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December 12, 1938

PROPOSAL TO ESTABLISH i FSDEHAL r.*;' LftOAI; SQUI.PMEKT AT'TUQmTY
1. To stimulate recovery now and prevent bottlenecks l a t e r i n
freight t r a f f i c , equipment isaking f a c i l i t i e s and s t e e l , i t i s suggested
that a federal corporation be e s t a b l i s h e d , which, from the proceeds of
the eale of i t s own guaranteed debentures, w i l l contact for t h e purchase
of new r a i l r o a d equipment to be rented or leased to r a i l r o a d s .
7% Railroad equ-'petent has declined both i n quantity and quality
greatly since 192Q with the r e s u l t t h a t a t the tirae of t h i s year 1 ®
r e l a t i v e l y low peak of car loadings the number of surplus cars WSB l i t t l e
greater than the i r r e d u c i b l e minium of the twenties* To meet the needs
of f u l l recovery i n three years the r a i l r o a d s should spend fron £600
million to $B00 million yearly on new r o l l i n g stocV. ffali ftmt they
w i l l spend f?5 m i l l i o n .
3 . In addition t o • I t i i i l l i t recover;; now and presenting b o t t l e necks in the f u t u r e , adoption of the proposal would permit an extension
of long-term economic s t a b i l i t y i n what has h i t h e r t o v een a highly unsbabili«5nff f i e l d , I t wcild arive r i s e t o l a r g e ocono^iee as« a re#el% of a
continuous progr&s!, standardissation, research, arid the gradual development of a national car pool, i t would perm t a reduction in railroad debt
and a s u b s t i t u t i o n of variable for fixed charges, i t would, through the
provision of low r e n t a l s , induce the retirement of much almort obsolete
equipment wbieh now burdens the r a i l r o a d s with high operating and r e p a i r
c o s t s , and, f i n a l l y , i t would r^ake for a valuable contribution t o O P
O
n a t i o n a l defense.
4.. ?he proposal has been discussed with p r a c t i c a l railroad men
technical problems appear to d i f f e r l i t t l e frorr* those now encountered
by t t e private car leasing companies and in the interchange of r a i l r o a d

eat**

$i The proposal promises to be issniBdiately nor© effective and to
be superior on various other counts to the alternative of att^rvpting to
induce railroads to borrow wore money on "avorable terrrs ^"or the purchase
of rolling