New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-07-16
Rail Bonds to
Pay Y. S. Bill
Are Proposed
Issue Would BE Guaranteed
by Government and All
Proceeds Used II, Senle-
ment of Wartime Claim.
Cumrnins Supports Plan
Sees New'Tax Burden Avoid.
ed; Hoover and Mellon
To Be Consulted Soon

WASHINGTON, July 15.-Imno-.,,.
plans of railroad financing and for tbo
settlement of the controversy over ~.
claims of the roads against the oova,,
mcnt are under consideration in Az
mlnlstratlon, Congressional and Ir+ar-
state Commerce Commission circ9es.
senator Cummins, chairman Of ,bs
Senate Interstate Commission ron,n;,
tee, has taken up with Chairman rIar,,
of the Interstate Commerce Cornm;.
sion plans by which ise believes tba
railroads and the government can rescb
a settlement and the amount due tba
government be refunded. At the sama
time an appropriation by Congress to
meet the claims of the roads against
the government would be avoided
Secretary Of the Treasury Mellon
Secretary Of Commerce Hoover and
Senator Cummins will have a. confer.
ehce on the proposals at an early date,
L. S. to Back Railroad Bonds
In effect, the plan is to have The
S70O,O00,000 due the United States fron,
the railroads for Improvements made
to the roads by the government in the
period of Federal operation funded into
ten-year bonds. These would bear
perhaps, 6 per cent interest. The honda
of the railroads, which would be go.
curities of high order, would be guar
anteed by the government and then
sold to the public The money thus
realized would be utilized to pay the
railroads what is due them from the
government to cover claims arising OFT
OF the Federal control period.
1t is estimated that about half-
billion dollars will be required To NEE.
the sums which the government will
have to pay the roads. This is in ad.
dition to more than S200,0O0,000 which
has already been appropriated to meet
such claims and is not yet expended.
The claims Of the lines against the
government, chiefly for undermining.
nance, in the Federal control period.
amount TO approximately 81 500. 600 900,
If the railroad theory on such claims is
accepted. The Railroad Adminfstra-
ton admits Q total of between $780,
100000 and S90o,ooo,o 00 Some of these
claims, however, are being paid off,
and it is. calculated that it would prob
ably be possible to effect a settlement
with nearly al the roads without delay
or litigation on a basis &C hetwee,,
S70o,000,000 and s80o,Oo0,00 II tie
government paid the roads approx
mately a half billion dollars as the
proceeds of bond sale plus the more
than $2o0,000,000 which stands already
appropriated, this total would come
close to closing the account.
S700,000,000 Owing Government
The amount which the roads owe the
government for improvements and bet
terments made by the government
while it operated the roads is in round
numbers S700,000,000. This is the sum
which tbs proposed to fund into ten
year bonds. The railroads are con-
sidered to be in no position to pay this
sum now. Moreover, it is pointed out
that if they had themselves made the
improvements it would not have been
a cash transaction. They would have
issued bonds and raised the capital
necessary.
The President has, the authority TO
allow the roads to fund their debt to
the government. They doubtless will
be allowed time to pay what they owe.
Secretary Mellon recently let it be
known that about S50o,000,o00 would
probably have to be appropriated or
raised somehow by the government TO
pay the railroad claims.
Senator Cummins, who has studied
the subject closely, says it will be i'm
possible, without the utmost difficulty,
to get. Congress to appropriate any
such sum now. Moreover, il would
burden the public. Therefore. he holds
the practicable plan is to make use OF
the funding bonds given by the rail-
roads to raise the money with which to
square accounts with the railroads.
Just what rate of interest the bonds
would have to bear is open to question.
Senator Cummins said to-day that he
Is opposed to making them tax free.
He believes S per cent railroad bond,
If backed by the government. would be
a desirable security.
Would Avert New Tax Burden
Unless some such plan is adopted
Senator Cummins foresees long con
troversy and trouble He holds this
would lead to a quick and amicab,e
settlement, which would avoid add
tional appropriations at this time and
more tax burdens.
Senator Cummins also has taken up
with the Interstate Commerce Commits
sion and leading railroad executives
the idea of conference between the
commission and roads with a view TO
reduced freight rates on agricultural
produce and building materials He
holds that in view of the widespread
protest against high rates and the be-
lief the roads would do more business
and get more return on lower rates
me roads should satisfy the pub
lie wish and try the effect Of material
reductions.
"Ihe psychological effect alone on
the country would be good" said Sens
tor Cummins, "and hope the plan will
be tried