Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-01-08
SECURITY MARKETS
SHOW FIRM TREND
IN WEEKS TRADING
Business Discouragement Is
Not Reflected on Various
U. S. Exchanges.
DEBT CORRECTION HELD
NECESSARY TO RECOVERY
Process of Defation in Real Estate
Is Apparently Making Some
Progress.
BY CHARLES F. sPEARE.
Special Dispatch to The Star.

special DlSphtCn 10 Inc 0tdI
NEW YORK, January THE three
critical situations today are those sur
the railroads, urban real es-
tate and farm mortgages. All are in
volved in debts too heavy to carry now
or in the future and in interest charges
out of proportion to the income from
which they must be met.
The solution Of the problems con-
nected with an adjustment of these va
riouS forms Of debt demands the i'm
mediate and serious attention of the
statesmen and banking interests Of the
country.
The railroad debt accumulated over
long period of years, but chiefly in the
decade between 1920 and 1880 The
portion of 1t that has become an en-
barrassment to the carriers developed
from program of enlarging transpor-
tation facilities and increasing the eff
cheney of those already in existence;
also in the purchase of properties that
in some cases were legitimately required
to integrate certain systems but In
others represented the desire for addi-
tional power or strategic advantage.
Traffic Currents Change.
Today there is an excess of railroad
facilities due to a decline of nearly so
per cent in the Nations business, but as
well to the new forms of competition
that have developed in the past 10 years
and whose effects on the currents Of
traffic and on rates will be permanent
1t is obvious. therefore, that the rail-
road plant cannot sustain the weight of
debt imposed omit and that If healthy
railroad credit structure is to be estab-
llshed a substantial portion Of the
junior railroad bonds that have been
hoated since 1920 must be scaled down
or transferred into some form of nom
interest bearing or contingent interest
type of obligation.
In urban real estate, as well as In
real estate in suburban areas contiguous
to metropolitan centers, there has been
since the war the same kind of initiation
and promotion that occurred in corpo-
ration securities from 1928 to 1929.
Values Of land and buildings were
driven TO exaggerated levels. Loans
were made in conformity with these
boomttme appraisals. There was an
overproduction in the building industry
along with expansion in the field Of
transportation and In the industrial
world.
Billions of dollars worth of real
estate securities, predicated on the high
values and rents Of the 20s, were dis
tributed among investors. Today more
than SO per cent of these are in default
Widening of Defiation.
The defiation of this section of the
real estate securities market Is nearing
completion. 1t Is now, however, reach
ing that class Of urban and suburban
real estate mortgages that were made
q Tyo fNe 6nc ic kzttf rrri.N
ton Is today affected by the inability
Of owners of property to meet their in
terest payments and their taxes on &C
count of the perpendicular decline in
their rentals or in the income which
they derive from their labor or services
or from various kinds of investments.
The attempt to correct the several
effects Of imitation by more imitation has
been made in the past year. 1t is being
proposed again in Congress. It cannot
succeed 1t will make bad situation
worse If it follows the lines that have
been experienced by other countries
since the waT We must get as quickly
as possible down to the hard facts that
debts created during the period Of pros
perity cannot be prolonged and that
concessions must be made in all critical
circumstances between creditors and
debtors.
Security Markets Firm.
In spite of the discouragements that
have faced the business world at the
beginning of the new year, markets for
securities this week have been astonish-
ingly firm. The strength in stocks Is
attributed somewhat to renewed dis
cussion of currency imitation. Bonds
that should react adversely to such a
suggestion have likewise been buoyant.
They have been influenced by the
enormous amount of free money seeking
investment and still showing strong
preference for either Government or
municipal issues or the highest type OF
corporation loans.
Copyright, 1887