Indianapolis Times, Volume 47, Number 46, Indianapolis, Marion County, 3 May 1935 — Page 13

MAY 3, 1935;

FLYNN URGES STEPS TO SAVE U. S. RAILROADS Reorganizations Are Needed, His View of Critical Situation. BY JOHN T. FLYNN Time. perll Writer One great industry in this country is practically dead because most of its buyers are practically broke. That industry is the business of building railroad equipment. The busted buyers are the railroads. Daily for some years we have been told of the paralyzing influence of our vast long-term debt. More cheerful souls assure us that it is nothing measured against our vast national wealth. There is a notion that the debts are all neatly spread out over the wealth and that the debt coating is hence quite thin. But this is not o. These debts press down only on spots. They paralyze the spots where they rest. And the spots on which long term debts rest are the railroads, utilities, construction industries, the states, counties and cities. Consider the railroads. They make their chief purchases of equipment and construction with borrowed funds. Thus they are large buyers in the capital goods markets. When they are excessively loaded with debt they can borrow' no more. Then they can buy no more. That part of the capital goods industry which sells to the railroads ceases to do business. Debts Nearly 5700,000,000 Let us look at a single great railroad. Its capital stock is carried at half a billion dollars. But it has long term debts of nearly $700,000,000 It must pay over $30,000,000 a year in interest. For three years it has not made enough money to pay this interest. This is bad for that road. But so is the effect upon general business. The road must spend less for equipment. In 1929 it spent $58,000,000. In 1933 It spent half this. It was the same with road maintenance. This would be a fair picture of most of our roads. Their roadbeds are in desperate need of repair. Their coaches are shabby. Their locomotives are ancient and run down. Amazing modern inventions have rendered all this existing rolling stock hopelessly obsolete. Yet the roads can buy no locomotives, rails, cars, because they have no credit. They have no credit because they are hopelessly crushed under debt. No one is willing to lend money to a corporation which can't pay its interest charges. Yet all the while here lies one of the greatest markets in America, lifeless. Presses for Reorganizations What follows from this? 1. These roads must be revived j as buyers of capital goods. 2. To do thus they must be relievcd of excessive debt. 3. This can be done only by re- [ organizations. This would injure j neither railroad bondholder nor! stockholder. Take the road already pictured. I Its stocks sold at 256 in i929. They ; sell at 16 now. Some of its bonds are priced as low' as 52. The injury is already done. At least half of the junior bonds should be changed into stocks. The existing common stocks should be written down at least onesixth. The credit of the road would be revived immediately. It would resume buying on a great scale. This could be applied to scores of roads. The effect on the capital goods industries would be enormous. We would see a great era of railroad rebuilding. Urges Three Steps To accomplish all this the following steps are essential. 1. The government should stop paying railroad interest and preserving these debts. 2. The Wheeler investigation of railroad financing should be vigorously pressed. 3. It should serve as the basis for an intelligent railroad bankruptcy and reorganization law, under which the companies could be reorganized in the interest of bond holders and tne public. This would be a genuine recovery measure. t Copyright. 1935. NEA Service. Inc.) Paving Work Soon to Begin Work will begin in the near futuie on the paving of West-st, between New York-st and Indiana-av. The contract for paving the strip with reinforced concrete was awarded yesterday bv the State Highway Commission to the Union Asphalt Construction Cos., Indianapolis.

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THE INDIANAPOLIS TIMES

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