Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-07-07
RAIL MERGERS HIT
SNAG IN CONGRESS
Growing DiStrust of Holding
Company Control Shown
in Recent Session.
Nv IN. Aranciatsd Press.

By the Associated Press
Advance toward national consolida-
ton of railroads was we'll nigh brought
to a complete though perhaps tempo
rary halt by events and developments
associated with the congressional ses-
sion just closed
A single proposal came to final vote
in one house and other projects, all OF
a nature tending to cast doubt on the
future of the national merger program,
were left hanging.
Ten years ago Congress by great
majorities ordered the Interstate Com
merce Commission to prepare means
systems into Is or 20 giant units, and
empowered it to set aside antitrust
statutes for the purpose.
Reversal Is Noted.
One house of the Congress just
adjourned voted by an unexpected ma
jority to withdraw the power the COM
mission holds to override the anti
trust laws. The other house Of the
same Congress. hesitating to go that
far, was torn by a demand for action
ger the commission had approved.
Adjournment buried doubts and diff
ferences for the time being, though 1t
left a congressional committee buSily
delvinE into the modern methods Of
railroad finance which came under hot
fire during the controversy.
Meanwhile, aside from Congress, the
four chief railroad interests which had
asked the commerce commission to
sanction specific plans for merger &C
tons, Withdrew their applications TO
await develonrnentS
The new agitation over railroad CON-
Solidation was melted primarily by an
extraordinary report to Congress from
the commerce commission last Fall,
asking investigation Of railroad finance
ing.
Danger Pointed Out
Joseph 3. Eastman, chairman Of the
commissions legislative committee, fol-
lowing up the report, explained to
House committee that there was dan
ger Of complete loss of public control
Of the process of railroad unif1cationp
from the remarkable use being made Of
the holding company device. He said
also the 'pyramiding" of ownerships
going on ought to be at least thorough
ly understood by the law making bodies.
Principally, here was cited the re-
narkable accomplishments of the Van
Sweringen brothers of Cleveland, who
have linked together a string of rail-
roads-North, South, East and West
Of greater proportions and extent than
any OF the Hill, Hartman, or Gould
empires of transportation.
AS the congressional inquiry dis
closed, the holding company device has
been astoundingly developed In the pro-
cess, one corporation after another
being superimpoSed upon predecessors,
and vast quantities of securities being
emitted and marketed with the invest
ing public at each stage.
Example Of Financing.
Thus, to give q single example, 81
per cent Of the Chesapeake & Ohio
Railroad voting stock became the chief
asset of new company, the Chesa-
peake Corporation, and was made SUBJ
ject to q collateral bond issue of $48,-
100000, while 10 per cent of the voting
stock of the Chesapeake Corporation
became property of the Allegheny
Corporation.
In turn, the Allegheny Corporation,
after selling 6625 per cent of its own
stock to the public, and bonding It's
assets under another collateral mort
gage issue, appears to have passed $780,
900 shares of its own common stock to
the Van Sweringen Corporation, the
third link In the holding chain.
Commissioner Eastman indicated that
the chief purpose of the procedure was
to enable voting control of immense
holdings OF rail property to be retained
by investment at the top of a relatively
small sum OF capital, and the various
legislative resolutions emitted from the
study of the performance had a common
character in suggesting that holding
corporation dealings with rail securities
be brought under commission super
vision.
Some Lines Stay Clear.
The Pennsylvania company, through
the Pennroad Corporation, also APP
peared from the inquiry to have gone
strongly into holding corporation play.
However, the two remaining of the
great Eastern trunk lines, the Balti-
more g. Ohio and the New York Gem
trail, remained clear and incidentally
got during the Winter specific grants
Of official favor.
The Baltimore g. Ohio has been per-
mitted to make outright purchase of
the Buffalo, Rochester 81 Pittsburgh,
and the Buffalo & SuSquehanna, ia
cilitating the ambition of its veteran
president, Daniel willard, to create O
new Chicago-New York short line in
Northern territory, The New York
Central got authority to consolidate its
Michigan Central, and to buy up q
whole group of short lines along its
routes.
In the West, the congressional re-
volt over rail consolidation was famed
into flame principally by the commits
sion's conditional sanction of the union
of the Northern Pacific and Great
Northern system. That project IS
years ago was banned by Federal
court order, because antitrust law OPP
poses the union of parallel and COM
petine lines of railroad"
The protest from the Northwest
against its renewal was undated when
Congress closed, and 1t was reported in
financial circles that the management
nf the kwn rnads MOULD Mikhdram frnr,a