Evening star., 1935-10-02
JONES FLAYS TWO
ON LOAN METHODS
False Statement Charged in
Attempt to Block Gen.
trail Solution.
BY the Associated Press.

"A J. P. Morgan partner and the
head of the First National Bank OF
New York were accused yesterday by
Jesse H. Jones, Reconstruction Finance
Corp. chairman, of attempting to
block q solution of the financial sit
uation of the New York Central Rail-
road
In a letter to Harold S. Vanderbilt
Of the Finance Committee OF the
road, made public here. Jones charged
that letter signed by George Whitney
OF the Morgan firm and Jackson z.
REYNOLDS of the First National, con-
tanned a statement that was mot
true" and that the letter was "ob-
viously intended to make impossible
nv suggestion that the banks and
the r. F. c. exchange their demand
notes for bonds"
The statement branded by Jones
as mot true" was that his proposal
that the banks and the r. F. c. take
convertible bonds was asking the
financial institutions to violate the
banking laws forbidding them from
owning railroad stocks. In another
letter, written Sunday to Vanderbilt,
Jones said the controller OF the cur
rency had held that the banks could
legally accept the convertible bonds.
Loans Are Extended.
Immediately after writing yester-
days letter. Jones left for New York.
but last night 1t was made known
that the corporation has extended
until November 80 New York Central
loans totaling s1560O,0oo which fell
due yesterday. The COMPANY owes
the r. F. c. a total OF S27,5O0.0UO
and 10 banks s63 100000. Jones, Van
derbilt, Whitney and Reynolds have
been seeking a means by which tne
railroad company could place these
loans on a long g-time basis. The bank
loans all are on demand" notes.
THE Reynolds Whitney letter, cir
oulated by you among the 10 lenolns
banks" said Jones yesterday. OBJ
viously intended to make impossible
my suggestion that the banks and the
&c. exchange their demand notes
for bonds, as we'll as to discredit my
efforts to bring about such solution
1T imputed to me proposal that
the banks violate the law-whlch Is
not true; assuming to themselves more
scrupulous ethics.
In order that there may be no mis-
understanding as to my position OF
theirs, 1 am releasing the correspond
ence."
Jones, in his letter of September 2e
TO Vanderbilt, took the New Yorker
and the bank heads to task for critl-
cizing his discussions of the financial
situation of the railroad company with
newspaper men. Vanderbilt said, q
cannot see what useful purpose Is
served by the publication Of inter.
views such as the one referred to-"
Government Official
You and they seem to forget, y
Jones answered to this, that I am a
Government official, lending Govern
nent funds, and that the public is in
terested in r. F. c. activities and In
the New York Central's finances. You
forget, too, that these interviews tc
which you object are the result OF per-
tinent inquiry by the press. But II
you will search the newspaper hles
you will find no statement by me that
could be hurtful to the New York
Central or to any other Institution
that has had occasion to borrow from
the r. F. C.
II appreciate that some bankers and
LII i,if,
but railroads are required by law to
make public their entire activities, as
is also the R. F. C. Yours is one of
our prominent railroad systems and
the condition of It's finances is Of in
terest to the public.
"One very good way to avoid further
publicity Of this character would be
TO put your finances in order"
Jones told Vanderbilt he felt he
would be derelict in his duty II he did
not do what he could to help correct
what I know to be an unhealthy sit
uation" and that he would continue.
He said he told Reynolds that If
the road would authorize 10000, 900
convertible bond issue with which TO
iUo OCptc, WILL t1lC
approval of the Interstate Commerce
Commission, the r. F. c. would take
half the issue, which would pay the
roads debt to the r. F. c. and reduce
the bank holdings by s3o,ooo,ooo.
Per Cent Interest.
The bonds, Jones also thought,
should bear per cent interest and
be convertible at an attractively low
figure. Reynolds, the r. F. c. chair
man said, had held out for 434 per
cent and a conversion price of $50.
/. The letter from Vanderbilt to Jones
was sent to the following heads Of
banks involved in the loans:
w. c. Potter, chairman Guaranty
Trust Co. Of New York; Lewis E.
Pierson, chairman of Irving Trust Co.;
Winthrop w. Aldrich, chairman Of
Chase National Bank; James H. Per-
kins, chairman National City Bank
Of New York; Walter ]. Cummings,
chairman Continental Illinois Nation
al Bank & Trust Co.; Richard K. Mel
Ion, president, Mellon National Bank;
H. S. Leyman. chairman First National
Bank Of Cincinnati; John P. Oleson,
chairman First National Bank of Chi
cago; jackson E. Reynolds, president
First National Bank of New York;
George Whitney, ]. P. Morgan 81 Co.