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Author: 
 
 Mechanics and Metals 
 National Bank 
 
 Title: 
 
 The shipping board and 
 our merchant marine 
 
 Place: 
 
 New York 
 
 Date: 
 
 [1921] 
 
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 The Shipping Board 
 
 and Our 
 
 Merchant Marine 
 
 
 ESTABLISHED 1810 
 
 The Mechanics & Metals 
 National Bank 
 
 of the City of New York 
 
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 if 
 
 mv^ 
 
 MWG 
 
 
 LIBRARY 
 
 School of Business 
 
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 The Shipping Board 
 
 and Our 
 
 Merchant Marine 
 
 ESTABLISHED l8lo 
 
 The Mechanics & Metals 
 National Bank 
 
 of the City of New York 
 
 
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 <1 
 
 Foreword 
 
 THROUGH the power of its own huge 
 fleet and the influence of its policies 
 and decisions upon the development and 
 operation of the entire American mer- 
 chant marine, the Shipping Board consti- 
 tutes an important factor in the economic 
 situation of the United States. It bears 
 upon the disposal of the surplus products 
 of our industries, upon our international 
 trade and political relations, and upon 
 taxation and national income. 
 
 With the purpose in view, therefore, of 
 making available to the customers and 
 friends an analysis of this situation that 
 may enable them to judge better the 
 merits and importance of future develop- 
 ments, we present the following review of 
 the functions and duties mandated to the 
 Board and of the chief problems which 
 now confront it. 
 
 The Mechanics &? Metals 
 National Bank 
 
 of the City of New York 
 
 Decemhery ig2i 
 
 3 
 
 
 
 11' . 
 
 VI 
 
 The Shipping Board and Our 
 Merchant Marine 
 
 Copyright 192 1 
 The Mechanics & Metals National Bank 
 
 UNTIL the middle of the last century our Atlantic 
 States, dependent upon trade with older countries, 
 and upon distant sources for many of their require- 
 ments, developed a race of mariners, built the finest ships, 
 sent the American flag into every port of the world, carrying 
 the bulk of our foreign commerce. Then came the develop- 
 ment of our western territories and the increase of our 
 industrial capacity. New and greater profits from the 
 investment of money and energies here led our interests 
 away from the sea. The Civil War, and the competition 
 of other nations themselves facing the urgencies of overseas 
 trade and colonization, contributed to the rapid reversal 
 which occurred in our marine position. 
 
 Now the tide has turned again, accelerated by war but 
 nevertheless inevitable. A surplus of products, inter- 
 national competition for world trade, have of necessity 
 sent us back to the sea. But a merchant marine cannot 
 exist of itself; it is no more than a tool of commerce, a 
 means by which an end may be achieved. Its problems 
 are in the last analysis the problems of commerce, and 
 artificial aid without appreciation of these problems can 
 give but an artificial stimulus. We will keep on the sea not 
 through such aid but by the development of a broad 
 national policy of encouragement to foreign enterprise of 
 which the maintenance and operation of our fleet is but 
 one important part. 
 
 Though the economic forces demanding maritime 
 strength had been gathering momentum before the war, 
 no real national shipping policy had begun to develop — 
 except, perhaps, the deadening effect of restrictive labor 
 legislation. With the early years of the war these forces 
 
i 
 
 were emphasized, yet in our maintenance of strict 
 neutrality we withheld any pronouncement of policy until 
 the Shipping Act of 191 6 in accordance with which the 
 Shipping Board was first established. 
 
 A brief period of nominally peace-time regulation, prior 
 to our declaration of war, was followed by a purely military 
 development — a period of ships and more ships, built 
 primarily to carry munitions and supplies and only in- 
 cidentally to meet future commercial competition. After 
 the Armistice, the first national reaction was still military 
 — a determination never again to be without a merchant 
 marine as a war auxiliary. Then came the renewed 
 expression of our earnest resolve to have a fleet to carry 
 our own goods— the Merchant Marine Act of 1920. This 
 act strengthened and clarified the policies outlined in 191 6 
 and took account of the problems presented by the huge 
 Government-owned fleet which in the meanwhile had come 
 
 into existence. 
 
 Thus on a foundation of peace-time legislation designed 
 to encourage a normal and gradual development of the 
 American merchant marine, there was reared the colossal 
 shipbuilding and ship operating structure necessitated by 
 the abnormal demands of our participation in the war. 
 
 From a regulatory body the United States Shipping 
 Board expanded, parallel with the development of our 
 entire war program, into an organization several hundred 
 times greater in its responsibilities and scope than the 
 greatest private shipping enterprises had attained after 
 years of development. On the extent and rapidity of its 
 achievement depended the outcome of the war. That the 
 full measure of its accomplishment, expressed in completed 
 ship tonnage, came after the cessation of hostilities, does 
 not discredit the value of this accomplishnient; the 
 indications are, rather, that the promise of its entire 
 program, the definite assurance of its increasing contribu- 
 tion to Allied munition transport, exercised a powerful 
 moral eflPect, hastening the conclusion of the conflict. 
 
 There is to be no attempt made to review here in any 
 detail that part of the war program which was delegated to 
 the Shipping Board. That it constituted a colossal 
 achievement cannot be fairly denied. As a war measure 
 it used up money; likewise it used up men, both physically 
 and politically. Whether the waste and inefficiency in its 
 operation, bearing in mind that time was the essence of 
 the contract, was proportionately greater or less than in 
 other parts of the war program, need not be discussed. 
 That chapter is finished. 
 
 But the liquidation of the shipping program is not 
 finished; it could not have been completed in any measure 
 of satisfaction within this time under any probable com- 
 bination of circumstances. Yet in this question of 
 liquidation lies the crux of the immediate Shipping Board 
 problem. To what extent was liquidation accomplished 
 before the advent to the Board of the present personnel ? 
 What are the ramifications of the problem which confront 
 this Board and how is it meeting them? What eff'ect 
 will their decisions and the decisions of Congress have 
 upon the future status of the American merchant marine ? 
 
 For the purpose of setting up a somewhat comparable 
 example, let us suppose that the war-time governmental 
 administration of the railroads had been delegated to the 
 Interstate Commerce Commission. Suppose, further, that 
 this body had found it necessary as a war measure to 
 insure the movement of troops and supplies, to construct a 
 hundred thousand miles of new railroads paralleling 
 existing lines. The Interstate Commerce Commission is a 
 regulatory body. It has a record of achievement in this 
 field. But with this activity it would have been compelled 
 to undertake a vast administrative program embodying 
 both construction and operation. It would, legitimately, 
 have been subject to an unending fusillade of publicity 
 and, less legitimately, to criticism for political ends. With 
 the cessation of the war it would have had an operating 
 organization which, with respect to its operation of 
 
DAMAGED PAGE(S) 
 
 "requisitioned" roads, would have been readily liquidated, 
 as was the actual Railroad Administration. But in addi- 
 tion it would have had on its hands the hundred thousand 
 miles of new lines for which, under current business con- 
 ditions, the existing and established roads could find 
 neither capital nor immediate use. It would have a 
 difficult problem of liquidation. And in the meanwhile its 
 regulatory functions would have been lost sight of; the 
 inevitable criticism of its war operations would have 
 influenced public opinion unfavorably; the surplus railroad 
 capacity would affect the whole railroad situation. 
 
 It is in much the same situation as the hypothetical case 
 above, that the Shipping Board finds itself. Reduced to 
 the simplest terms, the temporary war structure must be 
 removed from the foundation of shipping regulation and 
 assistance. Yet the world trade conditions are bound to 
 make this a slow process. Granting the desirability of an 
 adequate merchant marine for the years to come, the new 
 Board must so conduct the work delegated to it and in- 
 herited by it as to win to this merchant marine the 
 support of all those elements — farmers, traders, tax- 
 payers, manufacturers, legislators — on whose cooperation 
 depends its success. 
 
 What is the work delegated to the Board; what prob- 
 lems has it inherited ? Firsty continuing regulatory powers 
 over shipping and efforts toward the permanent upbuilding 
 of our merchant fleet. Second^ the liquidation of govern- 
 ment owned tonnage. Thirds the-^ operation of the govern- 
 ment fleet pending liquidation. 
 
 It will probably be a number of years before the skeins 
 are untangled. That heritage of the war, the fleet and its 
 operation and disposal, is seemingly mixed inextricably 
 with the problem of the entire merchant marine. To try, 
 on the one hand, to break off at once from government 
 operation, regardless of consequences, would defeat the 
 efforts of the other hand to assist and encourage private 
 development. Probably no other war problem is still 
 
 so thoroughly with us, unsolved, as is the shipping situ- 
 ation. There has been no other problem of liquidation 
 kept so completely in front of us for commendation or 
 condemnation — nor one which can be so greatly benefited 
 by restrained and sober consideration now of the under- 
 lying factors and possible methods of solution. 
 
 The basis of any consideration of the Shipping Board 
 actlTT-ify lies in the legislation which set up the Board and 
 which dircc^Q the broader policies on which its operation is 
 based. There ar^ t-,ro principal legislative acts; first, the 
 Shipping Act of 1916 enctcu-4 six months before our entry 
 into the war; second, the American Merchant M-irine Acr, 
 1920, known as the Jones Bill, approved eighteen months 
 after the Armistice. Between these two basic instruments 
 came a number of minor enabling acts, largely in the 
 nature of definitive appropriations covering the war-time 
 activity of the Board. For the most part this war activity 
 was conducted under delegation of authority granted to 
 the President. For this reason and because of its strictly 
 emergency character, this interim legislation set up no 
 standards bearing upon current or future Board activity, 
 and need not be considered here. 
 
DAMAGED PAGE(S) 
 
 f^mm 
 
 Shipping Legislation 
 
 THE Shipping Act of 1916 has been characterized as the 
 first effort of this country after nearly half a century of 
 inactivity to devise a general and forward-looking shipping 
 policy. Edward N. Hurley, in his book, "The N«^ 
 Merchant Marine," credits the late Bernard N. TXuh.er with 
 being the "father" of this new legis1^*^'^^> passed under 
 the guidance of Senator Fle^-^^cr of Florida and Repre- 
 sentative AlexanHer ot Missouri, later Secretary of Com- 
 merce from December, 1919, to March, 1921. It is true 
 that the progress of the World War in its affect on world 
 shipping, had an important bearing upon the immediate 
 need of some enactment that would preserve the integrity 
 of the fleet under the American flag, and provide for any 
 emergency that might develop. But essentially, and in so 
 far as its guiding policies looked ahead toward a continu- 
 ing development and encouragement of our merchant 
 marine, the 1916 Shipping Act was peace-time legislation. 
 This Act has three somewhat distinct phases relating, 
 first, to the construction, acquisition and charter of ship 
 tonnage and the transfer of vessels to and from the 
 American flag; second, to specific investigations into con- 
 ditions bearing upon the merchant marine; and third, to 
 the regulation of rates and practices of common carriers by 
 water in foreign and interstate commerce. By it a Shipping 
 Board of five members was established for the purpose, 
 according to its preamble, "of encouraging, developing 
 and creating a naval auxiliary and naval reserve and a 
 merchant marine to meet the requirements of the com- 
 merce of the United States with its territories and posses- 
 sions and with foreign countries." 
 
 Subject to greatly restricted limitations the Board was 
 authorized to build, lease or charter ships; also to form a 
 150,000,000 corporation, the life of which was limited to 
 
 8 
 
 five years from the end of the war, which could purchase, 
 lease, charter, maintain and construct ships and, only if 
 unable to sell or charter, could operate them. Definite 
 restrictions were established on the transfer of vessels to 
 foreign registry during war emergency and in normal times. 
 Questions of transfer of tonnage engaged most of the atten- 
 tion of the Board before our declaration of war. 
 
 The Board was directed by the Shipping Act to in- 
 vestigate specifically these six subjects: 
 
 Relative costs and conditions of construction and 
 
 operation here and abroad. 
 Rules under which ships could be constructed here 
 
 and abroad with respect to classification and rating. 
 Marine insurance. 
 Navigation laws. 
 
 Mortgage loans to encourage investments in ships. 
 Discrimination by foreign governments. 
 
 Under this initial legislation and under supplementary 
 legislative appropriations and presidential proclamations, 
 the Shipping Board continued to function until the 
 Merchant Marine Act of 1920 was made effective through 
 the appointment of the present Board. 
 
 Bearing on the character and content of this new, 
 current shipping legislation are two features of interest. 
 First, there was no obvious intention in the original 
 legislation to set up a system of government operation of 
 shipping, except in so far as private enterprise could not be 
 found to operate tonnage deemed necessary to merchant 
 marine development. The extent of the government's 
 participation in shipping — particularly in the acquisition 
 of a huge fleet of its own — could hardly have been foreseen. 
 If, in the liquidation of government operation of this fleet 
 during the period since the Armistice, the old Board has 
 been criticised as dilatory and as contriving to maintain 
 government control, the measure of the criticism is a 
 matter of personal opinion as to the expediency and possi- 
 bility of immediate liquidation irrespective of conse- 
 
quences. Certain it is that the new legislation, approved 
 over a year ago, definitely reaffirms the policy of private 
 ownership and operation. 
 
 Second, the previous Boards carried out, to such a 
 degree as was feasible in the light of their concentration 
 upon immediate war problems, the investigations which 
 the original legislation had directed them to make, and 
 were able to contribute to the new legislation recom- 
 mendations considered valuable and far reaching regard- 
 ing marine insurance, ship mortgages and other features 
 of this new and comprehensive Shipping Act, and to make 
 progress on the codifying of our navigation laws. 
 
 The Preamble and Section i of the Merchant Marine 
 Act, 1920, states the necessity for an adequate merchant 
 marine and outlines the policy of the United States for its 
 development and encouragement in these words: 
 
 An Act To provide for the promotion and maintenance of 
 the American merchant marine, to repeal certain emergency 
 legislation, and provide for the disposition, regulation, and use 
 of property acquired thereunder, and for other purposes. 
 
 Be it enacted by the Senate and House of Representatives 
 of the United States of America in Congress assembled. 
 That it is necessary for the national defense and for the 
 proper growth of its foreign and domestic commerce 
 that the United States shall have a merchant marine of 
 the best equipped and most suitable types of vessels 
 sufficient to carry the greater portion of its commerce 
 and serve as a naval or military auxiliary in time of war 
 or national emergency, ultimately to be owned and 
 operated privately by citizens of the United States; and 
 it is hereby declared to be the policy of the United 
 States to do whatever may be necessary to develop and 
 encourage the maintenance of such a merchant marine, 
 and, in so far as may not be inconsistent with the 
 express provisions of this Act, the United States 
 Shipping Board shall, in the disposition of vessels and 
 shipping property as hereinafter provided, in the 
 making of rules and regulations, and in the admin- 
 istration of the shipping laws, keep always in view this 
 purpose and object as the primary end to be attained. 
 
 10 
 
 There have been laid down in this legislative enactment 
 known as the Jones Bill provisions and regulations which, 
 subject to such revisions as experience and necessity may 
 dictate, constitute the charter under which the Shipping 
 Board must proceed. The policy of private ownership 
 expressed by a negation of government operation in the 
 1 91 6 Act, becomes in this act a clearly defined and posi- 
 tive expression of policy. The policy to be pursued in 
 the liquidation of the war enterprise is enunciated. And 
 by a number of specific measures, assistance to American 
 shipping and shipbuilding is facilitated. 
 
 The sponsor for this legislation was Senator Wesley L. 
 Jones of Seattle, Republican member of the Senate from 
 Washington since 1909. "An adequate merchant marine,*' 
 Senator Jones has said, "built in American shipyards by 
 American labor, owned by American capital, operated and 
 managed by American seamen, carrying American com- 
 merce to all parts of the world, flying the American flag, 
 has been my dream for many years, and it is my purpose 
 to do whatever I can to attain this great end." 
 
 The provisions of the Jones Bill may be divided, for 
 purposes of a brief summary, into four classifications: 
 (i) Specific enactments governing the composition of the 
 Board and assistance to shipping; (2) regulatory pro- 
 visions; (3) instructions covering liquidation of govern- 
 ment holdings; and (4) investigations directed to be made. 
 
 (i) The Act repeals war emergency legislation and three 
 sections of the 191 6 Act and amends other sections of it; 
 it sets up a board of seven (instead of hv^) commissioners, 
 territorially and politically representative, with salaries of 
 Ji 2,000 (previously ^7,500), to direct and enforce its 
 provisions and to exercise powers previously granted to, 
 and delegated by, the President. The commissioners must 
 not acquire financial interest in a common carrier subject 
 to the Act, but, contrary to the earlier provision, a man 
 with shipping interests is not debarred from appointment, 
 but may not take part in discussions relative to them. 
 
 II 
 
Section 34 is one of the most far-reaching provisions and, 
 incidentally, subject to the liveliest discussions in its bearing 
 on the tariff and on foreign relationships. It directs the 
 President to terminate those provisions of treaties with 
 other countries which restrict the right of the United States 
 to impose discriminating customs duties favoring imports 
 in United States vessels and discriminating tonnage dues. 
 Neither President Wilson nor, as yet, President Harding, 
 have complied with this direction and further congressional 
 action is possible that will define the application and extent, 
 if any, of this proposed discrimination. 
 
 A provision of immediate benefit to the shipping in- 
 dustry and one which has, to a certain extent, been taken 
 advantage of, relieves profits of ship operation from 
 federal war and excess profits taxes if an amount equal to 
 these taxes is invested in new ship construction in United 
 States shipyards up to one-third of the cost of the new 
 construction; similarly it exempts from these taxes profits 
 from ship sales if the entire profits are invested in new ship 
 construction. These exemptions apply for a period of ten 
 years beginning with 1921. 
 
 The Board may create separate insurance funds to 
 insure its own interests in vessels or plants; and a revolving 
 construction loan fund out of revenues during five years 
 not exceeding $25,000,000 to aid in the construction of ship 
 tonnage in private yards, up to two-thirds of the cost of 
 each vessel. 
 
 The Board is directed to take over, maintain and de- 
 velop dock and terminal properties acquired by the 
 President, these not to be sold unless authorized by law. 
 The American Bureau of Shipping is officially recognized 
 as the Classification Agency for Government-owned vessels, 
 thus strengthening the position of this organization. 
 
 Considered of fundamental importance in its bearing on 
 the whole shipping problem, inasmuch as the liquidation of 
 government tonnage is dependent upon the investment of 
 private funds, is Section 30 of the Merchant Marine Act, 
 
 12 
 
 1920, cited for separate reference as the Ship Mortgage 
 Act, 1920. This section, specifically and in great detail, 
 changes the existing law of ship mortgages to allow the 
 granting of a preferred mortgage to take precedence over 
 all maritime liens. By thus improving the security 
 afforded for ship mortgage, it is expected that a greater 
 amount of money will, other things equal, be attracted to 
 investment in American shipping. 
 
 (2) Of the regulatory provisions of the Jones Bill, the 
 application of Section 28 has been the first to receive active 
 consideration at the hands of the new Board by reason of 
 its possible immediate benefit to American ship owners. 
 This section prohibits the application of lowered joint or 
 proportional rates by carriers subject to the Interstate 
 Commerce Act in connection with foreign transportation 
 except in conjunction with vessels documented under 
 United States laws. The Interstate Commerce Com- 
 mission may, however, suspend the application of this 
 section where, in the opinion of the Shipping Board, 
 adequate facilities are not provided by American vessels. 
 This discrimination in favor of our shipping is another 
 example of the advantages sought to be gained for the 
 American merchant marine by this shipping legislation, 
 without a resort to measures of direct subsidy both 
 championed and opposed so bitterly in earlier congres- 
 sional consideration. 
 
 Other phases of regulation are outlined. For example: 
 The Board is directed to make rules affecting shipping in 
 foreign trade, to adjust unfavorable conditions, and to 
 cooperate with other Government Departments in this 
 respect. Regulations of the Shipping Act, 1916, governing 
 deferred rebates, "fighting ships," retaliations and unfair 
 discrimination are further strengthened by an amendment 
 regarding violations by aliens and the certification of such 
 acts to the Secretary of Commerce. Coastwise shipping 
 laws are extended to Island possessions after February i, 
 1922, thereby restricting trade between the United States 
 
 13 
 
(^ 
 
 and these possessions to American vessels, provided 
 adequate American service is established and maintained. 
 Mails are to be carried, so far as practicable, on vessels 
 American built and documented. 
 
 (3) The instructions governing the liquidation by the 
 Board of Government-owned shipping authorize and direct 
 the sale of all vessels. Selling prices are to be judged on the 
 basis of a business disposing of property which it is not 
 forced to sell. Completion of payment cannot be deferred 
 beyond fifteen years. Vessels considered unnecessary to 
 the American Merchant Marine may be sold to aliens if no 
 market for them exists here; in this case payments may be 
 deferred for ten years. The Emergency Fleet Corporation 
 is authorized to continue in existence until all vessels are 
 sold. Previous legislation limited its life to five years from 
 the cessation of the war. 
 
 Proceeds from the disposal of this property, except for 
 the special funds authorized, and for operating capital, are 
 now directed to be turned in to the Treasury. 
 
 (4) The Shipping Board is directed specifically to in- 
 vestigate the establishment of new or additional steamship 
 lines for the development of foreign and coastwise trade 
 and adequate postal service. It is authorized to sell or 
 charter vessels for these lines or, if necessary, to operate 
 and maintain them until they can be sold or are found not 
 self-sustaining. Government service paralleling private 
 American service shall not, however, charge lower rates. 
 
 The Board is also directed to cooperate with the Secre- 
 tary of War in promotingipand developing ports and their 
 facilities, and to investigate terminal equipment. 
 
 h 
 
 H 
 
 The Immediate Problems of the Shipping 
 
 Board 
 
 THIS summary of the basic legislation under which the^ 
 Shipping Board functions has for its purpose a clarify-* 
 ing of the relationship between the broad, continuing func- 
 tions of the Board, and the very important, immediate* 
 problems of war liquidation and ship operation. 
 
 With these immediate problems the public is more or 
 less familiar, certainly to the extent that the glaring nature- 
 of some of them have furnished material for columns* 
 upon end of newspaper report and comment. Without- 
 deprecating in any way the seriousness of the apparent* 
 demoralization of the shipping situation and the seeming . 
 hiatus which occurred in the formulation and execution of • 
 Shipping Board policies previous to the appointment of* 
 the present Board, it is probable that a clearer under-, 
 standing of them is to be gained by setting up these, 
 problems in proper perspective. 
 
 Two points have been suggested in current editorial 
 comment that may be worth noting. The first is that, in 
 the main, the new Board is but energizing policies broadly 
 outlined more than a year ago and on which a certain 
 measure of progress had already been made. In the second 
 point, an allowance or discounting is made for possible 
 reasons behind the widely heralded characterization of the 
 shipping situation as the "greatest commercial wreck in 
 the history of the world." 
 
 Just as the entire scope of the Shipping Board resolves 
 itself into two chief factors — (i) continuing peace-time 
 regulation and assistance, and (2) liquidation of the war 
 program — so may this liquidation be considered from two 
 related but nevertheless distinct angles. One is external 
 to the Board — the dislocation of world commerce; the 
 
 15 
 
other internal — the problems of personnel, management 
 and policies. For the difficulties and necessary delays to 
 liquidation arising from the tremendous surplus of ship 
 capacity throughout the world, both an actual excess of 
 tonnage and an actual deficit in volume of trade compared 
 with any scale that might be called normal, there seems to 
 be no remedy that any body of men could devise. In time, 
 the condition will adjust itself; unprofitable tonnage, ships 
 that were worked to death during the war, will be scrapped. 
 Fleets will be brought to a better balance. International 
 movement of commodities will set its own new normal. 
 In the meanwhile the United States must accept the fact 
 that it has on its hands the greatest single fleet ever con- 
 structed, at present at the low ebb of its usefulness; a fleet 
 which, irrespective of any reasonable price at which it is 
 offered, can only slowly be liquidated and stay liquidated. 
 
 For the internal problems of personnel, management and 
 policies there is daily evidence that remedies are being 
 applied. Not all of them are new wi th the new Board ; in some 
 respects, at least, efforts were being made to clear away part 
 of the "wreckage" under the direction of the Board which 
 with but two members carried over until the present incum- 
 bents were appointed. It is understandable that what 
 amounted to an interim organization would hesitate to take 
 any broad action which might conflict with the more exten- 
 sive and continuing decisions of the new and larger Board. 
 
 But the energizing effect of a permanent and responsible 
 body supported, as it seems to be, by the hearty cooperation 
 of the President, gives assurance to shipping interests and 
 the public in general that decisions will be made. For of the 
 whole mass of criticism and invective that has been hurled 
 at the government for its handling of the shipping situation, 
 the bulk of it simmers down to one thing — indecision. 
 
 Drawing, now, a line of demarcation between continuing 
 regulations and the problems of liquidation, the immediate 
 considerations falling within this latter group include the 
 following: 
 
 i6 
 
 il 
 
 (i) Disposal of Government-owned vessels by sale 
 or charter, enabling the withdrawal of the 
 Government from ship operating. 
 
 (2) Operation of fleet pending disposal. 
 
 (3) Disposal of other surplus property. 
 
 (4) Reorganization of management and personnel. 
 
 (5) Adjustment of claims, litigation, contracts. 
 
 (6) Budgeting and financing of operations on the 
 
 basis of the greatest attainable economy. 
 
 (7) Cooperation with private shipping interests. 
 
 Nor does this include the most important of all, the 
 yardstick by which in the end the accomplishments of the 
 Board will be measured— the reestablishing of public 
 confidence and approval. 
 
 Progress in the solution of these problems is a matter of 
 almost day-to-day report. All indications seem to mark as 
 the outstanding accomplishment so far, the departure from 
 bureaucratic practice in the revamping of the personnel of 
 the operating activities of the Shipping Board and the 
 appointment of experienced shipping men at commen- 
 surate salaries. This reorganization follows the expressed 
 belief of the new Shipping Board Chairman that "to get 
 the Shipping Board operation on an efficient basis is the 
 quickest and shortest step to creating a situation whereby 
 private people can buy these boats and get the Govern- 
 ment out of Government ownership." What has been 
 done along these lines is best described by sketching briefly 
 the present composition of the Board and of the executive 
 organization subordinate to it. 
 
 During the better part of three months following his 
 inauguration. President Harding had before him the 
 pressing problem of the appointment of a new Shipping 
 Board to consist, under the Jones Bill, of seven members. 
 Legislation now permitted the selection of men having 
 shipping interests or affiliations, and an earnest endeavor 
 
 17 
 
was made to secure the services, for the position of Chair- 
 man, of men of the type of James A. Farrell of the United 
 States Steel Corporation and W. C. Teagle of the Standard 
 Oil Company of New Jersey, men familiar with the 
 problems of world commerce and shipping and of proven 
 executive ability. Such men had problems of recon- 
 struction of their own which demanded their attention; 
 furthermore, the position was considered in many respects 
 not an enviable one, a position bound to expose them to 
 criticism, unjustified probably, certainly severe. 
 
 Forced to leave this particular field of men familiar with 
 shipping problems, the President sought out and obtained, 
 as the Chairman, Albert D. Lasker, of Chicago, a man 
 whose successful experience in problems of reorganization 
 could be given full play in what is probably the greatest 
 problem of its kind ever presented for solution. Mr. 
 Lasker was admittedly unfamiliar with ships and shipping, 
 but he early gained the confidence of the marine operators 
 by proceeding to enlist for his operating departments 
 the services of experienced ship operators. 
 
 Following is a list of the members of the United States 
 Shipping Board, nominated on June 8, 1921, and confirmed 
 the following day. The legislation directs that this 
 membership shall be representative of the diflferent sections 
 of the country and that not more than four members shall 
 be of the same political party. 
 
 Albert D. Lasker, Chairman (Illinois); Republican; 
 representing Great Lakes district; term of six years. 
 Secretary-Treasurer and Director of Lord and Thomas, 
 a Chicago advertising agency, to which he had come 
 from newspaper work in Galveston more than twenty 
 years ago; interested in a number of enterprises which 
 he has reorganized and advertised. 
 
 T. V. O'Connor, Vice-Chairman (New York); 
 Republican; representing Great Lakes; term of five 
 years. President of International Longshoremen's 
 Association for twelve years; prominent in labor circles; 
 appointed in 192 1 a member of the New York State 
 Industrial Commission. 
 
 18 
 
 f 
 
 I 
 
 George E. Chamberlain, Commissioner (Oregon); 
 Democrat; representing Pacific Coast; term of four 
 years. Former United States Senator from Oregon. 
 
 Edward C. Plummer, Commissioner (Maine); Re- 
 publican; representing Atlantic Coast; term of three 
 years. Editor and Admiralty lawyer; formerly Secre- 
 tary of the Atlantic Carriers Association, representing 
 the interests of American sailing vessel owners. 
 
 Frederick I. Thompson, Commissioner (Alabama); 
 Democrat; represendng Gulf States; term of two years. 
 Newspaper publisher; member of Shipping Board 
 from December, 1920 to March, 1921. 
 
 William S. Benson, Commissioner (Georgia) ; Demo- 
 crat; representing Atlantic Coast; term of one year. 
 Rear Admiral U. S. N. (retired). Appointed the fourth 
 Chairman of the Shipping Board March 15, 1920, to 
 fill the unexpired term of Chairman Payne. Chairman 
 Benson and John A. Donald constituted the sole 
 membership of the Board from June, 1920, until the 
 appointment of the new Board. Standing almost alone 
 to keep the "wreckage" together, Admiral Benson has 
 been credited with achieving a remarkable record in 
 view of the difficulties confronting him. 
 
 Meyer Lissner, Commissioner (California); Re- 
 publican; representing the Pacific Coast; term of one 
 year. Lawyer, interested in public service matters; 
 Chairman of the first Board of Public Utilities in Los 
 Angeles. 
 
 This is the composition of the Board created under the 
 Merchant Marine Act of 1920 to carry out the provisions 
 of that Act — the permanent function of regulation and the 
 immediate function of ship operation and liquidation. 
 
 A quotation from the testimony of Chairman Lasker 
 before the subcommittee of the House Committee on 
 Appropriations on July 27, 1921, shows the policy of the 
 Board, which has been carried out, with respect to a seg- 
 regation of these functions to permit efficient operation: 
 
 "It (the Shipping Board) has been an authority over all of 
 the boats . . . and it has had to run a part of the com- 
 peting boats . . . That in itself would make impossible 
 the successful running of the fleet by the Government. 
 
 19 
 
 
. . . The law mandates us to do so many detail things that 
 we have not sufficient time for the larger things. Now we 
 are putting the operation of the boats under the Emer- 
 gency Fleet Corporation. . . . By separating the opera- 
 tion of the boats and placing it in an independent cor- 
 poration, when the Shipping Board meets it meets for the 
 purposes for which it was primarily brought into being." 
 The duties of the Shipping Board have now been divided 
 among the Commissioners who will act as heads of bureaus 
 as outlined below. Chairman Lasker will be a member 
 ex-officio of each bureau and will handle all matters of 
 finance. 
 
 Commissioners Frederick I. Thompson and Edward 
 C. Plummer will head the Bureau of Traffic. They will 
 handle all traffic matters and will determine the neces- 
 sary trade routes which should be developed. They 
 will scrutinize all conferences and agreements in the 
 foreign and domestic trades and will investigate all 
 complaints of discrimination in rates or unfair prices. 
 
 Commissioner T. V. O'Connor will have charge of 
 the Bureau of Operations. He will study the relative 
 cost of operation of American and foreign ships, par- 
 ticularly with regard to labor costs. His work will 
 also cover industrial relations with regard to marine 
 and dock labor, and in compliance with section 8 of 
 the Jones Bill he will make studies of port, pier and 
 terminal facilities. 
 
 The Bureau of Construction will be under Commis- 
 sioner William S. Benson. His duties will be to study 
 the relative cost of shipbuilding at home and abroad, 
 particularly the cost of building the most efficient 
 types. He will pass upon transfers of American vessels 
 to foreign ownership or registry, and will administer 
 the construction loan fund which has been authorized. 
 
 Commissioner George E. Chamberlain will have 
 charge of the Bureau of Law. He will scrutinize inter- 
 national, foreign and domestic shipping laws affecting 
 shipping and will advise the Board of any instances 
 wherein the laws are unjustly discriminatory; he will 
 conduct such hearings as the Board may hold and 
 have general supervision of all litigation. 
 
 20 
 
 Commissioner Lissner will head the Bureau of Re- 
 search. He will conduct studies and gather data per- 
 taining to various activities in which the United States 
 Shipping Board would be affected or interested, and 
 will have supervision over the division of field infor- 
 mation. In addition his work will include the super- 
 vision of marine insurance matters for the Board and 
 the investigation of this entire subject. 
 
 Section 35 of the Jones Bill provides that power and 
 authority vested in the Board, except as otherwise specifi- 
 cally provided, may be exercised directly by the Board or by 
 it through the United States Shipping Board Emergency 
 Fleet Corporation. Under this authority, and with the 
 approval of President Harding, the Shipping Board 
 announced a complete separation of the Fleet Corporation 
 from the Board effective October i, 1921. This separation 
 was made complete by the resignation of the members of 
 the Board as trustees and officers of the Corporation and 
 the election of Joseph W. Powell, J. B. Smull, W. J. Love, 
 A. J. Frey, Henry S. Kimball, Elmer Schlesinger and E. P. 
 Farley as the new trustees. Mr. Powell was chosen 
 President and General Manager. 
 
 The operation of the properties of the Board, and the 
 liquidation of the physical assets other than ships, have 
 been turned over to the Fleet Corporation, the Shipping 
 Board retaining to itself the power to veto cancelling of 
 established lines and the allocation of passenger vessels. 
 
 In matters of physical operation, therefore, those having 
 business with the Emergency Fleet Corporation will have 
 to deal through the new board of trustees and the Cor- 
 poration officers, that is, with men thoroughly familiar 
 with shipping practice and problems and possessed of the 
 necessary authority to make prompt and unhampered 
 decisions. The Shipping Board itself will thus be able to 
 concentrate on the subject of gradual disposal of the fleet, 
 and on the matters of jurisdiction over the activities of the 
 entire American merchant marine. 
 
 21 
 
 
Emergency Fleet Corporation 
 
 WITH the official segregation of the ship operating 
 management from the other functions of the Board, 
 it should now be possible for the public to gain a clearer con- 
 ception of the work of each of these two bodies — the Fleet 
 Corporation and the Board itself^and a better under- 
 standing of progress gained and difficulties encountered. 
 Irrespective of world trade conditions, of the financial 
 embarrassment of many ship operators, and of the present 
 vast surplus of tonnage, the success of fleet operations 
 depends immeasurably upon the personal equation of 
 those entrusted with their direction. It is significant, 
 therefore, that the appointment of the new Fleet officials 
 has met with an approval which promises that sympathetic 
 cooperation so necessary to an untangling of the existing 
 situation. Any disappointment that may have been felt 
 over the lack of experienced shipping men on the Board 
 itself, was dissipated by the selection for the Fleet of men 
 of the widest and most valuable accomplishment in marine 
 affairs. Further, the indications are that they will con- 
 tinue to be given free rein and the responsibility resulting 
 therefrom. 
 
 Heading the personnel of the Fleet Corporation are the 
 seven men who, as trustees, are also its chief executive 
 officers. Of these, Messrs. SmuU, Love and Frey, 
 originally appointed as vice-presidents, have been desig- 
 nated by Chairman Lasker as the "key men" of ship 
 operation. Their previous experience and standing is 
 outlined briefly as follows: 
 
 Joseph W. Powell, President and General Manager 
 of the Emergency Fleet Corporation, serving the 
 Government without salary, was formerly Vice-Presi- 
 dent of the Bethlehem Shipbuilding Corporation, Ltd. 
 He is devoting his attention to financing, accounting 
 and sales and to the general problems of organization. 
 
 22 
 
 J. Barstow Smull, Vice-President, at a salary of 
 ^35,000, came to the Corporation from the Vice-Presi- 
 dency of J. H. Winchester & Company, Inc., mentioned 
 as one of the largest, if not the largest of American 
 ship brokerage companies. Mr. Smull was born in 
 New York in 1874 and entered the shipping business in 
 1894, joining his present firm in 1907. He has been 
 Vice-President of the New York Produce Exchange. 
 With a wide experience in all branches of shipping, he 
 is recognized by shipping interests as a foremost expert 
 in ship operation. 
 
 William J. Love, born in Baltimore in 1873, was, at 
 the time of his appointment. Assistant Manager in the 
 United States for Furness, Withy & Company, Ltd., 
 one of the largest shipping firms of Great Britain. He 
 had previously been associated with the Atlantic 
 Transport Company and later was manager of the 
 American flag steamers of the International Mercantile 
 Marine Company. He is especially familiar with 
 competitive trade conditions throughout the world and 
 likewise has a wide acquaintanceship with merchants 
 and exporters. As a Vice-President of the Fleet Cor- 
 poration, Mr. Love receives ^35,000 a year. 
 
 Mr. Smull and Mr. Love were two of the three men 
 who were members of the charter committee of the 
 United States Government during the war, having full 
 charge of all the allocations of boats used for merchant 
 marine purposes under the American flag — a depart- 
 ment which, according to comment, challenged the 
 interest and admiration of the shipping world. During 
 the war period that committee passed on upwards of 
 20,000 charter parties. 
 
 A. J. Frey, a practical ship operator of twenty 
 years' experience, is the third of the original three 
 "key" men selected by Chairman Lasker, receiving 
 $25,000 as Vice-President. For sixteen years previous 
 to 191 8 he was associated with the Pacific Mail Steam- 
 ship Company. During the war Mr. Frey was a member 
 of the Pacific Coast organization of the Shipping Board 
 and in charge of the Ship Construction Division of the 
 Southern Pacific Division. More recently he was Gen- 
 eral Manager of the Los Angeles Steamship Company. 
 
 As financial officer of the Fleet Corporation Mr. 
 Henry S. Kimball, of New York City, will have direct 
 
 23 
 
 i 
 
 « . i^ 
 
 I 
 
supervision of the treasurer's, comptroller's and audi- 
 tor's office and of all collections of the Shipping Board 
 establishment. Mr. Kimball's associations have been 
 with the Boston Edison Company, American Zinc Lead 
 and Smelting Company, Aetna Explosives Company, 
 Remington Arrns, Union Metallic Cartridge Company 
 and Gaston, Williams and Wigmore. 
 
 ElmerSchlesinger, General Counsel for the Board, and 
 E. P. Farley, Sales Manager, complete the list of the 
 seven trustees of the Emergency Fleet Corporation. 
 The Treasurer is T. S. Clear. 
 
 As the duties of these executives, and of the new district 
 managers, have become delineated, progress in the entire 
 organization of the vast personnel of this enterprise has 
 gone forward, with the assignment of other able executives 
 to the staff and with a gradual and effective systematizing 
 of inter-relationship and functions. 
 
 The extent to which this organization, engaged in the 
 executive and clerical direction of the government ships 
 and shipping properties, had developed and had been 
 maintained up to the beginning of the present Board 
 administration, is shown by a statement of the number of 
 employees in the Shipping Board and its subsidiary 
 company. As of July 15, 1921, this organization in the 
 United States numbered 7,603 employees whose annual 
 salaries aggregated $14,716,662. In the foreign offices 
 there were 677 as of June 30, representing a total yearly 
 payroll, expressed in dollars, of approximately $1,200,000. 
 
 The readjustment necessary to a material reduction in 
 the numbers of these employees was one of the first matters 
 undertaken by the new regime. In particular, the com- 
 position of the foreign offices, notably that in London, 
 had come in for considerable criticism in the percentage of 
 non-Americans on these staffs — comments characterized 
 as largely in the nature of "flag-waving." Whether or not 
 they carried weight is immaterial; at any event it was con- 
 sidered that there would be less duplication of effort if 
 most of the work of these foreign offices were consolidated 
 
 24 
 
 ^ If 
 
 with the offices in this country, and this is being put into 
 effect. The reduction in staff here and abroad has totaled 
 about 4,000 members, cutting the organization to less than 
 half of what it was at the middle of the year, and repre- 
 senting a saving of possibly $7,500,000 yearly. 
 
 Nearly every consideration of the situation confronting 
 the Shipping Board since the Armistice has begun with a 
 statement of the three-and-a-half billion dollar expenditure 
 for a fleet of thirteen and a half million deadweight tons. 
 Usually, also, condemning reference is made to the six 
 hundred wooden ships, representing a million nine hundred 
 thousand tons of this total. 
 
 That an analysis of the quantity and make-up of the 
 government-owned fleet has, in this case, been withheld 
 until a background of Shipping Board legislation, activity 
 and personnel has been broadly sketched, does not imply 
 any lack of appreciation of the fact that in this volume of 
 tonnage lies the whole problem of physical operation and of 
 liquidation of capital assets and war organization. The 
 fact remains that the ships are in existence; that they 
 represent but about two-thirds of the entire ship program 
 of the war in progress or definitely planned at the time 
 hostilities ceased; and that this program and its costs can 
 be compared only with the value of the successful outcome 
 of the war, as in the case of any other war activity. 
 
 Summary of Total E. F. C. Ship Construction 
 
 Ci Anc Number Deadweight 
 
 OF Ships 1 onnage 
 
 Requisitioned Steel 384 2,687,266 
 
 Contract Steel 1*309 8,927,695* 
 
 Contract Wood 589 1,885,250 
 
 Contract Composite and Con- 
 crete 30 136,500 
 
 Total 2,312 13,636,711 
 
 *Includes 19 vessels of 217,700 tons to be delivered, 
 with one exception, during 1921. 
 
 25 
 
The wooden, composite and concrete vessels may be 
 considered as having but a purely nominal salvage value 
 and may be eliminated from further consideration. 
 
 An analysis of the types of the steel vessels, both 
 requisitioned on the ways and built under contract, shows 
 the following totals: 
 
 Analysis of E. F. C. Steel Ship Construction 
 
 Steel Vessels Number Deadweight 
 
 Type of Ships Tonnage 
 
 Cargo 1,420 9,509,234 
 
 Tanker 13B 1,363,030 
 
 Passenger and Cargo ... 25 308,972 
 
 Transport 22 179,775 
 
 Refrigerator 19 161,400 
 
 Collier 9 7o,3SO 
 
 Barges o 22,200 
 
 Tugs 54 W 
 
 Total 1,693 (2) 11,614,961 (2) 
 
 (i) No tonnage given for tugs. 
 
 (2) These figures include the 384 vessels of 2,687,266 
 deadweight tons requisitioned on the ways, of which 
 78 of 728,817 tons has been reconveyed to former 
 owners by June 30, 1921, and are included in the 
 figures of sales given below. 
 
 In addition to this new construction, the seized German 
 vessels, aggregating over 600,000 tons, brought to the 
 American fleet a number of large passenger ships, many of 
 which have already been reconditioned and placed in ser- 
 vice in the development of new trade routes. 
 
 The problem now exists of utilizing this fleet to best 
 advantage in the upbuilding of a permanent marine, trans- 
 ferring it to private ownership as rapidly as conditions 
 permit, and writing oflF its excess cost as a legitimate war 
 expenditure. As of June 30, 1921, a total of 402 vessels — 
 steel, wooden, requisitioned and seized — of 1,900,121 tons 
 had been sold or reconveyed, on the basis of a sales value of 
 ^260,000,000, of which 1131,000,000 had actually been paid. 
 
 26 
 
 
 ' 
 
 Whether these ships will in all cases "stay sold" de- 
 pends, it would appear, upon the action of the Board in 
 respect to the mortgages or notes which it holds covering 
 the unpaid balance. The plight of the "pioneer pur- 
 chasers" of Shipping Board tonnage has aroused con- 
 siderable discussion in Congress and in the press. Briefly 
 stated, the situation is that this tonnage was for the most 
 part purchased during the period of shipping prosperity 
 that followed the Armistice. On the basis of indicated 
 earning capacity, prices of about $200 a ton were agreed 
 upon. With the subsequent collapse of trade and shipping 
 activity, the purchasers of this tonnage find themselves, in 
 many cases, unable to continue the deferred payments 
 then arranged for, and it is contended that some of them 
 are facing bankruptcy. Foreclosure by the Board would 
 not advance the progress of fleet liquidation; on the other 
 hand it appears that the Board cannot, unless specifically 
 authorized by Congress, remit or cancel any part of the 
 original purchase price. 
 
 Feeling that any arbitrary or "upshot" price could not 
 now be applied generally — and probably realizing also 
 that in the present state of the market it would be next to 
 impossible to arrive at any equitable sale value — the 
 Board is conducting a detailed survey of every ship to de- 
 termine its condition and, at least, relatively, its value. 
 It is pointed out with reference to the Government fleet 
 of steel vessels, that they are very largely oil-burning — an 
 important consideration in economy of operation — and 
 generally eflicient in character of design and construction, 
 though in many cases somewhat over-engined. This does 
 not, however, overbalance the fact that their aggregate 
 volume obviously must hang over the market as an un- 
 stabilizing influence for some years, at least in so far as 
 vessels of the general cargo type are concerned. 
 
 It is contended by some that during the "boom" the 
 Board should have set a sale price of 1 150 or less a ton, 
 instead of ^200, and thus have encouraged the purchase of 
 
 27 
 
greater numbers of ships. But in answer to this, others 
 feel that had this been done, the number of threatened 
 failures by now would have been even greater, and that 
 no one but the Government itself could have carried any- 
 real volume of this new tonnage during this world-wide 
 curtailment of the international movement of commodities. 
 Its direct reaction came upon world shipping, reflected in 
 operating deficits and in the withdrawal of ship tonnage, 
 which the Shipping Board has faced in common with 
 operators the world over. 
 
 A measurable improvement in trade conditions particu- 
 larly, as far as this country is concerned, in imports, would 
 seem to be indicated. But irrespective of this, irrespective 
 of the amount written off of the cost of the fleet as war 
 expense, it will take time for private enterprise to absorb 
 this immense volume of tonnage. 
 
 The figures of world shipping tonnage issued by Lloyds 
 as of June 30, 1921, are interesting in this connection. 
 Taking the steel ocean-going steamships of the principal 
 maritime countries, there has been an increase from 
 42,514,000 gross tons in 19 14 to 54,217,000 tons this year. 
 If world trade demand and the parallel growth of ship 
 tonnage had continued at its previous rate of increase, the 
 present figure would have been about normal. But with 
 world commerce subjected to the violent upheaval which 
 has occurred, there is now a disparity about equivalent 
 to the amount of the increased ship capacity. And with 
 ships, as with other commodities fluid in their movement 
 between sources of supply and demand, a small surplus, 
 say 3 per cent, is enough to cause a break in the market. 
 
 Two points are, however, frequently overlooked in con- 
 sidering these figures of world tonnage. In the first place, 
 approximately one quarter of this increase consists of oil 
 tank ships. In 1914 vessels of this type numbered 385 with 
 a gross tonnage of 1,479,000; for 1921 the corresponding 
 figures are 861 of 4,419,000 tons. About a half of this 
 tanker tonnage is American. Second, the present figures 
 
 28 
 
 I -» 
 
 1 
 
 include a great number of vessels variously estimated by 
 shipping authorities at from 3,000,000 to 5,000,000 tons 
 which must be scrapped in the course of the next few years. 
 Ship tonnage '^^ existence during the war was driven hard, 
 there was opportunity only for the most perfunctory 
 maintenance and replacement, and some of it has become 
 obsolete, with the result that a considerable part of this 
 tonnage cannot continue to survive in competition with the 
 newer and more efficient ships. In so far, therefore, as the 
 future is concerned, there should not be any dangerous 
 excess of tonnage under a return to a normal, even though 
 a new normal, of world trade. 
 
 Another feature that has an important bearing upon 
 relative economy of operation is the increased use of oil 
 fuel — accounting in part for the greater number of tankers. 
 In 1914 there were 364 oil-burning vessels of 1,310,000 
 gross tons. This fleet has now increased to 2,536 of 
 12,797,000 tons, of which about 8,000,000 tons are under 
 the American flag, or roughly two-thirds of the total 
 American fleet of 13,335,000 gross tons. 
 
 On January i, 1921, the steel vessels of the Shipping 
 Board fleet numbered 1,331, according to a statement by 
 Chairman Lasker, of which 1,142 were in operation. 
 On July 23, 1921 there were 1,445 vessels in this fleet of 
 which only 632 were being operated, 66 were under repair 
 and 747 were tied up. This decrease is indicated in terms 
 of tonnage by an official tabulation showing steel ships in 
 service by months for the year ending June, 1921. During 
 the last six months of 1920 the figures vary between 
 7,600,000 and 8,250,000 deadweight tons, averaging 1,161 
 vessels and 8,000,000 tons. With 1921, this tonnage began 
 to be withdrawn from service, as was a part of the tonnage 
 of private fleets, until in June, 1921, the Shipping Board 
 Fleet in service numbered only 691 of 5,259,000 tons. By 
 November, 1921, the number of these vessels in service 
 had been reduced to about 400 of approximately 3,000,000 
 deadweight tons, a decrease for the year of over 60 per cent. 
 
 29 
 
 '^^ 
 
 I 
 
In the face of the slackened demand for ships indicated 
 by these figures, it can be appreciated that the problem of 
 the profitable operation of this huge fleet is itself a difficult 
 one, let alone the question of its liquidation.^ 
 
 The conflicting factors in the ship operating situunon 
 are these, that from the viewpoint of immediate national 
 economy, the fleet must be run at the least possible loss 
 from current operations— for the time being a profit can 
 hardly be anticipated; and at the same time the conditions 
 imposed must be such as to assist in the upbuilding of a 
 capable group of private operators who can be encouraged 
 and enabled gradually to absorb this fleet from the 
 Government in accordance with the policy of government 
 withdrawal from ship operation and ownership. Withal, 
 the needs of the American exporters and importers must be 
 considered in the development of adequate shipping ser- 
 vice to all parts of the world. 
 
 While awaiting a sale market for these ships there are 
 three methods under which tonnage can be chartered, that 
 in greater or less degree relieve the Government of the 
 details and the financial burden of direct operations. 
 
 The first of these is the time charter or bare boat basis, 
 under which the Government would be released from all 
 operating costs, the charterer paying so much per ton per 
 month for the hire of the vessel and assuming all operating 
 expenses. This is considered in many ways the most 
 satisfactory method, but under the present conditions 
 almost as difficult to arrange as are sales. While it the 
 time charter rates are set low enough to attract charterers 
 now, there would not be the incentive to purchase. 
 
 Under the second method, and the one toward which 
 the greatest efforts are being made to develop a satis- 
 factory plan, the ship operating company and the Fleet 
 Corporation would work on a partnership basis, hach 
 would have something at stake, the charterer standing his 
 share of any losses and participating proportionately in 
 any profits. 
 
 30 
 
 ,1 
 
 i 
 
 To the extent that the Government is unable to charter 
 its vessels under either the time charter or the partnership 
 plan, it must have recourse to the system of allocation or 
 agency agreement for any other ships which it desires to 
 operate in conjunction with private companies. Under 
 allocation, the Emergency Fleet Corporation pays all of 
 the expenses of operation and the operator receives a fixed 
 percentage of the gross receipts, usually from 2^ per cent 
 to 5 per cent depending upon the nature of the commodity 
 movement. This is the basis of the agreement widely 
 known as the MC)-4 contract — that is, the fourth plan 
 that was drawn up with the managing operators. In the 
 hearings before the House Committee already referred to. 
 Chairman Lasker said: "May be if I had been on the Board 
 at that time (when this system was inaugurated) or if any 
 of you gentlemen had been on the Board . . . you 
 would have voted for that contract in the light of things as 
 they were then. . . . Without comment, because I am 
 not expert enough on whether ... it should have been 
 voted for or not, it has turned out to have been as vicious 
 and incompetent a basis of doing business as the human 
 mind could devise . . ." It is contended that under 
 allocation, the operator has no incentive to economize on 
 expenses or to take any pride in the boats themselves; 
 rather, that the incentive is to incur expenses dispropor- 
 tionate to the revenue from added business for the sake of 
 the assured percentage on this business. And further that 
 in addition to being the worst contract for the Govern- 
 ment, it is by no means the most favorable to the operator 
 in that it constitutes an unstable condition, unfavorable to 
 the proper development of the merchant marine. Never- 
 theless, with respect particularly to passenger liners en- 
 gaged in developing new routes for American ships, there 
 has appeared to be no other method that will keep these 
 vessels in operation under present conditions. 
 
 Congressional appropriation committees have never 
 failed since the inception of the Shipping Board to 
 
 31 
 
 iWMM 
 
 " ■ ■■ ^ 1-Hv. iv * >iid^.'»" r? 
 
exercise their full prerogative in the matter of investigation 
 and cross-examination of the affairs of the Board, and it is 
 probable that the operation of no other department has 
 been so completely yet so unsympathetically scrutinized. 
 On July 27, 1 92 1, there came up for consideration under 
 the Urgent Deficiency Appropriation Bill, 1922, the 
 request for an added appropriation of $100,000,000 for 
 the six months ending December, 1921, accompanied by 
 the recommendation that all receipts from liquidation of 
 capital assets during the year be carried into the Treasury 
 and that direct appropriations be made for the expense of 
 the Board. Testimony taken at that time disclosed a con- 
 fusion in the accounting practices of the Shipping Board 
 that not only made difficult a clear-cut segregation and 
 analysis of previous operating experience but, together 
 with the general uncertainty of ship operations, caused 
 Mr. Lasker to disclaim repeatedly responsibility for the 
 accuracy of any budgeting of the requirements for the 
 coming year. This budgeting was, however, as follows: 
 
 Estimated Cash Requirements for the Fiscal Year 
 
 Ending June 30, 1922 
 
 Current Operations: 
 Losses due to operation 
 
 of ships $100,000,000 
 
 Reconditioning of vessels 1 6,000,000 
 Insurance claims and 
 
 losses on ships .... 10,800,000 
 Administration overhead 15,000,000 
 
 Total estimated cash requirements on 
 
 current operations $141,800,000 
 
 Construction expenditures $30,610,000 
 
 Less appropriation ap- 
 proved June 16, 1 92 1 . 25,000,000 
 
 Net requirement for construction . . . 5,610,000 
 
 Total $147,410,000 
 
 3^ 
 
 In addition to the above, the estimated cash require- 
 ments for claims total 158,291,500, comprising largely 
 cancellation claims on ship construction. The sum of 
 these two items, ^205,700,000, was the basis of the request 
 for half the amount, or roughly J 100,000,000 for the half 
 year in addition to the $25,000,000 already appropriated. 
 
 A note is appended to this estimate explaining that the 
 sundry civil bill approved March 4, 1921, allows the Board 
 to retain up to $55,000,000 derived from the sale of capital 
 assets to be applied to operating and construction expenses 
 during the year ending June 30, 1922; but stating that no 
 deduction of this amount is made in the estimate because 
 of the announced intention of the Board to ask for repeal 
 of this authority and the provision of all necessary funds by 
 direct appropriation. 
 
 The appropriation finally granted, in addition to the 
 earlier $25,000,000, amounted to $48,500,000 and it was 
 generally expected that the Board would later in the 
 current session request additional funds. However, on 
 September 27th it was announced that the Board had 
 informed Congress that it does not expect to ask for any 
 new appropriations because of reductions that are being 
 made in the operating deficit. 
 
 Just what provision this will make for the payment of 
 claims is not clear. Mr. Schlesinger, General Counsel, 
 estimated that their face value was about $300,000,000 to 
 $350,000,000 involving some 3,500 separate cases. The 
 work of handling these claims has necessitated the 
 formation of a larger and reorganized legal staflF, and no 
 approximation has yet been reached of the aggregate 
 amount of the settlements that will finally be made. 
 
 To pass on these claims, a Claims Commission has been 
 appointed by the Shipping Board, but separate from it, 
 consisting of five men: Judge Walter D. Meals, of Cleve- 
 land, Chairman; and Homer Ferguson, President of the 
 Newport News Dry dock and Shipbuilding Company; 
 T. W. Wood, formerly President Maryland Steel Com- 
 
 33 
 
I 
 
 pany; Commander Richard M. Watt, formerly Chief 
 Construction Officer of the Navy, and Arthur W. Teele, 
 Vice-President of the Public Accountant Association of 
 the United States. The Board and the claimant will both 
 appear before this Commission by counsel and the Board 
 will not therefore be in the position of being both arbitrator 
 and defendant. 
 
 On the other hand, the Board had, it was estimated as of 
 June 30, 1 92 1, about $500,000,000 of so-called quick assets 
 of which $287,000,000 are in the shape of notes and 
 accounts receivable, about half from vessel purchasers. 
 These together with the capital assets of the Board are now 
 being subjected to careful inventory and review, prior to 
 efforts toward collection and liquidation. Incidentally, no 
 assets may now be disposed of without the permission of 
 the Government Budget Officer. 
 
 In connection with the subject of appropriations, the 
 following figures are extracted from a "statement of 
 moneys authorized, appropriated for, and otherwise 
 provided for from the inception of the Board to June 
 30, 1921." 
 
 Appropriated for: 
 
 United States Shipping Board (per- 
 manent fund, salaries, expenses) . $52,683,753 
 
 U. S. S. B. Emergency Fleet Cor- 
 poration (Emergency Shipping 
 
 fund) 3,240,053,000 
 
 Otherwise provided for 29,512,426 
 
 Total appropriated or provided . . $3,322,249,179 
 
 (This does not include $20,459,000 that was not 
 available until July i, 1921.) 
 
 This review of the functions and the problems of the 
 United States Shipping Board and its subsidiary Corpora- 
 tion has not attempted to go into the many related 
 questions bearing upon the general status of ship operating 
 
 34 
 
 
 L 
 
 m 
 
 
 under the American flag — such, for example as the much- 
 discussed relative cost of operation; the Edmonds* Bill 
 amending the LaFollette Seamen's Law in the matter of 
 crews on oil-burning vessels, and other labor problems; 
 development of efficient marine organizations here and 
 abroad; revision of tonnage measurements; oil supply; 
 and any detailed discussion of preferential treatment for 
 American ships. Nor has the economic necessity and 
 value of an adequate American merchant fleet been argued. 
 
 Here the assumptions are made, justified by the weight 
 of experienced opinion, that a merchant marine capable of 
 carrying fully half of our international trade in com- 
 petition with the fleets of other countries, is a national 
 requirement and an asset of tremendous tangible and in- 
 tangible value. And that, weighing the advantages and 
 disadvantages, there are no insuperable obstacles to the 
 success of our fleet in world competition. 
 
 For, rising and falling as the underlying economic factors 
 have pointed our attention first to the sea, then to the 
 riches inland, our merchant marine in the century past has 
 measured the extent of our dependence upon foreign trade. 
 "They that go down to the sea in ships, that do business in 
 great waters," they who build up the seafaring spirit of 
 the people, do so because surplus products, surplus eflPorts, 
 find there the outlet which means individual and national 
 prosperity. 
 
 35 
 
ESTABLISHED i8lo 
 
 The Mechanics &^ Metals 
 National Bank 
 
 of the City of New York 
 20 NASSAU STREET 
 
 Capital, Surplus and Profits — $27,000,000 
 
 I 
 
 ,1 
 
 'branches 
 
 25 Broadway 
 Columbus Avenue and 93rd Street First Avenue and 103rd Street 
 Madison Avenue and 60th Street Broadway and 86th Street 
 Seventh Avenue and 58th Street Amsterdam Ave. and 125th Street 
 Third Avenue and 116th Street Second Avenue and 14th Street 
 
 !»•«. 
 
 Officers 
 
 Gates W. McGarrah President 
 John McHugh Vice-President 
 
 Frank O. Roe Vice-President 
 Harry H. Pond Vice-President 
 Samuel S. Campbell Vice-President 
 Joseph S. House Cashier 
 Ernest W. Davenport ^45^^. Cashier 
 
 TRUST department 
 
 Raymond H. See Manager 
 
 Arthur M. Aiken Asst. Cashier 
 William E. Lake Asst. Cashier 
 Arthur W. McKay Asst. Cashier 
 Clifton Stanton Asst. Cashier 
 Alexander F. Bryan Auditor 
 
 foreign department 
 Carl Schulz Manager 
 
 BOND department 
 
 M. G. B. Whelpley Manager 
 
»iii*l;'_-7^7J:*.i " 
 
 - 1 
 
 Date Due 
 
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 The mechanics & metals national 
 bank, New York 
 The Shipping board 
 
 1925 
 
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 TITLE