Evening Star Newspaper, February 18, 1933, Page 4

THE EVENING STAR, WASHINGTON, purely t of view, he has might illustrate the point I am | mous thing for the debtor, but from a 3 1 poin HASTNGS EXPLANS =B BANKRUPTCY BILL Senator, in Forum Talk,| Yells of Effort to Protect Debtor and Creditor. Provisions of the bankruptcy bill which he introduced in the Senate a| year ago, and the necessity for such leg- slation to relieve the’distress of indi- vidual and cofporate debtors in the United States, were discussed by Sena- tor Daniel O, Hastings of Delaware in the weekly Radio Forum arranged by ‘The Washington Star and broadcast Iast night over the Nation-wide network of the National Broadcasting Co. ' with proposed legiSlative means of granting, relief to debtors, Senator Hastings said it was the inten- | tion of Congress to safeguard the inter- | ests of Woth debtor and creditor. Creditor Interests Guarded. “Bearing in mind,” he said, “that the debtor class is somewhat more seriously affected than the creditor class, this| bill undertakes to give the debtor some yelief, and those of us who have given it careful consideration believe we have lavoid it we have provided that they oring to make by a dozen examples immediately come to my mind. But, seems to me that what I have said is & thing 5o well known that it must be admitted by thoughtful people every- where. One of the first lessons which the youth learns in the avesige Americn home of which we so proudly boast, is | that in order to be successful in life, he | must adopt one cardinal principle, and that is to pay his fust debts. The average American who has had the advantages of any such training as this, looks with | horror -upon having to resort to the bankrupty laws for relief. I have per- sonally known of men who seriously considered ending their very existence rather than to be ever afterwards re- ferred to as a person who escaped pa; ing his debts by voluntary bankruptcy. I think this dread of adopting any such avenue of escape should be en- couraged, and the payment of debts as- sociated always with honor and good | conduct. I think also.we should -voxdi as far as may be, the use of the pres- ! ent economic conditions as a sufficient | excuse. This principle must not, however, be carried so far as to sap the energy, ambition and hope which has herétofore been the foundation of America’s greatness. Stigma of “Bankrupt” Avoided. In all of the sections under this chapter, it is contemplated that those seeking the relief shall never bear the stigma of “bankrupt,” and in order to shall be referred to as “debtors.” In- SENATOR HASTINGS D. C., SATURDAY, application would be too great for hu- man endurance. The result would be utter confusion. The Federal courts would be flooded with applications and the bitter feeling of disappointed and incensed debtors greatly increased. only. g the provisions of the section relating to the individual debtor, but has in it some special consideration for the farmer. In view of the fact that this was not in the House bill and has not been upon by the Senate, I shall not undertake here to give a more de- tailed description of its terms. The sections pertaining to corporate reorganization and railroads engaged in interstate commerce are quite similar in form, except that in the railroad section a very definite and important duty is imposed upon the Interstate Commission. The Interstate Commerce Commission, as is well known, has a general supervisory power over rail- roads engaged in interstate commerce. stances the securities which they issue. The fact that the Interstate Commerce Commission is thoroughly familiar with the affairs of the railroad seems to make it desirable that the plans for reorganization should at:some time be mbmlltud to that commission for ap- proval. Procedure Regarding Railways. Under the plan of the bill now be- fore the Senate a rallroad desiring to reorganize may file a bill 'n the District Court in which it has its domicile, or has its principal offices, stating that it is insolvent or unable to meet its obli- gations as they mature and it desires It controls their rates and in many in- | FEBRUARY 18, 1933. ‘mediately appoints a Teceiver to mthemvpefl- yo!‘uwnurnd.ml plan for reorganization is then consid- | cessity of appointing ancillary receiv- ers in ever’y“!umdkuon Where the cor- | often resist the’application for a re= ered by the Interstate Commerce Com- having 'Mpmmu to bel: g an opportunity ard, that plan, or any other plan, by the commission. submitted go the creditors and stock- | thirds of any class of creditors agree to the proposal, the other one-third | shall be bound by their decision. If | there be a class in which two-thirds |do not agree, there is in the bill a |plan for an appraisal of the value of their securities and a payment in cash or securities that are equivalent to cash. The corporate reorganization section is somewhat different. There is, of course, no necessity for submitting any | plan under this section to the Inter-. | state Commerce Commission, because | that commission has nothing to do with corporations, except those engaged in operating railroads in interstate com- merce. In the section relative to corporate reorganizations, as now written, the power is not given to two-thirds of any class to bind the other one-third. What will be the final result of this provision cannot be determined until after the Senate has acted upon fit, and then the assent of the House in conference been obtained. ‘The purpose of these sections is to make it easier to reorganize corpora- tions. Under the present system this can only be,done in courts of equity, and complications frequently arise be- cause minority interests refuse to par- ticipate in such reorganization. In many instances such failure to co- , 1s ap- it'is then | holders of the corporation, and if two- | |give the figures in my possession that Dosals. Another important will be avolded, :fi that is m&hfl# Poration Y- Under the | ceivership, wi plans pro- resent law that becomes :ece-u'y. Domed mfiu:k;:t;:dr:l:ymtm could nder $gis law that would not pe true. done which would put the railroad Different Zind of Relief. in & better financial position and in this, way improve the condition of I have not time in this address 10| every one of its security holders, would greatly emphasize the importance | May I say in conclusion that while | of this legislation, but I call your at- all of us are anxious to do something tention to the fact that the railroads|that will be helpful to the individual | are a public necessity, and 1t is be-pebtor and to the farmer, who are in Cause of this fact that relief has been extended to them by the Government | through the Reconstruction Finance | the ration. corporations are essentlal in order that The relief granted under this bill is | We may protect another great class who of an entirely different kind. It not | Will not make application for relief un- e e A e it o e assets of | all over the corporation in the interest, in x'fl..ny | the Nation who have not been able to e Pl T et | ™ bcause, Thels s s serves ¢ are security holders. | been such that they were compelled to While, as I have stated, I have not | pay cash for all that they have re- time here to quote I do desire | ceived. We must make every effort to give to you the following data per- | possible to relight the fires that once taining to railroadd. | burnéd, revive the hopes that not so It is estimated that there are 10,000 | loNg ago existed around every fireside, conductors, 10,000 engineers, | *0d bring back once again confidencs 55,000 firemen and 65,000 trainmen who | i1 the future of America’s economic tre now idle. That makes a total of | Progress. If there be antipathy for 140,000 men who have been accustomed , COrPorations in general and for rail- to receiving good wages who are at the | T08ds in_particular, as many contend, present time witnout employment. On |l &m sure it will have no effect upon the other hand, the total maturities in | 80y Of us if we be satisfled that the railroad bonds and equipment mileflshflon proposed will aid in bring- | Dotes for 1933 amount to $295,182,492. | INg about a revival of their activities, Under normal conditions these rail- |for this will undoubtedly, directly or roads would have no difficulty in suf. | indirectly, improve the conditions of ficiently refinancing themselves to uke|m“'-‘°" of our citizens, care of these maturities. Under the ———— done no real harm to the creditor. In- |deed, these sections undertake to fur- | Mmight, if they had time to invesu:-te]dmre ing times, with debtors striving | to offer a plan of financial rehabilita- | operate is purely selfish, the persons| Present conditions such refinancin deed, if all of the sections we have | nish relief for those who are not bank- | nd thoroughly consider the matter, be | to hoids on to their property until con- | tion. If the court finds the papers | objecting belleving that they c‘:en, by | seems to be impossible. This is km)w: Total production of toba f all given consideration to could be adopted, | rupt as that terms has been defined |relied upon to do justice between & |ditions improve, the job ‘of declding | filed come Within the provisions of the | holding out, receive a larger sum than | to the holders of the bonds and notes. | types in eutocs his " oot e are satisfied that we have done & { under the old act. In all of these sec- | debtor and his creditor, but in thes whether there was merit in the debtors |section of this bankruptcy act, it im- | those who' have agreed to the pro-|8s Well as it is o the railvoads. but | a1 Sy 240 ey ooyl VoA is estimated Teal service. to the creditor as well as to the debtor.” Relief to corporations and to raflroads | was described by the Delaware Senator as of vital importance to the country. He declared that in providing relief for corporations the bill not only- requires no expenditure of money, “but it tends to conserve the assets of the corpora- tion in the interest, in many instances, of the public generally, but in the par- ticular interests that it serves are the | security holders.” Railroads Considered. “May I say in conclusion,” Senator | Hastings said, “that while all of us are anxious to do something that will be helpful to the individual debtor and to the Jarmer, who are in distress, I think it is well to remember that the pros- perity of the railroads and the pros- perity of the great industrial corpora- tions are essential in order that we may protect another great class who will not make application for relief under | POS! any of these sections.” This class, he pointed out, is com- ed of those people “who have not en able to even reach the point of ‘becoming a debtor because their con- dition has been such that they were compelled to pay cash for all that they have received.” ‘The legislation proposed will aid this «class, together with all others, he point- ed out, by bringing about a revival of activities of business in general and “will undoubtedly, directly or indi- rectly, improve the conditions of mil- lions of our citizens.” Text of Hastings’ Address. The text of Senator Hastings' address follows: During the present session of the Congress there has been much discus- sion in the public press on bankruptcy legislation which has been under con- sideration during this session by sub- committees of the Judiciary Committees of both Houses, On February 29, 1932, the President transmitted to the Congress a message recommending the strengthening of the rocedure in the judiciary system, ether with a report of the Attorney General on bankruptcy -Jaw and prac- tices. On the same day I introduced a bill, prepared by the Department of Justice, which bill was a general revision of the bankruptcy act of July 1, 1898, and the various amendments thereto. On March 1, 1932, an identical bill was introduced in the House, Sub- committees were promptly appoinied by the Judiciary Committees of the respect- ive Houses of Congress and held joint hearings during the menths of and May. ‘ In that bill there was.a new chapter to the bankruptcy act, known as chap- ter 8, entitled “Provisions for the Relief of Debtors.” 1t contained four sections. ‘The bill introduced in February, amending the bankruptcy law, involv- ing many questions of policy, becameé very controversial and the Subcommit- tees have up to the present time made no reports to their full committees. Three Features In BilL ‘The House on January 30 last passed # bill under this new chapter having in it three paragraphs; one was the relief of the individual debtor, including the farmer; the second related to corporate reorganization, and the third related to the reorganization of railroads engaged In interstate commerce. I have called attention to the fact that chapter 8 is entitled, “Provisions for the Relief of Debtors. I can think for the moment of no single sentence that might be written that would attract the attention of more people than that title to this chapter ‘which I have just quoted. I am very much afraid that many persons have been led to believe that the Congress is about to find some form of relief from the one thing that has been the bane of their existence, namely, their individual debts. ‘There are two other groups of people ‘who are attracted by these words also. There is the group that is both debtor and creditor and they begin to wonder | ‘where a bill for the “relief of debtors” 1s going to leave them when the balance is struck; whether the relief is of a kind that relieves those who owe money to them and at the same time compels them to pay the money that is due by em. The other group is the creditor, the investor, and he is wondering what the Congress is endeavoring to do with the | sacred and solemn contract existing between him and his debtor. I want to assure both the debtor and the creditor that these words do not ean exactly what they seem to mean. !E}m bill does not propose to take away e obligations or the duty of a debtor vho can pay and, therefore, does not ke away from the creditor anything pon which he might be able to realize. We must remember, however, that the g:ople of the United States are going rough & new experience for most of them and if it be not a new experience for all of them, it may safely be said to be more serious than any previous sit- uation through which they have lived. Thinks Bill Aids Both Parties. Bearing in mind, therefore, that the debtor class is somewhat more seriously affected than the creditor class, this bill undertakes to give the debtor some relief, and those of us who have given it careful consideration believe we have done no real harm to the creditor. In- deed, if all of the sections we have given consideration to could be adopted, we are satisfied that we have done a Teal service to the creditor as well as to the debtor. The creditor has no anxiety in these days to possess the physical property of the debtor. In many instances he is willing to give him additional time in which to pay. In many instances he “knows that his debtor will not be able to pay, certainly not at the present time, and unless some relief is granted to the debtor, he will not be able to pay at any time in the future. It is| no benefit to the creditor, whether that | creditor be an individual or a financial Institution, to carry on his or its books obligations which. the creditor knows cannot be paid. On the other hand, the ambition, the energy, and the hope of many debtors have been ofttimes de- stroyed by a realization of the impos- sibility of the obligations which they have made. The constant | pressure which ts them every day for payment add to their misery. It is| no advantage to the creditor of such a debtor to arbitrarily refuse to cancel or tions the person filing the application must allege one of two things, namely, that he is insolvent, which is the term used in the old law, but here is added another very important provisicn, “or unable to meet his debts as they ma- ture.” There are, therefore, two pro- visions. Insolvency means that he has not sufficient assets to b2 pay his debts, while the other provision makes g0 such admission, but alleges that his finaneial condition is such that he can- not meet his debts as,they mature. If the debtor's proposal be a compo- sition, namely, a_compromise with his creditors by which he is to pay in cash a sum less than the face value of their claims, or if his proposal be an exten- sion of time for the payment of his debts, it becomes necessary for him to get a majority in number of all of his creditors, which number must also rep- resent a majority in amount of all his debts, to consent in writing to his pro- al. This is presented to the court, and “The court shall confirm the pro- posal if satisfied that (1) it includes an equitable and feasible method of liqui- dation for secured creditors whose claims are affected and of financial re- habilitation for the debtor; (2) it is for the best interests of all creditors; (3) that the debtor has not been guilty of any of .the acts, or failed to perform any of the duties, which would be a ground for denying his discharge; and (4) the offer and its acceptance are in good faith, and have not been made or procured except as herein provided, or by any means, promises, or acts herein forbidden.” Time Extension Provided. This section distinctly provides also that the terms of an extension propo- sal may extend the time of payment of either or both unsecured debts, as well as secured debts, provided the security is in the actual or constructive pos- session of the debtor or of the cus- todian or the receiver. It can well be understood that the provision affecting secured creditors did not find its way into_either the House bill or the Sen- ate bill without a very serious discus- sion and the most careful considera- tion, I did not.suppose .ai the begin- ning of such discussien that I could be persuaded to agree to write into any bankruptey bill. anything which would in any way affect a secured creditor, but I came to the conclusion thaf in these days of uncertainty and distress, with threats of physical violence to those in autherity and with the duty resting upon them to uphold the law, that it was wise to do something that would compel an arbitrary and un- reasonable secured creditor from fore- closing his lien and thus in many in- stances destroying the debtor as well as all of the clalms of the unsecured creditor. The committee had in mind in-this connection the operation of the present, law, which, under the decisions of the courts, gives to the Bankruptcy Court the authority to stay all pro- ceedings against the debtor from the time he is adjudged a “bankrupt” until the estate has been administered. Using this as a basis and as a justi- fication for dealing with the secured creditor, we have deliberately and pur- posely written into this bill the right of the court to extend the time for the payment of a secured debt as well as that of an unsecured. We think we have sufficiently safeguarded the. po- sition of the secured creditor in para- graph (i), page 45, by the following e: 8g “Provided, however, that such exten- sion or composition shall not impair the lien of any secured creditor, but shall affect only the time and method of its liquidation.” In order for such secured creditor to be s0 affected it becomes necessary for the debtor to take the amount of such secured debt into eonsideration when he undertakes to get a majority in number and a majority in amount tQ consent to his proposal. In these days there is much talk and much effort being made to secure moratoriums on mortgages. The bill presented here makes no pretence of doing any such thing and in that re- spect it may be disappointing to many persons. It is not expected that this bill will work any wonders. The chances are all of its provisions will not be applicable to more than a small | percentage of the distressed debtors, but it is believed that it reaches a sufficient number to warrant the Sen- ale giving immediate and careful con- sidegation to it. Section Applies to Farmer. In this connection, I desire to point out that in the House bill there was a provision for the extension of time of the payment of debts, both secured and unsecured, without the consent of any of the creditors of the debtor. It was necessary, however, as stated in that act that before the court could confirm any such proposal, it should be made to appear that the debtor’s plan was a feasible method of financial re- habilitation and that it was to the best interest of all of the creditors. It seemed to the committee that it ought to be as easy to convince a majority in number and amount of the creditors that the plan suggested by the debtor was for the best interest of all of the creditors and thus get their written consent as it would be to convince the court. But, there are additional rea- sons for not approving any such plan. It would be unfair-to impose any such responsibility upon referees or Federal judges, or any other human being for that matter. Federal judges as a rule Minute Mysteries Solution to DEAD MAN'S BATH (See Page A-3.) A small clue caused the profes- sor to suspect Becker of his friend’s jnurder. Becker said Willard threw his clothes on the floor as he un- dressed, yet Fordney found the clothes in the WRONG order. His silk undershirt was UNDER his tie, dress shirt and suit, proving conclusively that Willard had not undressed 1f. Becker later confessed that he had undressed his friend while insensibly drunk, ml;;‘hlm in the tub and drowned . 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