Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-15
HOLDS RAILROADS
CREDITS. AT LIMIT
insurance Head Says Loans
Will Be Refused If Lines
Do Not Show Profit.

Continued From First Page
dollar Of lost revenue with q CORE
spending reduction in expense.
LAS . result net railway operating in
come has declined to q much greater
relative degree than have revenues" he
said.
During the 10 years from 1921 TO
| 1880, he asserted. earnings were $2,574.-
$4,000 below the So per cent fixed
| by the commission as a fair return on
| railroad property.
| Since the 1920 rate increase was au-
thorized. changes downward have re-
| duced revenues more than $500, 000,-
900. Parmelee said.
In 1929, the year Of record net earn
| ings, he said the carriers as q whole
earned 2.28 times their fixed charges
i and in 1880 this ratio dropped to 1.76.
The 1881 forecast indicates. he sdded.
that the earnings will be less than l.27
times the fixed charges.
New Low Held Set.
The rate of return or property in
vestrnents." Parmelee continued, which
stood at 2.Sl per cent in 1921. increased
in 1928. 1925 and 1925. The rate for
1925 was 4-e6 per cent. which Is the
peak rate OF return since the war.
| There was a drop in 1927. then in
| creaseS In 1928 and 1929, the rate for
1929 being 48l per cent. 1t then de-
| clined to 3.27 per cent in 1880 and
dropped to . new low level of 2,07 per
| cent on an annual basis during the FIRST
| four months of 1881"
Parmalee discussed at length the i'm
! portance OF covering fixed charges by
| a comfortable margin and the relation
| ship OF this probe n to railway credit.
= - IA
less than three-fourths as much as two
years ago and passenger traffic had
| shown severe declines. dropping ap-
proXimately Is per cent for the FIRST
four months Of 1881, as compared with
1929.
Referring to reductions in rates since
1920. Parmelee said that had the aver
age revenue per ton mile of 1921 been
maintained. freight revenues would
have been greater for the 10-year period
by an aggregate of S6582. 748, 900 Aver
9Ee revenue per ton mile during the
period was 1876 per cent for the coun-
try At large.
Increase In Expenditures.
THE railways in 1880" he continued,
maintained their capital expenditures
on more than an average scale. AS be-
tween 1929 and 1880 there was an in
crease In gross capital expenditures
from $3.50, 72l 900 to 1872 500, 900.
The financial returns in 1880 were
so discouraging that reductions in
capital expenditures were made during
the FIRST quarter of 1881. Gross capital
expenditures for the three months
amounted to $93,656.oOo, compared with
a corresponding total OF 223.772, 900
during the flrst quarter of 1880 Elk
penditures for material and supplies in
1929 were 81 32s,535, 900 and in 1880
81 .03s, 500 600"
Parmelee said the railways had made
an almost unbroken series Of reductions
in their unit expenses OF freight opera
ton since 1880. From 1920 to 1880 eX-
penses per 1000 revenue ton miles were
reduced from $1066 to STAB and trans
portation expenses from $685. per 1000
revenue ton miles in 1920 TO 1882
In 1880.
Railroad taxes are entirely too high,
he said. He noted an increase in every
year from 1921 to 1880 in all taxes
other than Federal income taxes.
The ratio Of taxes. he said. rose from
cents per dollar Of revenue in 1921
to 6.S cents per dollar of revenue
in 1880.
More than . third Of the carriers
net operating revenue is being absorbed
by taxes In 1881" he said.
Dufneld, who followed Parmelee. told
| 100000 life insurance policyholders
and nearly 13,00o,0 900 savings bank de-
positorS were threatened by the de-
crease in railroad revenues.
Emergency Held Real
Parmelce's testimony was interrupted
| to permit Dufheld to appear. The lat
ter Is chairman of the Emergency
Committee on Railroad Investments Of
Life Insurance Companies and Mutual
Savings Banks, which filed a brief re-
Gently In support Of the railroads plea.
Duffield said that as a result Of 4
conference Of heads Of banks and life
insurance companies the executives
| concluded the margin of safety with
| respect to railroad bonds had reached
| a point where their duty required them
to make representations to the COM
mission that a true emergency exists.
The emergency, he said. involves not
only the maintenance and integrity
Of the railroad transportation system.
but the interest of over 0.000, 900 life
insurance policy holders and nearly 49,
100000 savings bank depositors."
Duf1ield said the committee believed
possible results of 4 failure to protect
promptly declines in the security of rail-
road investments would so seriously
affect the public interest that the in
situations represented by the committee
deem 1t incumbent on them to present
the situation fully and frankly to the
commission"
May Refuse Further Loans.
Dufaeld said that if the credit OF the
railroads could not be conserved the in
surance companies mutual savings
banks would have to refuse to loan
further money to thsm.
He said that on January ], 1881. IN
surance companies held approximately
50 600, 900 900 of railroad bonds and
mutual savings banks on June 30, 1891.
held 81 100 100000 worth. This Is
more than 40 per cent Of all the rail-
road bonds outstanding, he said. The
witness added that New York exchange
prices on bonds had shown deprecia-
ton Of more than $40o. 900 900.
The investment policies of both
classes Of institutions are based. he said,
on recognition that they stand in the
position of trustees Investing the savings
placed in their custody by policy hold
ers and depositors.
The primary oonsidera ton in making
such investments must be safety" he
said.
Farm Bureau to Participate.
CHICAGO, July is (P).-The Amer
lean Farm Bureau Federation today
notified the Interstate Commerce Com
mission It's directors would appear ~
body during the hearing on railroaH
requests for is per cent increase