Evening star., 1939-05-02

only the effect of those rates on that
particular mode Of transportation,
and, If properly administered, this
should mean far better and cheaper
transportation.
The committee which has been
considering this bill in executive
session has overcome whatever meri-
torious objections have been raised
by interested parties during the
hearings. AS it emerges from the
committee 1t will be a constructive
and modern piece of regulatory leg
islation.
Another major railroad problem
that has been commanding the at
tention of the Senate Committee on
Interstate Commerce is the chal-
lenge to do something constructive
about those railroads that are in
the financial hospital-receivership
or bankruptcy. A distressingly large
proportion of the railroads that
transport our goods and carry us as
passengers, while outwardly in good
physical health, are able to continue
as going concerns only because they
are in the care of receivership or
bankruptcy courts.
To the consumers of transporta-
ton service the railroads are so many
miles of steel rails, so many loco
motives, so many box cars, passenger
cars, stations and terminals. In the
securities markets, however, the rail-
roads are so many bonds, so many
shares of stock, so many interest
coupons and so many dividends.
These stocks and bonds with their
varying rates of interest and divi-
dends make up the financial struc-
ture of the railroads-just as the
rails, cars and locomotives make up
their physical structure.
Third in Distress.
When a locomotive breaks down,
it is taken into the shop for repairs.
When a railroads bonds break down,
the financial structure is taken into
the bankruptcy or receivership
courts for repair. That repair proc
ess is referred to as reorganization.
At the present time companies
operating more than $4,000 miles or
roughly one-third of our entire rail-
road mileage are in acute financial
distress.
The burden Of the financial struc-
ture Of these companies on their
physical structures has been so
heavy that their physical structures
were unable to produce enough cash
to enable them to meet their ma
turing obligations.
The effect Of this unfortunate sit
uation is no private or local matter
it extends directly or indirectly to
every member of the public The
problem is a national problem of
first magnitude.
The simple statistics run into box
car numbers. The Indebtedness and
stock of these bankrupt railroads
exceed five and one-haIf billion dol
lars. The number of persons d.
rectly employed by them exceeds a
quarter Of million workers.
But the consequences of this
financial distress do not stop with
the security holders and employees
directly affected-they extend to the
passengers and shippers, the indus
tries that supply railroads with
equipment and supplies, insurance
policyholders, the securities market
to every factor in our economic
system-and to the Government it.
self.
Our whole economy is sensitive to
the financial stability of the rail-
roads. For this reason adequate pro-
cedures and standards for financial
rehabilitation of the insolvent rail-
roads are matters of national con-
Germ.
The purpose of bankruptcy or
receivership reorganization is to
restore the railroads to financial
health. Unless the results of the
reorganizations will be really sound
financial structures for the compa-
nies that emerge from the process,
the consequences to our national
economy will be dangerous.
Facts Inescapable.
Try as we may, we cannot escape
the facts. We cannot escape the
TACT that roads unsoundly capital
lied will find themselves under re-
lentless pressure to skimp on MAIN
tenance Of their physical struc-
lures, with the result that efficiency
and even safety will be put at risk.
We cannot escape the fact that the
quality of service available to the
public will also suffer from the
railroads financial inability to keep
abreast OF archaeological improve
ments. We cannot escape the fact
That railroad labor, and labor in
general, will be adversely affected
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