Evening star., 1947-05-19
|RFC 5 Loan 10 B. & 0.
Defended BY Jones;
Young Is Assailed
By HE Associated Pres.

Vs ~ TsHV
By HE Associated pssss
Jesse H. Jones, former chair
man of the Reconstruction
Finance Corp, insists there was
nothing. irregular or unnat-
urar' about the RIGS $50, 600, 900
loan to the Baltimore b Ohio
Railroad.
Mr.. Jones statement, his first
since the Senate Banking Commit
tee began an inquiry into the trans
action. was issued yesterday.
1t brought prompt support from
Russell Snodgrass, financial vice
president of the B. 65 o.. but criti-
cism from Robert r. Young, chair
man of the board of the Chesapeake
& Ohio Railroad
Mr.. Young told the committee on
May that the loan transaction was
either dishonest or incompetent. I"
Untruths Charged.
.One does not expect incompe-
tency in financial matters from RFC
or former RFC officials" he added.
Mr. Jones declared that many ur1-
truths have been purposely publi-
Icized' sbout the loan, and he said
Mr.. Young had made false state
ments."
"On my return to Washington
after an absence Of several months
at my home in Houston" said Mr..
Jones, Il read some of the tram
scripts of the hearings before the
Senate Banking and Currency Com
mittee. purporting to investigate the
Reconstruction Finance Corp. loan
to the Baltimore 81 Ohio Railroad.
obviously the committee and the
public have been imposed upon since
many untruths have been purposely
publicized.
There was, of course, nothing
irregular or unnatural about the
B. & 0. loan The witnesses who
testified against it were giving opin-
ions and not facts. The RFC made
a great many conditional loans, to
railroads and others, that required
the borrower to rearrange it's finan-
cial aaffirs. The B. 81 o. loan
was one OF these. The condition in
that bond purchase agreement was
that the roads other principal credi-
tors concur in rearrangement and
extension of its debts.
ICC Approved Plan.
"The B. d o. sought relief under
the Mclaughlin Act, passed by Con-
gress to enable railroads to avoid
receivership. The plan formulated
under law was first approved by
the Interstate Commerce Commits
sion. then by a Special Federal
Court. This court spent days hear
ing the same objections that have
been presented to the Senate Bank
ing and Currency Committee, and by
the same interests. Every critical
statement with respect to the loan
that was presented to the Senate
committee had been urged upon
this United States Court at Balti-
more and had been judicially de-
termined to be without merit. The
court was composed of two United
States Circuit Court Judges and one
United States District Judge, The
question naturally arises, what was
Mr.. Youngs purpose? Was it really
that he wanted to get control of
another railroad by questionable
methods? If judged by his other
testimony. his statement that he
had no such intention with respect
to the B. g. o. was meaningless.
The plan saved the road from re-
ceivership, and saved it's security
holders many millions of dollars. 1t
could not have been made effective
without assent of $3.50 of the ag-
gregate amount of the roads funded
debt. Whereas, more than .8lqo as.
sented, and more than 99% of all
claims that voted assented. The
plan was definitely in the interest
of the roads creditors, which in
cluded life insurance companies,
savings banks. fiduciary institutions,
and private investors, as well as the
RFC.
IS Railroads Aided.
Loans have been authorized by
the RFC to 95 railroads, which con-
stitute two-thirds of the entire rail-
road mileage of the country. The
authorizations aggregated s1,7OS,-
600 900 of which $685., 900 900 was not
taken, the roads, with RFC commit
ments, being able to get the funds
from private sources. $l,052 ,000, 900
was actually disbursed OF this
amount 1907, 600 900 has been repaid
Or the securities sold, leaving a bal
ance outstanding Of only s150000,-
900, which is we'll secured. A profit of
Sll $1,000 was realized from the sale
of railroad securities in addition to
interest at the rate of A., which
yielded a further substantial profit
to the RFC and helped to make up
the $500, 100000 net profit to the
Government on RFC non-war OPP
erations. The $50 1000 600 loan to the
B. 81 o. is now secured by bonds hav-
ing market value OF approxima tely
two for one.