Evening star., 1938-10-23
Bic RAIL CHANGES
OR FEDERAL MOVE
DECLARED CERTAIN
Basic Reforms Necessary,
Says Twentieth Century
Fund Report.
BY the Associated Press.

oS inc ASSOCihtcQ EEeSS.
NEW YORK, Oct. 22-In a survey
OF the debt structure of the railroads,
the Twentieth Century Fund, in a re-
port made public today, made the fore
cast that unless some unexpected
change for the better soon sets in, it
is virtually certain that we must have
either wholesale reorganization or
some sort of Government rescue
party"
Other public utilities, with the ex-
ception of electric railways, the report
added, appear to have maintained a
fairly liquid position through the de-
preston"
The railroad report of the Twenti-
eth Century Fund-an independent
organization for social-economic re-
search. endowed by the late Edward A..
Filene-is part of 4 three-year study
OF the Nations postwar debt structure
being made by the funds Committee
on Debt Adjustment.
Drastic Change Urged.
Declaring the incomplete revival Of
railroads during the recovery period
suggests strongly that there must be
some fundamental change in their op-
Grating conditions before they can
hope to earn reasonable return of
their present capitalize tion," the re-
port continued:
over 28 per cent of railway mileage
is already in receivership, as compared
with 2 per cent in 1928, and ultimate
losses to creditors are likely to be
heavy. The assumption that railroads
have perpetual earning power is not
as credible as it used to be, and the
financing of railways on this assump-
ton has reached the point of break
down.
The feeling of stockholders is
shown by the fact that prices of rail-
way stocks fell in June, 1898, to one
third their level Of March, 1897, while
industrial stocks stood at nearly two.
thirds their 1887 peak. Certain off,
c1als are on record as believing that
revenues can be increased only bv
raising rates-a counsel or despair
since higher rates will DISCOURAGE
shippers. At least one critic suggests
that the railroads are entering their
period OF economic old age, and that
their failure to pay of debts while
they had adequate earnings NAV make
it necessary to write of many debts
later on"
Interest in Default.
Deferring to the wholesale default
on railway bond interest, the report
said that at the end of 1896, matured
unpaid interest on debts of class /
railroads amounted to $3.50, 900, 900: of
this. $400,000,000 had accumulated
since 1929.
With low prices for railroad bonds
IN lean years, it became difficult, if
not impossible at times, to sell new
bonds for refunding purposes.
However" the report continued
in 1886 railway bond prices rose
and market conditions for new issues
were relatively favorable. Over s70o,-
100000 Of railway bonds were floated.
principally for refunding; though
again the weaker roads were unable to
take advantage and the amount of
past due principal rose to $3.50, ,O0o, 900.
But early in 1887 bond prices turned
downward.
BY October, railroad bonds were
priced below the 1885 average and at
the low point in June, 1898, they
stood at less than half their high
level of 1887. This development
checked refinancing. Down to the
end of 1887, however, this apparent
ly did not lead to any great increase
OF past-due principal. -
The barrier to reorganization is,
OF course, precisely the desperate
condition Of railway finance which
makes reoreanization desirahle"