The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-01-19
CAPITAL idle
PENDING COLD
CLAUSE CASES
Operations Are Postponed
Indefinitely; Outlook
Seen Gloomy.
BY w. IAN MACK
Times Snecial Writer

NEW YORK, Jan. 19.-Uncertain-
ty created by the impending Su-
preme Court decision on the con-
stitutionality of the abrogated gold
clause in contracts, together with
probable revaluation of the dollar
to its former parity in the event of
an adverse ruling, has had the eff
feet of postponing indefinitely all
financing operations in the nigh
lethargic capital market. Only a
favorable decree, investment bank
ers today indicated, would permit
fotation of the few issues already
negotiated.
Intolerable burdens that would be
imposed upon debtor corporations
by verdict invalidating the much
disputed statute repeating the gold
clause precludes any financing on
the one hand, authorities explained,
while the def1ationary influences
inevitably to be eXerted upon the
domestic economy by a concurrent
restoration of the dollars metallic
content to 1922 grains of gold obvi-
ates any possibility Of investor de-
mand for securities which might
show capital losses or the other.
Only Best Would Squirt
Even if the Administration were
to decide to maintain the dollars
status quo following an adverse de-
cision, it was pointed out, few bond
issues other than obligations of the
Government which possess gold
clauses would advance to reflect the
SO per cent increase applicable to
them On the basis of the dollars
current worth. These, it was init
mated, would be limited to the pri-
mary liens Of corporations with
relatively small indebtedness and a
high ratio of earnings to charges.
On the other hand, some obServ-
ers argued, there is every possible
ity that widespread bankruptcies
| among corporations with towering
debt structures would ensue by a
ruling citing the repeal laws I'M
conStitutionality. Such develop
ment, neceSSitating the invocation
of Section 77-B of the Bankruptcy
Act, was foreseen as eXerting such
an unsettling influence upon trade
conditions generally that increased
unemployment and renewal Of the
defationary process under way from
1929 to 1888 would result.
Rails, Utilities Hit
Inundated by debt, these experts
insisted, would be both the Nations
railroads and public utility systems.
In this respect they pointed out
that the expanded Indebtedness of
both industries would absorb what
ever equities are possessed therein
today. The railroads obligations
under the new order would be
equivalent to nearly 80 per cent of
their combined valuation, while
those of the public service group
would be increased to the extent
that they would approximate more
than 10 per cent of indicated worth.
An example of the temporary eff
fects of offsetting developments was
noted, in the trend of bond prices
yesterday. These remained stable as
stock and commodity values broke
precipitously. AS long as the threats
of an unfavorable Supreme Court
decision and probable revaluation
of the dollar remain over the mar
kets, it was agreed in informed
quarters, the values of fixed income
bearing obligations will tend to fluc-
tuate within a narrow range, pend
ig Qualification of the outlook pro
or con.