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FEDERAL OPERATION OF TRANSPORTATION SYSTEMS.

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C., January 8, 1918.

The committee met at 10 o'clock a. m., Hon. Frank E. Doremus presiding.

The Committee thereupon proceeded to the consideration of H. R. 8172, which is as follows:

[H. R. 8172, Sixty-fifth Congress, second session.]

A BILL To provide for the operation of transportation systems while under Federal control, for the just compensation of their owners, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the President, having in a time of war taken over the possession, use, and control (called herein Federal control) of certain systems of transportation (called herein carriers), is hereby authorized to agree with and to guarantee to any such carrier that during the period of such Federal control it shall receive as its just compensation an income at an annual rate equivalent as nearly as may be to its average net railway operating income for the three years ending June thirtieth, nineteen hundred and seventeen (called herein standard return); said net railway operating income for the purposes of this Act shall, as to carriers making returns to the Interstate Commerce Commission, be computed from such returns, excluding, however, debits and credits arising from the accounts called in the monthly returns leased road rents and miscellaneous rents: Provided, however, That no Federal taxes in excess of taxes assessed during the year ending June thirtieth, nineteen hundred and seventeen, shall be charged against revenue in computing such standard return. Any net railway operating income in excess of such standard return shall be the property of the United States. The amount of such standard return as accruing during said period of three years shall be determined by the Interstate Commerce Commission, and the certificate of said commission as to the amount of said net railway operating income shall, for the purpose of such agreement and guaranty, be taken as final and conclusive.

During the period of such Federal control adequate depreciation and maintenance of the properties of the carriers shall be included as a part of the operat ing expenses or provided through a reserve fund, in accordance with such principles and rules as shall be determined by the President.

SEC. 2. That if no such agreement is made, the President may nevertheless pay or cause to be paid to any carrier while under Federal control an amount not exceeding ninety per cent of such standard return, remitting such carrier to its legal rights in the Court of Claims for any balance claimed; and any amount thereafter found due above the amount paid shall bear interest at the rate of six per centum per annum; and any excess amount paid hereunder shall be recoverable by the United States, with interest at the rate of six per centum per annum.

SEC. 3. That any claim for just compensation not adjusted as provided in section one shall be submitted to a board of three auditors appointed by the Interstate Commerce Commission, members of which and of the official force thereof being eligible for service as such auditors, but without additional compensation therefor. Said auditors shall give a full hearing to such carrier and to the United States, and shall report to the President the amount due such carrier as just compensation; a sum not exceeding the amount so re

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ported may be agreed upon by the President and such carrier. an agreement, either the United States or such carrier may file a petition in Failing such the Court of Claims for the purpose of final ascertainment of the amount of such just compensation, and in the proceedings in said court the report of said auditors shall be prima facie evidence of the facts therein stated. The just compensation of any carrier under Federal control not making returns to the Interstate Commerce Commission shall be determined in accordance with the provisions of this section.

SEC. 4. That the return of any carrier shall be increased by an amount reckoned at a rate per centum to be fixed by the President upon the cost of any additions and improvements made while under Federal control, with the approval of the President, to the property of any carrier and paid for by such carrier from its own, capital or surplus, and by an amount equal to the rate accruing to the United States upon any advances made to such carrier for the cost of such additions and improvements as provided in section six hereof. SEC. 5. That no carrier while under Federal control shall, without the prior approval of the President, declare or pay any dividend in excess of its regular rate of dividends during the three years ending June thirtieth, nineteen hundred and seventeen: Provided, however, That such carriers as have paid no regular dividends or no dividends during said period may, with the prior approval of the President, pay dividends at such rate as the Presient may determine.

SEC. 6. That the sum of $500,000,000 is hereby appropriated, out of the Public Treasury from any funds not otherwise appropriated, which, together with any funds available from any excess earnings of said carriers, may be used by the President as a revolving fund for the purpose of paying the expenses of the Federal control, and any deficit of any carrier below such standard or ascertained return, and to provide terminals, improvements, engines, rolling stock, and other necessary equipment, such terminals, improvements, and equipment to be used and accounted for as the President may direct and to be disposed of as Congress may hereafter by law provide.

The President may also on or in connection with the property of any carrier, make or order any carrier to make any additions and improvements necessary or desirable for war purposes or in the public interest. He may from said revolving fund advance to such carrier all or any part of the expense of such additions and improvements so ordered and constructed by such carrier or by the President, such advances to be charged against such carrier and to bear interest at such rate and be payable on such terms as may be determined by the President, to the end that the United States may be fully reimbursed for any sums so advanced.

Any loss claimed to accrue to any carrier by reason of any such additions or improvements so ordered and constructed may be determined by agreement between the President and such carrier; failing such agreement the amount of such loss shall be ascertained as provided in section three hereof.

From said revolving fund the President may expend such an amount as he may deem necessary or desirable for the purchase, construction, or utilization and operation of boats, barges, tugs, and other transportation facilities on the inland and coastwise waterways, and may in the acquisition, operation. and use of such facilities create or employ such agencies and enter into such contracts and agreements as he shall deem in the public interest.

SEC. 7. That for the purpose of providing funds requisite for maturing obligations or for other legal and proper expenditures, or for reorganizing railroads in receivership, carries may, during the period of Federal control, issue such bonds, notes, equipment trust certificates, stock, and other forms of securities, secured or unsecured by mortgage, as the President may approve as consistent with the public interest. The President may purchase for the United States all or any part of such securities at prices not exceeding par, and may sell such securities whenever in his judgment it is desirable at prices not less than the cost thereof; any sums available from the revolving fund provided in section six may be used for such purchases.

SEC. 8. That the President may execute any of the powers herein and heretofore granted him with relation to Federal control through such agencies as he may determine, and may fix the reasonable compensation for the performance of services in connection therewith, and may utilize the personnel and facilities of the Interstate Commerce Commission and call upon members of such commission, or any of its employees, or employers of any department of the Government for such services as he may deem expedient. No such Fed

eral official or employee shall receive any additional compensation for such services.

SEC. 9. That the President is hereby authorized while carriers are under Federal control to direct that the Federal workmen's compensation Act of September, nineteen hundred and sixteen, shall be extended so as to apply to carrier employees, on such terms and conditoins as will give due consideration to remedies available under State compensation laws or otherwise.

SEC. 10. That nothing herein contained shall be construed as modifying or restricting the powers heretofore conferred upon the President to take possession and assume control of any or all systems of transportation; and the President, in addition to the powers conferred by this Act, shall have and is hereby given such other and further powers necessary or appropriate to give effect to the powers herein and heretofore conferred.

SEC. 11. That carriers while under Federal control shall, in so far as is not inconsistent therewith, or with the provisions of this Act, or any other act applicable to such Federal control, or with any order of the President, be subject to all laws and liabilities as common carriers; and suits may be brought by and against such carriers and judgments rendered as now provided by law: Provided, however, That except with the written assent of the President no attachment shall be levied by mesne process or on execution on or against any of the property used by any such carrier in the performance of its duties as a common carrier.

SEC. 12. That every person or corporation, whether carrier or shipper, or any reeciver, trustee, lessee, agent, or person acting for or employed by a carrier or shipper, or other person, who shall knowingly violate or fail to observe any of the provisions of this Act, or shall knowingly interfere with or impede the possession, use, operation, or control of any railroad property, railroad, or transportation system hitherto or hereafter taken over by the President, or shall violate any of the provisions of any order or regulation made in pursuance of this Act, or of any other Act concerning such possession, use, operation, or control, shall be guilty of a misdemeanor, and shall, upon conviction, be punished by a fine of not more than $5,000, or, if a person, by imprisonment for not more than two years, or both. Each independent transaction constituting a violation of, or a failure to observe, any of the provisions of this Act, or any order entered in pursuance hereof, shall constitute a separate offense. For the taking or conversion to his own use or the embezzlement of money or property derived from or used in connection with the possession, use, or operation of said railroads or transportation systems, the criminal statutes of the United States, as well as the criminal statutes of the various States where applicable, shall apply to all officers, agents, and employees engaged in said railroad and transportation service, while the same is under Federal control, to the same extent as to persons employed in the regular service of the United States. Prosecutions for violations of this Act or of any order entered hereunder shall be in the district courts of the United States, under the direction of the Attorney General, în accordance with the procedure for the collection and imposing of fines and penalties now exisitng in said courts.

SEC. 13. That the Federal control of transportation systems herein and heretofore provided for shall continue for and during the period of the war and until Congress shall thereafter order otherwise.

Mr. DOREMUS. I regret to announce that Judge Sims, the chairman of this committee, is absent this morning, his absence being occasioned by an accident which occurred last evening. I have just been told over the telephone that while the injury is quite painful it is not necessarily serious, and we are hopeful that Judge Sims will be with. us in a few days.

We have met this morning to consider H. R. 8172, a bill to provide for the operation of transportation systems while under Federal control, for the just compensation of owners, and for other purposes; a bill introduced by Mr. Sims on January 4. Commissioner Anderson, of the Interstate Commerce Commission, who has taken a very prominent part in the preparation of this bill, is with us this morning. I think the committee, Mr. Anderson, will be pleased to hear from

you now.

STATEMENT OF HON. GEORGE W. ANDERSON, COMMISSIONER, INTERSTATE COMMERCE COMMISSION.

Mr. Escн. If you prefer, Mr. Anderson, I suggest that you be permitted to conclude your remarks before questions are asked.

Commissioner ANDERSON. It is immaterial to me; I am entirely willing to be interrupted. I have no set speech, and if I can illuminate the mind of any member of the committee in any situation better by an interruption I am entirely willing to be interrupted. My own preference, when I am on the other side and do not see a point, is to interrupt the speaker. So you will follow your own views on that.

At the outset, Mr. Chairman, I ought to make it clear that, although a member of the Interstate Commerce Commission, I do not speak this morning for the commission as a commission. This bill has not been taken up formally with the commission in conference to consider what attitude, if any, it should take. Indeed, as I understand the custom there, ordinarily matters of prospective legislation. are not so taken up unless they are involved in the annual report or are referred to the commission by some committee of Congress. It happened, these being war times and matters of precedent and practice necessarily being somewhat disregarded when conditions are as bad as they have been recently, that I have had to take a considerable part in the preparation of this bill, and am therefore assumed to be in possession of a somewhat more intimate knowledge of it than most others; I therefore have been asked by the Director General, after consultation with Judge Sims, to come here and make a brief statement as to what has been attempted to be covered by the bill. Perhaps I might add that I have had the benefit of consultation with some of my associates, and while I do not assume to bind them, I do not claim either the merit or demerit of sole responsibility for everything there is in this bill. Of necessity I have checked my own judgment from every available source, as we have tried to work our way through to a tentative decision on the difficult and mainly new problems presented.

The situation as presented is that we have, as is known to the committee, possession, control, and the utilization of the railroad systems of the country, including the water-transportation companies which are owned or controlled by them, under the power vested in the President under the act of last August. This bill is an attempt to present for consideration proper supplementing legislation. It is so plain, that we need not stop to consider it, that whenever any property of citizens, whether corporately or individually owned, is taken for public purposes there must be just compensation. No express rule of just compensation was laid down or intimated in the act of last August, under which the President was authorized to take possession and control of and to utilize the railroad systems. Whether or not there was any implied power to deal with that point, I do not discuss.

Section 1 of this bill undertakes to lay down a general principal under which the President may enter into contracts or agreements with the carriers whose property has thus been appropriated to public use. It is, I think, of some importance to have in mind that section 1 does not require the President to make any contract of any