The Western news. [volume] (Libby, Mont.) 1933-current, 1934-12-13
SEEN and HEARD
around the
National Capital
BY CARTER FIELD;

s. BY CARTER FIELD -
Observation-Disclosures interest rates
Is part and purcell of the adIninlstra-
lions small prpiits" program. and is
to be applied very shortly to the rall-
roads of The country.
The plan is to have the interest rates
on all railroad bond issues. where the
rAals are now In the hands of receiv
DIS. markei down. 1t may be applied
IN someI railroads not p4-rr-ln the hands
of hgeik ers. also, Though thts has not
been dciinffTfy decided.
Most railroad bonds bear interest at
rates varying from 1 per ceht up to
per cent only the very .Sffong roads
were uble Ia obtain money III the lower
ngure. And IN the eube of nearly all
the weak rnads. the returns are actual
" much higher THANH the interest rate
indicates For the bonds were sold orig
iually below par. 50 that the specified
rate say Of So on each 500 is actually
81 on SS.1. for example In addition to
which the original purchaser. II he
holds the bond until maturity. makes
| the Sl5. or whatever discount may have
been on the original price.
All OF which is important In consid.
| Grafton of the present plans of the ad,
/ minfstration. 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 nearls
one-sxtll of their total freight and pas
senger recelpts-net. not gross-in In
terest on their Indebtedness. This does
not include dlvdends-for such roads
as are fortunate enough to be paying
theu. and they are few and far be
tween. 1t includes nothing but inter
est on money borrowed. mostly In thu
form of bonds. and mostly ut rates IL
excess Of "A per cent.
Presidents Idea
The Idea most favored by the Pres
ldent. 1t Is learned. is to start Will
roads now In reeeivershlp. which mean
with bonds which Mt present are In de
fault. The government would super
wise an exchange. In which holders 0
existing binds would accept bond
hearing Il much lower rate of Interest
The incentives to the hondhnhfer
would be two. One would be that III
whole transaction would SD tighten TIL
fixed charges Of the railroads that til
interest would almost certainly b
earned. hut more important. the GOV
eminent would guarantee the interes
though not the principal-naymen
Thus d man Ownin. 81 tFai hond c
the \ I. and u. railroad c0mpnn,
which on It's face caIls for the na'
ment to that man of $40 year. woul
accent bond calling for payment {
only $50 q year. Bnt lie would be sur
of getting his $40. and As ii result h
would nor have the slightest difficult
In selling the bond should he desire
do so. 1t would be as good as go
eminent bond except fhat the princip;
would not be guaranteed.
And actually. the government woul
be taking only a mpdicum OF risk. F'
n the interest burden OF the rairoat
were SO scaled down. they would ear
enough money to pay the interest Z
cent In a few instances. and In fhe'
instances the government presiiilah
would not have provided for q qua
antee. For the administration prngra
does not contemplate that the goyer
ment would guarantee small rate
Interest on all railroad bonds. Maj
of the weak sisters will be so cut dow
and frozen out that only properties
garded as economically sound won
remain.
Another consideration, from {
treasury viewpoint, would make {
whole idea sound from the gnsernme
standpoint. AT present the II. +. G.
|. holding many millions OF railrn
bonds as security--honds which m
easily become worthless In the ne
future unless this interest burden
The railroads Is scaled down. nlcii
STUDYING the question believe the e
!, eminent would salvage more on X
q. loans than ii would lose In rehnal
Ing mistakes
Favor World Court
Reports that President Roosev
will make a drive on the new Sent
! 70 haye the United States join
World court have been rife In the i
few DAYS, although no word has co
9 from the President himself on the =
y iect. Most Of the senators with wh
Y the President conferred nj Wa
!, Strings have long been advocates
Q only of United States participation
Q the World court. but also of join
y the .eagup of Nations, so there was
Z effort on his part TO win converts.
G. the World court was discussed.
T. polnt at issue was tactics IN acqfllr
III $500. thirds ma iurity and forcing