Evening star., 1932-03-13
j. s. AID FOR RAIL
PROJECT IS SOUGHT
Pennsylvania Application Re-
veaIs Difficulty in Obtain
ing Loans.
BY CHARLES F. SPEARE.
Special Dispatch to The star.

NEW YORK, March IA picture
Of officials of the powerful Pennsyl-
vania Railroad Co. going about among
the banks last year and soliciting q
loan, in order to carry on their pro-
gram of electrification of the New
York rk-Washington line. may be drawn
from remarks in the application to the
Reconstruction Finance Corporation for
$55 100000 to complete this project.
Apparently the lending institutions
took the same attitude toward the
largest and one of the most strongly
fortified carriers that they did to the
applications of the average small bor-
rover.
The Pennsylvania also found the
door Of the investing institutions closed
to It, for the life insurance companies
and the mutual savings banks in the
second half of 1881 had, In effect, boy
cotted railroad securities. According
to the Pennsylvania application they
have not greatly changed their atti-
tude SO far this year, for in January
and February they made purchases
Of less than per cent Of railroad Sc
curities Of the total Of all bonds bought,
while the savings banks were said to
have sold seven times as many rails"
as they took into their portfolios. As
matter Of fact, the insurance COM
panies have been making few new
investments for months In as much as
the demands for loans by policy holders
Is still heavy. Much Of the buying
by the savings banks has been in the
nature OF short-term Government OBJ
legations,
Jurisdiction Point Raised.
Recourse TO the Reconstruction
Finance Corporation has, therefore,
been taken by the Pennsylvania RatI-
road as the only source OF additional
capital supply Since 1t was first in
timated some weeks ago that the Penn
sylvania would petition this Govern
ment agency for a loan to complete
its electrification work, there has been
much discussion as to whether its
construction problem came within
the Jurisdiction of the corpora
ton primarily set up for the
purpose Of meeting emergency situa-
tions, such as those Of carriers that are
so low In cash that they cannot meet
charges. The point made in connection
with the Pennsylvania Railroads appli-
cation Is that this covers work that
has long been under way and therefore
does not conflict with the policy Of
the Reconstruction Corporation In
denying funds for new construction or
improvements.
The strong argument Of the Pennsyl-
vania Railroad in its application Is that
such a loan as it requires will provide
employment for $4,000 men and give
important orders to the large electrical
manufacturing companies. Therefore,
1t aids the labor situation and gives Q
strong lift to general business. 1t Is
doubtful II the directors Of the Recon-
struction Corporation can find a satis-
factory basis on which to refuse such O
request. Their decision may, however,
involve the omission of the next
dividend on Pennsylvania's railroad
stock, thus breaking an uninterrupted
record Of payments TO shareholders
covering three-quarters of a century.
The application Of the Pennsyivania
cities the fact that, in 1882 its esti-
mated operating income will be $7S,-
$4,000. compared with slightly over
$50 ,o00,0 In 1881. This improvement
VIII be due in part to the $4,000, 900
increase in gross earnings from the ad-
vance In freight rates granted by the
interstate Commerce Commission last
year, while a saving Of S4,616,000 Is
anticipated in connection with the
operation Of the electrified lines during
the first II months of their use. 1t Is
also to be taken into consideration that
the 10 per cent reduction In railroad
wages that went into effect on Febru-
ary l will permit of large operating
economies. Consequently, there should
oe a material gain over the earnings of
pennsylvania stock of $i51 q share
recorded during 1891.
Three-Year Loan Sought.
The lean Is to run for three years.
At the end of that time the Pennsyl-
vania Railroad would expect to pay
back to the Reconstruction Corporation
the ful amount Of 1t. The road would
then obtain release of the 662, 900
shares OF Pittsburgh, Fort Wayne &
chicago and Panhandle stock given as
collateral, securing funds by the sale
OF new bonds or stocks in a market
that by 1885 Is expected to be more
friendly TO such issues. It Is suggested
also that the period will be one of
moderate dividends" on the stock of
the railroad.
tcopyrisht, iss2.)
WIFE BOWS TO HUSBAND