^^i 'r-r >t ^.v '.MV-: ■i^^^?v^Sl»^ He: 2757 Strata, S^eu Qnch ^vtWo-^A \VarV Unshaded portion shows part of income retained by railroad and sliaded portion, part turned over to General SRailroad Contingent Fund after Individual Contingent iFund is created. I 2 a Western District contloQad on 4 8S. S»nunua»nn»» Chart prepared for the National Transportation Conference by W. W. Salmon, Rochester, N. Y, lOi TABLE No. 3— WESTERN DISTRICT— Continued AVERAGES OF TEST PERIOD— JULY 1, 1914, to JUNE 30, 1917 1 NATIONAL TRANSPORTATION CONFERENCE PLAN ROAD Miles Operated Peopebtt Investment Acct. Railway Operating Income Tbmpobart Valuation roH Determining Excess Income Estimated Net Railway Operating Income in a Year When the Yield Equals 6% UPON THE Aggregate Property Investment Accounts op all or THE Railroads of the District Amount Percentage of District Total Amount Percentage on Property Investment Account Percentage of Total Railway Operating Income of District Amount Percentage of District Total Amotmt Percentage , of District Total Percentage on Property Investment Account Disposition of Net Operating Income No. In Period While In- dividual Contingent Fund is Being Built Up In Period After In- dividual Contingent Fund is Built L^p and Maintained Retained by Railroad Co. Contribu- ted to Con- tingent Funds Retained by Railroad Co. Contribu- ted to Gen- eral Con- tingent Fund 33 Texas & Pacific 1,944 1,647 171 120 836 $110,182,256 67,879,614 9,013,267 3,523,119 81,195,069 1.412 .870 .116 .045 1.040 $4,138,786 2,643,047 366,412 147,324 3,546,351 3.76 3.89 3.95 4.18 4.37 1.031 .658 .089 .037 .883 33— T. & P. 34-M. & St. L. 36— v., S. & P. 36— M. R. 37— K. C. S. $80,428,920 51,358,696 6,914,421 2,856,295 68,910,088 1.181301 .754336 .101549 .041948 1.012116 $6,139,652 3,264,411 423,189 214,161 4,164,341 1.097801 .694989 .090344 .045706 .889347 4.66 4.79 4.70 6.08 6.13 $4,825,736 3,081,522 414,865 171,378 4,134,605 $313,917 172,889 8,324 42,783 29,736 $4,930,374 3,139,152 417,640 185,639 4,144,517 $209,278 115,259 6,549 28,522 19,824 33— T. & P. 34 Itf inneaooHs & St* Louis *•••■*■■• ••••*•• 34— M. & St. L. 36 Vicksbirre'. Shreveoort & Pacific 36— v., S. & P. 36 36— M. R. 37 TTaiiQaQ Citv Southern 37— K. C. S. 38 LoQ Anp'eles & Salt Lake 1,164 7,434 10,216 7,645 2,678 77,693,910 324,208,653 680,348,423 319,181,430 176,913,464 .996 4.164 7.436 4.090 2.254 3,414,343 14,352,672 27,343,309 15,079,956 8,341,050 4.39 4.43 4.71 4.72 4.74 .850 3.674 6.808 3.755 2.077 38— L. A, & S. L. 39— Mo. Pac. 40— C, M. & St. P. 41— C,R.L&P. 42— D. & R. G. 66,342,543 278,910,265 531,333,459 293,035,662 162,083,082 .974413 4.096491 7.803963 4.303966 2.370484 3,909,689 17,896,666 32,620,691 18,734,004 9,644,266 .835098 3.822441 6.967193 4.001208 2.069766 5.03 5.52 5.62 6.87 5.48 3,909,689 16,734,616 31,880,008 17,682,140 9,644,265 1,162,050 740,683 1,161,864 3,909,689 17,121,966 32,126,902 17,966,095 9,644,265 774,700 493,789 767,909 38— L. A. & S. L. L 39 Missouri Pacific • 39— Mo. Pac. Cliirfliro- Milwaukee & St. Paul * 40— C, M. & St. P. 41 Chicago. Rock Island & Pacific 41— C, R. I. & P. 42 Denver & Rio Grande 42— D. & R. G. 43 4,778 117 943 11,066 477 286,113,393 10,544,953 70,960,212 956,211,005 17,439,594 3.666 .135 .909 12.253 .223 13,610,028 602,720 3,398,024 47,727,330 971,267 4.76 4.77 4.79 4.99 6.67 3.389 .126 .846 11.884 .242 43— St. L. & S. F. 44— C. C. & C. S. 45— St. L. S. W. 46— So. Pac. 47— C, R. I. & G. 264,472,704 9,770,716 66,030,380 927,437,699 17,439,594 3.884447 .143612 .969816 13.621746 .256150 15,918,264 691,462 3,838,382 64,412,263 1,140,055 3.399766 .126226 .819720 11.621131 243481 6.56 6.61 6.40 5.68 6.64 15,868,362 686,243 3,838,382 64,412,263 1,046,376 49,892 5,219 93,679 15,884,993 687,983 3,838,382 64,412,263 1,077,602 33,261 3,479 62,453 43— St. L. & S. F. 44 Crintili* Creek & Colorado Snrinsrs 44— C. C. & C. S. 45 St Louiq Southwestern 45— St. L. S. W. 46 Southern Pacific * 46— So. Pac. 47 Chicapo. Rock Island & Gulf 47— C, R. I. & G. 48 Mintipanoli-0 1 TEN. CENT. tS" 2 A.a& A. 3 0.M.& N. « C.C.&0. sCOAL&COKEtb < N.0.& O.N. ^ 7 8.A.L. • VJRGINIAN • N.&'S. 10 SOUTHERN tt G.8.& F. 12 6.&S.I. 13 L.H.& ST. L. uCENT.ofGA. 15 WRYoFALAjhn 16 ILL. CENT. 3 4 10 12 13 U 15 16 17 18 19 20 21 EXPLANATION Of graphs showing relation between Contributiona to and Distributions of General Railroad Contingent Fund. UPPER GRAPH shows percentage of total Contribu- tion. LOWER GRAPH, as a whole, shows percentage _ of total Distribution. Shaded portion shows part retained by Railroad and unshaded portion, part returned to Gen- eral Railroad Contingent Fund. For fuller explanation see accompanying table. 12 13 14 15 16 n 18 19 20 Chart prepared for the National Transportation Conference by W. W. Salmon, Rochester, N. X. XI ORGANIZATION OF BOARDS OF DIRECTORS OF CONSOLIDATED RAILROAD COMPANIES Section 18. Any railroad corporation that may be allowed hy the Federal Transportation Board to acquire the securities or prop- erties of other railroad companies and to form a consolidated rail- road system under the jurisdiction of the United States shall he required by the Board to organize with a Board of twelve directors, one of whom shall be a representative of the employes of the sys- tem and nominated for that position by such employes, and three of whom shall be selected by the Federal Transportation Board to represent the principal interests involved in the territory served by such system. The Board of Directors thu^ selected shall make such regular and special reports to the Transportation Board as that Board may require. [In preparing a bill embodying in legislative form the Confer- ence program, it was decided to recommend ttvo representatives of the employes and two (instead of three) representatives of the public interests.] This recommendation of the National Transportation Conference was made because that group of men coming from many walks of life all felt that the railroad business is of a public nature — that it diflEers from purely private enterprises. The railroads serve the entire public. The business opportunities, living conditions, social organization and the very success of government itself are depend- ent upon, and indeed are largely determined by, the extent and character of transportation services, especially the services of rail- road transportation. To make the railroads government enterprises in the United States would be to reduce the ability of the railroads to serve the public, and would retard the future development of transportation facilities. Private initiative in the ownership, operation and de- velopment of American railroads is of vital importance to the public; but while retaining the benefits of private initiative it is 110 desirable that the public should have some share in the manage- ment of the railroads. If the public is given a share in the management of the rail- roads it will be able to regulate them more intelligently. Eegula- tion can be co-operative, constructive and helpful, rather than merely corrective and punitive. The public will have a more intimate knowledge of what must be done to improve the railroad service and to bring about the development of facilities; and, what is especially important, the misunderstaxtdings and friction between public authority and the companies managing the rail- roads will be minimized. In the past the managers of the railroads and the governmental officials regulating the railroads have occupied opposing camps, each side trying to checkmate the other. This attitude on the part of public authority has enabled the government to correct many of the abuses that grew out of the unrestrained competition of the railroads when they were regarded by their owners as strictly private enterprises; but the time has come for railroad managers and public officials to occupy the same camp and to co-operate in bringing about improvements of the railroad service and in secur- ing the maximum development of transportation facilities. To facilitate the co-operation of the railroad companies and public officials in the development and enforcement of policies in the public interest, the Transportation Conference recommends that the railroad companies of the future shall be required by the Federal Transportation Board to organize with Boards of twelve directors, two of whom shall be selected by the Federal Trans- portation Board to represent the principal interests served by the several railroad systems. The plan is that there shall be upon each of the directorates of the consolidated railroad companies that are to be formed by the merger of existing lines in accordance with plans approved by the Federal Transportation Board, two directors selected by govern- ment authority to represent, not the government, but the public, i. e., the agricultural, manufacturing, commercial or other dom- inant interests of the territory served by each railroad. The direct- ors thus selected to represent the public are to make such regular and special reports to the Federal Transportation Board as that Board may require. In this manner the government agency Ill primarily responsible for the administrative regulation of the rail- roads will be kept in vital relation with the boards of directors that manage the railroads. Eegulation will thus become intelligent and direct, and can be made constructive as well as corrective. For reasons similar to those that make it desirable for the public to be represented upon the directorates of the consolidated rail- roads of the future, it is advisable to provide for the representa- tion of railroad employes upon the boards of directors. The pres- ence of two representatives of the employes upon the board of direct- ors of each railroad company will be beneficial to the public, the railroads and the employes. It will promote a better understanding between employes and employers; it will help to establish and maintain mutual confidence. It is a policy in hai-mony with the tendency of the times. It means more co-operation and greater democracy in industrial affairs. The National Transportation Conference recommends that the representatives of the employes of a railroad company upon the board of directors shall be nominated by the employes of the system. They should be as truly representative of those who select them as are any of the other ten members of the board of direct- ors. Without doubt, the representatives selected by the employes will be men having the confidence of the employes and the respect of the employers and will prove to be very helpful members of the board. PEEVEimON OF THE EeCUEEENCE OF PasT AbTJSES IN RaILEOAD Managbmient The Transportation Conference gave careful consideration to measures proposed for inquiring into the practices of railroad management and for preventing the recurrence of past abuses therein. The members of the Conference, like other open-minded students of the railroads, are aware of the shortcomings as well as the virtues of the railroads. As is said in the statement regard- ing, the powers and duties of the proposed Federal Transportation Board: "Because of the incompleteness of the past regulation of railroads, the financial and other practices of those irresponsible and unscrupulous men who unfortunately are to be found in limited number in practically every line of business, have brought ruin upon some American railroad systems and have injured the secur- ities of all railroad companies in the minds of the investing public." 112 The railroad business in the United States, as the result of a long period of government regulation, probably has higher ethical standards than most other kinds of business; but, on account of the public nature of their service, it is desirable that the railroads should not only be more ethical than other business organizations, but should be freed of all suspicion of unethical practices on the part of any companies. The railroads should set the standard of business morality. It is for this reason that "the Conference favors the adoption by Congress of the plan * * * of promoting, in the highest degree, both legal and moral accountability upon the part of railroad directorates and of railroad executive ofBcers." It is the hope of the Transportation Conference that future government regulation may give to corporate management of the railroads a public nature. It has long been recognized that the railroad service is of a public nature ; it is possible and desirable to give to railroad management the same characteristic. It is be- lieved that this can be accomplished by carrying out the plan recommended by the Transportation Conference — ^by requiring the consolidated railroads of the future to organize with directorates containing, along with directors representing the owners of the property, a representative of the employes and representatives of the principal interests. served by the several systems. XII BOARDS FOR ADJUSTMENT OF WAGES AND WORKING CONDITIONS By W. N. DOAK (Statement before the Committee on Interstate and Foreign Commerce of the United States House of Eepresentatives, July 35, 1919.) Committee on Interstate and Foreign Commerce House of Eeprbsentatives^ Friday, July 35, 1919. The committee met at 10 o'clock a. m., Hon. John J. Bsch (chairman) presiding. Mr. DoAK. I am here, Mr. Chairman, this morning in my indi- vidual capacity. I am vice-president of the Brotherhood of Eail- road Trainmen. Mr. Winslow. But you do not appear for the brotherhood? Mr. DoAK. No; not in this instance. Gentlemen, in appearing before the committee this morning I do so at the request of the National Transportation Conference Committee to discuss only one subject of this proposed plan, and that is the plan indorsed by the National Transportation Confer- ence dealing with the adjustment of labor disputes. It is only fair to say to the committee that the railroad brother- hoods are committed to another plan. All of the organizations have indorsed what is known as the Plumb plan, which is a form of government ownership. Consequently, the organized labor of the railroads and I myself are committed to that plan, but having spent several months, or having spent some time during several months with the gentlemen composing the National Transporta- tion Conference and discussing the different phases of this ques- tion, the National Conference has adopted the same plan of ad- justing wages and conditions of service as proposed in the Plumb plan, and having had a part in those conferences, I was requested by the Conference to appear before the committee and present their views on this subject. 114 I want to make this statement, in fairness and justice to the gentlemen of the Conference — that they may have made a most ex- haustive study, and all of their deliberations have been conducted with the utmost frankness and freedom. They tried to assemble as many representative men as it was possible in this conference from the different walks of life, and every one has had an oppor- tunity in their conferences to frankly and freely express his views, and I am quite sure that the committee can well afford to give consideration to their plan. I am convinced that there are no selfish or ulterior motives that prompted these gentlemen during their deliberations. We differ on the question of government and private ownership. I think there are some most excellent features connected with this plan, and if we have government ownership, I think the Plumb plan is the only one that has been proposed that would cover the situation fully. If private ownership is to be the policy, I think it would be well to give careful consideration to the plan adopted by the national conference. Mr. Wheeler and other gentlemen have appeared before you and have discussed the different features of the plan. I shall only dwell on this feature: "The Conference favors the adjustment of wages, hours of labor, and other conditions of service of railroad employees by boards consisting of equal numbers of representatives of employes and officers of the railroads, with appeal, in cases of the disagreement (deadlocks) of an adjustment board, to the Federal Transportation Board as referee." For a number of years the question of the adjustment of dis- putes arising from requests for increases in wages and the adjust- ment of many of the numerous grievances arising on the railroads has been a subject of general public concern. In this country we have always had what might be termed volun- tary systems; and I think that under our old Erdman Act, which was later supplanted by the Newlands Act, we have had more ac- commodations than in any other country in the world, with their so-called compulsory acts or labor courts, and practically all of these matters have been disposed of without any suspension of business. But in 1916, when the four transportation brotherhoods inaugu- rated their 8-hour movement, an accommodation was not had under the provisions of this law, with the result that Congress, after the President had intervened, passed what was known as the Adamson law. There has been a great deal of difference of opinion as to that particular law. Personally, I do not know whether it ever amounted to anything or not, because, outside of a declaration by the court holding it to be constitutional, in practical application, we do not 115 know what it means. It temporarily stopped any action on the part of the employes in looking to a suspension of business but it did not settle the question. It was a mere declaration, and, as a result, the employes finally had to take steps to see that it became effective or that the 8-hour day became effective. A second serious crisis became almost inevitable, it seemed, and on the morning of the 19th of March, 1917, before the court had finally passed on the constitutionality of the act, an agreement was reached between the national conference committee of railroads and the represen- tatives of the employees providing a method for the application of the 8-hour day. One plan provided how it would be applied in the event the law was declared unconstitutional, and another how it would be applied in the event it was declared constitutional. At noon that day the court, after this agreement had been reached, rendered its decision, upholding the constitutionality of the act. At this conference certain basic principles for the application of the basic 8-hour day were outlined; but anticipating that with all of the care that had been exercised there would be many contro- versies arising when this law was to be applied to sixteen or seven- teen hundred different schedules over the country, the parties agreed that there would be a commission appointed composed of four managers or four representatives of the railways and four representatives of the employes, whose duty it would be to apply this principle to the different schedules and settle all questions of controversy arising from the application of the basic 8-hour day. This commission was in existence about a year, or probably a little over a year, and during that time they had somewhere in the neighborhood of between thirty and forty thousand disputes arising out of the application of this basic 8-hour day to the individual schedules. But the singular feature of it was this, that of these numerous cases that were referred to them their decision was unanimous in all the cases with the exception of one or two. As a result, when the contention of different ones followed that it was necessary to have some compulsory form of investigation or arbitration in this country, the transportation brotherhoods ap- peared before your committee and stated that they believed it was unwise to attempt a plan of that kind, and they thought more good could be accomplished if we had voluntary boards, or even a feder- ally created board, evenly balanced, to adjust all wage disputes. After the declaration of war there was no desire on the part of any of the employes to interfere with transportation in any way; and after the period of governmental control it was decided that there would be created a commission or a board with extended authority to take the place of the commission of eight that was created solely for the purpose of handling questions arising out of the application of the basic 8-hour day, and an agreement was entered into by the chief executives of the organizations, on the one hand. 116 and the regional directors on the other, and approved by the director general, and issued in what is known as General Order No. 13. There were eight men selected. The regional directors, on the one hand, selected four operating oflScers and the chief executives of the four transportation brotherhoods, on the other hand, selected four officers, one from each of the respective organizations. The board was organized on April 8, 1918, and up to the recess of the board last night we had handled about 1,100 disputes, involving almost every form of discipline and schedule disagreements imag- inable, and no dissenting opinion has yet been filed by the board, and I think it is safe to say that in practically all of these cases there was a unanimous decision of the board. Following the creation of railway board of adjustment No. 1, a short time, railway board of adjustment No. 2 was created, which handles cases of shop men, and it is created just in the same manner with an equal number on each side. Later, railroad board of ad- justment No. 3 was created, which takes in the other classes of employes on the railroads. Mr. Sims. All other classes ? Mr. DoAK. All of the remaining classes on the railroads. Mr. Dew ALT. What does railway board No. 1 handle? Mr. DoAK. Disputes of the four transportation brotherhood em- ployes. With the issuance of General Order No. 27, which is a wage order, which was issued about the 1st of June of last year and made retroactive to January 1, 1918, the director general provided for the creation of a wage board whose duty it would be to investigate wage questions and make recommendations to the director general. That board has been functioning since that time. The Chaieman. That is an additional board to the adjustment boards. Mr. DoAK. Yes, Mr. Chairman, it handles only questions per- taining to the wages of employes, increases in wages, and it is purely an advisory board that makes exhaustive studies. They study these questions all the time and make their recommendations to the director general. Boards of adjustment have absolute authority and their decision is final, and not subject to review by the director general, only in such cases where it involves an inter- pretation of a wage order, and in those cases we review them and make the recommendations to the director general as to how it would be applied on that certain property. When the national transportation conference met, labor repre- sentatives were invited to participate in the conference, and I pre- sented, or tried to present to the gentlemen of the conference, this question just as I am presenting it now, in about the same language and in about the same way, with the result that they indorsed the principle, and they asked me to present it to your committee as I had to them. 117 The question may be asked, whether or not this would work out under private ownership ? I will say to you frankly that a plan of this kind can be worked out under any form, be it Government regulation, strictly private ownership, or Government ownership because it has been tried out under private ownership and it has been tried out under Government control, and so far it has been a decided success. No one ever thought years ago that such a thing was possible — to take eight partisans, if you please, or so- called partisans, and put them on a board, that they would settle such disputes, but having served on Board No. 1 since it was created, I am prepared to say that the four gentlemen representing the railroads have met us in the broadest, most liberal manner, and you would be surprised to know how easy it is for us to arrive at a conclusion after we hear the arguments in a case. In ease we have a deadlock, there is provision made that the direc- tor general will act as the referee, but in case five of us agree, that is final. Knowing that, we have tried to reach an agreement, and we have, in every single case that has been presented to us. I have no doubt the question would be raised as to who would act as referee. That is a matter that could be very easily taken care of, and of course, in the plan that the National Conference has adopted, they provide that the transportation board shall act as referee, and I assume that when you get through with this legis- lation, whether it is Government ownership or what not, there will be some kind of a board created, and whatever that board is, it can easily referee in those cases, because from past experience, the referee has nothing to do. It would no doubt be asked, how you could handle it if you had strictly private ownership, where would you get authority? That is very easily answered. In my opinion, practically all the rail- roads will come in and the organizations will come in. Those that do not, the two parties will make it very uncomfortable for them before they get through with them and they will be glad enough to come in. Mr. Denison. Whom do you mean by the two parties ? Mr. DoAK. The railroad managers who have come in on the one side and the employes on the other side. We found in the ex- perience of the commission of eight that certain railroads did not give authority to the National Conference Committee to repre- sent them. Later when they were confronted with the question of either settling with the employes or having their business seriously interfered with, they came to the board and asked them to arbitrate their differences. We have acted as arbitrators in several cases on Railway Board Adjustment No. 1 on small lines that were not under Government control. After the machinery is once estab- lished, gentlemen, I am convinced of its practicability because as hard as we have worked since last April, when we adjourned yester- day there were 479 eases awaiting action before the board. I under- 118 stand that the other two boards have been about as successful as our board. Of course, they have not had the numerous cases that we have had to adjust. Mr. Sanders of Indiana. How many are there on the other boards ? Mr. DoAK. Twelve on one and eight I think on the other. I think that Board No. 3 has 8 and Board No. 3 that takes in the miscellaneous crafts has 13. I want to say also that the board of railroad wages and working conditions is likewise composed of equal representatives, three from each side, and they have gotten along very nicely. I understand their recommendations have been practically unanimous, all of them. There is one thought which I should like to leave with you. As I explained to the Conference, do not attempt to provide for any- thing further than voluntary arrangements in connection with boards of this kind. I do not believe that' a purely governmental board will work, and there is a reason for it. While we have ap- proached these questions in the broadest and most liberal spirit and the results are here to speak for themselves, we have not lost our connection with our respective sides, and consequently we can go to them and advise them and they can likewise come to us. In that way we know the things that we represent and we suggest many things that we could not if we were a strictly governmental board. The other feature of it is this. I do not care whether it is a man operating a railroad or a man braking on a train, or a lawyer, or a Member of Congress, we are all American citizens and you can lead us to do anything within reason, but you generally can not drive us to do anything. The minute you would give a policy the stamp of compulsory action you would to a great extent limit it in its efforts. I think there should be a plain declaration by Congress in what- ever plan you adopt. Somewhere in your bill you should provide that boards shall be created to dispose of disputes and then leave the details, leave all the rest to the employer and employe to work out. If you do that I think you will get results. The employes and likewise the manager have some hesitancy in going to a gov- ernmental tribunal that they would not have in going to a board of this kind. In the Dominion of Canada the War Board created a similar board. It takes in all of the classes and they can handle on request anything and act as arbitrators in any case. It is purely a voluntary arrangement, each side pays its pro rata part of the expense and they have gotten along in a most admirable way, and they have adjusted many, many complaints. The only difference with our boards is that each side pays their representatives on the board, but the cost of maintenance of the officers is borne by the Railroad Administration. It was created by voluntary agreement and it has been maintained that way, and that is what I would suggest to you gentlemen as a solution of the labor question of the 119 American railroads. Our experience has demonstrated the practi- cability of it and the feasibility of the plan. I was asked the other day what I would suggest to be done with the Newlands Act and the Board of Mediation and Conciliation. I stated at that time that I would not interfere with it at all, that there might be eases, there might be times and certain conditions under which the parties would desire to invoke mediation. If such is the case, I would let it continue. That law has adjusted more disputes, gentlemen, than any other piece of legislation that was ever passed on the face of the earth. In the Railroad Administration, I understand, they have media- tors that go out in certain cases and use their good offices to bring about adjustments of schedule revision cases, or to make new schedules with some of the railroads where the employes were not organized and had no agreement prior to the period of Government control, and I think it would be just as well to let the Board of Mediation and Conciliation, as provided in the Newlands Act^ con- tinue to function in cases of private ownership of railroads after this period of Government control ceases. Of course, the transportation brotherhoods feel that Government ownership is the proper thing and that possibly labor adjustments could be more easily taken care of under that plan, but these gentle- men of the National Transportation Conference feel that the sug- gested method of labor adjustment ought to be adopted as a part of their plan ; and, frankly, the method can be carried out about as easily under their plan as under Government ownership of the rail- roads. I know what is in the mind of each of you gentlemen, that if somebody has a solution for the labor question of the American rail- roads that you will be most happy to give it careful consideration. I think we have one ; I think it is practical, and I think it is worthy of your consideration. I will say that the gentlemen representing the National Transportation Conference think so, and they have given careful consideration to it. The gentlemen interested in the Plumb plan think so. I think if you ask the representatives of the Eailroad Administration, who have been handling these matters, that they will say there is one thing at least in which the Eailroad Administration has been successful, and that is in the handling the labor disputes with the four transportation organizations since and prior to the beginning of the war. — XIII NECESSITY FOR ARTICULATION OF RAILROADS, WATERWAYS AND HIGHWAYS By WALTER S. DICKEY. "Moving things" and "freighting," next to subsistence itself, is the world's greatest enterprise. Congress having by legislation, regulation, taxation, and earning limitation, restricted Eailroad progress, should now approach the rehabilitation in a sympathetic manner. Increasing population and traffic requires rapid expansion and co-ordination of every feasible means for moving men and merchan- dise throughout the vast area of the United States. Diversification and encouragement of transport facilities have not kept pace with the enormous commercial growth of the country, and unless facilities are provided, the domestic trade, swelled by goods for export, will be disastrously affected. Motor trucks and hard roads are now a short haul factor. The extension of the use of trolleys for freighting, the expansion of terminals, the double tracking of rail lines, and the enlarged use of waterways, lakes, canals and rivers, all combined into a National System, must be accomplished rapidly if congestion is to be avoided. To handle the increasing volume of the nation's business at home and abroad, will require careful planning. Federal encouragement, the co-ordination of terminal and trans- fer facilities would stimulate action. It is believed that the adop- tion of the recommendation of the National Transportation Con- ference for the creation of a federal transportation board, clothed with large powers, would promote the development of a national system of rail, water and highway transportation, and the articu- lation of all. Unless forward-looking legislation provides for some such development upon a huge scale, the United States is threatened with a national calamity. 122 We cannot afford to renew again experiences of 1906 when short- age of motive power and equipment, and embargoes and blockades were disastrous to industry. At that time the Great Pennsylvania System, to clear its tracks and sidings, refused all freight for seventy-two hours, and west of the Mississippi and the Missouri, grain remained tiU snow fell, piled on the open prairie adjoining railroad stations, waiting, waiting, waiting for railway equipment. During this time the vast potential power of the Mississippi and its navigable tributaries as freight carriers was overlooked and neg- lected. Doubling the domestic trade of the United States, already the most gigantic trade in all the world, and tripling the foreign busi- ness, must come with the advance of the United States to its new place in world's afEairs, and this growth of trade calls for a corre- sponding development of transportation. The Federal Government must, in some way, stimulate the enlargement, diversification and utilization of all known means of getting goods to market and to the sea. Business for all, and more than all carriers can handle is in sight. A Federal Transportation Board clothed with suitable powers, as recommended by the Na- tional Transportation Conference, devoting special time and thought to this work, can help to bring about a combined system of trolley, railway, highway and waterway freight facilities, including ample terminals and transfer arrangements. The issuance of negotiable through bills of lading over combined through routes would relieve pressure and lessen congestion. In big cities it may be possible to emulate the well-known British and Canadian meth- ods of store-door delivery and collection of less than car-load freight. Electric trolley power may also be made publicly available in many sections of the country for use on highways to encourage speedy and economical movement by vehicles of many kinds. It is to bring about these improvements, extensions and econo- mies of transportation, that a Federal Transportation Board with adequate executive and administrative powers is needed and should be created. XIV THE CHAMBER OF COMMERCE RECOMMENDATIONS FOR RAILROAD LEGISLATION By GEOEGE A. POST, Chairman, Eailroad Committee, Chamber of Commerce of the United States (Statement before the Committee on Interstate and Foreign Commerce of the United States House of Eepresentatives, August 18, 1919.) Gentlemen of the Committee: I have the honor to be the instrument whereby the Chamber of Commerce of the United States seeks to bring to the atten- tion of your honorable body the results obtained by the votes of its organization members upon the several recommendations con- tained in its Eeferendum No. 28. The recommendations which I shall present to you today have received the approval of the members of the Chamber of Commerce of the United States and are, up to a certain point, identical with the program of railroad legislation presented to this Committee two weeks ago by representatives of the National Transportation Con- ference recently held under the auspices of the Chamber. The Conference program goes further, however, and includes certain recommendations which, although entirely in harmony with the principles embodied in the Chamber plan, have not yet been sub- mitted to the members of the Chamber for approval by referendum vote. It was impossible to place before the members of the Chamber of Commerce of the United States any detailed plan, couched, section by section, in statutory phrasing, because in our referenda it is necessary so to fram.e the questions submitted that they shall be susceptible of answer, "Yes" or "No," to each interrogatory. 124 The Chamber is made up mostly of business men who can and do grasp a business principle, consider it and give adhesion thereto or oppose it. You have their judgment on several major points of the railroad problem. They have contented themselves vrith giving expression to their sentiments on a few of the many mat- ters that must engage your attention. The Chamber has full appreciation of the perplexities that confront you in framing the legislation which must precede the return of the railroads to their owners. It has aimed to be helpful to you in showing the trend of thought of American business upon some of the outstanding issues involved in your deliberations. It feels that was its duty to you as our representatives in the Congress. It knows that deep study is needed of the complexities inherent in the very existence of a transportation system which serves those who need service which they desire to obtain at the lowest possible rates, a service which is rendered possible through the labors of those who are entitled to liberal wages for dangerous and exacting toil, and re- quires investment of billions of dollars from the savings of thrifty folks who will invest only if the return is attractive to them. In such circumstances, no one of the elements may reasonably hope to exact the fullest measure of its desires either as to lowness of rates, height of wages or abundance of investment return. Amekican Business Deeply Interested American business is deeply concerned respecting the future of our railroads. It has high hope of a wise outcome of your delib- erations. It has noted with gratification the earnestness, patience, and fairness with which the Congressional Committees are seeking to secure all possible information. Groups of business men differ in the details of financial plans, all of which must undergo your careful scrutiny, but in one thing they will be found in firm agree- ment: G-overnment ownership must not prevail. To you, gentlemen, is confided a great responsibility. As you proceed in your work of bringing order out of chaos in the realm of transportation, you are entitled to the friendliest, most zealous co-operation of all. The Chamber of Commerce of the United States indulges the confident hope that under your guidance the day is near when our railroads shall emerge from the slough of despond in which they are now submerged, and, returned to their owners for operation under a comprehensive and beneficent 125 system of governmental supervision, with assurance of adequate revenue, shall give such economical and satisfactory service as only courageous individual enterprise, with ample freedom of operation, can vouchsafe. Method of Taking Vote For your information as to the method of procedure of the Chamber in submitting its referenda, I beg to state that when any of its standing committees, or a special committee created for the study of any particular subject of national scope, has, after mature deliberation arrived at certain conclusions with ref- erence thereto, the Committee forthwith renders a report to the Board of Directors, making its recommendations, accompanied by its reasons for such conclusions, and for the action that it recom- mends. If the Board of Directors considers the findings of the Committee of such a nature as to warrant the ascertainment of the opinion of the members throughout the country, a referendum is ordered and in due form the machinery of the Chamber is set in motion and each and every member organization is called upon to express its opinion by a yea or nay vote upon the proposals made. The directors do not record an expression of their opinion. Forty-five days are allowed for the consideration of the proposals by the member organizations, all votes to be filed on or before a certain fixed date. As the member organizations vary in size of enrolled memberships and income derived therefrom, which is the basis for the number of votes which each member organization is entitled to cast upon all referenda of the Chamber, the voting strength varies, but each organization, no matter how small, is entitled to one vote, and no organization, no matter how affluent in iacome or strong in enrolled memberships is entitled to more than ten votes. In accordance with the law of the Chamber, the railroad ques- tion, in its various phases, was referred to the Eailroad Committee. Many meetings of the Committee were held, free discussion was had, and a report was made to the Board of Directors at a meet- ing held in St. Louis, on April 30, 1919. On June 9, 1919, Referendum No. 28 was issued calling for Judgment upon the several recommendations made by the Railroad Committee. On July 24 the polls closed and an ofScial announcement was made of the results of the voting. 126 Under its rules a two-thirds afBimative vote of those voting must be cast upon any proposal submitted to make it effective as a declaration of the sense of the Chamber of Commerce of the United States. Ten Ebcommbndations Made The Eailroad Committee had made ten recommendations and in their numerical order they were as follows : The Committee recommends Adherence to the Policy of Corporate Ownership and Operation of the Railroads Under a Compre- hensive System of Government Regulation. The vote upon this recommendation was: Yes, 1,458; No, 11. At the time that this recommendation was made, there was no doubt in the minds of the Committee that government ownership and operation was not an issue pressing for attention upon the present Congress. Due to the unfavorable impression made upon the public mind by the operation of the railroads under Federal control, for a period of sixteen months, there was manifest through- out the country a strong, even overwhelming, sentiment against a continuance of Federal control and operation. Prior to the ad- venture into the field of Federal control (undertaken as a war measure) many men in public ofiice and multitudes of private citizens had been harshly critical of railroad management and had zealously advocated and brought about legislation severely restrictive and punitive respecting railroad operations. In their bitterness, engendered by what they considered unfair and aggra- vating practices of the railroads, they had declared that govern- ment ownership and operation was the only remedy for railroad evils. Later they were so aroused by what they deemed the baleful effects of government operation upon their personal convenience and upon the conduct of their business, consequent upon the indif- ference of governmental agencies to their transportation needs, the elimination of comforts, co-operation, facilities, and courtesies to which they had been accustomed, that they renounced their pre- vious advocacy of government ownership, and became vigorous opponents thereof. So recently as July 15, last, at the opening of these hearings before this Committee, Chairman Esch said: "In view of the widespread sentiment throughout the country against government ownership, I feel we ought not to spend very much time on that proposition." 127 The Eailroad Committee of the Chamber was of the opinion, however, that a declaration should be made by the Chamber upon the subject at this time so that, as a matter of record, the position of its members might be made clear and emphatic thereon. In its statement accompanying its recommendation, the Committee presented some of its controlling reasons for the consideration of members, and the practically unanimous approval accorded the same in the votes recorded, shows, unmistakably, that the commer- cial and industrial interests of the country are a unit against government ownership and operation, and against government ownership with operation by private corporations as lessees of the government. Among the reasons urged against government owner- ship and operation are: Argument Against Government Ownership First: TJnder government ownership the development of rail- road facilities would depend upon Congressional appropriations which would prevent the anticipation of the transportation needs of the country. Appropriations would not be made in the amount and at the time needed to insure adequate development of the railroads. Political considerations might also control the amount of appropriations and the objects for which they were made. Second: The interest rate which the government would have to pay to secure railroad capital would not be lower than the rate paid by corporations. To acquire the railroads the government would have to pledge its credit for eighteen to twenty billions of doUars, at a time when other large financing must be done. It would be difficult for the government to dispose of the securities required to purchase the railroads, and it would be necessary for the government to secure from five hundred million to one billion dollars of new capital each year. If the government were to as- sume the burden of financing the railroads at the present time, when the war debt is so large, its interest rate would necessarily be as high as, if not higher than, the rate at which corporations could secure capital. Third: Government operation is seldom, if ever, as efficient as corporate management. Competition, the incentive to efficiency and progress in private enterprises, is absent from the government administration of affairs. Individual initiative is less, bureau- cratic methods are more characteristic, and the services rendered are less progressively efficient. Fourth: While the government would presumably select officers and employes by means of efficiency tests, political influences would 128 almost certainly be given weight in selecting men for official positions. Fifth: Unless the government adopted the policy of fixing low rates and fares with the intention that any resulting deficit from operations should be placed as an increased burden of taxes upon the general public, rates and fares would be higher under govern- ment than under private operation. Under government operation expenses rise in relation to income, and the charges imposed by the government, if a deficit is to be avoided, must be higher than those which it would be necessary to permit railroad corporations to make. Sixth: The political eifect of government ownership and opera- tion of railroads in the United States might be serious. There are now about 500,000 civil employes of the government. The addition to the public services of 2,000,000 railroad employes, the majority of whom are voters, would constitute a force of about 3,500,000 government employes interested in controlling the policy of the government as regards wages, hours and conditions of service. Such a body of employes might easily exercise a controlling influ- ence upon state and national politics. Speedy Eetuen of Egads Being convinced that the public was now thoroughly and stren- uously opposed to government ownership and operation of the railroads, the natural sequence of thought was that Federal control should come to an end as speedily as possible. The second recommendation was, therefore, as follows : The Committee Recommxnds the Return of the Railroads to Their Owners as Soon as Remedial Legislation Can Be Enacted. The affirmative vote upon this recommendation was identical with that in favor of corporate ownership and operation: Yes, 1,458; No, 13. Thus it is conclusively shown that the voice of business is in consonance with the view of the Eailroad Committee which argued that: It would be unwise for the government to retain the railroads longer than is necessary to enact the legislation required for the return of the properties under conditions that will be just to the owners and will insure to the public adequate transportation facil- ities by properly financed railroads. This legislation should be enacted as soon as possible and before the government retires from 129 railroad operation. It would be a hardship to the public and unjust to the owners of the roads were the government to return the properties without first removing the obstacles to efficient and economical operation of the railroads by their owners, without revising past methods and agencies of government regulation, or without adopting measures that will enable the carriers to obtain revenues sufficient to provide the public with adequate facilities and efficient service. As soon as this legislation has been enacted, government operation of railroads should end. Argument Against Extension of Time The third recommendation was: The Committee Recommends That No Extension of the Period of Government Operation Should Be Made Until Congress Shall Have Found It Impossible to Enact the Required Legislation Within the Period Possible Under the Railroad Control Act. The vote cast was. Yes, 1,3391/2 ; No, 1141^. This recommendation was responsive to a recommendation made by Director General McAdoo, just prior to his retirement from office that the period of possible government operation of railroads be extended until January 1, 1924, in order that a test may be made of the possibilities of government operation of railroads in peace time and that the government may carry on the work it has begun of developing the use of waterways, of connecting them with the railroads and of articulating rail and water traffic. It was also argued by the Director General that Congress could not frame and pass the necessary legislation to return the railroads to their owners with such celerity as to avoid projecting the whole railroad question into the Presidential campaign of 1920, which, he said, would be a calamity to be avoided, and which could be avoided by the adoption of the plan of a five-year extension of Federal control. This proposal by the Director General fell upon deaf ears, with the exception of those of the railroad brotherhoods, which having fared so generously under Federal control, seemed willing to have it continued for any length of time. The public at large, however, showed no favor toward the appeal made, repelling it vigorously, and the project "died a bornin," so to speak. It was finally nailed in its coffin when the President gave notice to Congress that he would release the railroads from Federal control at the end of 130 this calendar year — the question of an extension of Federal con- trol beyond the time of the Act of March 21, 1918, is not, therefore a live one before Congress. The vote of the Chamber was over- whelming against the extension. Fourth in order: Consolidation' in Strong Competing Systems The Committee Recommends That, While Adhering to the Prin- ciple of Railroad Competition in Service, the Railroads Be Allowed, in the Public Interest, When So Declared and as Ap- proved by Public Authority, to Consolidate to Such Extent and in Sv^h Manner as May Be Necessary to Enable the Existing Railroads to Unite in a Limited Number of Strong Competing Systems, So Located That Each of the Principal Traffic Centers of the Country Shall, if Possible Be Served by More Than One System. The vote upon this recommendation was: Yes, 1,3091^; No, 125y2. The argument of the Committee which proved persuasive to the Chamber members in support of this recommendation was: It is the opinion of the committee that legislation should be enacted that will facilitate the early grouping and the ultimate consolidation of the railroads in the United States into a limited number of strong competitive systems. The grouping should be about the present large systems and not by territorial subdivisions of the country. The existence of so many railroad systems as there now are in- creases the difiSculty of co-ordinating their facilities and services to the extent necessary to secure the most economical operation. Moreover, some of the present roads are financially weak and their continuance as separate systems complicates the government's prob- lems of rate-making, of the common or joint use of equipment and facilities, of the regulation of security issues and of re-estab- lishing the financial credit of the railroads as a whole. If the railroad systems that are financially unstable and the many systems of minor importance can (subject to the approval of the govern- ment, and under conditions which it may prescribe) be grouped, or consolidated, with a limited number of strong systems, a better 131 service can be rendered and a larger development of lines, terminals and other facilities will be possible. Without sacrificing the benefits of competition in service, the government should facilitate the co-ordination of railroad facilities and services, the common use of equipment, and the joint use and development of terminal facilities, when in the public interest. CON'SOLIDATIONS CONDITIONED IJPON GOVERNMENT APPROVAL The consolidation of railroads, as well as the co-ordination of their facilities, should be subject to the approval of the govern- ment, and, with such authorization required, the railroads should be encouraged to work out the natural groupings of systems and to combine their facilities in the interest of traffic economy and of financial stability. Many states have laws against the combination of railroads, and in the constitutions of several states there are provisions prohib- iting the acquisition by a railroad of another competing line. The obstacles which these state laws and constitutional provisions place in the way of associated activities and the consolidation of railroads may be removed by changing the status of railroad companies from state to federal corporations, as recommended in this report. While favoring the early grouping and ultimate consolidation of the railroads in the United States into a limited number of strong systems, which shall be built upon the large systems which have developed in response to commercial needs, the committee feels that competition among these systems, in service (not in rates), is desirable from the standpoint of the public and will lead to greater efficiency of operation on the part of the railroads. In all kinds of business the most effective incentive to improvement and to economy of operation is competition. In the case of the railroads the same charges must be made for similar services. The rates and, to a large extent, the practices of carriers must be reg- ulated by the government, but regulation does not preclude the possibility of active competition in service. In facilitating railroad consolidation, the government need not, and in the interest of the public should not, eliminate railroad competition. 132 Fifth in order : COEPOEATIONS SUBJECT TO UNITED STATES The Committee Recommends That Railroad Companies Engaging in Interstate Commerce Shall Be Required to Change From State to Federal Corporations, with Suitable Provisions in the Act of Congress Providing Therefor That the Several States Shall Retain the Power of Taxation and Police Regulations of the Properties of Said Railroads. The vote upon this recommendation was: Yes, 1,334; No, 193. By Eeferendum 31, which was submitted by the Chamber of Commerce in September, 1917, the commercial organizations of the country, with comparatively few dissenting votes, declared themselves in favor of the enactment of a federal incorporation law and also of a law requiring all carriers now subject to the Jurisdiction of the Interstate Commerce Commission, or which may hereafter be created, to organize under a federal incorporation act. It has been represented to the committee by jurists who have given the matter careful consideration that Congress can enact a statute that will provide a simple process of converting state railroad companies engaged in interstate commerce into federal corporations by methods similar to those followed in changing state banks into national banks. If such a plan shall be found by Congress to be constitutional and feasible, the committee recommends the federalizing of rail- road corporations engaging in interstate commerce, by the enact- ment of a statute similar in principle to that of the National Bank Act, which provides a direct method of converting state banks into federal institutions. In requiring railroad companies to change from state to fed- eral corporations. Congress should provide that the states shall retain the power of taxation and police regulation of the property of the federal railroad corporations. Eegulation of Capital Expenditdees and Security Issues The Committee Recommends That the Interstate Commerce Com- mission, or Such Federal Agency as May Be Designated hy Con- 133 gress. Be Authorized to Pass Upon the Public Necessity for Expenditures of Capital {in Excess of a Stipulated Amount) by Carriers Engaged in Interstate Commerce, and to Determine the Amount and to Regulate the Other Conditions of the Issur- ance of Securities to Obtain the Funds Required to Cover Au- thorized Capital Expenditures; and That a Railroad Applying to the Federal Agency for Authority to Make Capital Expendi- tures, or to Issue Securities, Shall be Required to File With the Proper Authorities of the States in Which the Railroad Is Located, Copies of the Original Petition; and That the Federal Agency Be Required to Notify Said State Authorities of the Hearings Upon the Petition, in Order That They May Advise The Federal Agency as to Actions They Favor. The vote upon this recommendation was: Yes, 1,334^; No, 9oy2. The organization members of the Chamber of Commerce of the United States, in acting upon Eeferendum 31, voted almost unani- mously in favor of federal regulation of the issuance of the securi- ties of railroad companies engaged in interstate commerce. It is the opinion of your committee that federal authority should also regulate large capital expenditures. In acting upon applications of the railroads for the approval of security issues, or large capital expenditures, the federal agency win need to inquire as to the public necessity for the work pro- posed to be done. The amount of capital that will need to be ex- pended, and, if securities are to be issued, what amount thereof will need to be authorized to enable the carriers to obtain the funds required for the execution of the work which the government may find to be of public necessity. Assistance feom State Authorities In order that the state authorities may assist the federal agency to obtain as complete knowledge as possible of the local needs for additional railroad facilities and of the expenditures required to meet those needs, the federal agency should require a railroad company, applying for permission to issue securities or to make a large expenditure of capital, to file with the authorities of the states in which the railroad in question is located copies of the original 134 petition to the federal agency, which should notify the interested state authorities of the hearings upon applications for approval of security issues and capital expenditures in order that they may have full opportunity to advise as to the actions they favor. Seventh in order : The Committee Reviews Its Previous Becommendation That the Interstate Commerce Commission Be Given Authority ly Statute to Regulate Intrastate Bates, When Those Rates Affect Interstate Commerce. The vote upon this recommendation was: Yes, 1,3391^; No, II6I/2. This recommendation was approved by the organization members of the Chamber of Commerce of the United States in November, 1917, with comparatively few dissenting votes. This action having been taken shortly before the United States took over the operation of the railroads, Congress has had no opportunity to act upon the question. It is therefore deemed necessary and important by the committee that this recommendation shall be included in its pres- ent report as a part of the plan for remedial railroad legislation. The experience of the past two years has confirmed the committee in its conviction that regulation by the several states of such intra- state rates as affect interstate commerce interferes with the effec- tive and uniform regulation of interstate rates by the United States government. Indeed, conflict detrimental to the public interest has arisen with respect to the Jurisdiction of the state commissions and the Interstate Commerce Commission over intra- state rates even when it was clear that such rates affected the inter- state rates subject to the regulatory power of the federal govern- ment. Eighth in order: Rule of Rate Making The Committee Recommends the Enactment of a Statutory Bule Providing that Bailroad Bates and Fares Authorized by the Interstate Commerce Commission Shall Be Designed to Yield the Bailroad Companies, in Each of the Traffic Sections That Shall Be Designated hy the CoMmission, Aggregate Bevenues Which Will Provide {After Allotment Has Been Made For Be- 135 newals and Depreciation) Such Net Return Upon a Fair Value {Determined by Public Authority) of the Property Devoted to the Public Use As Will Be Sufficient in Amount to Enable the Carriers to Obtain at Reasonable Cost the Capital Required to Furnish the Public With Adequate Facilities and Efficient and Economical Service. The vote upon this recommendation was: Yes, 1,2231/2; No, 209y2. If the railroads are to be returned to their owners at the end of this calendar year, as the President has signified it to be his purpose, then the function of Congress is to provide the means whereby they shall be so returned, with financial safety to the owners and with an assurance that they shall be so equipped as to meet adequately the traf&e demands of our nation. In the enactment of the necessary legislation by Congress the railroads must be provided with ample revenue wherewith they may per- form properly the public service for which they are intended and without which performance our country's commerce and industry must languish. The welfare of our nation is so closely bound up with its transportation facilities that any trouble or weakness with which the railroads are afflicted immediately affects injuriously every citizen. Kegulation- in the Past It is urged upon Congress that the time has arrived when a revision of augmentation of instructions should issue from the law-making body to its regulatory agency, that it may be apprised that those who are expected to make effective by statute the desires of the public, now feel that cognizance must now be taken of the physical and fiscal welfare of the railroads. Stern discipline, pun- ishment for past sins, stringent rules of conduct, prescriptions for accounting, laws for applications of safety appliances, commands fixing wages, hours and conditions of labor for employes and all sorts of "Shalts" and "Shalt nots" have poured forth in steady streams from legislative and regulatory sources for many years. A warm tribute of appreciation is due to the vigor manifested, the vigilance exercised and the comprehensiveness of scope of the leg- islative activities of those statesmen who, covering a long period of years before the war, dealt heroically and drastically with the 136 pestilential aspects of railroad deviltry practiced in years long gone by. They diagnosed many of the railroad conditions to be diseased and dangerous to the public, and then by statutory pur- gatives and emetics they proceeded to purify their interiors, and by violent and long-continued flagellation they thoroughly subdued them. Does any one now doubt the omnipotent power of the people to compel obedience to their will by the railroads ? Today the owners of the railroads are absolutely powerless as a political factor. They have been shorn of the possession of their property ; it is in the possession of the government. A vast major- ity of the people believe that their owners know how to run the railroads better than the government. There should not be the slightest change in any regulation that is protective of the public interest. But after all possible safeguards have been erected, there is an interest of the public that is of transcendant importance, viz. : that the income of the railroads shall be sufficient to enable them to secure readily and economically the capital necessary to provide adequate facilities. The Eailroad Committee of the Chamber frankly said to the members : Opposition to Government Guarantee In carrying out this principle special diiSculty results from the fact that the same rates will yield the more prosperous companies greater revenue than they need, while the less prosperous com- panies, due to their unfortunate situation or to their past history, are unable to secure income sufficient to enable them either to develop their facilities in proportion to the needs of the public, or to perform the services required by the section of the country in which the roads are located. It is believed that the most practicable way to provide the rail- roads of the United States, as a whole, with adequate revenue, and thus to re-establish railroad credit, is to authorize the Inter- state Commerce Commission to divide the country into such traffic sections as may seem to the Commission wise, and to direct the Commission by a statutory rule to fix such rates and fares as will yield the railroad companies, in each of such traffic sections as shall be designated by the Commission, aggregate revenues which will provide — after allotment has been made for renewals and depreciation — a net return that will enable the carriers to furnish the public with adequate facilities and efficient and economical service. 137 The committee is not in favor of a government ^arantee of a minimum return to each railroad company, either upon, its capi- talization or upon the property which it devotes to the public serv- ice. A government guarantee would tend to lessen initiative and to cause both the prosperous and the unprosperous roads to feel less responsibility for efficient management. While not favoring a government guarantee of a minimum return, the committee believes that Congress ought to adopt a statutory rule providing that the public authority which fixes the railroad rates assure reasonable revenues to the railroads as a whole and in each of the natural traffic sections of the country. The committee is of the opinion that such a statutory rule can be en- forced without placing an unjust burden upon the public and without causing individual railroad companies to obtain excessive profits. In connection with the foregoing suggestion must be taken the proposition embodied in item 4 of Eeferendum 28 heretofore recited providing for railroad consolidations when found and adjudged by governmental authority to be in the public interest. Item 9 of the Eeferendum did not receive the requisite two-thirds affirmative vote, and is not, therefore, pressed upon your attention. Federal Teanspohtation' Boakd. The tenth in order : The Committee Recommends That a Federal Transportation Board Be Created Whose General Duty It Shall Be to Promote the De- velopment of a National System of Rail, Water and Highway Transportation, and Thus to Make Possible the Articulation and Economical Use of All the Facilities, Including Tracks, Ter- minals and Transfer Facilities, of Steam and Electric Roads, Waterways, and Hard-surface Highways. The vote upon this recommendation was : Yes, 1,197 ; No, 244. I cannot do better than to quote the language of the committee sustaining this recommendation : The development of a national system of transportation is a public necessity. Up to the present time the steam and electric railways, the waterways and highways have been developed separate- ly without reference to a common plan and without thought of creating, from the various agencies of transportation, a unified system. 1S8 The time has come when the waterways of the coimtry as a whole should be systematically developed according to a definite plan. Their larger use should be made possible by connecting them with the railroads at river, lake and ocean ports and by enabling shippers to send their traffic by the most economical combination of rail and water routes. The work which the Eailroad Administration has so happily begun of providing for the traffic use of important rivers and canals, and of articulating the railroads with the waterways in a traffic sense, should be continued after the railroads have been returned to their owners. The development of highway transport should be facilitated with a view to the coordinated use of all transportation agencies. While the people of the United States have been creating an exceptionally economical system of transportation by rail, highways have been relatively neglected and the expenses of carrying freight to and from the railroads are, in most instances, greater than the cost of the railroad haul. The systematic development and the organized use of hard-surface highways greatly reduce the transportation burdens borne by the people of the United States. It is especially important that provision should be made for the common use and construction of terminal and transfer facilities at all the larger traffic centers of the country ; but, unless some federal authority is vested with power to bring about the common use of terminal and transfer facilities, and their joint construction by the carriers (in so far as they may be in the public interest), it is practically certain that the present expensive methods of terminal operation will be indefinitely continued. The development of a unified national system of transportation is an executive task that can be performed only by creating a board primarily administrative in purpose and organization. The In- terstate Commerce Commission, in the regulation of rates and in the performance of the other duties with which it is charged, wiU have as much work as it can successfully perform. It has not been suggested to take from the Interstate Commerce Commission any of the functions it has thus far exercised, but a large addition to the duties of the Commission has been recommended. It would be unwise to impose upon that body the large and exacting task of guiding and facilitating the development of a national system of rail, water, and highway transportation. That work should be undertaken by an especially created Federal Transportation Board. XV PRINCIPLES OF RAILROAD LEGISLATION ADOPTED BY THE CHAMBER OF COMMERCE OF THE UNITED STATES The Chamber of Commerce of the United States urges — CoEPOEATE Ownership and Operation Adherence to the policy of corporate ownership and operation of the railroads under a comprehensive system of government regula- tion. Prompt Eetdrn op Eoads to Owners Eeturn of the railroads to their owners as soon as remedial legis- lation can be enacted and no extension of the period of government operation unless and until Congress shall have found it impossible to enact the required legislation within the period provided in the Eailroad Control Act. Consolidation in Strong Competing Systems Permission for the railroads, in the public interest, when so de- clared and as approved by public authority, to consolidate to such extent and in such manner as may be necessary to enable the existing railroads to unite in a limited number of strong competing systems, so located that each of the principal traffic centers of the country shall, if possible, be served by more than one system. Corporations to be Subject to the United States That railroad companies engaging in interstate commerce be required to change from state to federal corporations, with suitable 140 provisions in the act of Congress providing therefor that the several states shall retain the power of taxation and police regulation of the railroad properties. Pedeeal Eegulation oe Capital Expenditures and Secueitt Issues That the Interstate Commerce Commission, or such federal agency as may be designated by Congress, be authorized to pass upon the public necessity for expenditures of capital (in excess of a stip- ulated amount) by carriers engaged in interstate commerce, and to determine the amount and to regulate the other conditions of the issuance of securities to obtain the funds required to cover author- ized capital expenditures; that a railroad applying to the federal agency for authority to make capital expenditures, or to issue secur- ities, be required to file with the proper authorities of the states in which the railroad is located, copies of the original petition, and that the Federal agency be required to notify the state authorities of the hearings upon the petition, in order that they may advise the Federal agency as to actions they favor. Federal Eegulations of Intrastate Eates Affecting Interstate Commerce That the Interstate Commerce Commission be given authority by statute to regulate intrastate rates when those rates affect interstate commerce. Eatemtaking by Interstate Commerce Commission Enactment of a statutory rule providing that railroad rates and fares authorized by the Interstate Commerce Commission shall be designed to yield the railroad companies, in each of the traffic sec- tions that shall be designated by the Commission, aggregate revenues which will provide (after allotment has been made for renewals and depreciation) such net return upon a fair value (determined by public authority) of the property devoted to the public use as will be sufficient in amount to enable the carriers to obtain at reasonable cost the capital required to furnish the public with adequate facili- ties and efficient and economical service. 141 Creation op Federal Teansportation Board Creation of a Federal Transportation Board whose general duty it shall be to promote the development of a national system of rail, water and highway transportation, and thus to make possible the articulation and economical use of all the facilties, including tracks, terminals and transfer facilities, of steam and electric roads, water- ways and hard-surface highways. XVI THE FRELINGHUYSEN BILL REMARKS BEFORE THE SENATE OF THE UNITED STATES SEPTEMBER 15, 1919 By HON. JOSEPH S. PEELHSTGHUYSEN OE NEW JERSEY Mr. PEELINGHUYSEN. Mr. President, I send to the desk a bill providing for railroad reorganization, and I ask that it be referred to the Committee on Interstate Commerce. The bill (S. 2998) to provide for the creation and organization of a Federal transportation board, to define its powers and duties, to authorize the organization of national railroad companies, to define their rights, duties, and liabilities, and for other purposes, was read twice by its title and referred to the Committee on Inter- state Commerce. Mr. EEELINGHUYSEN. Mr. President, I desire to make a brief statement at this time. The bill is introduced without any desire to embarrass the Committee on Interstate Commerce, of which I am a member. It is introduced simply in order that it may in some way, if possible, furnish additional thought to that committee in its deliberations on the subject. This bill embodies the plan of railroad legislation worked out by the National Transportation Conference. This conference, which met at the invitation of the Chamber of Commerce of the United States, was called together by that body "to consider the broader aspects of the transportation problem and the formulation of a basis for the control and operation of the transportation facilities of the United States after the conclusion of the present Government control." In calling the conference together the National Chamber of Commerce recognized that many different interests throughout the Nation are affected by transportation, and that each interest 144 should have a voice in determining what shall be done with the railroads after the present emergency has passed. Prominent men belonging to each important interest affected by transportation — commercial, industrial, agricultural, financial, labor, govern- mental, economic, civic, and social — ^were invited to attend the conference and to take part in its deliberation. About 50 men, representing these various interests, were present. The conclu- sions finally reached by the conference are the best expression that has been made of the views of the public as a whole concerning the question, "What shall be done with the railroads ?" I shall not impose upon the patience of the Senate by reading the list of men who constituted the conference, but, with the permission of the Senate, will print in the Eecord the names, together with a brief statement of the provisions of the bill and also the referendum of the chamber of commerce on the questions which were submitted to the various commercial bodies throughout the country, together with the vote that was taken upon those questions. The PEESIDENT pro tempore. Without objection, permis- sion to do so is granted. The names referred to are as follows : "Among the prominent shippers and manufacturers were Fred- erick J. Koster, president of the San Francisco Chamber of Com- merce; W. W. Salmon, president of the General Eailway Signal Co., of Rochester, N. Y. ; W. S. Dickey, president of the W. S. Dickey Clay Manufacturing Co., of Kansas City, and George A. Post, president of the Standard Coupler Co., of New York. "Among the prominent agriculturalists who took an active part in the deliberations was the Hon. H. C. Stuart, former governor of Virginia, and chairman, of the National Agricultural Advisory Committee. "Among the bankers who helped to work out the plan of rail- road legislation were Harry A. Wheeler, vice president of the Union Trust Co., of Chicago, and three times president of the Chamber of Commerce of the United States ; and Paul M. Warburg, former- ly vice governor of the Federal Eeserve Board. "The labor leaders who participated in the deliberations of the conference included, among others, the executives of the railway brotherhoods, and Frank Morrison, secretary, and Henry Sterling, legislative representative of the American Federation of Labor. 145 "An active part in the deliberations of the conference was taken by Daniel Willaxd, president of the Baltimore & Ohio Eailroad; S. T. Bledsoe, general counsel of the Atchison; and B. G. Buck- land, president of the New Haven. "The conference was twice addressed by Hon. Walker D. Hines, Director General of Eailroads, and an active part in the discussions at the successive sessions of the conference was taken by Winthrop M. Daniels, member of the Interstate Commerce Commission, and by Charles B. Blmquist, president of the National Association of Eailroad and "Utilities Commissioners. "Prominent university professors who have given special atten- tion to transportation economics, contributed their knowledge to the work of the conference. These professors of economics included Edwin E. A. SeHgman, of Columbia University; Bmory E. John- son, of the University of Pennsylvania; W. Z. Eipley, of Harvard; John E. Commons, of the University of Wisconsin; and Henry W. Farnam, of Yale University. Of these men Prof. Johnson and Prof. Seligman were most active. "The men who were present to represent the civic and social viewpoints rather than any particular business interests included, among others, E. G. Ehett, former president of the Chamber of Commerce of the United States ; Alexander W. Smith ; ex-president of the Georgia Bar Association; and Charles P. Neill, who was Commissioner of Labor during the Eoosevelt administration." Mr. PEBLINGHUYSElSr. Mr. President, such was the per- sonnel of the conference. It would be hard to conceive of a more representative group of men. They are men of high standing who labored disinterestedly to perfect a plan of railroad legislation that would give due consideration to all the various interests affected by transportation. The work of the conference was thorough, painstaking, and comprehensive. The conference as a whole met on five different occasions, each meeting lasting for two days. The first meeting was in December of 1918, the last was in June of this year. At these five different meetings 22 sessions were held, and between the meetings committees of the conference had numerous sessions. A majority of the members of the conference attended practically all of the sessions, and voted in favor of the program finally adopted. As indicative of the freedom of discussion that prevailed in the conference, and of the open-mindedness and fairness of those who 146 participated in the work, reference may be made to a statement made before the House Committee on Interstate and Foreign Commerce by Mr. W. N. Doak, vice president of the Brotherhood of Eailroad Trainmen. Mr. Doak said : I want to make this statement in fairness and justice to the gentlemen of the conference — that they have made a most ex- haustive study, and all of their deliberations have been conducted with the utmost frankness and freedom. They tried to assemble as many representative men as it was possible in this conference from the different walks of life, and every one has had an oppor- tunity in their conference to frankly and freely express his views, and I am quite sure that the committee can well afford to give consideration to their plan. I am convinced that there are no selfish or ulterior motives that prompted these gentlemen during their deliberations. The plan of railroad legislation adopted by these gentlemen, working in the disinterested manner I have described, would, if adopted, provide for — 1. Eeturn of the railroads to private ownership and operation as soon as the necessary remedial legislation can be enacted. 2. Consolidation of existing railroads into strong competitive systems. 3. Requirement that all carriers engaged in interstate com- merce subject themselves as corporations to Federal jurisdiction. 4. Exclusive Federal regulation of the capital expenditures and the security issues of all carriers engaged in interstate commerce. 5. Interstate Commerce Commission to retain its present powers and to be given additional powers over rates. 6. Creation of a Federal transportation board, to promote the development of a national system of rail, water, and highway trans- portation; to pass upon the public necessity for capital expendi- tures; to regulate security issues; to administer and enforce the measures that may be adopted for strengthening and stabilizing railroad credit; to determine the grouping or consolidation of rail- roads deemed to be in the public interest; and to carry out plans authorized by Congress for merging all railroads engaged in inter- state commerce into strong competing systems. 7. Adjustment of the wages and working conditions of railroad employees by boards consisting of equal numbers of representatives of railroad employees and railroad officers, with the Federal Trans- portation Board as referee. 8. Adoption by Congress of a plan for the stabilization of rail- road revenues and credit by means of (a) enactment of a statutory rule providing that the rate structure established by public author- ity shall be designed to yield a net return of six (6) per cent, per 147 aniiTim upon the aggregate fair value of the property of the roads in each traffic section of the country, such fair value to be deter- mined after due consideration of both physical value and earning power, (b) Use of the aggregate property investment accounts of the railroads as the fair value of the property for rate-making purposes pending the completion of the valuation now being made by the Interstate Commerce Commission, (c) Creation of two kinds of contingent funds — an individual railroad contingent fund established by each road to support its own credit, and a general railroad contingent fund maintained by contributions from all pros- perous roads, managed by trustees appointed by the Federal Trans- portation Board and used to support the credit of all of the rail- roads of the country. Any excess in the general railroad contingent fund above $750,000,000 is to be used for the general development of the transportation system of the country. 9. Creation of a railroad reserve fund administered by the Fed- eral Transportation Board to facilitate the prompt stabilization of railroad credit, and loan of $500,000,000 to this fund by Congress as soon as the railroads are returned to their owners; this loan to be used, if necessary, in making advances to the general railroad contingent fund, and to be repaid with interest from moneys con- tributed by the railroads to the general railroad contingent fund. 10. Determination and announcement by the Federal Trans- portation Board of the grouping or consolidation of railroads deemed to be in the public interest; and authorization for the board to re- quire such consolidations if they shall not have been effected or well advanced within a period of five years after the board has declared them to be desirable. 11. Organization of the board of directors of each consolidated railroad system with 13 members of the board, 8 to be elected by the stockholders and 4 to be representatives of the employees and of the public interests. This program of legislation has been put into an appropriate leg- islative form in the bill which I have the honor to introduce. I believe this bill contains the soundest and most comprehensive plan of railroad legislation that has been presented to Congress. It is based upon the principle that the railroads in the United States should be privately owned and operated, subject to comprehensive regulation by the Federal Government; that the railroads should be so grouped as to eliminate the weak and struggling systems while maintaining effective competition among the strong systems that are perpetuated, these strong systems in due time to be con- trolled by Federal corporations whose securities are to be regu- lated by the United States; the Interstate Commerce Commission is to regulate rates, both interstate and intrastate rates, insofar as 148 the latter affect interstate commerce; a Federal transportation board is to be created to exercise the many adininistrative functions of regulation; wages and working conditions of employees are to be adjusted as at present by boards consisting of equal numbers of representatives of employees and railroad oflBcials ; the credit of the railroads is to be restored and maintained by the enactment of a statutory rule of rate making designed to yield the railroads as a whole a net return of not less than 6 per cent, per annum upon the aggregate fair value of the railroads; and to make practicable the working of the statutory rule, each railroad company is to ac- cumulate a company contingent fund to be drawn upon in lean years, and all railroads having earnings in excess of 6 per cent, per annum upon the fair value of their property are to contribute a portion of the excess earnings to a general railroad contingent fund which may be drawn upon by the railroads as a whole when the rates fixed by public authority yield less than the 6 per cent, per annum upon the aggregate fair value of the railroad property. To provide for the maintenance and prompt stabilization of rail- road credit during the period of transition from Government to corporate operation of the railroads, Congress is to loan $500,000,- 000 to the Federal transportation board to be employed as neces- sary in accordance with the provision of the bill; and lastly the boards of directors of the future consolidated railroad systems are each to consist of 13 members, 8 of whom are to be elected by the stockholders and 4 of whom are to be representatives of the employees and of the public interests served by the several systems. While the deliberations of the N'ational Transportation Conference were in progress and before its final program had been adopted, the Chamber of Commerce of the United States held its annual meet- ing in St. Louis, beginning on the 30th of April, 1919. At this meeting the board of directors of the chamber received from and adopted a report of the railroad committee of the chamber of com- merce. The members of this committee were participating in the deliberations of the national transportation conference and the re- port that they submitted to the board of directors of the chamber embodied most of the principles that were subsequently adopted by the transportation conference. The board of directors of the cham- ber submitted the report of the railroad committee to a referendum vote of the organization members of the chamber, including local chambers of commerce and other business associations. The favor- 149 able vote on this referendum by the chambers of commerce through- out the country is the best expression that could be obtained of the business sentiment of the country upon the program of railroad legislation that should be adopted by Congress. The principles of railroad legislation approved by the business interests of the country, as expressed by the referendum vote taken by the national chamber, include: (1) Corporate ownership and operation of railroads. (3) Eeturn of the roads to their owners as soon as the neces- sary legislation can be enacted. ( 3 ) Consolidation of existing roads in strong, competing systems. (4) Compulsory Federal incorporation. (5) Federal regulation of capital expenditures and security issues. (6) Federal regulation of intrastate rates affecting interstate commerce. (7) Adoption of a statutory rule of rate-making that will assure to the railroads revenue suEBcient to enable them to furnish the public with adequate facilities and efficient and economical service. (8) Creation of a Federal transportation board to promote the development of a national system of rail, water, and highway transportation. The principles voted upon in this referendum were embodied in 10 specific propositions : I. The committee recommends adherence to the policy of corporate ownership and operation, with comprehensive regulation, 1,458 votes in favor, 11 votes opposed. II. The committee recommends return of roads to corporate operation as soon as remedial legislation can be enacted, 1,458 votes in favor, 13 votes opposed. III. The committee recommends adherence to the period of Federal control as now fixed unless and until impossibility of reme- dial legislation in this period clearly appears, 1,3391^ votes in favor, 1141^ votes opposed. IV. The committee recommends permission for consolidation in the public interest, with prior approval by Government authority. in a limited number of strong competing systems, 1,3091/^ votes in favor, 1251^ votes opposed. V. The committee recommends a requirement that railroad companies engaging in interstate commerce become Federal cor- porations, with rights of taxation and police regulation reserved for States, 1,224 votes in favor, 193 votes opposed. 150 VI. The committee recommend exclusive Federal regulation of capital expenditures and security issues of railroads engaged in interstate commerce, with provision for notice and hearing for State authorities, 1,3341^ votes in favor, 901/^ votes opposed. VII. The committee recommends Federal regulation of intra- state rates affecting interstate commerce, 1,3291^ votes in favor, 1161^ votes opposed. VIII. The committee recommends a statutory rule providing that rates in each traffic section shall yield an adequate return on a fair value of the property as determined by public authority, 1,333% votes in favor, 209^ votes opposed. IX. The committee recommends payment into a fund of a share of the excess earned by any railroad system under application of the above statutory rule over an equitable minimum return upon fair value of property, this fund to be used as Congress directs for strengthening general railroad credit and increasing general rail- road efficiency, 8631^ votes in favor, 5421^ votes opposed. X. The committee recommend a Federal transportation board to promote development of a national system of rail, water, and highway transportation and articulation of all transportation fa- cilities, 1,197 votes in favor, 344 votes opposed. In accordance with these votes, the chamber is committed to each of the propositions I to VIII, inclusive, and proposition X, since more than one-third of the voting strength of the chamber was recorded upon each, and more than two-thirds of the votes thus cast, representing more than 30 States, were in favor of each of the propositions I to VIII, inclusive, aJid proposition X. The chamber is not committed to proposition IX, since two-thirds of the votes cast were not in favor of that proposition. These principles include most of the features of the plan of railroad legislation adopted by the National Transportation Con- ference. It IS entirely accurate to say that the principles upon which is based the plan of railroad legislation embodied in the bill which I have the honor to introduce have been approved by the business organizations of the country. This is a fact of great significance. The plan that was adopted after six months' deliberation by a group of between 40 and 50 men representing all the principal economic and social interests of the country has found favor with the business men of the country. I believe that a careful consideration of the plan by Congress will cause the plan to receive the support here which it has already attained from business men. I also ask permission to present and have printed in the Ebcoed a digest of the bill just introduced by me. 151 The PEESIDENT pro tempore. Without objection, it is so ordered. The matter referred to is as follows: Digest of Bill "To provide for the creation of a Federal transportation board, to define its powers and duties, to authorize the organization of Federal railroad companies, to define their rights, duties, and liabilities, and for other purposes." The contents of the bill, section by section, are summarized below : Sections 1 and 2 provide a short title and definitions. Section 3 provides that the act shall not apply to Territories or possessions. Section 4 creates a Federal transportation board composed of five members, appointed by the President with the consent of the Senate. Members of the board are provided with salaries of $12,- 000 a year and terms of 10 years. At least one member of the board must be a person experienced in the management of railroads. Section 5 authorizes the transportation board to make its rules of procedure, elect its officers, appoint a secretary, and employ other assistants. Sections 6 and 7 permit the board to examine the books and papers of railroad companies and to require by subpoena the at- tendance of witnesses and the production of documentary evidence. Testimony may also be taken by deposition. Section 8 requires the board to report annually to Congress. Section 9 provides that the board shall promote the development of a national system of rail, water, and highway transportation, properly articulated. The board is also required to inquire into the practices and operations of railroad companies. Sections 10 and 11 provide that national railroad companies may be incorporated under this act for the purpose of carrying on the business of common carriers by railroad. These corporations may be organized under the supervision of the transportation board by any number of natural persons not less than five. Sections 12 and 13 provide for the form and content of the organ- ization certificate and the filing of the certificate, while section 14 gives the national railroad corporation general corporate powers and the power of eminent domain. Sections 15 and 16 provide that the affairs of every national rail- road company shall be managed by 12 directors, of whom two are elected by the employees, eight are elected outright by the stock- holders, while the remaining two are selected by the stockholders from among persons nominated by the transportation board. Sections 17, 18, and 19 provide that the capital stock of every national railroad company shall be divided into shares of $100 each. 152 The transportation board may prescribe the amount which must be paid in on such stock in advance. The company may later change its articles of association so as to increase its authorized capital. Section 30 specifies the voting privileges connected with such stock. Sections 21, 22, and 23 permit any existing railroad company to convert itself into a national railroad company if a majority of its stock assents and if the transportation board approves, notwith- standing any State constitution or laws. It is provided that such conversion shall not interrupt the business of such railroad com- pany. Section 24 forbids any person other than a national railroad com- pany organized under this act to engage in the business of a common carrier by railroad in interstate commerce, from and after two years from the passage of the act, unless the transportation board grants an extension of time in the case of a particular carrier. Section 25 provides that no railroad company may issue stock bonds or other securities without the approval of the transportation board. Section 26 makes unlawful the charging or collecting of any rate which injuriously affects interstate commerce, thus extending the rule of the Shreveport case. Section 27 requires the Interstate Commerce Commission to di- vide the United States into traffic sections for rate-making pur- poses. These sections may be based on geographical boundaries or groupings of railroads, or both. Sections 28 and 29 provide for representatives of the railroads meeting ia conferences, and constructing schedules of rates designed to produce revenue suBBcient to yield earnings of not less than 6 per cent, on the aggregate value of all the railroad property in each traffic section. The Interstate Commerce Commission then passes upon these schedules as a whole, after which they are initiated by the individual carriers affected, when they become subject to all the provisions of the Interstate Commerce act. Section 30 supplements section 19a of the Interstate Commerce act respecting the valuation of railroads. Pending the completion of the commission's valuation, the aggregate property investment accounts of the railroads in each traffic section shall be deemed to represent the fair value of the railroad property in such section. Section 31 provides that in any year when the earnings of any railroad exceed 6 per cent, of the value of its property, one-half of the excess shall be placed in a contingent fund to be maintained by each railroad company, and the other half shall be paid into a gen- eral railroad contingent fund. Provision is made for revising the permitted rate of return decennially. Section 32 permits a railroad company to draw upon its own con- tingent fund when, and to the extent that, its net income falls below 6 per cent, of the value of its property. 153 Section 33 requires any railroad company which has accnimilated an adequate contingent fund to turn over two-thirds of its excess income into the general railroad contingent fund, the remaining one-third to be retained by the company. Section 34 provides that the general railroad contingent fund which is to be managed by five trustees shall be drawn upon when and to the amount that the railroads as a whole in a given trafBc section fail in any year to earn 6 per cent, upon the aggregate fair value of their property. The money is to be distributed among all the railroads of the traffic section in proportion to gross earnings. Section 35 provides that the general railroad contingent fund shall be maintained at $750,000,000, any excess to be used for de- veloping a national transportation system, or for reducing the cap- ital or investment accounts of railroad companies. Such excess may also be covered into the Treasury of the United States, if Congress so directs. Section 36 appropriates $500,000,000 for a railroad reserve fund to pay deficiencies which the general railroad contingent fund is unable to pay within 10 years after the passage of this act. Such sums so paid must be repaid with interest by the carriers. Section 37 provides that the acts of Congress which prohibit monopolies and combinations shall not be construed to prevent con- solidations and mergers under this act. Section 38 requires the transportation board and the railroads to prepare plans for grouping the railroads of the country into a "limited number of strong competitive systems, so arranged that each traffic center shall be served by more than one such system." Within five years after the board completes and approves such plans, the railroads are required to effect the mergers, consolidations, and reorganizations prescribed by the board. Section 39 provides that the power of the States over railroad companies with respect to taxation and police regulation shall not be impaired by the incorporation or reincorporation of a railroad under this act. Section 40 provides for labor boards, composed of equal numbers of representatives of railroad companies and employees to consider demands relating to wages, hours, or working conditions. Decisions of these boards are binding on the company and on the employees. In ease of a deadlock, the transportation board acts as referee. Section 41 appropriates $300,000,000 to be used as a revolving fund to enable the transportation board to make necessary loans to railroads which deserve financial assistance and which can not secure loans elsewhere. Section 43 appropriates $500,000 to meet the expenses of admin- istering the act. 154 Section 43 provides that the invalidity of any part of the act shall not affect the validity of the remainder. Section 44 provides that the act shall become effective on the termination of Federal control of the. railroads, except that those sections creating the transportation board and vesting it with certain powers and duties shall take effect on the passage of the act. XVII THE FRELINGHUYSEN BILL TEXT OF THE BILL Senate bill 2998 introduced September 15, 1919, by Hon. Joseph S. Frelinghuysen of New Jersey, embodies, with a few minor ex- ceptions, the entire program of railroad legislation worked out and adopted by the National Transportation Conference. The text of the bill is as follows : A BILL To provide for the creation and organization of a Federal Trans- portation Board, to define its powers and duties, to authorize the organization of national railroad companies, to define their rights, duties, and liabilities, and for other purposes. 1 Be it enacted hy the Senate and House of Representor 2 tives of the United States of America in Congress assembled^ 3 That this Act may be cited as the "Federal Transportation 4 Board Act." 5 Definitions 6 Sec. 2. That when used in this Act, unless the context 7 indicates otherwise — 8 The term "rates" means rates, fares, tariffs, and 9 charges and classifications, regulations, and practices, 10 relating thereto. 156 1 The term "person" means an individual or a corpora- 2 tion or other association of two or more individuals. 3 The term "Interstate Commerce Act" means the Act 4 entitled "An Act to regulate commerce," approved Feb- 5 ruary 4, 1887, and all Acts amendatory thereof and sup- 6 plemental thereto. 7 The term "commission" means the Interstate Com- 8 merce Commission. 9 The term "board" means the Federal Transportation 10 Board created by this Act. 11 The term "national railroad company" means a corpora- 12 tion organized under the provisions of this Act. 13 The term "State railroad company" means a railroad 14 engaged in interstate commerce but not incorporated under 15 the provisions of this Act. 16 The term "railroad company" means a national railroad 17 company or a State railroad company. 18 The term "carrier" means a common carrier by rail en- 19 gaged in interstate commerce, whether a national railroad 30 company or a State railroad company. 31 The term "documentary evidence" means books, ac- 33 counts, records, papers ajad correspondence. 23 The term "securities" means stock, bonds, notes, trust 34 certificates, and other evidences of indebtedness of or interest 35 in a railroad company. 157 1 Sec. 3 That this Act shall apply to the United States, 2 but not to its territories or possessions. 3 Federal Transportation Board. 4 Sbc. 4. That a Federal Transportation Board is hereby 5 created. The board shall consist of five members appointed 6 by the President, by and with the advice and consent of the 7 Senate. Each member of the board shall receive an annual 8 salary of $12,000, payable monthly, together with actual 9 necessary traveling expenses. 10 No person who has served as a Senator or Representa- 11 tive in Congress shall become a member of the board within 13 five years after the termination of his term of office in Con- 13 gress. No member of the board shall engage in any other 14 business, vocation, or employment. No person shall, while a 15 member of the board or for two years after the termination of 16 his connection with the board, hold any office, position or 17 employment in or under any railroad company, or hold or 18 own any securities or other pecuniary interest in any rail- 19 road company or in any partnership, association or corpora- 20 tion manufacturing, producing or selling railroad supplies. 21 At least one of the members of the board shall be a person 22 experienced in the management and operation of railroads. 23 Of the members first appointed one shall be designated by 24 the President to serve for two years, one for four years, one 25 for six years, one for eight years, and one for ten years; 158 1 and each member thereafter appointed for a full term shall 2 serve for ten years. Vacancies occurring before the end of 3 a term shall be filled by an appointment for the unexpired 4 term. The President may remove any member of the board 5 upon filing with the board a statement of his reasons for such 6 removal. 7 Sec. 5. That the board may make its own rules of 8 procedure and change such rules from time to time. It shall 9 annually elect from among its own membership a chairman 10 and vice chairman, and shall fix the duties of these officers. 11 It shall appoint a secretary at a salary of $6,000 per annum, 13 and may employ and fix the compensation of such attorneys, 13 special experts, examiners, clerks, and other employees as 14 it may require, from time to time, and as may be appro- 15 priated for by Congress. With the exception of the secre- 16 tary, the attorneys and such special experts and examiners 17 as the board may from time to time find necessary for the 18 conduct of its work, all employees shall be appointed from 19 lists of eligibles to be supplied by the Civil Service Commis- 30 sion and in accordance with the Civil Service Law. 31 Powers op Board 33 Sec. 6. That the board may, by one or more of its mem- 33 bers, or by such examiners as it may designate, prose- 34 cute any inquiry necessary to the performance of its duties 25 in any part of the United States. For this purpose the 159 1 board or its duly authorized agents shall at all reasonable 2 times have access to, for the purpose of examination, and 3 the right to copy, any documentary evidence of any rail- 4 road company, the affairs of which it is investigating; and 5 the board shall have power to require by subpcBna the at- 6 tendance of witnesses and the production of all such docu- 7 mentary evidence relating to any matter under investigation. 8 Any member of the board may sign such subpoenas, and the 9 members and examiners of the board may administer oaths 10 and affirmations, examine witnesses, and receive evidence. 11 The attendance of witnesses and the production of such docu- 12 mentary evidence may be required from any place in the 13 United States at any designated place of hearing. In case 14 of disobedience to a subpoena, the board may invoke the aid 15 of any district court of the United States in requiring the 16 attendance and testimony of witnesses and the production of 17 documentary evidence, and the court within the jurisdiction 18 of which such inquiry is carried on may, in the case of con- 19 tumacy or refusal to obey a subpoena issued to any railroad 30 company or other person, issue an order requiring such rail- 21 road company or other person to appear before the board, 22 or to produce documentary evidence, if so ordered, or to 23 give evidence touching the matter in question; and any 24 failure to obey such order may be punished by the court as a 25 contempt thereof. 160 1 No person shall be excused from attending and testi- 2 fying, or from producing documentary evidence before the 3 board, in obedience to the subpoena of the board, on the 4 ground that it may tend to incriminate him or subject him 5 to a penalty or forfeiture, but no natural person shall be 6 prosecuted or subjected to any penalty or forfeiture for or 7 on account of any transaction, matter, or thing as to which, 8 in obedience to a subpoena and under oath, he may so testify 9 or produce evidence, except that no person shall be exempt 10 from prosecution and punishment for perjury for so tes- 11 tifying. 12 Sec. 7. That the board may order testimony to be 13 taken by deposition in any proceeding or investigation, or 14 at any stage of such proceeding or investigation pending 15 under this Act. Such deposition may be taken before any 16 person designated by the board and having power to ad- 17 minister oaths. Such testimony shall be reduced to writing 18 by the person taking the deposition, or under his direction, 19 and shall then be subscribed by the deponent. Any person 20 may be compelled to appear and depose and to produce doc- 21 umentary evidence in the same manner as witnesses may 22 be compelled to appear and testify and produce documentary 23 evidence before the board as hereinbefore provided. 24 Witnesses summoned before the board shall be paid the 25 same fees and mileage that are paid witnesses in the courts 161 1 of the United States, and witnesses whose depositions are 2 taken and the persons taking the same shall severally be 3 entitled to the same fees as are paid for like services in the 4 courts of the United States. 5 Any officer, agent, or employee of the board who shall, 6 without its authority, make public any information obtained 1 by the board, unless directed by a court, shall be guilty of a 8 misdemeanor, and upon conviction shall be punished by a 9 fine not exceeding $5,000, or by imprisonment not exceed- 10 ing one year, or by both such fine and imprisonment, in the 11 discretion of the court. 13 Sec. 8. That the board shall, on or before the 1st day 13 December in each year, make a report to Congress, which 14 shall include its recommendations and the results of its in- 15 vestigations, a summary of its transactions, and a statement 16 of all expenditures and receipts under this Act, and the 17 names and compensation of all persons employed by the 18 board, who are paid remuneration of more than $3,500 19 per annum. 30 Sec. 9. That, in addition to the powers expressly con- 31 ferred upon it by this Act, it shall be the duty of the board 33 to promote the development of a national system of rail, 23 water, and highway transportation, by providing for the 34 articulation of railroads with waterways for traEBc purposes, 25 by bringing about the common use and construction of termi- 162 1 nal and transfer facilities at the principal traflSc centers, and 2 by such other means as may be found practicable and in the 3 public interest. The board shall also inquire into practices 4 relating to railroad management and operation, and shall 5 propose measures for preventing inefficiencies and abuses 6 therein. 7 National Eaileoad Companies 8 Seo. 10. That national railroad companies for carrying 9 on the business of common carriers by railroad in interstate 10 commerce may be formed under the provisions of this Act. 11 Such national railroad companies are hereby declared to be 12 military and post roads, as well as instrumentalities for the 13 regulation of interstate commerce and the carriage of Gov- 14 ernment supplies. 15. Sec. 11. That such national railroad companies may be 16 formed by any number of natural persons not less than five. 17 The incorporators shall enter into articles of association speci- 18 fying in general terms the object for which the corporation 19 is to be formed, and such other provisions not inconsistent 30 with law as such corporation may be authorized to adopt for 21 the regulation of its business and the conduct of its affairs. 22 Forms for such articles of association shall be prescribed by 23 the board, and supplied by it on application to persons desir- 24 ing to incorporate hereunder. The articles shall be signed by 163 1 the incorporators, and shall be filed with and preserved by 2 the board. 3 Sec. 12. That the ineorporators shall fill out an organi- 4 zation certificate on forms provided by the board, which shall 5 state: (a) That the subscribers thereto associate themselves 6 with the intention of forming a national railroad company 7 under the provisions of this Act; (b) the corporate name 8 assumed, which name shall be subject to the approval of the 9 board; (c) the location of the principal office and division 10 offices; (d) the termini and route of the proposed line of rail- 11 road to be operated by the corporation; (e) the total amount 12 of capital stock of the corporation to be authorized, the par 13 value of the shares, the number of shares in which the capital 14 stock is to be divided, and the restrictions, if any, imposed 15 upon their transfer; and if there are to be two or more classes 16 of stock, a description of the different classes and the terms 17 on which they are to be created and the method of voting 18 such stock; (f) the names and places of residence of the in- 19 corporators and the amount of stock subscribed for by each; 20 (g) such other details of the corporate organization as the 21 board may from time to time prescribe. 22 Sec. 13. That the organization certificate shall be 23 acknowledged before the judge of a court of record or notary 24 public, and shall be, together with the acknowledgment 164 1 thereof, when authenticated by the seal of such court or 2 notary, transmitted to the board, which shall record and pre- 3 serve the same. 4 Sec. 14. That upon duly making and filing articles of 5 association and an organization certificate, as hereinbefore 6 provided, the incorporators shall become, as from the date of 7 the execution of the organization certificate, a body corpo- 8 rate, and as such and under the name designated such na- 9 tional railroad company shall have nower (a) to adopt and 10 use a corporate seal; (b) to have perpetual succession, sub- 11 ject to dissolution by Act of Congress or by forfeiture of 13 franchises for violation of law, and subject to the power of 13 Congress to modify, expand, or extinguish by law any of the 14 powers, franchises, or privileges of the corporation; (c) to 15 mate contracts, incur liabilities, and borrow money on its 16 credit and for its use; (d) to sue and be sued, complain, and 17 defend in any court of law or equity as fully as natural 18 persons; (e) to own, hold, purchase, transfer, convey, mort- 19 gage, lease, or control such real and personal property as the 30 purposes of the corporate business may require; (f) to exer- 31 cise the power of eminent domain; (g) to elect or appoint 33 directors, who in turn may appoint and employ suitable 23 ofi&cers, agents, and employees, and define their duties and 34 obligations, fix their salaries, and dismiss such officers or 25 any of them at pleasure, and appoint others to fill their 165 1 places; (h) to adopt by its board of directors by-laws not 2 inconsistent with law or with any rules or regulations pre- 3 scribed by the board, regulating the manner in which its 4 stock may be transferred or exchanged, its directors elected 5 or appointed, its officers appointed, its property transferred, 6 its general business conducted, and the privileges granted to 7 it by law exercised and enjoyed; (i) to have a capital stock 8 of such an amount as may be fixed in its articles of associa- 9 tion or certificate of organization, or in amendments thereto 10 as hereinafter provided; (j) to acquire, own, control, and 11 operate railroads, and to acquire and control a majority of 13 the capital stock thereof, and to purchase the land grants, 13 franchises, and appurtenances of, and consolidate, on such 14 terms as may be agreed upon between the parties, with any 15 railroad company or companies heretofore chartered by Fed- 16 eral, State, or Territorial authority. All the rights, fran- 17 chises, and privileges and all the property and appurtenances 18 of every description belonging to a railroad company so pur- 19 chased or consolidated shall vest in and become absolutely 20 the property of such national railroad company; (k) to 21 exercise, enjoy and perform all the powers, benefits, fran- 22 chises, duties, obligations, and privileges of a carrier of 23 freight and passengers, and all business iacident thereto or a 24 part thereof. 166 1 Sec. 15. That the afEairs of such national railroad com- 2 pany shall be managed by twelve directors, of whom: (a) 3 two shall be elected by the employees of the corporation 4 acting through their trade-unions and brotherhoods in such 5 manner as the board shall direct; (b) eight shall be elected 6 by the stockholders in such manner as the board shall direct ; 7 (c) two shall be elected by the stockholders from six persons 8 proposed to the stockholders by the board: Provided, That, 9 if only one appointment is to be made, three persons shall 10 be so proposed. 11 Sec. 16. That the directors of a national railroad com- 12 pany shall hold office for one year, except those elected by 13 the stockholders from persons proposed to the stockholders 14 by the board, who shall hold office for three years. A va- 15 eancy in the board of directors shall be filled for the unex- 16 pired term in the manner provided for the original selection 17 of such directors. No vacancy in the board of directors 18 shall impair the right of the remaining members to exercise 19 all the powers of such board. The board of directors shall 20 annually elect one of its members as chairman and one as 21 vice chairman. 22 Sec. 17. That the capital stock of every national rail- 23 road company shall be divided into shares of $100 each, and 24 shall be transferable on the books of the company in such 25 manner as may be prescribed by the board. Every person 167 1 becoming a stockholder by such transfer shall, in proportion 3 to his shares, succeed to all the rights and liabilities of the 3 prior holder of such shares ; and no change shall be made in 4 the articles of incorporation by which the rights, remedies, or 5 security of the existing creditors of the company shall be 6 impaired. 7 Sec. 18. That such proportion of the authorized capi- 8 tal stock of every national railroad company as the board 9 may by order prescribe, shall be paid in before such com- 10 pany shall be authorized to commence business; and the re- 11 mainder of such stock shall be paid in such installments and 13 at such times as the board may by order direct. The pay- 13 ment of each of such installments shall be certified to the 14 board imder oath by the president or treasurer of the com- 15 pany. 16 Sec. 19. That any national railroad company may, 17 by its articles of association, provide for an increase of its cap- 18 ital from time to time, as may be deemed expedient. But 19 the maximum of such increase to be provided in the articles 30 of association shall be determined by the board. 31 Sec. 30. That in all elections of directors, and in de- 33 ciding all questions at meetings of stockholders, each stock 33 holder shall be entitled to one vote for each share of stock 34 held by him. Stockholders may vote by proxies duly au- 35 thorized in writing; but no officer, clerk, teller, bookkeeper, 168 1 or other employee of such national railroad company shall 3 act as proxy; and no stockholder whose liability is past due 3 and unpaid shall be allowed to vote, 4 Eeincoepoeatiout of Eailkoad Companies 5 Sec. 21. That any State railroad company may, by vote 6 of a majority of its stock and with the approval of the board, 7 be converted into a national railroad company under this 8 Act, under such name as the board may approve. In such 9 cases the articles of association and an organization certifi- 10 cate as required by this Act for the original creation of a 11 national railroad company, shall be executed by such State 13 railroad company, acting by authority of a majority vote of 13 its directors, who shall have been thereto duly authorized 14 by the vote of not less than a majority of the entire voting 15 capital stock of such company, by appropriate resolutions 16 duly entered upon its minutes authorizing the change and 17 conversion of such State railroad company into a national rail- 18 road company. The majority of the directors, after duly 19 executing the articles of association and the organization cer- 30 tificate, shall have power to execute all other papers and do 31 whatever may be necessary to complete and perfect the con- 33 verted organization of a national railroad company under the 33 provisions of this Act. 34 Sec. 33. That such change and conversion of any State 35 railroad company into a national railroad company, as herein 169 1 provided, shall not close or interrupt the business of such 2 railroad company as a common carrier, nor shall any of its 3 existing obligations to others, nor any existing obligations 4 of others to it, be in any manner prejudiced or impaired, but 5 such State railroad company shall continue as a corporation, 6 with the same officers and directors until other directors, as 7 hereinafter provided, shall have been chosen, and the same 8 property, assets, and business as before its conversion, save 9 only that jurisdiction over it as a corporation, shall be vested 10 in the Government of the United States under the provisions 11 of this Act. The shares of any such corporation may con- 13 tinue to be for the same amount each as they were before 13 the conversion, and the directors may continue to be direc- 14 tors of the corporation until others are elected in accordance 15 with the provisions of this Act. When the board issues to 16 such corporation a certificate affirming that the provisions 17 of this Act have been complied with, such corporation and 18 all its stockholders, officers, and employees shall have the 19 same powers and privileges and shall be subject to the same 20 duties, liabilities, and regulations in all respects as shall be 21 or have been prescribed by this Act and by the board for 32 corporations originally organized as national railroad com- 23 panics. 24 Sec. 23. That all the provisions of this Act, relating 25 to the reincorporation hereunder of State railroad com- 170 1 panies, shall be effective notwithstanding the provisions of 2 any State or Territorial laws or constitutions which now or 3 hereafter may be inconsistent therewith. 4 Sec. 24 That from and after two years from the pas- 5 sage of this Act, no person, except a national railroad com- 6 pany organized under the provisions of this Act, shall en- 7 gage in the business of a common carrier by railroad in in- 8 terstate commerce, unless upon application and after full 9 investigation and hearing, under such procedure as the board 10 may prescribe, the board shall grant to a particular State 11 railroad company existing at the time of the passage of this 12 Act, an extension of time, not to exceed a further period of 13 two years, in which to comply with the provisions of this 14 Act. 15 Eequlation of Issues of Securities 16 Sec. 25. That, from and after the date when the opera- 17 tion of railroads is resumed by their owners, no stock, and 18 no other securities maturing more than two years after the 19 date of issuance thereof, shall be issued, sold or negotiated 30 by any national railroad company or any State railroad 21 company, except with the express approval of the board. 22 Before issuing such securities, such railroad company shall 23 petition the board, setting forth the total par or face value 24 of the securities proposed to be issued, the rate of interest 25 to be paid thereon and the purposes for which the proceeds 171 1 are to be used. The board, after due investigation under 2 such procedure as it may by general order prescribe, may 3 by order approve or disapprove such petition, or approve 4 it in part and disapprove it in part, and may grant its ap- 5 proval under such terms and conditions as it may see fit, 6 relating to the issuance, sale, and negotiation of such securi- 7 ties, the minimum price at which such securities may be 8 sold, exchanged or negotiated, the interest provided there- 9 for, and the use of the proceeds derived therefrom. All se- 10 curities issued, sold or negotiated without such express ap- 11 proval of the board shall be void: Provided, That any mis- 13 application of the proceeds derived from the issuance, sale 13 or negotiation of such securities shall not affect the validity 14 of such securities. Such railroad companies shall use the 15 proceeds of the issuance, sale or negotiation of such securi- 16 ties only for the purposes approved by the board as herein 17 provided, and in accordance with the terms and conditions 18 in the order of the board containing such approval. 19. Sec. 26. That it shall be unlawful for any railroad 20 company to charge collect or enforce rates which injur- 21 iously affect interstate commerce. The commission, such 32 railroad companies, and all other persons shall have the same 23 powers, rights, and remedies, and the same duties, obliga- 24 tions, and liabilities, with respect to rates that injuriously S. 2998 2 172 1 affect interstate commerce, as are conferred or imposed on 2 them, or any of them, by the Interstate Commerce Act with 3 respect to the rates referred to therein. 4 Traffic Sectiosts 5 Sec. 27. That, as soon as practicable after the passage 6 of this Act, the commission shall determine and prescribe 7 by general order such number of traffic sections as it may 8 deem desirable for rate-making purposes under the provi- 9 sions of this Act, and it may from time to time rearrange 10 or change the number of such traffic section. Such traffic 11 sections may be based either on geographical boundaries 13 or on appropriate groupings of railroad systems, or both, 13 and they shall be so arranged, as far as practicable, that 14 every large terminal shall be placed within the same traffic 15 section as the railroad system which such terminal serves. 16 Sec. 38. That, within ninety days after the issuance of 17 the commission's order prescribing such traffic sections, all 18 State and National railroad companies in each such traffic sec- 19 tion shall send representatives to a rate-making conference to 30 be held therein, at such time and under such regulations 31 as the commission may by general order prescribe. The 33 representatives of the railroad companies in each such eon- 33 ferenee shall revise and reconstruct the existing schedules 34 of rates applicable to the carriage of passengers and property 35 wholly within such traffic section, under such regulations 173 1 for the proper coordination of such rates as the commission 2 may by general order prescribe. Each such traffic section 3 rate-making conference shall, at such time and under such 4 regulations as the commission may by general order pre- 5 scribe, select representatives to a general rate-making con- 6 ference. The representatives attending such conference 7 shall revise and reconstruct all existing schedules of rates 8 applicable to the carriage of passengers and property from 9 one traffic section to another such section, under such regu- 10 lations for the proper coordination of such rates as the com- 11 mission may by general order prescribe. The revised and 12 reconstructed rate schedules prepared by such conferences 13 shall be designed to produce a net aggregate annual railway 14 operating income -for all the State and National railroad 15 companies in each traffic section, after such provision has 16 been made for renewals and depreciation as the commission 17 shall by general order prescribe, equal to not less than 6 18 per centum per annum upon the aggregate fair value of 19 all the property in each traffic section devoted to the public 20 use by all State and National railroad companies therein. 21 Representatives of shippers and of the general public shall 22 be permitted to submit to such conferences recommendations 23 respecting changes or proposed changes of rates, and the 24 representatives in such conferences shall consider such 25 recommendations. 174 1 Seo. 39. That such revised and reconstructed schedules 2 of rates shall be promptly filed with the commission by the 3 representatives attending such conferences. The commis- 4 sion shall consider such schedules as a whole and according 5 to trafiSc sections, and shall approve them if, in its opinion, 6 they are adequate to produce such revenues, and are fair 7 and reasonable in aU other respects. Such revised and 8 reconstructed schedules of rates, when so approved by the 9 commission, shall be published and filed by the individual 10 railroad companies affected, in the manner provided in the 11 Interstate Commerce Act. The commission may then act 13 upon such rates individually, as provided in the Interstate 13 Commerce Act. The commission, the railroad companies, 14 their directors, officers, agents, and .employees, and all other 15 persons shall have the same rights, powers, and remedies, 16 and the same duties, obligations, and liabilities, with respect 17 to such rates so initiated, as are conferred or imposed on 18 them, or on any of them, by the Interstate Commerce Act 19 with respect to the rates provided for therein. 30 Valuation and Contingent Funds 31 Sec. 30. That the aggregate fair value of all the prop- 23 erty in each traffic section devoted to a public use by the 33 State and National railroad companies therein shall be ascer- 24 tained by the commission from data obtained by the If 35 commission in the valuation proceedings authorized by sec- 175 1 tion 19a of the Interstate Commerce Act. In determining 2 such fair value, the commission shall consider earning power, 3 and any urgent equities involved in particular cases, as well 4 as other factors of value which, under the provisions of such 5 section 19a, the commission is authorized to consider in de- 6 termining the final valuation provided for therein. Pending 7 the completion of such valuation by the commission, the 8 aggregate railroad property investment accounts of all the 9 State and National railroad companies in each traffic section 10 shall, for the purposes of this Act, be deemed to represent 11 the aggregate fair value of all the property in a traffic section 12 devoted to a public use by the railroad companies therein: 13 Provided, That, if part of the property of any such railroad 14 company is not wholly within one traffic section, the board 15 shaU determine what part of the railroad property investment 16 Jaccount of such railroad company shall be applied to each 17 traffic section in which such property is located, for the 18 purpose of determining the aggregrate railroad property in- 19 vestment accounts of each of such traffic sections. 20 Sec. 31. That in any year in which the railway oper- 21 ating income of any State or National railroad company ex- 22 ceeds 6 per centum on the fair value of its property, deter- 23 mined as hereinbefore provided, one half of such excess shall 24 be placed in a contingent fund established and maintained by 25 st.3h railroad company, and the remaining one-half of such 176 1 excess shall be turned over to the general railroad contingent 2 fund established and maintained as hereinafter provided : Pro- 3 vided. That, in the year 1930 and in every tenth year there- 4 after, the board, after consultation with the Federal Keserve 5 Board, shall determine what, under the conditions then 6 existing, constitutes a fair and adequate return upon the 7 fair value of such railroad property, and the board may in- 8 crease or decrease the 6 per centum of return herein estab- 9 lished as a basis for determining the excess income. Pending 10 the completion of the commission's valuation, the fair value 11 of the property of any railroad company, for the purposes 13 of this section shall be held to be a sum equivalent to that 13 proportion of the aggregate property investment accounts of 14 all the railroads in the same traf&c section which its average 15 annual railway operating income (computed for the period 16 and in the manner prescribed by the Act entitled "An Act 17 to provide for the operation of transportation systems while 18 under Federal control, for the just compensation of the 19 owners, and for other purposes," approved March 31, 1918) 20 bears to the aggregate annual railroad income of all the rail- 31 road companies of such traffic section, computed for the same 33 period and in the same manner: Provided, That, if the use 33 of this rule shall result in a valuation of the property of any 34 railroad company which is greater than the amount of its 25 average railroad property investment account for the three- 177 1 year period ending June 30, 1917, the amount of such prop- 2 erty investment account shall be used instead of the valuation 3 derived by such rule : Provided further. That nothing herein 4 contained shall operate to reduce the railway operating in- 5 come which any such railroad company shall be permitted 6 to retain below the compensation computed or allowed to it 7 under such act of March 21, 1918. To the valuation of the 8 property of any railroad company, derived in accordance 9 with the provisions of this section, there shall be added all 10 legitimate increases of property investment account made by 11 such carrier after June 30, 1917. 12 Sec. 32. That for the purpose of paying dividends or 13 interest on its stocks, bonds, or other securities, a railroad 14 company may draw upon its contingent fund, whenever, 15 and to the extent that its said annual railway operating in- 16 come shall fall below 6 per centum of the fair value of its 17 property, determined as provided in this Act. 18 Sec. 33. That in any year in which the railway operat- 19 ing income of a railroad company which has accumulated 20 and is maintaining a contingent fund equal to 6 per centum 21 of the fair value of its property, determined as provided in 22 this Act, exceeds 6 per centum of such fair value, such rail- 23 road company shall turn over to the general railroad contin- 24 gent fund two-thirds of such excess railway operating in- 25 come, and the remaining one-third of such excess shall be 178 1 retained by the railroad company for distribution among its 2 stockholders, or for such other lawful purposes as it may de- 3 termine. 4 Sec. 34. That there shall be established a general rail- 5 road contingent fund, which shall be managed by five 6 trustees, appointed by the board from persons nominated 7 by the national and State railroad companies, in accordance 8 with rules and regulations prescribed by the board. The 9 general railroad contingent fund shall be used for the pur- 10 pose of making good the deficiency in any year of the aggre- 11 gate annual railway operating income of all the railroad com- 12 panics in any traffic section below 6 per centum of the 13 aggregate fair value of the properties of such railroad com- 14 panies. The amount of such deficiency shall be drawn from 15 the general railroad contingent fund by the trustees thereof, 16 and shall be distributed among the railroad companies in 17 such traffic section upon the basis of the gross earnings from 18 railroad operations of the railroad companies within such sec- 19 tion; and if the sum of the amount received by any railroad 30 company from this distribution and the railway operating in- 21 come of such company exceeds 6 per centum of the fair 22 value of its property, the excess shall be divided and applied 23 as provided in section 31 with respect to excess railway oper- 24 ating income. In any year, following the completion of 25 the consolidations' and mergers hereinafter provided for, in 179 1 which the aggregate railway operating income of the rail- 2 road companies in any traffic section shall equal or exceed 3 6 per centum of the aggregate fair value of their property, 4 and in which the total contribution made by such railroad 5 companies to the general railroad contingent fund amounts 6 to less than 5 per centum of the aggregate railway operat- 7 ing income in that traffic section, the railroad companies in 8 that section shall contribute to the general railroad contingent 9 fund the amount necessary to bring their aggregate contribu- 10 tion for the year up to 5 per centum of such aggregate 11 railway operating income. In such case each railroad com- 13 pany shall contribute for this purpose pro rata to its railway 13 operatiag income for that year. Moneys turned over to the 14 fund shall be invested by the trustees in United States Gov- 15 emment securities or shall be deposited in the Federal re- 16 serve banks. 17 Sec. 35. That the general railroad contingent fund shall 18 be accumulated under the direction of its trustees until it 19 amounts to $750,000,000 and shall be maintained approxi- 20 mately at that sum for the purposes provided for in this Act. 21 Any excess thereafter acquired shall be used as directed by 22 the board for the development of the national railroad trans- 23 portation system, or for the increase of transportation equip- 24 ment and facilities, or for the pro rata reduction of the capital 180 1 or capital obligations and property investment accounts of 2 any railroad company, or, if so ordered by Act of Congress, 3 the excess shall be turned over to the Treasury of the United 4 States. 5 EAILEOAD EESEEVB FUND. 6 Sec. 36. That the sum of $500,000,000 is hereby ap- 7 propria ted out of any moneys in the 'Treasury of the United 8 States not otherwise appropriated, which sum shall constitute 9 a railroad reserve fund. This fund shall be administered by 10 the board, which shall invest it in United States bonds or 11' notes. The interest accruing from such bonds and notes, 12 and the earnings upon the proceeds thereof, shall be covered 13 annually into the Treasury of the United States. If at any 14 time within ten years after the approval of this Act the 15 general railroad contingent fund shall not be sufficient to 16 pay deficiencies as provided in section 34, the board shall 17 advance to the general railroad contingent fund from the 18 railroad reserve fund the amount necessary to enable the 19 trustees of the general railroad contingent fund to pay to 20 the railroad companies the sums due to them for that year 21 under the provisions of section 34: Provided, however. That 22 any sums so paid by the board shall be repaid at the rate 23 of 5 per centum per annum to the board and deposited 24 by it in the railroad reserve fund by the trustees of the gen- 25 eral railroad fund from contributions out of excess income 181 1 received from the railroad companies, as provided in this 2 Act, after the general railroad contingent fund shall have 3 reached the sum of $500,000,000, but such repayment shall 4 only be made from amounts in excess of $500,000,000 in 5 such fund. 6 Sec. 37. That the provisions of section 5 of the Inter- 7 state Commerce Act, or of the Act entitled "An Act to 8 protect trade and commerce against unlawful restraints and 9 monopolies," approved July 2, 1890, or of the Act entitled 10 "An Act to supplement existing laws against unlawful re- 11 straints and monopolies," approved October 15, 1914, or 12 of sections 73-77, inclusive, of the Act entitled "An Act 13 to reduce taxation, to provide revenue for the Government, 14 and for other purposes," approved August 27, 1894, or the 15 Act entitled "An Act to amend sections 73 and 76 of the 16 Act of August 27, 1894, entitled 'An Act to reduce taxa- 17 tion, to provide revenue for the Government, and for other 18 purposes,'" approved February 12, 1913, shall not affect 19 or prevent any consolidation and merger of national railroad 20 companies or State railroad companies which has been 21 approved by the board. 22 GROUPING OF EAILEOADS. 23 Sec. 38. That the board shall, as soon as practicable 24 after the passage of this Act, prepare and announce plans 25 for the grouping of all existing railroads into a limited num- 182 1 ber of strong competitive systems, so arranged that each 2 traflBc center shall be served by more than one such system. 3 Pending the completion of the board's plans for the grouping 4 of the railroads, any national railroad company or any State 5 railroad company may prepare and submit to the board 6 plans for its consolidation and merger with any other Na- 7 tional or State railroad company or companies, and the 8 board, if it finds such plans consistent with its plans for the 9 ultimate grouping of the railroads, shall approve and author- 10 ize such proposed merger and consolidation. Within five 11 years from the date of the completion and announcement l3 by the board of its plans for the grouping of railroads, and 13 the consolidation of National and State railroad companies, 14 it shall be the duty of such railroad companies to effect, under 15 the supervision of the board, the mergers, consolidations, 16 corporate reorganizations, transfers of property, and other 17 action required to carry out the plans of the board. Any 18 such National or State railroad company which fails or re- 19 fuses to comply with any order of the board relating to such 20 grouping and consolidation of railroads within such period 21 of five years after the announcement of the board's com- 22 pleted plans in relation thereto, shall, unless such time be 23 extended on application to the board, be subject to a penalty 24 in the sum of 10 per centum of its annual railway operating 25 income, to be recovered in proceedings instituted in the 183 1 courts of the United States by the Attorney General. When 2 recovered such sum shall be paid into the general railroad 3 contingent fund. 4 Sec. 39. That nothiag in this Act shall be construed 5 to amend, repeal, impair, or affect the existing power of the 6 several States relating to the taxation of railroad companies, 7 or the police regulations of such railroad companies, or their 8 operation, whether owned or operated by a national railroad 9 company or a State railroad company. Except as may here- 10 after be provided by Act of Congress, a national railroad 11 company shall be subject to all the duties, obligations, and 12 liabilities now or hereafter imposed upon railroad companies 13 by the several States in pursuance of such power of taxa- 14 tion and police regulations, and shall further be subject to 15 all duties, obligations, and liabilities imposed by any State 16 upon any State railroad company existing at the time of 17 the passage of this Act which is hereafter merged and con- 18 solidated with or converted into such national railroad com- 19 pany, except as provided in this Act. 20 LABOR BOARDS. 21 Sec. 40. That any demands or requests which may be 22 made by the employees of any National or State railroad 33 company relating to wages, hours of labor, or working con- 24 ditions may be adjusted by a board composed of equal num- 25 bers of representatives of the railroad company, and of 184 1 representatives of the employees. Such boards shall afford 2 all such employees full and fair opportunities to make com- 3 plaints and suggestions relating to wages, hours of labor, and 4 working conditions. Such boards shall have power to 5 make and publish findings and recommendations, which, if 6 concurred in by a majority of the members of any such board, 7 shall be binding on the railroad company and its employees. 8 In case of a disagreement amounting to a deadlock among 9 the members of any such board the Federal Transportation 10 Board shall, on appeal, act as referee. 11 Sec. 41. That, in the event that the board may deter- 13 mine that any National or State railroad company stands in 13 need of loans of money to protect its credit and maintain its 14 properties, pending the completion of the consolidations 15 herein provided for, that the public interest requires that such 16 railroad company obtain such loans, and that it is unable 17 to secure such loans elsewhere upon reasonable terms, the 18 board may loan to such railroad company such sum of 19 money, under such forms of obligation and under such pro- 20 visions for security for the repayment of such loan, as the 21 board may deem proper. The sum of $300,000,000 is 22 hereby appropriated, out of any moneys in the Treasury not 23 otherwise appropriated, to enable the board to carry out the 24 provisions of this section. Such money shall be used as a 25 revolving fund by the board, and the moneys loaned and repaid 185 1 under the provisions of this' section may be loaned agiain 2 in the same manner. 3 Sec. 43. That the sum of $500,000 is hereby appro- 4 priated out of any moneys in the Treasury not otherwise 5 appropriated to enable the board to carry out the provisions 6 of this Act. 7 Sec. 43. That if any provision of this Act, or the appli- 8 cation of such provision to any persons or circumstances, 9 shall be held invalid, the remainder of the Act, and the appli- 10 cation of such provision to persons or circumstances other 11 than those as to which it is held invalid, shall not be affected 12 thereby. 13 Sec. 44. That this Act shall take effect upon the termi- 14 nation of Federal control of railroads under the Act of March 15 21, 1918, except that sections 2, 4, 5, 6, 7, 9, 27, 30, 16 38, 42, and 43 shall take effect upon the passage of this 17 Act. As soon as practicable after the passage of this Act, . 18 the President shall appoint the members of the board, and 19 such members shall take such action as may be necessary 20 to put the provisions of this Act into operation upon the 21 termination of such Federal control. For additional copies apply to Richard Waterman, Executive Secretary, National Transportation Conference, Mills Building, Washington, D. C. of-n W& '*'. :^^/ :<■■>>-■. •tH