Evening star., 1932-04-03
PAYMENT OF RAIL
LOANS u. S. HIT
Senate Inquiry Into Advance
Fnent of Government Funds
Is Possible.
BY GEORGE e. DOYING.

Whether Government money should
be used to bail out" Wall Street banks
by lending cash to railroads Tor repay
ment of loans made by the bankers
and which they decline to extend has
been answered aff1rmatively by the Re-
construction Finance Corporation and
with some reluctance" by the Inter-
state Commerce Commission, but it Is
apparent that more will be heard on
the subject from several members Of
Congress.
During a Senatorial debate, both
Senators Borah and CouZens-the lat
ter Is chairman Of the Interstate Com
merce Committee-declared that pres
sure" put upon the Interstate Com
merce Commission to approve a loan
for the Missouri Pacific Railroad by
the Reconstruction Finance Corpora
tion calls for an investigation.
Senators Contention.
In approving a loan of 12,800, 900 to
the Missouri Pacific, including $780,
900 to repay one-half of loans due April
i to j. P. Morgan & Co., Kuhn, Loeb
a. Co. and the Guaranty Trust Co. of
New York, the commission passed the
buck" to the Reconstruction Finance
Corporation, the Senators asserted.
I'VE are not convinced" the COM
mission said, that the Reconstruction
Finance Corporation should be expected
to take up bank loans of this charac-
ter. We yield our own views to those
of that body which, as we conStrue the
law, is charged by Congress with the
responsibility for determining that
question"
At the same time the commission
tmpliedly criticized the New York bank
ers for their refusal to extend the Mis-
souri, Pacific loans, although the bank
ers did recede from their original posi-
ton by agreeing to extend half the
&11, 100000 April l maturities.
THE bankers who hold the loans
ere bankers for the carrier" said the
commission. LAS such they have prof
tied largely in handling its financing
In the past. 1t is often represented to
us that the relation of a banker to a
railroad is very valuable to 1t because
of the banking assistance so rendered
in time of stress; that railroad can
afford to compensate its bankers we'll
in connection with its regular flnanc-
ing In order to have such support avail
able when it is needed. We have here
tofore thought that theory to have
more merit than this transaction ap-
pears to indicate"
The loan was approved, however, be-
cause the Reconstruction Finance Cor
poration had adopted a resolution set
ting forth that "all existing uncertain
ty as to the disposition of the April
maturities Of the Missouri Pacific Rail-
road Co. is detrimental to the general
credit situation Of the railroads." and
that 1t was the opinion of the board
''that the said railroad Is unable to
obtain funds through banking channels
or from the general public in order to
pay said loans"
Eastman's Declaration.
Joseph B. Eastman, member of the
Interstate Commerce Commission, how
ever, declared in a separate opinion
that no good reason had been shown
for approving a Government loan TO
senable the railroad to make a so per
fcent payment on the bank loans, and
4tklat there had not even been an at
bempt made to show that the loan is
needed In the public interest
There 1s no necessity for the loan to
prevent a Missouri Pacific receivership,
Mr.. Eastman asserted, because the
bankers would not, so long as the in
terest on these bank loans is paid, force
a receivership by refusing an extern
sion"
(Copyrisht 1922