New-York tribune., 1919-07-31
Federal Guarantee
Rail Control Plan
Presented to House
Boston Man Explains to
Committee How Weaker
Roads Would Benefit
By Government Fund
NefC Yorlo Tribune
Wdshiu0tote Bureau

WASHINGTON, July 3o.-Dr. Edgar
J. Rich, of Boston, presented to the
Interstate Commerce Committee Of the
House to-day the plan for financing
the railways adopted by the Associated
Industries of Massachusetts.
This plan provides for a Federal
guaranty OF capital and interest 81 to
weak roads on loans for physical i'm
provement Of property. 1t also con-
templates that railway rates shall be
fixed at figures that will put the rail
ways OF the country in the same rela-
respect to net income in the three
years before the war. In those three
years the annual average aggregate Of
railway deficits was $22, 900 900, which
would be the outside amount the gov
ernment would have had to make good
had the plan under consideration then
been effective.
AS an offset to this expenditure by
the government in guaranteeing obli-
cations the Rich plan proposes tina,
more than per cent applicable to its
capital stock, the surplus shall be
equally divided between the railway
company and the government. During
the three years before the war this
division would have yielded the gov
ernment $52,000,000 annually The
fund thus accumulated would be drawn
on for making good the guarantees OF
the roads that cannot finance thei,
improvements without government
backing. Pending the installation OF
Dr Qicb !
present compensation guarantee to the
railroads continued through 1920.
Railroads seeking government guar
antees under this plan would be re-
quired to establish sinking fune
adequate to retire their bonds in fifty
years. DR.. Rich summed up the advan
tages of his plan as follows:
Every railroad could raise the
necessary capital for improvements,
and thus every community would re-
| ceive proper transportation service.
"Ths result is obtained at the
, least possible cost to the shippers,
, rates to the point necessary for the
, establishment of credit to all rail
, roads through earnings.
The strong roads would continue
to finance their own requirements,
and the weak roads would be en-
tirely free from the unwhoesome
. domination of banking interests.
Competition is preserved, and with
1t private initiative.
\ cone Of the most important adj
vantages of the plan at the present
moment is that it can be put into
immediate effect. If other plans arc
c selected as the ultimate solution
such. for instance, as the consolida-
ton Of weak lines with strong lines,
or the fixing of rates so as to give a
Q return upon the valuation of rail
roads as found by the Interstate
D Commerce Commission, the railroads
y arc relieved from the menace of
s bankruptcy and become at once an
effective agency of transportation
, Too much stress cannot be laid upon
: this point, for the railroads are
faced with disaster unless some ade-
quate plan is put into effect at once
'Fictitious capitalization is not
recognized in rate making. No seri-
n Gus charge of overcapitalization has
been made against the strong lines;
|. it is the weak lines which have been
: subject to this criticism. No at
s tempt is made to establish rates so
n as to give the weak lines credit
S Credit is given by the government
ruarorteo -