Evening star., 1932-12-25
Markets Generally Depressed
During Week, but Trading
Volume Is Small.
FINANCIAL ADJUSTMENT
OF RAILROADS IS URGED
Movement for Revision Of Debts
Has Been Steadily Gaining Mo-
mentum Here and Abroad.
BY CHARLES r. SPEARE.


NEW YORK, December 24.-It is un-
fortunate that in our scheme Of Fed
eral taxation we have set up the fea-
ture of establishing losses on securities
as an offset to income or profits and
that the operation OF this plan in
Variably reaches its maximum force at
the end of the calendar year. Conse-
quenty. the markets are disturbed by
the liquidation involved.
1t has frequently happened that an
nual inventories OF investments have
to be made by institutions and 1ndi-
viduals with prices at their minimum
levels. This develops degree Of pes
simism under which the new year
begins and offsets the value of various
constructive developments that may, at
the same time, be taking place.
The depressed condition Of the mar
ketS at the end OF this week has been
largely due to what is known as tax
selling" In stocks the volume Of 1t
has been smaller than in other years.
In bonds, however, it has been greater.
1t is in this department Of the market
This rather technical situation has nat
urally revived the fears of defaults
among the railroads, whose junior Sc
CuritieS are already quoted at prices
that suggest default. Most OF the
bonds in this class are still above the
low figures of last Spring, the excep-
ton being the refunding obligations Of
the Missouri Pacific system, which were
issued to the extent Of over 5000 900 900
in the period between 1927 and 1881.
Roads Burdens Heavy.
1t is difficult to see how financial
readjustments by a number of those
carriers that have been much exploited
in the last five years can be avoided.
Certainly there is little Justification for
continuance of the Reconstruction
Finance Corporations policy of lending
money to roads not now able to meet
their interest and their taxes and
handicapped by a debt that was out of
proportion to their normal earning
capacity prior to 1880. The sooner COR
rection Is made of their overwhelmed
debt structures, the better it will be for
the bondholders Of the individual prop
critics, as well as for others whose
credit, as reflected in the market prices
of their securities, Is infected by COM
petitors in poor financial health.
The receivership this week for the
! ,900-mile Central Railroad of Georgia
system was less expected than 1t might
1t reflected the terrific loss in gross
revenues that has been suffered by all
of the steam transportation lines In
the South from curtailment Of trafdc
from agricultural and industrial CEN
tiers, as well as competition from motor
trucks and motor busses.
Two Glasses Of Carriers.
The railroads whose financial outlook
is today regarded witht some suspicion
may be divided into two classes. In
the first are those systems that In re-
cent years have come under the control
of highly speculative interests. They
have bought up lines not always re-
lated in a traffic sense to the parent
company and by various devices have
established a series Of interlocking cor
porations resting on very narrow
in desperate condition. It Is only be-
cause Of their strong banking sponsor
ship that they are being protected.
In the second group are roads that
have kept within thei rproper sphere
of influence. nave stuck to the policy of
producing transportation on as efficient
basis as possible. and have not In
volved themselves or sapped their
strength by running wild In the rail.
road field and grabbing everything II
sight.
The attitude of the Government,
through the Reconstruction Finance
of roads, when they come to the day
Of their ultimate crisis. should be one
of severity where exploitation and
stock -jobbing has been primary and
railroading secondary, and Of the
greatest leniency possible where the
carrier has been the victim Of the de-
preston and has a financial structure
that is wholesome in normal times. To
be explicit, one would expect an entire
ly different attitude on the part Of the
Reconstruction Finance Corporation
toward the Missouri Pacific tfAn
toward the New York Central or the
Chicago e. Northwestern.
Debt Revision Spreads.
The subject Of debt revision both
here and abroad occupies central
place in financial discussion today.
tics and do not attempt to understand
political motives have been dtsap-
pointed in the inability Of President
Hoover and President-elect Roosevelt
to come together for an early consid-
Grafton of war debts. Two months In
the life Of a world that has suffered
more than three years from an un-
precedented panic condition is too long
a time to sacrifice for political expedi-
enCeS.
In every direction there are indica-
tions of voluntary or enforced conceS-
sions between creditors and debtors.
The movement is bound to spread. It
has officially made more progress
abroad, than in this country, perhaps
because Of the more pressing demands
of debtors.