Peter & Paul

Adolph Augustus Berle Jr. had called it "close to a high-water mark in vicious finance." The Interstate Commerce Commission declared it was not in the public interest. In a last-ditch stand, Pennsylvania's Democratic Representative Francis E. Walter cried that it would cause "a scandal." Nevertheless Congress last week, in a brisk mood, passed and sent the Wheeler-Reed rail reorganization bill.

The bill provides that any bankrupt road may be turned over to stockholders' control if it 1) earned enough to meet fixed charges during the preceding seven years and 2) grossed more than $50 million in any one of the preceding three years. The new law affects reorganization proceedings on five major roads.*

Solvent roads that run into financial trouble may also, under the bill, apply to ICC to ease their obligations. On a two-thirds vote of the creditors, or, failing that, on a two-thirds vote of the stockholders, loans will then be extended or interest rates reduced. What have the bondholders to say? In cases of prolonged disputes, grievances may be referred to the courts.

Some critics of the bill charged that boom earnings during the war were not a valid measure of a railroad's stability, made it too easy for shaky roads to qualify for refitted stockholders' management. Others pointed out that the bill exempts future transactions in rail securities from ICC and SEC supervision, leaving the field wide open for speculators. All agreed on one point: that the bill would reverse the usual position and give the stockholder a preferred position over the bondholder.

At week's end, never-say-die Francis Walter asked the President "for heaven's sake" to veto the bill.

* Rock Island, New Haven, Frisco, St. Louis Southwestern and Missouri Pacific.

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