Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-18
Holders Group Head Warns
]. c. c. Big Lines Will Fail
to Earn Fixed Charges.
LIQUIDATION AND PANIC
MIGHT ENSUE, HE SAYS
Analysis Shows Only 81 Roads Due
to Net $3.50 or More, Hearing
on Rate Raise Plea Is Told
BY the Associated Press.

. SASAA ''Oo WIN COOoy az AS AiN"A ALB VA
| freight rates that railroad bonds hav-
/ ing a par value of $5,748, 500, 900 proba-
j bly, would be removed from the legal
list Of securities because of inability to
| earn their fixed charges.
Fairman r. Dick of New York. testi-
| flying in the commissions hearing on
| the railroads petition for Is per cent
rate increase, said an analysis of rail-
! roads having gross incomes OF S10,-
I 600, 900 in 1929 showed only 81 Of them,
| on the basis of figures thus far this
| year, would earn their fixed charges of
$3.50 or more. Dick is chairman of
the Security Holders Committee of the
I Railroad Emergency.
Sees Disastrous Selling.
THE disastrous effect of the removal
| Of so vast a volume of securities from
said legal list upon the credit OF the
| railroads and their future financing is
apparent" he said.
He added that out of the situation
would grow the imminent danger of a
general unloading of railroad securities
upon an already depressed market.
THE disastrous consequences of such
liquidation cannot be exaggerated, -
Dick said, adding that the result might
be so complete disruption of the mar
Eet as to cause collapse Of prices
comparable to the worst panic days. "
Stock Value Now Halved.
This would visit losses of millions of
funds, many Of whom are absolutely
dependent thereon" he said. 1T would
at the same time occasion so complete
a destruction of confidence in railroad
securities as investments as might we'll
cause many large investors to adopt a
definite policy of refraining from pur-
chasing them in the future"
Dick said another factor which had
contributed to the collapse of railroad
credit was the decline in railroad stock
values. He added that at the high peak
of 1929 stocks of railroads having a
an aggregate market value Of $10,33l,-
| $50, 600.
Compares German Issues.
"As of June l, 1881" he said. 1.-THE
aggregate market value Of these stocks
was S4,094,067 ,000."
Dick compared the railroad credit
collapse with that OF German credit.
He said bonds of a large group Of rail-
roads had fallen 80 points on June l,
while German government So and 7
per cent bonds had dropped only II
points on that date.
Later in his testimony Dick COM
pared the flight Of capital from Ger
many to that of capital from railroad
| bonds to utility, government and
municipal bonds.
"On June the flight of capital was
exactly comparable to the German
situation" he said. Since June / the
fight of capital from Germany has
grown"
Holds Payment Imperative.
Dick said the confidence of investors
in the past has been largely due to
belief that government regulation would
abillZe returns on their bonds
That confidence must be maintained
if the roads are to enjoy the support
essential to the maintenance of an
adequate transportation system" he
said.
Dick was interrupted frequently.
Answering a question by Commissioners
Lewis as to laws of States other than
New York as they affect availability for
trust investments of railroad bonds,
Dick said New York law was considered
the standard.
The New York law requires. he SAID.
that companies on the legal list must
pay dividends of at least one-fourth
the fixed charges.
Commissioner Eastman asked II
road might not be in stronger position
as to its bonds If it had the earnings
despite failure to pay dividends.
Dick said it was generally considered
if a company failed to pay dividends
there was something wrong with 1t and
its credit was impaired.
Passenger Trains Cut.
Earlier representatives Of Western
railroads had presented data to show
they had reduced passenger train OPP
erations to cut expenses.
H. A. Scandrett, president Of the Chi
cago Milwaukee, st. Paul g. Pacific
Railroad. presented the data at the
outset Of today's hearing. In his preVl-
Gus appearance before the commission
he had been asked to supply the In
formation.
Scandrett said total passenger train
mileage between st. Louis and Chicago
in 1929 was 3,466,S55, and that in 1881
it would be reduced to 3l3l,878 He
said mileage between Chicago and
Kansas City in 1881 would be 4,473,527,
as compared to 5,147,879 in 1929.
Describes Situation.
Comparing through train service with
branch and local passenger service, the
railroad executive said. if the Milwau-
kee road reduced its passenger service
between Chicago and Minneapolis, Chi
cago and Omaha, and Chicago and
Kansas City to a minimum OF one
train daily 1t would save only per
cent in the passenger mileage OF the
system.
He added that through passenger
trains for the Milwaukee system ac-
counted for only 34.5 per cent OF the
total passenger mileage OF the MI
waukee road in April, 1881, but that
this produced 62.7 per cent OF the total
passenger train revenues for the month
The total passenger train mileage Tor
his own railroad was given as 1929
$40 for 1929 and Is, 407 ,492.
Quake Rocks Crusoes Island.
SANTIAGO. Chile, July 1S pa