The Great Depression exacts a heavy toll on the railroad industry, forcing substantial segments of the railroading industry into bankruptcy. Besides facing competition from one another, the railroads had new competition in the form of automobiles, trucks, and buses.

As the Great Depression settled over the United States after 1930, the railroads had already lost half of their passenger business. A similar decline in railroad freight traffic from which the rail lines realized most of their revenue made a bad situation even worse.