The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-05-03
FLYNN URGES
STEPS TO SAVE
U. S. RAILROADS
ReorganizationS Are Needed,
His View of Critical
Situation.
BY JOHN I. FLYNN
Times Special Writer

Times Special Writer
One great industry in this coun-
try is practically dead because most
Of its buyers are practically broke
That industry Is the business Of
building railroad equipment. The
busted buyers are the railroads.
Daily for some years We have been
told Of the paralyzing influence of
our vast long-term debt. More
cheerful souls assure US that it is
nothing measured against our vast
national wealth
There IS a notion that the debts
are all neatly spread out over the
wealth and that the debt coating
is hence quite thin. But this is not
50. These debts press down only
on spots. They paralyze the spots
where they rest. And the spots on
which long term debts rest are the
railroads, utilities, construction in
dustries, the states, counties and
cities.
Consider the railroads. They
make their chief purchases Of equip
ment and construction with Dor
rOWed funds. Thus they are large
buyers in the capital goods markets.
When they are excessively loaded
with debt they can borrow no more.
Then they can buy no more. That
part Of the capital goods industry
which sells to the railroads ceases
to do business.
Debts Nearly s7OO,OOO,OOO
Let us look at a single great rail-
road. It's capital stock is carried
at half a billion dollars. But it has
long term debts of nearly S7000O0.-
600. It must pay over $4,000, 600
a year in interest. For three years
il has not made enough money to
pay this interest. This is bad for
that road. But 50 is the effect upon
general business. The road must
spend less for equipment. In 1929
It spent S58000,000. In 1888 it spent
half this. 1t was the same with
road maintenance.
This would be a fair picture of
most of our roads. Their roadbeds
are in desperate need of repair.
Their coaches are shabby. Their
locomotives are ancient and run
down. Amazing modern inventions
have rendered all this existing roll
ing stock hopelessly obsolete.
Yet the roads can buy no locomo-
tives, rails, cars. because they have
no credit. They have no credit be-
cause they are hopelessly crushed
under debt. No one is willing 10
lend money to a corporation which
can't pay its interest charges. Yet
all the while here lies one of the
greatest markets in America, lifeless
Presses for ReOrganizations
What follows from this?
l. These roads must be revived
as buyers Of capital goods.
2 To do this they must be re-
heved Of excessive debt.
g. This can be done only by re-
organizations. This would lnJure
neither railroad bondholder nor
stakeholder.
Take the road already pictured.
Its stocks sold at 256 in 1929. They
sell at l6 now. Some of its bonds
are priced as low as 50. The in
jury is already done. At least half
Of the junior bonds should be
changed into stocks.
The existing common stocks
should be written down at least one
sixth The credit of the road would
be revived Immediately. 1t would
resume buying on a great scale.
This could be applied to scores of
roads. The effect on the capital
goods industries would be enormous.
We would see a great era of rail-
road rebuilding.
IIrpPS Three Stems