Evening star., 1933-02-15

roads, and that by reason thereof, they
are in their present plight" While
finding a tendency to overemphasive
this. it said that nobody can assume
authority without accepting RESPONSE
bility, and the existing railroad con-
dition speaks for itself, to say that reg
ulation by the Interstate Commerce)
Commission has left something to be
desired.
The committee recommended reor-
ganiZation of the activities of the Com
mission, with appropriate separate de-
partments, with a chief at the head of
each, for its legislative, executive and
judicial functions, and for each ma jor
special function such as control of cor
porate reorganization. It should have
also a planning department with a re-
search staff and such other depart
ments as experience indicates Except
in the exercise of its more important
legislative and judicial functions. de-
partmental hearings and decisions
should be sufficient and action as body
should not be required"
Bankruptcy Procedure Stressed.
Under its emergency recommends
tions, the committee stressed particu-
larly revision Of bankruptcy procedure
to permit prompt and realistic reorgani-
zation OF overcapitaliZed corporate
structure without destructive receiver
ships and judicial sales on depressed
markets. to the end that the railroad S
justiiable borrowing requirements may
be met with safety to the lender under
adequate protection"
It pointed out that the Reconstruc-
ton Finance Corporation was formed
to tide over an emergency, and "the
corporation cannot pour public treasure
into situations where, instead OF
temporarily supporting operations and
loaning to maintain prudent interest
payments, there is q wasteful delta OF
out-f1owing streams Of interest on un-
supportable capital structures"
After most careful consideration, u
said Smith in his memorandum, II
cannot recommend as an emergency
measure that there is immediate need
of action by Congress to make a new
statutory rule Of rate making, nor that
the present powers of the Reconstruc-
ton Finance Corporation to make loans
to railroads should be extended or ma
terially changed"
Smith vigorously defended automotive
transportation, saying, "Extravagant
claims are made as to the penalizing of
the railroad as contrasted with highway
transportation by taxes and by numerous
regulations affecting service and labor
Trucks and busses are already substan-
TALLY taxed through license, gasoline
and oil taxes, and these are being
steadily raised, SO that within short
time, In the course Of normal events
the users Of highways for commercial
purposes will be paying their full
share. He urged that the railroads
go into bus and truck business on a
larger scale. and be encouraged to dc
so by appropriate legislation.
Smith described the fundamental
problem as that "of Nationwide con-
solidation and reorganization to reduce
costs and rates and to write off losses
The era Of railroad pioneering is over
The roads must reduce overhead and
operating expenses. They must scrap
unnecessary, competing and weak lines
They must get rid of obsolete equip
ment."
He said the general public would not
tolerate writing up values or increasing
rates merely to protect securities.
Realistic Attitude Advised.
Whatever may be the basis of valua.
ton and rate making, there must be q
sealing down of many railroad securi-
ties" he added, saying that holders oil
securities must adopt a realistic atti.
tude toward that phase Of the problem
Smith said that II the railroads show
nc Willingness to reorganiZe, "reorgan-
ization can surely be brought about by
some form Of condemnation or eminen,
domain" He warned the owners oi
railroad securities that they must decide
whether the steps taken toward re-
organization should be compulsory OF
voluntary.
"The major railroad systems might
well give serious consideration" he
thought, ito the appointment of some
sort OF impartial chairman. arbitrator
or director general to coordinate their
present activities. and to prepare a plar
OF permanent consolidation.
Those who are responsible for pres.
ent railroad management" Smith
admonished, need not complain OF
radical or drastic governmental action
In the near future If they are unwilling
even to attempt to meet their problems
in bold, fortnight way through Their
own Initiative and cooperation.
They have an unrivaled opportunity
to do themselves and the country q
great service. They should have the
guidance and help of the National and
State Governments in fhic afFort