the purchase upon his return in November, with the result that President Underwood obtained another interview with Morgan, as to which he testified as follows:

"Then I went down and had an audience with Mr. Morgan, and I told him that practically the C., H. & D. had a floating debt that was not visible and in the statement he showed me. He said: 'Well, we will look at the statement,' and there was some attempt made to find that statement, but it was unsuccessful; it was not produced. I had not kept it because-well, I did not keep it. I said: 'Mr. Morgan, the statement that I made to you of the effect that the acquisition of the C., H. & D. on the Erie's finances is null and void, because the statement was inaccurate.' He looked at me and said: 'Well, sir, if the statement that we made to you was inaccurate, and for any reason you think that the Erie Railroad has made a bad trade, your duty is very simple-you have only to convene your board of directors and rescind it, and I advise you to do it at once.'

"I bade him good afternoon and walked out of his office, and as I came out of his office I met Mr. Stetson, and I told him, being counsel, 'Mr. Morgan has just authorized the rescinding of that trade, and I think it was a very unusual and extraordinary thing for him to do. I am surprised that he would do it. And I wonder if it would be bad taste for me to tell him that.' He said: 'He might like to hear it.' So I went back, and Mr. Morgan was standing with a paper in his hand, and I said, 'I would like to speak to you for a minute.' He made no answer. I said again, 'I would like to speak to you for a minute.' I said, 'I want to tell you I think you have done a very big thing, the biggest thing I ever came in contact with.' He said nothing. I said, 'Did you hear me?' He said 'I did, sir.' And I walked out."

In closing the report the Interstate Commerce Commission says as follows:

Nothing disclosed in the record before us is to be more regretted than the readiness of great banking institutions in our financial centers to loan enormous sums of money upon exceedingly precarious security in aid of such schemes as have been devised in the wrecking of these railroads. Not only this, but the high officers of such institutions, while acting ostensibly as directors of the railroads, have in fact been little more than tools and dummies for the promoters. The trustees of other people's money seem to have had little compunction about violations of their trusts for the benefit of the promoters, and at their demand.

Can the like of what has befallen these two roads. be made impossible hereafter? Perhaps not entirely, so long as financial circles continue complaisant toward financial exploitations which prove successful. But it will help if minority stockholders are more watchful of their interests and if bondholders assert their rights before their security fades away for lack of upkeep, purposely neglected in order to pay interest and dividends unearned. It would, in our opinion, render such exploitation more difficult if the issuance and marketing of all securities of common carriers were subject to Federal regulation. As to that we renew the recommendations repeatedly made to the Congress in our annual reports. We also point to the lesson, here again taught, that access to correspondence files is indispensable for a thorough and accurate understanding of the motives and purposes which underlie the formal entries made in accounts and records.

Unwise management contributed to the downfall of these roads, but breach of trust by corporate officials, often for personal gain, was the main cause here, as in the records developed in other investigations. Consolidations and Combinations of Carriers, 12 I. C. C., 277; The New England Investigation, 27 I. C. C., 560; St. Louis & San Francisco Railroad Investigation, 29 I. C. C., 139: Financial Investigation of N. Y., N. H. & H. R. R. Co., 31 I. C. C., 32; Financial Transactions C., R. 1. & P. Ry. Co., 36 I. C. C., 43. That downfall, with its deplorable consequences, can be traced only to betrayal within, and not to compulsion from without. Neither rivalry, nor rate level, nor regulation, nor all combined, can be found on this record to have contributed in any appreciable degree to the disaster.

In discussion of transportation conditions during the last two years or more much has been made of the fact that over 40,000 miles of our railroads were under receivership. A recent publication lists 69 railroads, among them the Pere Marquette and C., H. & D., as in the hands of receivers on December 31, 1916. Their combined operations cover 34,559 miles. Over 40 per cent of that mileage is in systems which, as shown by our investigations, have suffered principally from financial mismanagement and exploitation. Over 40 per cent more, of which a large part is located in Texas, is comprised in two southwestern systems. The remaining 5,800 miles are distributed among fifty-odd carriers in different parts of the country.

The statements of fact herewith presented having all been verified from the official records and sworn testimony taken before the Interstate Commerce Commission, disclose a condition of profligacy, waste, falsifying and destruction of records, and the ignoring and violation of law, both State and National, so vast in its conception and so successfully carried out in defrauding the American people as to be beyond belief.

Can it be possible that the American people, after learning how our great governmental functions have been usurped by the few, who have been given such vast and dangerous powers by special privilege, will permit this "invisible government" to destroy democracy and the public welfare in our Republic as here disclosed? The record is before you and the only remedy lies in the ownership by the people and the operation through the agencies of their Governemnt of all those utilities and natural resources which by right belong to the people, and upon the just and democratic administration of which the public welfare and happiness depend.

3