The New York herald. [volume] (New York, N.Y.) 1920-1924, 1921-02-01
RAIL GUARANTEE
PAYMENT URGED
L. L. Clarke Declares Refusal
Would Destroy Credit
Morale Of Country.

Unless the Congress Immediately
orders the payment OF the $3.50, 900, 900
due the railroads under the six months
guarantee provision OF the transporra-
ton act. the morale which before the
war supported the credit structure Of
the country will be impaired seriously.
In the opinion of Lewis L. Clarke. presi-
dent Of the American Exchange National
Bank. The Treasury Department has
refused to pay that sum on the ground
that the law provides for final and not
partial payment of the amounts due, Mr..
Clarke said yesterday.
This continued refusal by the depart
menk Mr.. Clarke declared. has forced
the roads to refuse payment to their
crtditors, who. in turn. have refused
payment to those to whom they are
Indebted, thus creating an endless chain
of deferred obligations and new and
alarming form Of frozen credit. Several
weaker roads will be forced into re-
ownership unless immediate relief be
given. Mr.. Clarke believes.
Most important of ALL said Mr..
Clarke, the situation is getting worse
The Withholding of the $350.000,000 by
the Government sinks into insignificance
alongside the increasing tendency of
debtors to refuse payment on the ground
that their debtors will not pay them.
Take the railroads themselves the East
ern roads. for example, refuse to pay the
Western roads their part Of the freight
collected at an Eastern terminal on ship
ments of goods originating on the West
ern roads. They simply say they have
no money that the Government refuses
to pay them what is due them under
the six months guaranty and they must
hold on to every cent they can get. Or.
take the case of supply men, coal fur
nishers. lumber dealers and others. who
are refused payment. They pass the
buck, saying to their creditors, We can
not pay you until the blanketyblanlS
railroad pays u.s. In the end the load
falls on the banks Borrowers expect
renewals as a matter OF course. They
show no more concern when told that
the time for payment has arrived than
they would show upon being told that it
was IL o'clock. This Is a serious situa-
ton. An essential element of prime
credit is promptness. The railroads
have always had prime ratings because
they paid their bills on the nail. Acting
under the example of the Government,
they are losing their appreciation of the
credit value of prompt payment.
aside from the moral aspect of the
situation, the withholding of s350,000,-
600 which the railroads expected, and
had right to expect. by not later than
November 1, 1920, is having a very
serious effect upon trade. The unavoid-
able handicaps to the resumption of
trade activity are serious enough as 1t
is, and certainly we should remove those
that can be removed without delay. The
railroads arc not only holding up their
own plans, but they are holding up the
plans of an army of others. They are
being forced to borrow money In a mar
ket in which they must pay the highest
rates that have prevailed In years. If the
Government would pay the roads what
it owes than much Of this borrowing
could be avoided.
There is apparently no remedy short
Of n special act of Congress. The rail-
reads whose money is being collected
and retained by terminal lines cannot
refuse to accept freight destined to
points on the Ines of the roads that re-
fuse TO pay over money already due.
That would mean az return TO the chaotic
conditions of last year and would even
moro seriously cripple trade. I intend
to ask the New York delegation to sup
port any relief measure that Is offered,
and I believe that immediate results
could be obtained II all those Interested
in the solution of the problem did like
wise. Some action is vitality necessary
and I believe that would be the most
effective.
There Is no sound objection to i'm
mediate settlement. III the audits dis
close overpayme1ts. the roads can re-
lmbarse the Government. Any overpay-
vent likely 90 be made would be small
AZ the most. and II safeguards are be-
licved necessary. the retention of a small
percentage OF the amounts certified as
duo would nrnNiIn them"