Evening star., 1933-01-30
HOUSE TAXES UP
DEBT CUTTING BILL
Measure to Relieve Individ.
uaIs, Railroads and Corpo-
rations Assured of Action.
BY MARK SULLIVAN.

BY MARK SULLIVAN.
The House begins consideration to-
day Of bill designed to bring about
scaling down Of debts of individuals,
railroads and other corporations who.
as significantly described in the bill, are
unable to meet their obligations as
they mature" That the bill will pass
the House promptly is universally ac-
cepted.. 1t is equally understood it Will
pass the Senate at an early date, GER
tainly before this session ends March 4.
That President Hoover viii approve it is
perfectly assured. He has sent special
message urging the bill as an emergency
necessity.
The status of this measure throws
convincing light on the relative pros
poets in Congress of the two methods
by which the present phase of the de,
preston can be overcome.
Talk Is of Imitation.
All the talk is about inflaticn of cur
rency. All the action Is about scaling
down OF debts. Imitation would be an
attempt to raise prices of land and
goods and thereby make debts easier
to pay. Scaling of debts Is a process by
which debts are brought down to a
workable relation with the present level
OF prices, and the debtor is enabled to
Keep his property and carry on.
Inc cleareSt fact about Congress is
that scaling Of debts is the path along
winch actual progress is being made.
1t is true some 80 bills for bringing
about imitation have been introduced.
1t is true many speeches urging imitation
are made In Congress. Partially as a.
result OF this, the opinion is general
IN nnanclal communities and elsewhere
that imitation is ahead. Nevertheless,
the fact Is no imitation bill has the
Iamtest chance Of passing this Congress.
On the other hand the present bill for
scaling down debts is certain to be en-
acted, and other formidable measures
Tor reducing debts are well on the way
10 enactment in this Congress or in the
early special session of the next. Fur
thermore, the prospect of these meas
ures being enacted has stimulated seal
ing down OF debts by private voluntary
arrangements between debtors and
creditors.
Measure Is Intricate.
The present bill is, of course, intricate
ana only main lines can be summarized
here. 1t provides separate processes for
lnolVldual debtors, for railroads and
Tor other corporations. The individuals
meant most to be helped are farmers
having mortgages of size now impos-
slnie such an individual may file
petition In court looking 70 "a compo-
Sltlon or an extension of time to paw
MS debts.' The court may, upon rea-
sonsnie notice to creditors, appoint a
custodian This action by the court
which can be prolonged as long as the
court deems wise. The custodian noti-
hes creditors that ''tEe debtor proposes
10 oner terms OF composition or ex-
tension The court will confirm the
composition or extension after it has
been accepted by ajority in number
OF such creditors including a
majority in amount of secured claims :"
Even where the debtor fails to secure
agreement by the necessary majority of
creditors, the debtor may nevertheless
file with the court proposal and the
court, after hearings, may confirm the
an equitable and feasible method of
hquldatlon for secured creditors
and financial rehabilitation of the
debtor and is for the best interests of
all creditors
Persons familiar with farm condi-
tlonS say that a main effect of this
will be to facilitate leniency by holders
OF mortgages. Insurance companies and
others holding many mortgages say that
in many cases they are willing to eX-
tend time, or to reduce the amount. but
they are forced to protect themselves
against the actions of minor creditors
having junior liens on farm imple-
ments. live stock and other chattels.
Thacher Opinion Given.
That the bill is rather revolutionary
is suggested by its opening paragraph
which says that courts = - shall ex-
eroise Jurisdiction in proceedings for
the relief of debtors" Because the bill
is recognized as pretty extreme, care
has been taken to make it 60 as far as
possible in relief of debtors, but at the
same time not collide with the consti-
tutional prohibition against interfer-
ence with private contracts The re-
port on the bill includes an opinion
from the exceptionally able and careful
solicitor general, Thomas D. Thacher,
to the effect that the right given by the
Constitution to Congress to legislate on
bankruptcies" includes the right to
legislate on debtors as in this bill In
further care to take account of the con-
SlltutAOLdl pIOluU1tlOIl dBdulSI eA pOSJ
facto laws. the bill specifically provides
that it shall apply as fully to debts
incurred prior to enactment as to debts
incurred after enactment" The report
accompanying the bill says frankly
that the bill is inspired by present con-
ditions of distress. while this bill
has been framed with due regard for
the present and Immediately prospective
unusual economic conditions, it 3" =
will prove itself to be permanently help
full to distressed debtors and to credi-
tors and in line with the public in
terest''
The care In drafting apparent in the
bill. and the type of the persons who
have co-operated in writing it, is assur-
ance that 1t Is not one more white
rabbit" but workable plan for reduc-
ing debt.
The momentum this bill has and the
standing and number of its sponsors is
convincing evidence of the trend Con-
gresS Is taking for the relief of condi-