Evening star., 1935-02-03
Preparation Believed Sign
That Government Fears
Adverse Ruling.
UNCERTAINTIES RESTRICT
MARKETS AND BUSINESS
Administration Expected to Face
Difficulties in Attempting
to Avoid Setback.
BY CHARLES F. SPEARE.

SAAA@AsAA@A1 "a LAND
Special Dispatch to The Star.
NEW YORK, February 2.-The eyes
of the financial world are today CEN
tered on Washington and the minds of
business men are concerned with the
decision expected to be handed down
soon on the famous gold clause"
cases by the United States Supreme
Court.
From the inspired dispatches in the
press at the end of the week dealing
with the possible offsets to an opinion
upholding the validity of Government
gold payment contracts, it is surmised
that the administration fears an ad-
verse decision and is preparing to take
immediate steps to make its present
gold policy effective. These may as
sumo the form of special tax. similar
to the processing taxes, which would
prevent any holder of a Federal gold
bond from realizing a profit on it to
the extent covered by the courts de-
cision; or there may be legislative ac-
ton forbidding the Court Of Claims to
entertain petitions based on the in
creased value of the gold dollar.
All of this substitution Of privilege
is not so easily put into operation as it
seems. One is inclined to agree with
Senator Harrison that "if the gold
cases are decided against sthe Govern
ment, we are likely to be here some
time getting out of our troubles"
Obviously, the uncertainty as to how
the proposed new measures may affect
sentiment in this country and in Eu-
rope will act as weight on business
and tend to restrict dealings in Sc
curities. AS an illustration of the in
hibitions of such confused situation,
the directors of the Louisville Gas g.
Electric Co. have just postponed the
redemption Of one of its bond issues
until after the gold clause" cases
have been clarified.
Shares OF in January.
Stocks were lower this week, Janu-
ary enGing with the biggest average
decline of any month since July.
There was not much significance in
the recent heaviness of junior shares,
as the volume of transactions in them
was small. The action of the bond
market, however, suggested spirit OF
caution pending the court decision as
we'll as a review of prices since the
first of the year. This disclosed that
Treasury issues had risen on the aver
age of nearly points and corporation
mortgages rated "AAA" and "AA"
from q of point to IL points and
the lower grades 2 to 312 points. AL
were higher than in 1884. The most
conspicuous gains in the corporation
list we're in public utilities, in spite
of the hostile political sentiment sur
rounding them. The smallest advance
! was ii the rails.
The rail average is held down by
the large number of issues OF COM
panies that are skating along on thin
ice and whose effort to proceed on
Government loans is again criticized
in this weeks report to the President
by Joseph B. Eastman, co-ordinator
Of transportation. Mr.. Eastman ad-
vances the opinion that the R. F. c.
should continue liberal advances TO
sound roads, but that it should not
provide funds for the preservation of
unsound financial structures"
There are four or five systems that
are now on the marginal line between
solvency and insolvency. 1t would,
perhaps, be we'll if thev sought the
temporary haven" in the bankruptcy
act from which they can later emerge
in a better position to face the fu-
ture." They are in that class OF roads
which Mr.. Eastman believes should
have fixed charges reduced to 80 per
cent of the average income of three
consecutive years of the 10 years prior
to passage of the act in which that
income was lowest"
Favors Private Control.
In his report Mr.. Eastman makes it
clear for the first time where he
stands with reference to Government
ownership. He looks on this as neces-
sary only if effective administration by
private managers fails and would pre-
fer that the present owners work out
their problems among themselves as
they are now trying to do.
"It is clear" he says, that under
present conditions, with the rapid de-
velopment Of competitive means of
transport, railroad methods must be
changed radically, and in the direc-
ton of cooperation, collective action
and coordination"
It is unfortunate that such splen-
did document and one so fair to the
parties in interest should be immedi-
ately involved in debate over tech
nical questions, such as the size and
scope of a new Interstate Commerce
Commission. 1t is under the present
form of commission government that
many of the evils of railroad manage
ment have been established, and the
failure to deal with competitive forces
has worked the railroads credit ruin.
The most sensitive indices Of bust
ness show a slight downward trend
this week. This is due to hesitation
over the forthcoming gold decision, to
the bitter weather in large section
of the country and to a certain
amount of catching up on orders by
producers and an accumulation of
merchandise.
Gold Still Flowing In.
Unwanted gold keeps coming into
the country, with nearly 100000, 900
added to the existing stocks since No
vember l last. Disposition of the gold
clause cases will give clearer picture
of what has been transpiring in the
foreign currencies since the first of
the year, as their fluctuations havs
followed the alarms over the Ameri-
can situation.
There is reason to believe that al
the gold-bloc countries are facing q
crisis. The constant tendency to make
concessions to the devaluationists Is
proof of this.
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