Evening star., 1933-02-18
Stock and
Special Dispatch to The Star.


NEW YORK, February I8.-Students
OF the railroad situation who have re-
Gently been dealing with it on the basis
OF facts and not from the standpoint
OF IDEALS, Will find ample support for
tnelr position in the report of the Ma
tional Transportation Committee. AS
the general conclusions have ALREADY
appeared. this dispatch deals with only
tWo-namely, the questions of rates and
capitalization and of consolidation.
1t has been frequently emphasized in
these dispatches that railroad managers
VINO were nsiStent that the way ont
OF tnelr troubles lies in permission to
cnarge high rates, were not in tune
WIN the times. 1t Is not conceivable
that the public would permit it's law
makers to allow railroad rates to be in
creased when commodities are still de-
Ginning, and are far under the aver
age that prevailed before the war. and
When all incomes have been radically
reduced.
Readjustment Urged.
On this subject the report saws.
The committee believes that a per-
manent and universal liquidation and
downward adjustment of values and in
comes of all kinds have occurred in
tnlS country, and that railroad rates
capital structures, salaries and wages
must all respond to this generally
changed condition, but that none
should be sacrificed for the benefit of
others
Amplifying this premise. the COM
mlttee expresses the opinion that while
proht Is the only incentive to private
Investments, this "does not mean that
railroads. any more than other indus
trles, are entitled to guarantee of
earnings on their investments in prop
erty''; in other words, it is not due
them that they should charge for their
services an amount that would main
tain their solvency at the expense of
the general public. A collateral aspect
OF TINS general question is frankly
treated by the committee 1t Is hoped
that railroad executives, their legal
counsel In washington, railroad bank
erS ana private investors, as we'll as
institutions that have refused to ac-
cept the fact of ovarcapitalization
Will give close attention to what the
committee has said on this point. Here
it is:
"A cause contributing to the present
crisis is the unwieldy proportion of
interest bearing debt in railroad cap
ltaLzation, much OF 1t representing ia
ciiities long ago scrapped. We distinct
ly do not believe that past mistakes,
as represented by present unwieldy
debt structures, should be salvaged by
increased rates. The present debt
structure must be revised and losses
written off. The present railroad
rule puts the cart before the horse.
1t tends to uniformity of results, per-
petuation of debt and of obsolete and
exaggerated capital structure, INSULT
cheney of allowance fer obsolescence and
depreciation. inadequacy of surplus and
reserves, and maintenance of unneces-
sary properties and facilities"
r. F. C. Loans.
All this raises the question once
more as to how far the Reconstruction
Finance Corporation should go in
granting Government funds to railroads
that have large amount of unprof1t-
able mileage and an unstable debt
structure. On this question the report
said: The corporation cannot pour
public treasure into situations where,
instead of temporarily supporting op-
erations and loaning to maintain pru-