Evening journal., 1921-06-01

fected the producers, especially some
lines of manufacture and the agri-
culture classes"
WASHINGTON, June 1.-The
government could materially assist
the railroads in their present dihi-
cult situation" Samuel Rea, presi-
dent OF the Pennsylvania Railroad.
today told the Senate Committee on
Interstate Commerce, by complet-
ing payments still due the roads
from the Federal control period II
this were done and the roads we're
allowed to issue Is year obligations
for the amount set by the govern
ment for permanent improvements
as would have been done il the roads
had themselves spent the money,
their present position would be
greatly improved" Mr.. Rea said.
Mr.. Reas recommendations as TO
change in the present situation with
respect to financing the balance OF
the $1,000 200, 900 of capital expen-
/ ditures made to the railroads by the
| government would not in any way
/ increase the governments obligation
and would avoid the present hold up
OF settlement.
These capital expenditures must
be assumed and paid by the rail-
roads with interest Mr.. Rea said
Almost s40O.0 900. 900 OF such out
lays was for equipment allocated 10
the roads and was funded by the
government under equipment trust
which require the roads TO pay back
these capital expenditures during a
period OF Is years with interest at 6
/ per cent. This left about $500, ,OOO,-
900 chiefly for road and facilities 10
be funded by the carriers"
Under the terms Of the Transpor-
tation Act discretion was conferred
upon the President to fund all these
expenditures. but the right was con-
ferred upon him with certain limita-
tions 10 offset against such expendl-
lures amounts due by the Railroad
/ Administration to the carriers on
/ other accounts for the Federal con-
/ troll period. This right will by an
understanding with individual car
riers and under the terms of the act
be exercised by the Administration
However, under the dificult condi-
tions that now exist these arrange
ments should be altered II the car.
riers cannot meet them az it is i'm.
possible for the railroads 10 sell Sc.
curities and pay on all these capita.
expenditures at present and they
have a shortage Of working capita
and practically no surplus earnings
Unless such funding is required a
considerable part Of the capital ex
pendltures for additions and better
ments made during Federal contro
will in effect be paid for through IN,
application OF what may be regard et
as current funds due TO the railroaf
companies now urgently needed b,
them for current purposes.
The railroads themselves voulf
have been obligated 10 raise m,
capital in advance OF making sucl
additions and betterments expendi
lures or else the work would No
have been done and the governnnen,
without loss 20 itself and receiving
70 good interest In return. shouid a.
, willing 20 fund the expenditures in
stead OF Withholding the cash tha
the railroads need badly 10 meet cur
rent requirements and help them 4
surmount this dlfhcult period.
Under present circumstances
Mr.. Rea said, the railroads can re
the requisite financial results 10 al
low them 10 exist by postponing al
capital expenditures, by curtailin
employment, by shutting down N
possible activities on the road an
, in the shops and offices. by stoppin
the purchase and use OF supplies. b
postponing for the present. eve
though they will cost more later. a
maintenance and replacement "a
|, penditures except those requisite 10
safety"
''It is clear that no horizontal @
general reduction IN rates can h
, granted until such time as the nf
railway operating income OF tn
railroads show a very substantif
Improvement. a general rate reduc
tion would not be in the public in
terest as Il would force the railroad
10 produce and sell transportation 70
less than cost and IL is extremeI
doubtful n II would stimulate pro
duetion or increase purchases o
goods by the public.
I'm addition, so long as the rail
roads cannot earn a fair return an
are much below the i-2 per cen
return on the value OF their prom
erty contemplated by the transporta
iion act. and have no cash surplu
from the previous year. there mus
be a deficiency In TRANSPORTATION In