The Hardin tribune-herald. [volume] (Hardin, Mont.) 1925-1973, 1934-12-14
and HEARD
around the
National Capital
ssy GARTER FIELpG

National Capital
- z=z= CARTER FE1Dz
Washington.-Lower Interest rates
II part and parcel Of the administra-
mons small profits program, and is
70 De applied very shortly to the rail
roads of the country.
Inc plan is to have the interest rates
on all railroad bond issues, where the
roaos are now In the hands OF receiy-
efs, marked down. 1t may be applied
20 some railroads not now In the hands
q receivers. also. though this has not
been definitely decided.
railroad bonds bear interest at
rates varying from 4 per cent up to Z
per cent. Only the very strong roads
wefe able to obtain money at the lower
ngnre. And in the case Of nearly all
the weak roads, the returns are actual.
~ much higher than the Interest. rate
inoicates For the bonds were sold orig.
many below par. SO that the specified
rate say Of Sc on each 500 is actually
70 on $50. for example. In addition to
wnich the original purchaser, II. he
nolds the bond until maturity, makes
the SD, or whatever discount may have
pee on the original price.
All Of which Is important In consid.
Grafton Of the present plans Of the ad.
ministration. For President Roose.
welt believes very. firmly that the rail.
roads, and for that matter. all bust.
ness, has been paying entirely too much
for the money.
The President has been studying
charts. which show that the railroads
OF the country as a whole pay nearly
one-sixth of their total freight and pas.
senger receipts-net, not gross-in in
terest on their Indebtedness. This does
4 not include dividends-for such roads
as are fortunate enough to be paying
them. and they are few and far be.
tween. 1t includes nothing but inter.
est on money borrowed. mostly In the
form of bonds, and mostly at rates in
excess of AZ per cent.
Presidents Idea
The idea most favored by the Pres.
ident, 1t Is learned, is to start with
roads now in receivership, which means
with bonds which at present are in de.
fault. The government would super.
wise an exchange, in which holders of
existing bonds would accept bonds
bearing a much lower rate Of interest.
The incentives to the bondholders
would be two. One would be that the
whole transaction would so tighten the
fixed charges of the railroads that the
Interest would almost certainly be
{ earned. But more important, the gov
eminent would guarantee the interest
though not the principal-payment
Thus a man owning a $1,000 bond of
the x. 7. and 2. railroad company,
which on its face calls for the pay.
ment to that man Of $40 a year, would
accept a bond calling for payment of
only $50 a year. But he would be sure
Of getting his $50. and as a result he
would not have the slightest difficulty
In selling the bond should he desire to
do So. 1t would be as good as a gov.
ernment bond except that the principal
would not be guaranteed.
And actually. the government would
be taking only a mOdicum Of risk. For
II the interest burden of the railroads
were SO scaled down. they would earn
enough money to pay the interest ex.
cept. In a few instances, and in these
instances the government presumably
would not have provided for a guar.
entee. For the administration program
does not contemplate that the govern.
ment would guarantee q small rate OF
interest on all railroad bonds. Many
Of the weak sisters will be SO cut down
and frozen out that only properties re.
garded as economically sound would
remain.
Another consideration, from the
treasury viewpoint, would make the
whole idea sound from the government
standpoint. At present the r. F. c. is
holding many millions of railroad
bonds as security-bonds which may
easily become worthless In the neal
future unless this interest burden or
the railroads is scaled down. Officials
studying the question believe the gov
eminent would salvage o on r. F
G. loans than it would lose In refnanc
ing mistakes.
Favor World Court
Reports that President Roosevelt
will make a drive on the new senate
to have the United States join tn,
World court have been rife in the las
few days, although no word has com
from the President himself on the sub
ject. Most of the senator's with whom
the President conferred at Warn
Springs have long been advocates no
only of United States participation IL
the World court, but also Of jOinin,
the League of Nations. so there was n,