New-York tribune., 1920-03-11
Rate Increases
70 Leave Many
Railroads Weak
New transportation Act
Does Not Guarantee Any
thing to Individual Lines,
but Lays Down Policy
Adjustment a Big Task
yn,ersfate Commission Nav
Loan Money, but Only
on Cilt-Edged Security
By Stanley Frost
'ispdtch to The Tribune


Sceeiol Dispatch to The Tribune
WASHINGTON, March 10.-When the
Increased freight rates are in effect,
snd after the close of the coming six
months battle to regain the business
that has been diverted under Federal
.on.rol, there will still remain rail-
,oads, perhaps a good many of them,
.hat will not be paying fair profit.
they will be weak spots in the rail-
,ysy situation. and even with its great
new powers the Interstate Commerce
Commission will be able to do very
little to help them.
The new transportation act, in the
so-caled guarantee clause" does not,
IN fact, guarantee anything to any in
djyidual railroad, or even to the rail-
roads as a whole. 1t lays down the
ooIicy OF fixing rates that will provide
4 fair average return on the value of
the properties.
/: may be assumed that the Inter
state Commerce Commission will try
70 do this. but when it is done there
viii be a good many roads that are
below the average and good many
that are above it. Roads that run
their earnings. But there is no pro-
vision that will give much support or
comfort to the roads that fall below.
Power to Make Loans
The commission can loan them money
If it has any to loan-but only on
their giving good security and con-
yincing the commission that the loan
will enable them to catch up. Then
the loan will be like any other bond
issue-interest and principal will have
70 be paid on the nail. SO the com
Missions help will do no more than
carry q road over bad year or two.
when the money market is tight. 1t
will do nothing at all except when the
commission has more faith in the road
than investors have.
Even this help is limited BY the
money the commission has on hand for
the purpose. At present it Is $500 .OOo.-
900. But this Is only about enough to
enable roads to keep up work on i'm
provements and extensions which are
already under way, and leaves nothing
TO be turned to the support of weak
roads. After that is gone the commits
sion's funds will come only from The
contingent fund" TO be made up Of the
contributions from roads which make
more than the 8 " per cent provided In
the law.
That fund will be long In startino
The reckoning will not begin till after
September /, and it will be year after
that before the earnings of the roads
can be checked up, and several more
months before the first payments to the
fund are made. So, practically, the
commission will be without power 10
help the weak roads till some time late
in 1921.
There is no doubt that some of the
weak roads are over-capitalized and
will have to "go on the operating table"
before they will become sound invest
ments. The law does not contemplate
making the rates pay profit on water.
but it Is not likely, with the present
Instability in the railroad situation
and the low state OF railroad credit,
that such proc ceedings will be under
'aken now. They would tend to in
crease the evils of the money market,
and there is a general willingness to
put them off till the financial weather
clears.
Sixty Roads Bankrupt
There are sixty railroads actually in
bankruptcy proceedings at present.
most Of them small roads, but with
'etal outstanding securities of nearly
billion dollars and operating alto
sether 1880 miles of rail. The largest
u these are the Missouri, Kansas &
Texas, the Denver & Rio Grande, the /
iexas & Pacific and the Chicago & Eas-
tern Illinois.
The government guarantee has pre-
vented bankruptcies during the last
Two years, but If the actual financial /
conditions OF the roads in 1919 were
aken as a standard, nearly two-thirds |
OF all the lines in the United States
would be In receivers hands.
Is Impossible to forecast what the /
condition Of any individual road will /
Oe after September /, when the new
n'es are in effect and the private /
operation has had chance to find it's