L G» S (p • O &> ) {? I iî. ADDRESS BY S. DAVIES WARFIELD, President, NATIONAL ASSOCIATION OF OWNERS OF RAILROAD SECURITIES BEFORE NATIONAL ASSOCIATION OF MUTUAL SAVINGS BANKS FOURTH ANNUAL CONVENTION BUFFALO, N. Y., JUNE 6TH, 1923 have gone into detail because it is desirable that you should have a. brief summary of these necessary provisions in the Act, and because they are interwoven with present necessi¬ ties. And they will become the storm center in the discussion of railroad legislation in the next Congress." NATIONAL ASSOCIATION OF OWNERS OF RAILROAD SECURITIES, BALTIMORE. MD. Address by S. Davies Warfield before National Association of Mutual Savings Banks—4th Annual Convention— Buffalo, N. Y., June 6, 1923. Mr. Toastmaster, Ladies and Gentlemen: It is a real pleasure to be here tonight, although it is with some hesitancy that I rise to address you be¬ cause of the limited time Mr. Knox has allotted me— you will observe he has his gavel ready. The last time I had the pleasure of meeting the mem¬ bership of your Association was at the time of its organization at Boston in April, 1920. Since then many things have happened, in both the savings bank and transportation world. Together with you all, I sincerely regret the illness of Mr. Brock, your President. Mr. Brock has always given us all such generous and splendid cooperation in every direction. Let me hope I may be entitled to some of the kind words expressed by Mr. Knox respecting the work that, not I,—all of us in the active management of the Association of security owners have attempted to ac¬ complish. To be frank, I regard the near future outlook as not reassuring to the investor in railroad securities. The savings banks are closer to the public than any other class of investor. You represent millions of depositors. They put their money in your banks and expect you to take care of it in safe investments, and this you do. At this particular time there is going on in Washington a very important work—railroad valua¬ tion—its far-reaching effect perhaps you do not fully realize. Since the result may be to greatly depreciate the value of your railroad investments I shall briefly present conditions to you which warrant your thought¬ ful and immediate consideration. Now, before entering into this—and Mr. Knox, I will take just a few minutes more than you intend to allow me—I want to go back into part of the history of the Association that I represent here tonight. COMPULSORY FEDERAL INCORPORATION When representatives of the National Association of Owners of Railroad Securities appeared in January, 1919, before Committees of Congress then considering railroad legislation, we.were there with a very definite policy. We had followed the appearance of representa¬ tives of the railroads before legislative bodies and the Interstate Commerce Commission ; also before the Newlands Committee—appointed by Congress to in¬ vestigate transportation conditions—when the rail¬ road executives insisted upon the compulsory Federal incorporation of all the railroads. It was contended this was the only method to prevent State Commissions from making intrastate rates—that is to say, a rate within a state—which would confiict w4th the interstate rates necessary to the conduct of commerce between the states by railroad. In 1919 they again asked Congress for compulsory Federal incorporation of all the railroads. We vigor¬ ously opposed this policy, and you may recall we filed with Congress the opinions of able lawyers that the policy proposed by the railroads would entail years of litigation, would be a serious menace to railroad credit, was unconstitutional, and could not be forced upon a dissenting carrier. It is amazing, gentlemen—observing the fear of Government operation now expressed by railroad executives—that they should have urged laws, to avoid state regulation, which would have subjected their roads to more intensive Government regula¬ tion by requiring all railroads organized under state charters to turn their properties over to corporations organized under Federal charters. Had this been in effect when the railroads were taken over by the Gov¬ ernment for purposes of war, do you suppose for one moment that these properties would have ever been relinquished to private operation? THREE FUNDAMENTAL PROPOSALS ACCEPTED The Transportation Act of 1920 contains the sub¬ stance of three of the four fundamental proposals made 2 by the Association of security owners before Commit¬ tees of Congress in 1919. I will briefly allude to them. One is the now famous—much discussed and often "cussed"—Sec. 422 (15a), which the men of this audi¬ ence, particularly, know of. That is the section enabling the Interstate Commerce Commission to adjust railroad rates to yield a reasonable return on the aggregate value of railroad property. This section was vigor¬ ously opposed, as you know, by the railroad executives with one or two exceptions. Today they are asking Congress to leave this Section in the Transportation Act, in fact, not to disturb the Act in any respect. This section, in addition to prescribing the measure that the Commission is to use in respect to a living return on the aggregate value of railroad property— properties that issued your securities—did more than that, much more. There was secured what the railroads had been endeavoring to accomplish for twenty years, —the prevention of a State Commission from making an intrastate rate that would conflict with the interstate rate structure made by the Interstate Commerce Commission to enable the railroads to receive revenue sufficient for the conduct of transportatio i. These questions are somewhat technical and perhaps you may not be able to quite follow. But for years the railroads had been complaining of their "Forty-eight Masters"—the forty-eight State Commissions; that they could not run their properties because the forty- eight masters were making different rates within their states which prevented the carriers from earning a living return. The railroads attempted to prove that these rates were discriminatory as between localities and indi- viduals^very difficult of proof. We contended that the questions involved in the making of intrastate rates were those of revenue and that no one state—a state here and a state there and so on—should have the right to make an intrastate rate that would curtail the revenue of carriers while passing within its borders to the extent of preventing carriers from receiving revenue sufficient for the conduct of interstate commerce in the public interest. 3 We believed the United States Supreme Court would uphold this doctrine and it has been upheld. So with the years of fight that the railroads made against the State Commissions, even to the extent of mging the compulsory Federal incorporation of the railroads, the question was finally decided on the doctrine we had put forward. SUPREME COURT SUSTAINS OUR POSITION AS TO REVENUE On that basis we went before the Supreme Court in the Wisconsin Passenger Fare Case. Coimsel of the railroads and Counsel of the Interstate Commerce Commission presented arguments on the basis of discrimination; om Counsel took the position that the questions involved were those of revenue. Chief Justice Taft, in writing the decision of a unanimous Court, sustained our position in every particular. I am perhaps troubling you with detail, but this is justified in my belief that the establishment of the basis for intrastate rate adjustment as a question of revenue and not of discrimination was one of the most import¬ ant things, if not the most important, that has taken place in transportation legislation. Section 422 (15a) covered two important points: first, the establishment of means to prevent undue burdening of the interstate rate structure through intrastate rates; the other, after the ascertainment of the aggregate property value of the railroads by the Commission, rates must be adjusted so as to produce sufficient revenue to enable carriers to finance the necessities of adequate transportation. The greatest railroad opposition was to the provision that after any railroad received revenue from rates yielding over 6% on its individual property value one half of the excess it could retain, the other half to be expended in the interest of transportation as a whole, not to help weak carriers as has so often been asserted. 4 CIRCUIT COURT SUSTAINS CONSTITUTIONALITY OF PROPOSALS You may be familiar with the Dayton-Goose Creek Railroad Case before the Circuit Court of Texas, where the railroad contended that it was unconstitutional to take part of its revenue, over 6%, notwithstanding the fact, as we have always contended, that a carrier would not have received this additional revenue had it not been for the necessities of transportation as a whole, which require rates to be made to enable the great majority of car¬ riers to live—hence the over-plus in individual cases from such rates is as much a matter of regulation as the regulation of the rate itself. Again our position was sustained by the Court and along the lines of the brief filed by our Counsel in this case also. So, Mr. Toastmaster, in this we accomplished quite a good deal. Our next suggestion was that the Commission should have jurisdiction over the divisions of freight rates. I do not think—and there are a great many Massachu¬ setts members of your organization here tonight— you realize what this has meant to what are known as the "New England carriers." Contending that the division of a freight rate was as much the subject of regulation as the rate itself, we suggested that the divisions of freight rates should be left to the Com¬ mission to regulate if the carriers did not allow the proper divisions of rates. Only recently—within the last eight or nine months perhaps—$15,000,000 was secured to the New England group of carriers from the Eastern carriers—$15,000,000 allowed as additional revenue by increasing the di¬ visions of rates between the New England and the Eastern carriers. The security owners were responsible for suggesting this in the Act, I hope consideration will be given this on the part of your brethren from New England. Without this feature of the Act, railroads operating within the so-called New England group, of which you doubtless hold securities, could hardly have lived through the reconstruction era. The railroads fought it. The Eastern carriers took the case to the Circuit Court of New York. The Court 5 declared the Commission's control over divisions con¬ stitutional. This was our second proposition. THIRD PROPOSAL USED IN EVERY EMERGENCY The third proposal to Congress was that in cases of car shortage and freight congestion emergencies the Interstate Commerce Commission should have the right to relocate freight cars from one railroad to an¬ other. This right to the Commission was also opposed by the railway executives. Yet, notwithstanding this, Mr. Toastmaster, there has not been a period of freight congestion since the Transportation Act went into effect—and they have been many and serious— that carriers have not appealed to the Interstate Com¬ merce Commission to make use of this emergency power granted by the Act, to relocate cars from one railroad to another—in plain words, "pool" cars during the emergency—and in this way the Commission has enabled transportation to be conducted. Yet the rail¬ way executives who opposed this procedure, as I say, go to the Interstate Commerce Commission to in reality "pool" their cars to help them out in these emergencies, because they are unable themselves to agree on a plan under which certain classes of freight cars could be pooled in the interest of transportation as a whole in order that the public shall be properly and economi¬ cally served. The inconsistency of railroad procedure in this entire matter is shown in the fact that while continuing to oppose the pooling of certain classes of interchange freight cars under an accredited central railroad agency, the railroads are today in effect pooling (but without an effective head) certain classes of interchange cars in Western territory by permitting the non-observance of their so-called "car service rules," in holding cars in that territory for loading Eastbound and not imme¬ diately returning such cars after unloading to the owners which their rules arbitrarily require. They 6 know that holding these cars is now essential to move traffic and to prevent the cross-haul of empty cars. You should not be disturbed by this clumsy method of gaining the effect of car pooling, instead of openly doing it, except that the cost to the public in freight rates by continuing so uneconomical a procedure must finally react on the railroads. Now, our fourth proposal was not acted on, had it been, yqu and the railroads would not be confronted by the present difficulties. The fourth proposal was considered essential to guarantee every saving through coordinated inter-carrier relations and a service that would adequately meet the demands of the country. The revenue-ratemaking proposals which were made before Committees of Congress were coupled with a central railroad agency, to be established by Act of Congress, to be managed by representatives of the railroads and from those who own their securities, empowered to aid in financing equipment and do the things the railroads now ask or expect the Commission to do. Through this coordinating agency greater facilit}' uses would be obtained,'and the joint use of interchange freight cars which should be pooled by agreement among the railroads, instead of asking the Commission to pool them in emergencies. THE STORM CENTER IN THE NEXT CONGRESS I have gone into detail because it is desirable that you should have a bHef summary of these necessary provisions in the Act, and because they are interwoven with present necessities. And they will become the storm center in the discussion of railroad legislation in the next Congress. It is significant, ladies and gentlemen, when you consider the difficulties incident to the technical nature of the questions involved, that three of the four funda¬ mentals we proposed found their way, with modifica¬ tion, into the Transportation Act; while no fundamental proposal of the Association representing the executives 7 of the railroads was adopted by Congress and in the Transportation Act of 1920. This is not in criticism. These conditions are the result of disinclination on the part of the railroads to do other than attempt to fune- tion through voluntary organizations without power to compel the observance of known necessities on the part of all the railroads, leading to the avoidance of the provisions of the Transportation Act dealing with*joint facility uses. So acute is the feeling of competition among railroads that they prefer to await the' enforce¬ ment by Government agencies of things essential to transportation rather than act themselves. RAILROAD VALUATION SERVES TWO PURPOSES I now come to the definite purpose of my talk before you this evening. You who are concerned in the pro¬ tection of the deposits of ten million people face a serious situation in respect to the two subjects that I will now discuss: first, the valuation of railroad prop¬ erties; second, the proposed consolidation of all the railroads of the country into a few large consolidated systems. Now, there are two purposes to be served by this valuation that is now being made by the Interstate Commerce Commission. One ; in these great consolida¬ tions which the Commission has been ordered to make under the Transportation Act—the merging of all the railroads of the country into some fifteen to nineteen large systems—it is required 'by the Act that all the- carriers that are to be merged into these large com¬ panies will be taken in at the Commission's valuation. No securities can be issued by the new companies that will acquire your securities or the securities of the railroads that will be merged, beyond the value that the Commission now places on the property of each railroad that goes to make up the respective large con¬ solidated systems. So you see how far reaching this is. Second; no railroad rate in the future, after these valuations are made, will be adjusted to yield a return 8 on a valuation greater than the Commission now places on all railroad properties. And yet today the railroads have no plan, by concerted action, before the Commission or agreed bases upon'which the railroads all stand for the valuation of the different portions of railroad property and such as the Commission can act on. So the situation, I say, is serious. VALUATION THE TAP ROOT OF CARRIER REVENUE Perhaps you have observed that the papers recently stated that Senator LaFollette had called a meeting of his associates in Chicago to take up the question of valuation, pointing out that the public were not prop¬ erly represented before the Commission, and that there¬ fore railroad properties would be valued beyond what they should be, in the public interest. Senator LaFollette fully realized what he was doing. He knew that the most effective method of attack on railroad rates was through valuation ; upon fair valua¬ tion rests the continuance of private operation and private ownership. He fully recognized that the rail¬ roads have shown no disposition to get together and that they were not in position and were unwilling to place themselves in position through coordinated re¬ lations to present a united front before the Commission on plans which the railroads as a whole could appeal to the Commission to follow in the valuation of their properties. Senator LaFollette is an able man and knows the subjects with which he deals, with tireless energy, and has covered the transportation field from his own view-point. He strikes the tap root of carrier revenue when he attempts to bring together those who agree with his policies with the view of appearing before the Commission to keep down the valuation of these properties. Considerable criticism was made of Senator LaFol¬ lette by railroad executives in interviews. Now, while I differ fundamentally with Senator LaFollette, he might well have asked those who criticised him, "Have you been able to get together; have you been able to 9 submit to the Interstate Commeree Commission any- well defined plan on valuation; have you been able to present to the Commission a solid front on this all important question to you and to the publie?" What is the answer? Not thus far. NO CONSTRUCTIVE BASES REPRESENTATIVE OF THE RAILROADS BEFORE COMMISSION While representatives of the railroads have made able arguments, they have thus far been unable to present to the Commission, matured, well thought out constructive plans representative of the thought of the railroads of the country to guide the Commission in making the valuation of these great properties. Therefore I suggest that before adjournment, your convention take up the question of valuation that so intimately relates to the properties which issued the securities you hold. I hope you will name a Committee that may cooperate with the Association of security owners in respect to this problem. Let us see if we cannot present to the Commission a concrete plan which should be helpful and a guide to them in valua¬ tion procedure. I hope, Mr. Knox, that the members of your organization will seriously consider this. The Association of security owners is the one organization in connection with transportation that represents no particular railroad, no particular security, and there¬ fore would be looked upon, both by the Commission and by Congress as presenting the thought at least of those who represent a great public holding of railroad securities, which must necessarily be affected by any procedure of the Commission in respect to both valua¬ tion and consolidations. CONSOLIDATIONS PERMISSIVE— NOT ENFORCED Let us now consider the questions involved in the requirements of the Transportation Act for the con¬ solidation of all the railroads into a few—from fifteen to twenty—large so-called competing consolidated sys- 10 terns. You gentlemen from Massachusetts and other states that are served by the New England group of carriers, are greatly concerned, especially concerned, in these consolidations. We have not favored the enforcement of consolidations. We do not believe the Commission should be authorized to map out the country and force all the railroads into, say, fifteen or nineteen railroad systems, merging all carriers into these systems. We do not believe this is good policy, particularly in view of the fact that under the Act no consolidation can be made after the Commission makes its plan of consolidations, unless it conforms and comes within the limits of the recommendations of the Commission. ASSOCIATION'S PROPOSAL IS TO COMPEL JOINT USE OF RAILROAD FACILITIES IN THE HANDS OF THE PRESENT CORPORATIONS (PERMISSIVE CONSOLI¬ DATION ENCOURAGED)—NOT TO ENFORCE CON¬ SOLIDATION OF THE RAILROAD CORPORA¬ TIONS TO OBTAIN SIMILAR RESULTS- DISTURBING ALIKE TO THE FINANCIAL AND OPERATING STRUCTURE. From the beginning we have been on record in favor of permissive consolidations, subject to the approval of the Commission in each case. We opposed at our original hearing before Congress in 1919 the enforced consolidation of the railroads into these few large systems. We believed such procedure, dependent as it is upon railroad valuation by the Commission—the bases for which will likely have to go before the Supreme Court—will unsettle railroad credit during the long time essential to bring about consolidations. We contended—and that was one of the purposes of our fourth proposal of a central agency—that the railroads should agree among themselves on a more general and greater joint use of their respective facilities as far as practicable, including pooling of the interchange freight cars of the railroads under the central agency to be managed by railroad men and representatives of 11 RAILROADS BY COOPERATION CAN GIVE RESULTS I will dwell, Mr. Knox, for a few minutes, on the pooling of certain classes of freight cars. It is an ex¬ travagant policy that forbids interchange freight cars —ears used in interchange traffic which spend fifty per cent of their time off the rails of the railroads that purchased them and go from one end of the continent to the other in the interchange of commerce—from being operated under arrangements between the rail¬ roads for their joint use, under plans that will give the shipper the use of my car or your car, reloaded as near the point of unloading as practicable and hurried off to destination without respect to ownership. That is what the big consolidations are expected to do, for when you mold all these carriers into, say, fifteen com¬ panies you are making fifteen car pools and of other facilities. So, instead of waiting for this to be done, with all the attending difficulties, why cannot the car¬ riers among themselves agree to pooling, and not wait for the Government to force it on them? When you see in the daily press that railroad car loadings have increased to this or to that figure, and car shortage has been reduced from this to that number of cars, you should understand that the figures pre¬ sented do not represent actual conditions. Let me detain you for a moment in respect to what car shortage means. It may not mean that there are not sufficient cars in the country, but it may mean that there are sufficient cars but not sufficient motive power to haul them; that there are not sufficient yard and terminal facilities to quickly load, unload and dispatch them; that there are not sufficient passing traeks on this rail¬ road or that to take trains; there are a multitude of reasons that contribute to car shortage. How can economical administration, with adequate service, be secured with each carrier purchasing equip¬ ment in quantities and of such character as will meet its own views, purchasing locomotives, building yards and terminals to take care of its so-called "own" business; doing all the numerous things that operation 13 and transportation call for, each working along in its own way with little respect to the other, one competing with the other? And yet, each railroad is part of a system of National transportation, with each railroad only one link in the chain, one dependent on the other. I ask you, can these conditions continue under the now constant turmoil arising from the dissatisfaction of the farmer, the shipper, the manufacturer, the public, all looking for adequate railroad facilities at reasonable rates as essential to their business prosperity and development, yet not able to put their finger on the real difficulty? There is the suggestion of high freight rates, then the suggestion for enforced consolidations, with incidental contraction of railroad facilities into these few large systems—for contraction is what it really means. COORDINATED RELATIONS BETWEEN RAILROADS And the reason for all this is that the railroads have been unable, because of their highly competitive rela¬ tions and because of the desire of each railroad head to hold on to his prerogative, if you please—I am a railroad executive and know what it means—to get together on a coordinated and "joint use" basis. The time has passed for continuing the old system. If the present barrièrs are not relieved, and the railroads do not get together and give the public the results sought by these great consolidations, or the results of operation under a single head—without its dangers and defects— and go to Congress and ask for definite legislation to enable them to put in effect a plan of their own selection to bring about these things, it would seem that we are nearing the point where it will be difficult to avoid the contention of those who assert that transportation is a Government function and cannot be continued through private operation, though Government operation would be uneconomical in results. My friends, why will the railroads stand out against the law—not of supply and demand—but the law of demand and supply? We should know what the public 14 and shippers' demands are in transportation. We know that the supply exists, or can be found, but the heads of the railroads of the country have failed thus far to agree on the most economical handling of the supply— the facilities that each one of the carriers owns or can acquire, so that the demand will be supplied by the rail¬ roads themselves through their own agency, if they will give and take in respect to their facilities, and not leave themselves under the necessity of calling upon a Gov¬ ernment body to help them meet these demands. These questions are of such vital moment that I desired to come here and endeavor to impress upon you the necessity of action. The splendid support given the Association of security owners by your Asso¬ ciation and by the savings banks generally of the country, together with the cooperation given in other quarters, has been the great incentive to us in the active management of the Association to obtain the recognition and protection to which we have felt you are entitled. We ask the continuance of your confidence and cooperation. It may be well to summarize— CONCLUSIONS Let us consider the position in which the railroad executives find themselves. I greatly dislike to refer to these matters and do so only because we are faced with the most serious legislative outlook that ever con¬ fronted the railroads. Not to be frank and "take stock" at this time would be suicidal. Speaking personally, I number among the railroad presidents many friends; they are able men. In appeal¬ ing to Congress, however—and to their stockholders to help—to let the Transportation Act alone, without amendment, they lose sight of the fact that the funda¬ mental provisions of that Act are based on the three proposals offered by the Association of security owners which the railroads asked to be defeated as vigorously as they now ask their retention. But the inconsistency of their position goes further. They also lose sight of the fact that the underlying purposes of these proposals and 15 the entire Transportation Act are in recognition that the railroads collectively form a National system of trans¬ portation, ivith their facilities subject to joint use where practicable. The railroads were not in sympathy with these purposes then and oppose them now. And while asking that the Act which demands their fulfillment be let alone, they fail to carry out the very policy and purposes which they ask continued. No better illustration of this can be given than their declination to take advan¬ tage of perhaps the most far reaching and—in efficiency and economic result—self evident of all joint facility uses—the pooling of certain classes of interchange freight cars. ' All three of the proposals that underlie the Trans¬ portation Act are based on the inescapable fact that all the railroads are inter-dependent—one railroad dependent upon the other—constituting a National railway system. I will explain: Under proposal 1—(now Section 422 (Sec. 15a, C. A.) of the Act)—rates are adjusted so as to produce sufficient revenue for the great majority of the railroads, with a division of excess revenue over 6% on property value of an individual railroad, and essential because of the inequalities existing between traffic territories, in which the respective carriers operate. The Supreme Court based its Wisconsin Passenger Fare Case decision on the fact that each railroad forms a part of a " National railway system" ; that no State could interfere in interstate commerce by making a state rate that would destroy the interstate rate and interfere with carrier revenue in conducting commerce between the states. Is all this not in recognition of the necessity of joint facility uses—rthat transportation must be considered as a whole? Under proposal 2—(Section 418 (Sec. 15, C. A.) of the Act)—Commission is empowered to adjust the divisions of freight rates : in illustration, say, two-thirds of a rate to the originating railroad and one-third to its connec¬ tions, or 75% to the originating road and 25% to its connections. 16 Is this not in recognition of the necessity of joint facility uses—that transportation must be considered as a whole? Under proposal 3—(Section 402 (Sec. 1, C. A.) of the Act)—Commission is empowered to relocate or "pool" freight cars in emergencies. To take the cars of any railroad to enable another railroad to perform a public service in emergencies. Is this not an extreme recognition of the necessity of joint facility uses—-that transportation must be considered as a whole? Proposal 4—not accepted—the one thing lacking to follow up the purposes and intention of the three other proposals. The establishment of a central railroad agency empowered to do the things that the railroads decline to do individually, which cannot be done through any voluntary organization of the railroads that has no responsibility to Congress and to the public, which the fourth proposal of the Association of security owners would have established. The reason the railroads vigorously opposed these four proposals, was because of the very fact that each proposal did recognize the necessity of joint facility uses and that transportation must be considered as a whole. The railroads have declined and still decline to recognize the right of the reasonable use of their facilities, in the public interest, by carriers other than the owning railroads. But after all, when they have seen the results of these proposals and have fotmd that the old-fashioned method of fighting for rates before the Commission has passed; that power was given to the Commission to do things that were essential to be done without the old procedure incident to every request for a raise in freight rates; when they realized that the proposals underlying the Transportation Act have saved the rail¬ roads, and without them the carriers would not have been able to successfully emerge from Federal control as they are now doing, the day began to dawn and they now beg of Congress—and of their stockholders to help —^in letting the things alone which they endeavored to 17 keep out of the Act because, perchance, some preroga¬ tive of a railroad president might be disturbed. But is it not the same old ''stand pat" policy to now ask to he let alone when it is known the railroads will not be let alone in the next Congress? Are there not now at work important legislative forces that represent Government operation? Are we not on notice in every direction—from the President of the United States, the Chairman of the Senate Committee on Interstate Com¬ merce, and other vital forces—that the Transporta¬ tion Act is to be taken up in the next session of Congress and that transportation legislation is to be enacted} Shall we wait until placed on the defensive? Have the railroads no constructive note to sound other than to be let alone, knowing they will not be? Do they believe that consolidation of all the railroads should be enforced —with the dangers to those who have bought their securities, and the unsettlement of railroad credit incident thereto—or shall consolidations be made per¬ missive? Is there to be continuance of the avoidance of car pooling by making car service rules and regulations in conflict with efficient service and every economic principle and to be broken and avoided in times of car stress, as is being done today in Western territory, to which I have alluded? I make the assertion that many of the most prominent and well recognized best informed car service men connected with the most important railroads in the cotmtry, if left uninstructed to report on the pooling of certain classes of interchange freight cars, would report in its favor as the practical and economical means to insure adequate service and pre¬ vent cross haul of empty cars and so-called car shortage. And to enable cars to be constantly followed and kept up through repair and rebuilding. I ask whether it is not advisable to frankly go to Congress, admit these conditions, and ask that legisla¬ tion be enacted which will ensure to Congress and to the public, as well as to those who have invested hundreds of millions of dollars in the securities of the railroads, a coordinating instrumentality along the lines of what we have suggested, and not wait for this to be done, as it Avill be done, in some drastic manner that 18 will imperil private operation and the investment in these properties. The present railroad propaganda of "Committees" and campaign of abuse of Senators, Members of Con¬ gress and others having Government ownership views will not prove effective ; they are entitled to their views and the present policy of the railroads gives ground for their encouragement. The way to combat them is by argument; by facts; by changing methods as outworn as those now superseded by the discussed provisions of the Transportation Act—and substitute therefor the instrumentalities that will obtain any advantage claimed for Government operation, but free from its serious uneconomical consequences and blighting politi¬ cal influences that would destroy incentive and initia¬ tive—the principal factors in building up the commerce and agriculture of the country. The fourth proposal of the Association of security owners in purpose and intent has not been changed since offered before Committees of Congress in 1919. On the contrary, the experience of the four years that have elapsed has demonstrated the urgent necessity of this central coordinating railroad agency. We have continued to ask for its establishment by Congress. It is again offered, believing the future will demonstrate that the railroads will make as serious a mistake by opposing it as has been demonstrated was made in 1919 in opposing our three proposals that underlie the Transportation Act of 1920, for the preser¬ vation of which the railroads now appeal. 19