The Rail Week

The head of the second biggest savings bank in the U. S. summoned reporters to the White & Gold room in Manhattan's Plaza Hotel one evening last week. He was Walter Harper Bennett, president of Emigrant Industrial Savings Bank. His news was that the much-discussed committee of citizens to study railroad problems (TIME, Sept. 19) was at last complete. Head of the committee is Citizen Calvin Coolidge, from the directorate of New York Life. Said Mr. Bennett to reporters: "The country as a whole has a great deal of confidence in Mr. Coolidge. ... I believe him to be a level-headed gentleman." Other committee members: Alfred Emanuel Smith, Bernard Mannes Baruch, Alexander Legge, Clark Howell Sr. (publisher of the Atlanta Constitution).

Prime-movers for the committee were savings banks, insurance companies and Yale, Harvard, Columbia and Chicago universities. Their joint letter of invitation to the committee members said: "The present financial position of the railroads of the United States is a matter of grave concern. . . . Only wise and timely Federal aid has averted the financial break-down of important systems. This situation touches every citizen. . . . The relief that the present emergency has made it necessary to grant to the railroads is a drain on the Federal Treasury and any ultimate loss will constitute a burden on every taxpayer. The present deplorable position of the railroads is not due wholly to stagnation of traffic. . . . Many of the present ills are due to governmental, financial, labor and management policies, some wrong in conception, some wrong in application, and others rendered obsolete by radically changed conditions. . . . No solution, however, will be effective unless the problem of the railroads is considered an integral part of the entire transportation problem of the United States, whether by rail, highway, waterway, pipeline or air.

"We beg that you examine all phases of the problem and recommend a solution which, with due regard for the public interest, will insure an opportunity for the railroads of this country to operate on a business basis. . . ."

Although the committee members were silent on their plans last week, it was thought a meeting would be called in a few days, a staff of experts organized to find and arrange data. No quick cure-all was expected but any legislative changes the committee proposes seem certain of enactment, so potent is the committee's personnel.

Tarnished Plate. Just half a century ago the first train ran over the rails of the Nickel Plate (New York, Chicago & St. Louis Railroad). The Nickel Plate is now a system of some 1,600 mi. The main part of the road consists of two great arcs, one curving between Buffalo and Chicago, the other between Detroit and St. Louis. An important branch runs to Peoria. Last year it carried 36,551.000 tons of freight, collected $36,551.000 in gross revenue.

The line was bought by New York Central in 1885. Legend is that when Commodore Vanderbilt first heard the asking price, he bellowed, "I would not pay that if the tracks were nickel plated." In 1916 control of the road was bought by Cleveland's hustling Van Sweringen Brothers. It was their first road and is today a key link in their railroad empire. Serving a rich territory, it prospered. In 1929 it borrowed $20,000,000 in three-year notes, using the proceeds to buy 53% of Wheeling & Lake Erie. This acquisition was made after a desperate.struggle with the Taplin brothers of Cleveland during which Wheeling shares, virtually cornered, ran up from $27 1/2 to $130. In 1930 the road's credit was still good and it sold $36,000,000 worth of bonds bearing only 4.5%. Last week came the Nickel Plate's crisis. It was unable to meet the interest and maturity of its $20,000.000 notes issued in 1929.

Aid was asked from Reconstruction Finance Corp. The I. C. C. refused to pass a plan by which R. F. C. would lend the road enough to pay bondholders 50% in cash, laid down a plan by which they were offered 25% in cash, 75% in three-year 6% notes. Last week on the day that the old notes fell due only 71% of their holders had assented to the offer. For the first time since the Wabash defaulted interest after it was in receivership (TIME, Dec. 14) a major U. S. railroad was in default. A receivership action was promptly started by a note-holder.

If the Nickel Plate goes into receivership and is reorganized, a new angle to current railroad problems will arise. Its control of the Wheeling has been pledged to R. F. C. as security on a loan. Calling of this loan would apparently bring about the first Federal ownership of an important railroad.

Last March the Missouri Pacific, an-other Van Sweringen road, was loaned $12,300,000 bv R. F. C. Half the funds went to repay J. P. Morgan & Co. half of a note they held. This deal excited hot words in Congress (TIME, April 11). Last week the loan fell due, was renewed for a year.*

Oris Paxton Van Sweringen, 53, and his two-year-younger brother Mantis James were at home in Cleveland last week, silent as to what they thought of the Nickel Plate's situation. Quiet, busy bachelors who live together in the fashionable Shaker Heights district which they built up, the "Vans" have always been shy of publicity. But many a success writer has written of their rise from newspaper selling with pooled assets of $16.32 to a position where they control 29,704 miles of track with Cleveland's new Union Terminal as their monument. The Depression has brought a severe strain on the holding companies which bind their empire and there has been many a rumor that they have lost control. Once, when such reports were at their height, Brother Mantis was off duckshooting and Brother Oris was calmly addressing New England Governors on the way he would like to see consolidation come about (TIME, Nov. 3, 1930). Dexterous financial management and the strong backing of J. P. Morgan & Co. and the George Fisher Baker interests have apparently enabled the "Vans" to resist the forces of disintegration.

If a receivership and reorganization of the Nickel Plate occurs it is likely that the only way common stockholders can retain control is through an assessment. Last February control of the Nickel Plate was shifted under option from Alleghany Corp., loaded down with bank loans, to Chesapeake & Ohio Railway, which at the end of last year had $11,000,000 in cash and cash deposits. Despite the Nickel Plate's situation, its common shares sold last week at $5, indicating most people thought the stock would not be wiped out, that the "Vans" could patch up their pyramid. And announcement of their interest in the Seatrain showed that the Brothers were still aggressively in the railroad business.

*Another R. F. C. loan last week consisted of $12.461.000 to Chicago & Northwestern, to be used for interest and partial payment of bank loans.

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