Evening star., 1936-03-06
LOOT|NC CHARGED
To PROTECTORS"
Of BONDHOLDERS
SABBATH Tells Subcommittee
of "systematic" Theft
in Reorganization.
EVIDENCE UNCOVERED
BY PROBERS is CITED
Defaults Unnecessary in Many
Cases. Properties Should Have
Paid, He Asserts.
BY JOHN II. CLINE.

BY JOHN III. CLINE.
The systematic looting of American
bondholders" during the past six years
was described to subcommittee of the
House Judiciary Committee today by
Adolph J. SABBATH. 70-year-old Repre-
sentative from Illinois
SABBATH is chairman of Specla
House committee which has conducted
an investigation of mortgage reflnanc.
ing in the principal cities of the coun'
try. This investigation has resulted
in the drafting of bill designed tt
remedy evils uncovered by the sub
committee, and which will be sub
rnitted to the House in the nature oi
an amendment to the bankruptcy act
This committee SABBATH said, has
uncovered conclusive evidence that
the small bondholder all over the
country has been Systematically rob-
bed and looted of his savings by re-
organization agencies. After the
crash in 1929, approximately s2o.-
o0o.O00.Oo0 of securities, owned by
more than 100000 investors, went
into default.
Bonds Bought in Cheaply.
I'm many cases after default. So
called bondholders protective commit
tees were formed. These committees
painted a gloomy picture of the out
look for the future of the bonds and
then proceeded indirectly to buy them
in at 2. and cents on the dollar
Then, suddenly and amazingly, the
properties began to pay"
SABBATH told the committee the
members of these so-called protec-
tive agencies did not own any of the
bonds and had no financial interest OF
any kind in the property.
In many cases." he declared, 'these
properties could and should have paid
from the start. There was no reason
for defaults. The committees simply
jumped in and grabbed them away
from the bondholderS.
And despite the efforts of Congress
to help the little fellow by the recent
amendments to the bankruptcy act,
these wise men of finance have man
aged to retain their control. In many
cases they have persuaded the courts
to select voting trustees of their own
choosing to operate the properties for
the next 10 or Is years. When they
get through. fear there will be little
left for the bondholders."
One of the most shocking phases OF
the entire situation, SABBATH said. is
that the victims thought they were
investing in safe securities.
Not Market Gamblers.
These people" he declared, "were
not stock market gamblers. They
were the widows and orphans of the
country who were advised by probate
judges and banks to invest their say
1ngs in bonds-supposedly safe in
Vestments. And now many of them
who once had fortunes of from S25 900
to S50000 are on relief rolls.
There is crying all over the
United States for legislation to save
those not already wiped out. This
committee has already effected ma
terial SaVings-in one case we forced a
reduction of S250O,000 fee to S75o, 900
but know of no greater need than
some legislation such as this.
The members of this committee are
not seeking personal credit. All We
want is legislation to put an end to
this graft, this thievery, this manipu-
lation. which, if unstopped, will result
IN few years in the best buildings
In the country falling into the hands
of financial racketeers for a few cents
on the dollar"
Colleagues Indorse Views.
Sabath's views were indorsed by
Representative Fuller, Democrat, of
Arkansas; Representative Dirksen, Re-
publican, of Illinois and Representa-
tive OMalley, Democrat, of Wisconsin,
other members of the subcommittee.
The Judiciary Subcommittee will
meet this afternoon to hear opponents
of the SABBATH bill, which authorizes
appointment of conservator to su-
pervise and act as a friend of the court
AL hll large lCO1 1SdIllLdtlOIlS.
Conservator Sole Receiver.
The conservator is to act as sole re-
ceiver, custodian or trustee with COM
pensation limited to actual expenses.
Attorneys for the conservator may act
as its counsel when acting as trustee.
receiver or custodian. This, it is be-
lieved, will materially reduce the
costs" which have enabled protective
committees to milk" properties under
going reorganization in the past and
will enable the conservator to have
full knowledge and control of the pro-
ceeding.
SABBATH suggested the naming of
some established governmental agency
as conservator.
Ten Recommendations.
Burton w. Marsh, director, traffic
and safety engineering department,
American Automobile Association. who
was for nine years chief traffic engi-
neer of the Cities of Philadelphia and
Pittsburgh and past president, Insti-
tute of Traffic Engineers. presented the
following 10 recommendations:
l. Conduct comprehensive survey of
the entire future traffic needs.
2. Set up ordinating authority to
develop program for correcting the
present situation.
8. Strengthen enforcement facilities
now seriously handicapped by the lack
of personnel for traffic duty.
4. Increase Traffic Department per-
sonnet
5. Ban fixing and reform court
procedure He urged appointment of
one or more additional judges.