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The decade which has just closed witnessed many trying years for railroads and their security holders. The unprecedented number of reorganization proceedings instituted in those ten years, together with various remedial proposals, tended to focus public attention on their problems. These problems necessarily involve the legal framework within which the railroad industry is carried on, an important segment of which is the long term lease. Railroad history has been such that in earlier periods of financial stress the mortgage device has played the conspicuous role, while the part of the lease has been relatively obscure. Between 1930 and 1940, however, with an increasing number of important lessee railroads in reorganization under Section 77 of the Bankruptcy Act or in equity, the lease began to take on greater significance. As a consequence, today many lessees in financial difficulties are realizing that the farreaching changes which have occurred in transportation may turn the long term lease into a snare and a delusion. Others, still solvent, are exercising greater care in making new leases, and seeking ways and means to modify existing ones. At the same time, holders of securities of lessor companies in many instances are experiencing the acute distress attendant upon the discovery that their securities, hitherto regarded as "gilt-edged," may be worth little more than the paper upon which they are printed.
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