The Washington times., 1933-01-31
WONT EXTEND
LOANS MADE
To RAILS
Sen. CouzenS Hears Threats
of Foreclosures Have Ac-
companied Demands

The big bankers Of America
have "shirked responsibility"
toward the railroads by refusing
to extend railroad loans, Atlee
Pomerene, chairman of the Re
construction Finance Corporation,
told a Senate subcommittee today.
Pomerene told Senator CouzenS
(R.) of Michigan, author of a
joint resolution to shut off fur
ther Federal aid to the carriers,
that in numerous instances the
banks had demanded full pay
ment of their railroad loans un-
der threat of foreclosure.
Couzens Raps r. F. c..
Couzens roundly criticized the
r. F. C. for advancing more than
$50,0OO,0O to the railroads for
the repayment Of loans to the
banks.
At the same time he submitted
evidence showing that all except
30 or 35 of the 1852 class l
roads of the nation are operating
at a loss.
Chairman Pomerene said:
81 have the feeling that some
Of our larger banks that are
IS to 100 per cent liquid ought
to play a larger part in railroad
financing.
BANKS REFUSED LOANS
"Some Of the major railroads
have advised us they went to
the larger banks for help and
could get none. 1t is up to the
larger banks themselves to aid
in this refinancing."
Senator Couzens (R) Of Michi-
gan, presiding, asked Pomerene II
his criticism was leveled at in
vestment bankers or commercial
bankers. His answer was:
"T am speaking Of bankers.
My statement was general"
The witness assailed the "plac-
ing of bank funds in cold storage,
declaring the bankers have
"shirked their responsibility" TO-
ward the railroads. He explained
his criticism applied both to long
and short term loans.
Directly to Banks
Of the 1897, ,435 ,O93 of railroad
loans authorized by the R. F. G..
with approval Of, the Interstate
Commerce Commission, $37 ,0OO,-
900 went directly to banks, Pom
creme revealed.
Another $16,OoO,00o went to
liouidate short term loans held
in part by banking houses. The
biggest single item, $73,960,0OO,
was used to meet past due IN
terest on capital investments.
other sums were advanced to pay
delinuuent wages, taxes and ex-
penses for equipment. Said Pom
creme:
with these loans falling due
soon in substantial amounts.
the railroad situation is serious
from a financial standpoint"
A total of $l31.000,000 in rail-
road bonded maturities become
due this year, the subcommittee
was told.
Securities Show Shrinkage
Miles C. Kennedy, chief rail
road examiner for the r. F. C.,
revealed that listed security with
an estimated market value Of $7O,-
100000 was pledged by the Balti-
more and Ohio Railroad as col
lateral for a $67, ,000, 900 loan au-
thorization. He explained:
Last December 10 this Sc
curity had shrunk in value of
$4,000, ,OOO."
Only $39 100000 has actually
been advanced to the B. & O.,
he added.
Security for an Erie Railroad
loan of $15,00O,000 has shrunk to
less than $13,000,O00 in value.
Terrible Condition" Shown
The RF.C. railroad statement
showed terrible condition."
Couzens asserted, explaining:
"T'm not introducing this
resolution to criticize railroad
loans you've already made, but
i think we should determine
how far the Government should
Co."
Pomerene replied that "it is diff
ficult to find a yard stick Of
value in times like these"
Senator Blaine (RO of Wiscon-
sin declared that expediency die
tated the making of many rail
road loans, adding:
81 am not saying this in criti-
cism Of the R. F. c."
Pomerene vigorously took issue
with this assertion. He replied:
TO make loans on a basis of
expediency would be in viola
ton Of the statute"
Mre Will ROnpr2