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Congress could not prevent the consideration of an element of property which was a legitimate element of property in the act of taking over, in what position will Congress be if they had permitted in all these years a certain standard of earnings to be recognized as legitimate and reasonable and proper and legal, and then when you want to take over the properties you will say: "We will make them cheaper by destroying their value?"

My judgment is that that proposition can not be sustained either in law or in morals. You are engaged in the one act of taking over these properties and paying for them what is a reasonable compensation. And you say: "We have also power under the act to regulate commerce of reducing the value of these properties, and we will do that in order that we can take them over cheaper." In my judgment that would be a violation of both the Constitution of the United States and of the moral principles which control this Government.

So I shall contend before you that your function here is a single function of ascertaining what the use of these properties is worth under the existing conditions, and that you can not change those conditions. in order to make them appear to be worth less.

Senator CUMMINS. To clear up some doubt in my mind, I think every lawyer will agree with you that if the Government takes this property it must pay just compensation for its use during the time that the Government is in possession of it. And I think every lawyer would agree with you that Congress can not fix that just compensation; that that is a judicial question. But what I want to be clear about is this: In the first place, have we taken over the property? Has the Government taken over the property, and does this Dill provide for taking over the property in the sense of taking private property for public use?

Mr. THOM. It seems to me, as I understand it, this is an administration bill, is it not?

Senator CUMMINS. It may be assumed so, I believe.

The CHAIRMAN. I think that is a very safe assumption.

Senator CUMMINS. The bill came in immediately following the President's message.

Mr. THOM. All I can do is to address myself to the bill.

Senator CUMMINS. What I want to know is from your standpoint. Senator TOWNSEND. Then you are addressing yourself to the same bill?

Senator CUMMINS. The same bill, of course. Has the Government taken over the property and is it operated, or is the Government simply exercising a larger measure and control and direction for the use of the property by the companies which own it?

Mr. THOM. I think that is an entirely substantial question, Sen

ator.

Senator CUMMINS. In other words, I should like to know, for instance, whether the men who are operating this property now, since the 29th of December, are Government employees. I should like to know whether the money which has come in since that time for the service that has been rendered is Government money and whether the expenditures that have been made from time to time since the 29th of December are Government expenditures. In other words, I want your idea upon whether we are taking this property in

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the sense that a Government exercises its power of eminent domain. I supposed we were, but there is very much in this bill and something in the communication of the President which lead me to doubt just our attitude now toward that property as set forth in this bill.

Mr. THOм. In the bill itself you will find a recital in the first line that the President, having in a time of war taken over the possession, use, and control.

Senator CUMMINS. I know that is the recital in the first clause. Mr. THOM. Now, of course, I have no way of determining what the administration's interpretation of the act which it has done is. I do not know. I think there is a great deal of uncertainty as to the extent of what has been done, but this is done beyond dispute, the management of these properties has been taken away from these companies. The policies of these companies are no longer dictated by them.

Senator POINDEXTER. May I ask you right there, not only the management but the possession? Now, if the possession and the manageagement have been taken over, what is there left for the railroad company?

Senator CUMMINS. That is just the question I asked him, whether possession has been taken over or not.

Mr. THOM. I will tell you why I am answering in the manner I am answering.

Senator CUMMINS. Let me put another question so you will have my full idea. I want to premise it by saying I think we ought to take possession of the property and ought to operate, and ought to pay the companies which own them just compensation for its use; but it would seem to me that it might bear this interpretation, that your use, your direction, your management is being interfered with only to the extent that the Director General issues a particular regulation or order, and that the Government is not attempting to operate the properties, and the order of the Director General in any particular matter bears about the same relation to the use of the property that the order of the Interstate Commerce Commission has heretofore borne to the property when it has issued an order regulating or directing a particular thing to be done.

Mr. THOм. I do not at all think that what has been done can, in any interpretation, be limited as the authority of the Interstate Commerce Commission is limited.

Senator CUMMINS. That ought to be made perfectly certain, should it not?

Mr. THOм. I agree that everything about these properties ought to be made certain. The situation is too important to leave any field of real uncertainty on any important matter connected with them. But at any rate, Senator, I was going to answer Senator Poindexter's question by reference to the situation in England. The language of the English law is very much like the language of the law under which the President acted.

The CHAIRMAN. Will you add that to your statement, the language of the English statute?

Mr. THOм. I think I have it in my pocket.

Senator ROBINSON. And in that connection also, if you have it, put in the paragraph of the act of August 29, 1916, authorizing the

President to take over these properties and under which he took them over. If you do not have it, we can supply it here.

Senator KELLOGG. That is the exact language of the proclamation which is before the committee.

Mr. THOм. Have you the proclamation there? I will read the two together. I have it here, leaving out a few things which are not very essential.

Senator POINDEXTER. May I read just a line there into the record, Mr. Thom?

Mr. THOM. Yes.

Senator POINDEXTER. This is the language of the proclamation.

It is hereby directed that the possession and operation and utilization of such transportation systems as hereby by me undertaken, shall be exercised by and through William G. McAdoo, who is hereby appointed and designated Director General of Railroads.

I just wanted to get that into the record.

Mr. THOM. Now, the English law, leaving out a few things nonessential, and, of course, you can supply them by a full copy of it Senator CUMMINS. I have it. I have it at my office, not with me just now.

Mr. THOм. These are the essential parts of the English law:

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There shall be paid to any person or body of persons whose railroad or plant may be taken possession of such full compensation for any loss or injury that may be sustained under this section as may be agreed

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upon between the Secretary of State and the said person or body of persons; or, in case of difference, may be settled by arbitration.

That is the important part of the English law.

Senator CUMMINS. That is the law; that is the order in council? Mr. THOм. No; that is the law; that is a quotation from the act of Parliament.

Senator CUMMINS. Of 1871?

Mr. THOм. Yes; that is a quotation from the act of Parliament. Senator CUMMINS. I knew it was in the order of council, but I had forgotten it was in the law.

Mr. THOM. Yes; that is the authority under which the English Government took possession of the railroads of Great Britain. Senator CUMMINS. I have a copy of the law, very kindly given me by Mr. Thom.

Senator KELLOGG. Can you hand it to the stenographer?
Senator CUMMINS. I shall be very glad to do so.

Senator KELLOGG. There were two statutes, one passed in 1871 and one in the eighties, as I understand?

Senator CUMMINS. Yes. Mr. Thom has begun in the later part of the law. The early part of the law defined what can be done by the council in case of emergency, and that, I think, is the part that was really asked for. I will furnish the full copy.

Mr. THOм. I should like to read into the record the paragraph in our law authorizing the President. It is as follows:

The President, in time of war, is empowered, through the Secretary of War, to take possession and assume control of any system or systems of transportation, or any part thereof, and to utilize the same, to the exclusion as far as may be necessary of all other traffic thereon, for the transfer or transportation of troops, war material, and equipment, or for such other purposes connected. with the emergency as may be needful or desirable.

I think that section which Senator Poindexter has read from the proclamation ought to be considered.

Now, how all that may be interpreted is a matter, of course, beyond my control. I think, at least, this is so: That the management and use of these properties for their owners' purposes to the extent that is permissible under existing law has now been interfered with, and the discretion with respect to this management has been turned over to the Government of the United States. Without that discretion the power to control the earning capacity of these properties disappears. We are deprived of the power to control the earning capacity of our properties, because we no longer have the discretion as to their management.

Senator CUMMINS. You had not full discretion before.

Mr. THOм. But we no longer have it to the extent we had it before. The question now comes up: Granting that we did not have it before to the full extent, granting that now we do not have it at all, what is the value of the thing of which we have been deprived? We know what it was to us under the limited authority we had before under existing law; that is a matter which can be stated in figures-in official reports we know what that value was. We now have no power to exercise that portion of our proprietary functions which we had before the President acted. The whole earning capacity of our properties, the whole initiative in respect to them, the whole use of them as separate entities, which was permissible under the law, the whole power of attempting to control business and to send it over our lines according to what the law permitted, is taken away. The properties have been unified, and the rolling stock and the motive power of one have been given to another. The terminals of one company, built at great expense and of great value as an earning asset have been taken away and coordinated so as to be open to all others. There is no longer the capacity to use these properties in accordance with the discretion of their executives or their boards of directors or their stockholders. What they shall earn is no longer a matter of private initiative or private control, but it is a matter of governmental control and that governmental control is being exercised.

Now, what is proposed in respect to it? It is proposed to recognize that change in conditions. It is proposed to guarantee a certain earning capacity and for the Government to take everything over that. If the Government manages them, well enough; if the volume of traffic is great enough, if the earnings go beyond the level of the guarantees, why it becomes the Government's money. What is left to us? No matter what you call it, whether you call it the modified possession that exists in England, where the current money is left in the hands of the carriers and the employees are not Government employees, or whether in this country the plan shall be adopted that all money is Governmental money, that all employees are Federal employees, that the Government recognizes each individual employee as an agent, and does not recognize merely the corporation as an agent, whatever it may be, the very substance of ownership has been taken away from us, and we can no longer control and we can no longer influence the earning capacity of those properties. Now the President says, in his proclamation, the way to deal with that is to guarantee to these railroads the value of their use as it

has been heretofore demonstrated to be, and for the Government to take all above that. Shall we not be deluding ourselves if we attempt to settle that question by determining whether or not the possession is a full possession, whether or not the status of the money as it comes, is that of Government money or private money, and whether or not the representatives of the railroads are Federal employees or railroad employees? The Government has put an end to our private use of these properties. It has put an end to our earnings from them, what heretofore, under the law, we had been authorized and permitted to earn, and have as our own, and whatever form it is, however it may be interpreted, the dominion over these properties has been taken from us, the capacity to utilize them as private property is withdrawn, and the question is, is there anything of value remaining in the use after you take that away?

Senator KELLOGG. Legally all we can do then is to create a commission to assess the value of the use and give an opportunity to review that in some court?

Mг. THOм. I do not think that is legally all you can do. I think that you can grant a discretion to some Governmental body to make a voluntary agreement with these carriers.

Senator KELLOGG. I mean outside of that?

Mг. THOм. And you can not force a carrier to accept that, and therefore you must have a tribunal which will settle the question, if it enters into the reign of disagreement.

Senator KELLOGG. That is what I assumed, of course.

Mr. Tном. Yes.

Senator CUMMINS. My only suggestion in that regard is it ought to be made perfectly clear. The people who are operating the railroads should be either responsible to the Government for fidelity and efficiency, or they should be responsible to their respective companies for the same result. It is a matter of indifference to the railroads, because under this bill they have a certain income guaranteed. And I assume they are patriotic and zealous men, and they will do the best they can, but they ought to be responsible to one head or the other.

Mг. THOм. The question of power, it seems to me, should be made perfectly clear, Senator.

Senator CUMMINS. Certainly.

Mr. THOM. But as to whether or not the full power should be exercised by the Government is a matter of discretion, it seems to me. Senator CUMMINS. The Government ought to exercise it through, of course, the existing organizations. I agree to that. We could not organize another body of railway operatives. It would be too long and too fatal an undertaking, but it ought to be made perfectly clear, ought it not, that the Government is in possession of this property and that the people operating it are working for the Government and nobody else?

Mr. THOм. It ought to be made perfectly clear by the statute what the limited governmental authority is, but whether the statute should go into details we would question-there ought to be the power somewhere to deal with that question.

What made me say that is the working of the English system. Under this extract from the law, which I have read to you, you see

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