Dan Willard's Friends

When Franklin Roosevelt journeys from Washington to Hyde Park, he generally takes the Baltimore & Ohio R. R. It is his favorite passenger line and its 78-year-old president, Daniel Willard, is his good friend. Genial Dan Willard is also the good friend of RFC Chairman Jesse Jones and has many a warm admirer in Congress, where he is regarded as a liberal with a good railroad labor record. In the last year and a half this widespread affection for President Willard is about all that has saved the sore-pressed B. & 0. from reorganization.

In January 1938, unable to borrow anywhere else, it got $8,233,000 from RFC to pay its wages (it already owed RFC $80,000,000). In June, without collateral for another loan, it met a $1,700,000 debt only because Jesse Jones arranged for PWA to buy the road's run-down Chesapeake & Ohio Canal, unused for 15 years, for $2,000,000. Last November the Interstate Commerce Commission allowed Dan Willard to cut his fixed charges $11,000,000 a year by persuading the bondholders to accept an eight-year moratorium on interest payments. Last week Dan Willard personally appeared before the Senate Interstate Commerce Committee to ask that Congress spare him the "personal disgrace" of a B. & O. bankruptcy by passing the Chandler Bill.

This measure, already passed by the House, is precisely the sort of legislation Chairman Burton K. Wheeler of the Senate Interstate Commerce Committee and the New Deal's braintrusters disapprove. Instead of putting such roads as the B. & O. "through the wringer" by wiping out junior securities and cutting down capitalization, it provides for voluntary adjustment of fixed charges between the road and its bondholders and for postponement of interest payments. Nonetheless, Chairman Wheeler, who could stop the Chandler Bill if he wishes, is letting it by with but one change--he intends to amend its technicalities so that in practice only the little Lehigh Valley and Dan Willard's B. & O. will be able to take advantage of it.

For the other U. S. roads facing similar crises, Burt Wheeler has more drastic medicine in mind. Last week his committee reported favorably a bill to create a special railroad reorganization court which would permit recapitalizations of bankrupt roads only upon a basis of "expectable future earnings"--the average for the twelve years prior to the year in which the railroad went bankrupt. That day at the White House Franklin Roosevelt seconded the measure.

The earnings expectations of U. S. railroads are anything but rosy. Class I roads had a net operating income of $85,808,000 in the first quarter this year (against $19,963,000 in the first quarter of 1938) but after paying their fixed charges they were $41,880,000 in the hole.* This loss is likely to increase in the second quarter as receding industrial production drags carloadings down with it. Lately many roads (particularly the B. & O.) have suffered acutely from the coal strike, for carrying coal is a big and profitable traffic.

Last week old Dan Willard, eyes flashing, still insisted valiantly: "If I thought business conditions were to remain as bad as they are, I would say put us into receivership. . . . The railroads are going to :ome back again. ... I haven't lost confidence in the United States!"

-The B. & O.'s net operating income was $4,957,000 against a deficit of $203,000 year ago. ts net loss: $1,784,000.

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