Credit Manager

In 14 months the R. F. C. has lent U. S. railroads the sum of $365,782,843 with which to meet taxes, hire workers, pay off creditors, replace equipment. If these loans are not repaid the U. S. Government will some day find itself the proprietor of most of the railroads in the land. In his campaign speech at Salt Lake City last year Franklin Roosevelt put the carriers on notice that they could not look for an unlimited flow of credit from his Administration. He was ready to help them through the slump but they, in turn, must accept more drastic Federal supervision.

Last week President Roosevelt moved to carry out this campaign pledge when he worked Adolf Augustus Berle Jr. (pronounced Burly), a short, thin, whispery professor of corporation law, into the R. F. C. as railroad credit manager. As special assistant to the R. F. C. board. Professor Berle will see that carriers get no more cash than they can reasonably be expected to repay. His standard of credit rating is expected to be a road's ability to write down its bonded debt as a means of reducing interest charges. Until the carriers' capital structures have been deflated, R. F. C. will take a hard-boiled stand against new loans. Director Jesse Jones, who appears slated to become board chairman, declared:

"It's ridiculous to suppose the R. F. C. can go on indefinitely making loans to railroads to enable them to pay off 100-c- on the dollar on their debt obligations. I've been looking for some time for an expert capable of interpreting the future of individual roads to the board of directors and I think we have found the man in Mr. Berle."

Professor Berle is the third member of the Roosevelt campaign "brain trust" to find a berth inside the Administration and like the other two (Assistant Secretary of State Raymond Moley, Assistant Secretary of Agriculture Rexford Guy Tugwell) he was drafted from Columbia University. Son of a liberal Boston clergyman, Adolf Berle Jr. arrived at Harvard at the age of 13, was widely publicized as an infant prodigy. He wore knickerbockers about the Yard up to his senior year. Graduated with honors at 17, he took a master's degree. At 21 he received an LL.B. from Harvard Law School. He worked briefly in the office of Louis Dembitz Brandeis (now on the Supreme Court) and drank deeply of his philosophic outlook. After the War he practiced corporation law in downtown Manhattan with his brother Rudolf as well as teaching it. His Modern Corporation and Private Property (coauthor: Gardiner C. Means) is an economic bible of the Roosevelt Administration. As the President's advance agent on railroad policy, he went about addressing groups of oldtime railroad executives who were often rubbed the wrong way by his didactic manner. He believes in such things as credit for consumption instead of production, collectivization of industry, public responsibility of private business. He is now 38.

Meanwhile the Roosevelt railroad program was being whipped into shape for submission to Congress this week. Because of disagreement among his advisers as to permanent policies, the President decided to present only one emergency measure now and let other railroad legislation go over to the next session. The first measure is to provide for a Federal coordinator who, with 15 regional coordinators, would control traffic and service on all lines with a view to eliminating duplications, cutting operating expenses. Two parallel competing roads would be required to combine their passenger service and terminals and divide the revenue. Two noncompeting carriers would agree to pool their excess equipment for emergency use. Empty trains would be dropped from time tables in an effort to screw service down to actual demands. While railroad executives were glad enough to let the Government do the dirty work of enforcing economies, railroad labor had good reason to fear that most of the prospective savings would come out of its payrolls.

President Roosevelt has yet to organize his Division of Transportation in the Department of Commerce. Planned are four branches: Land (the Interstate Commerce Commission's administrative functions); Water (Shipping Board); Air (civil aeronautics) ; Communications (Radio Commission). As a quasi-judicial rate-making body the I. C. C. is to be left as an independent agency.

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