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a more rapid movement of traffic, and it is therefore your belief that there must be a superior power intervening that will eliminate that

interest.

Commissioner HALL. Either that or the other alternative indicated in our special report, but that alternative, as has been suggested, is already in the past.

Senator CUMMINS. Now, do you believe the railway equipment of the country-and I includes in that cars, both freight and passenger, and locomotives and other things of that character-is sufficient to do the business that is now required to be done if the railways can be united in a single system and operated in the most economical and efficient way?

Commissioner HALL. That involving, of course, that terminals should be available in common as needed.

Senator CUMMINS. In every respect as a single road?

Commissioner HALL. Why, it seems to me, Senator, quite possible that the existing equipment might suffice for the immediate present. Of course, as rapidly as terminals are made more adequate, or the traffic is more widely distributed, it might be that equipment in excess of what is necessary to replace the obsolescent could be used to advantage. About 100,000 freight cars a little over, probably— become obsolescent every year, and it takes that amount to replace

them.

Senator CUMMINS. Is it your opinion that what might be called the 10ad facilities, or terminals or sidetracks, and other things of that kind, are sufficient, if they can be used as parts of a single system? Commissioner HALL. Well, Senator, that would be a matter of speculation. I have not studied any one of those terminals with that in view. They never have been so used. It seems very probable that they might be sufficient, at least for the present, in most cases. There might be individual spots here and there where they would have to be supplemented, but I should expect that with the existing equipment and the existing terminals very much greater results could be obtained by the operation of the plant as a whole, as distinguished from operation by competing entities.

Senator CUMMINS. I am leading up to this inquiry-eliminating the ordinary expense of maintenance, do you think that any considerable outlay on the part of the Government in the way of capital will be necessary in order to make the railway systems of this country united as they will be, sufficiently to do the business?

Commissioner HALL. I can only give you my personal view.

Senator CUMMINS. It is a very valuable opinion and I would like very much to have it,

Commissioner HALL. No; I do not think it is, under the circum

stances.

Senator CUMMINS. It is one of the most vital things in this whole matter.

Commissioner HALL. Yes; but my personal view is not, and I can only give you my personal view. My personal view is that it would involve an expenditure on the part of the Government in either making good a guaranty or in actual outlay for acquisition of equipment or terminals, very much less than the estimates that one frequently hears.

Senator CUMMINS. It is your view, then, that we can look forward to Government operation without the fear of any great expenditure of money for the purpose of additions or betterments that would be charged to capital?

Commissioner HALL. The need of them might be demonstrated as operation went on, but perhaps none would be needed right away, except at a few ports, piers, and warehouses, and things of that kind. Senator CUMMINS. Have you had under consideration the provisions that must be made, if the Government finds it necessary to add to the facilities and equipment of the railways-I do not mean in the ordinary operation and maintenance, but in addition, that would become a part of the capital of the railways?

Commissioner HALL. I have given thought to that subject; yes, sir. Senator CUMMINS. What is your opinion with regard to the proper provision for that expenditure, if it becomes necessary?

Commissioner HALL. I do not know what the best way to work that out would be, but I can indicate as analogous the case where a tenant puts improvements on leased property with the understanding and arrangement that he shall be compensated for those improvements when the term ends, or, if they are of a character that can be removed, that he may remove them. In other words, they do not become fixtures and go with the realty, as a matter of course.

Senator CUMMINS. All these railway companies have outstanding mortgages which cover their property to secure their bonds? Commissioner HALL. Yes, sir.

Senator CUMMINS. Have you considered what relation the expenditures, with regard to betterments and additions should bear to the mortgages on the property?

Commissioner HALL. I should think those betterments or improvements would naturally be for capital account, if made by the carrier, and if made by the Government as occupying and operating the roads for military necessity, might by appropriate provision remain out from under these preexisting mortgages.

Senator CUMMINS. Do you mean that these expenditures should be made a first lien upon the property?

Commissioner HALL. No, sir; I do not mean that at all. I mean that if the Government sees fit to put in some additional terminals, under arrangements such as I have suggested, or builds some warehouses or piers, even if that should be on railway property, prompted as that action would be by an emergency such as the President has recognized in taking over these railroads, there could be appropriate provision that those additions made by the Government upon the property would not be subject to the private contract made by or between the carrier and the bondholders, and would not go to enhance the security of those bondholders.

Senator CUMMINS. They would be of little value to the Government if it ceased to operate the railway property?

Commissioner HALL. That would depend upon what the addition or betterment was. It might chance to be a warehouse or pier that if not of value to one carrier would be of value to another carrier, after the storm has passed. It might consist of rails, or equipment, which would be of value anywhere; and, again, the improvement might be such as not to be severable. But, even so, supposing it should be of

little realizable value to the Government, after Government operation ended, the Government has a great task here to perform. It has its munitions to move and supplies to move, and all the rest, at heavy expenditure; and if it made some expenditure to better existing facilities and expedite movement, so as to better respond to its needs, the money so expended would not be wholly lost, any more than the money which goes into the shell or torpedo that perishes in the using. Even if that were so it would still seem to me a proper expenditure.

Senator CUMMINS. You will understand, Mr. Hall, that I am not taking this up with you in a controversial spirit.

Commissioner HALL. Yes, sir.

Senator CUMMINS. I am trying to get the information because that subject must be covered by legislation which will probably be at some time before this committee.

Commissioner HALL. Yes; it would seem that if the Government found it necessary to spend money for a betterment that was distinguishable from what was already there in the carrier's property, that betterment could remain on the carrier's property with suitable provision to enable the carrier to acquire it on reasonable terms after the Government possession is relinquished, but that meanwhile it would remain Government property, unaffected by any private contract, such as the mortgage that might have been put on the preexisting property of the carrier. In fact this would never have been property of the carrier at all, unless at the end it should acquire it from the Government.

Senator CUMMINS. It would not be fair, would it, to compel the railroad companies to take this property and pay for it when the properties are restored unless it was of value to the railways in normal times?

Commisisoner HALL. I should think not, Senator; and that is touched upon in the last paragraph of the special report as follows: With provision for fair terms on which improvements and betterments made by the President during the period of his operation could be paid for by the carrier upon return to it of the property after expiration of that period.

Without imposing upon it the obligation of taking over a strategic line which might be built if the war should shift to these shores, or additions or betterments which would be of no use to it in its ordinary business.

Senator CUMMINS. Mr. Chairman, Senator Kellogg desires to ask a few questions at this point with regard to some matters that have been covered, and I think it would tend to a better study of the matter, if they were asked at this time, and my questions with regard to these tables be deferred until later.

The ACTING CHAIRMAN. Very well.

Senator KELLOGG. Commissioner Hall, I understood you to say that there have been enormous increases of traffic on the railroads owing to the war. Do you give in your tables any increase since 1916!

Commissioner HALL. We have not the returns officially for 1917. They will be in the annual reports for that year, which will come in within the next few months. After their receipt it will take some time to check and compile the results.

Senator KELLOGG. I notice the railway executives have stated in a return made here, that the increase of traffic during the six months of April to September, 1917, over the six months of 1916, on roads. of class one, which include about 95 per cent, amounts to substantially 20.3 per cent.

Commissioner HALL. About 97 per cent, operating.

Senator KELLOGG. Well, 97 per cent, yes; that is, the railroads include about 97 per cent; it amounts to about 20.3 per cent. Have you looked into that question at all?

Commissioner HALL. Not to arrive at a definite comparison. The carriers are receiving their information currently, but it is called for by the commission only annually, and after it is received it takes time to compile it.

Senator KELLOGG. Well, there has been an enormous increase this year over last.

Commissioner HALL. Yes, sir.

Senator KELLOGG. This also gives an increase over 1915 of something over 50 per cent. Do you know whether that is substantially correct?

Commisisoner HALL. I should not be at all surprised. I assume that it is correct, if it comes from that statement of the executives.

Senator KELLOGG. Now you also state that the congestion is largely due to the traffic being routed to New York and Newport News, or largely so, for the convenience of shipments to Europe. I understood you to say that?

Commissioner HALL. The North Atlantic ports, yes, sir; and especially New York.

Senator KELLOGG. That is something the railroads could not control?

Commissioner HALL. No; as long as the boats only go to New York. Senator KELLOGG. And that is something that Government operation would not benefit in the least, is it not?

Commissioner HALL. Why, there has already been an arrangement made for the bottoms to go to other ports, and the carriers are getting ready to take the goods there; in fact, they are going.

Senator KELLOGG. Yes; but that could be done without the Government taking over the railroads just as well as with the Government taking over the railroads?

Commissioner HALL. Whether just as well or not, I do not know; but it could be done and is being done.

Senator KELLOGG. That depends on the Government ordering the goods shipped to certain ports that furnish ship transportation for it, does it not?

Commissioner HALL. Yes, if our Government is furnishing it. If the allies are furnishing the bottoms, I do not suppose our Government has much to say about it, except as it arranges with them.

Senator KELLOGG. Well, how does the Government operation of railroads enable the Government to ship goods to south Atlantic ports, when it could not do it before? I do not understand that.

Commissioner HALL. I did not say that it could not do it before, and I have said that the railroads were doing it now.

Senator KELLOGG. To what extent have the priority orders which have been issued by the various departments of the Government interfered with or congested transportation? I notice by the report

of Mr. McChord, a member of the commission, or rather his separate report, that there are several Federal agencies authorized by law to issue orders or directions with respect to transportation, and that they are executing that power. Has that tended to congest traffic? Commissioner HALL. I think so; yes, sir.

Senator KELLOGG. You mean that priority orders have been given by different departments of the Government which conflict or were unnecessary?

Commissioner HALL. I do not mean any priority orders issued by the transportation priority director, by Judge Lovett; I do not mean that. I mean that in the War Department there are at least five bureaus or boards-I think Gen. Baker said 12 a few days ago each undertaking to direct the kind of munition or supply that it is interested in, which shall receive preference movement. Then there is the Shipping Board seeking preference movement for what it is interested in; and there is the Navy; and those things frequently conflict. More than that, there is a system in vogue of placing in the hands of a manufacturer who has a contract for furnishing supplies, so-called "envelopes" that can be used to obtain preference, and those have been sometimes quite carelessly used, probably under officers who are looking after particular plants, with the result that the volume of movement under preference direction has grown to be very great.

Now, I do not know it as a fact-if you will pardon hearsay, but it comes from a very good source-I understand that quite recently something like 75 per cent of what was moving on the Pennsylvania Railroad was moving under preference directions of some sort. Is that so, Mr. Patterson?

Mr. PATTERSON. Yes, sir; east of Pittsburgh.

Commissioner HALL. If you get 100 per cent preference, then it can all move right along; but where you have 85 per cent preference to be separated from the remaining 15 per cent, it tends to produce congestion.

Senator KELLOGG. Is it your opinion that many of these priority orders are unnecessary?

Commissioner HALL. They probably did not seem unnecessary to those who issued them. They might seem unnecessary to one who did not issue them, and I did not issue them.

Senator KELLOGG. The President had full power under the act passed by the last Congress to place that all in the control of Judge Lovett. did he not-that last act gave the President authority to direct priority of shipments, did it not?

Commissioner HALL. The act gave the power that is expressed there. To answer your question, I should have to take it and study it and see whether it fully covered the situation. What power it gave is there; that is plain.

Senator KELLOGG. Well, if the President had that power, then he had all the power of the direction of priorities that he has now when he takes over the railroads, had he not?

Commissioner HALL. Without being understood as construing the effect of a statute that is not before me at the time, answering your question generally I would say that if the President has full power of priority direction he could deal with that phase of the subject, which is only one of many.

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