Mr. WOLVERTON. Do you think that the President would not be sensitive to that phase of it if he found that it would have the effect you have stated?

Mr. PETERSEN. Not at all; I am quite satisfied, I am quite satisfied that the President would be absolutely fair. But, I realize the fact that the President is just human and he cannot know everything about the administration of shipping; he cannot know everything about the administration of the Canal and that the Governor of the Canal Zone or the Secretary of War would naturally make the recommendations to the President. He would probably rely on them, as any President would have to do in relying on the members of his Cabinet and the officials whom he has selected and he makes his decisions upon their reports. Under this bill it would be made by the Secretary of War and as it now stands it is left with the Department of Commerce. He would have the same supervision, whether it were the Department of Commerce or the Panama Canal authorities, but we believe that if the determination of rates and interpretations are placed in the hands of the Department of Commerce, or are left there, its decision will be based more nearly on the needs of shipping than if left under the War or Navy Departments. Mr. WOLVERTON. But you feel that notwithstanding the President's interest in the success of his recovery program that he would be unable personally to determine whether an increase in rates would have the effect you have outlined?

Mr. PETERSEN. I do not know, Mr. Congressman. I realize and know that the President is trying to put over his national recovery program, and there have been advanced some 40 different theories and there seems to be some confusion about it. The President is no more a superman in certain lines of endeavor than the average intelligent American citizen. My contention is that you should leave the control of the shipping business in the Department of Commerce where the President now has placed it, in the reorganization program and let the Department of Commerce handle the merchant marine, and let the Department of Commerce handle navigation, and let the Panama Canal authorities handle the Panama Canal transiting of vessels, and if it could be shown by the Panama Canal authorities that they are not making money enough to meet the conditions then there might be some reason why there should be a different set-up in rates.

But at the present time the returns and the figures show that they are making plenty of money to meet operating costs, to maintain the Canal, and to make the necessary improvements, if the present rates are maintained without any increase whatever. And my contention is that if you put this bill through, enact it into law, it will have the effect of increasing costs, because the President will simply adopt the regulations that are laid down in this bill and that we will have a rate of $1 for laden ships and 60 cents for light ships that will include all these enclosed spaces and that they will levy those rates upon steamships, and they will have to pay the increased toll charges. That will increase tolls and will increase the amount of money collected by the Panama Canal authorities.

Mr. WOLVERTON. Is it your thought that the Department of Commerce could be trusted to give better advice to the President in this

matter than the War Department acting on the advice of the men in charge of the Panama Canal; is that your thought?

Mr. PETERSEN. Yes. This takes it out of the hands of the Bureau interested in navigation and shipping-of course, the President has control over both.

Mr. WOLVERTON. And puts it in the hands of the Panama Canal authorities.

Mr. PETERSEN. And puts it in the hands of the Panama Canal authorities; yes.

Mr. WOLVERTON. In either event the final discretion is lodged in the President.

Mr. PETERSEN. No doubt about that.

Mr. WOLVERTON. And the President would exercise his own judgment.

Mr. PETERSEN. We are not questioning that.

Mr. WOLVERTON. But you are assuming that he would not exercise it?

Mr. PETERSEN. I assume that he would be influenced by his own appointed officers.

Mr. WOLVERTON. Yes.

Mr. PETERSEN. Because if he appoints a man like the Secretary of War, in whom, no doubt, he has confidence, he would take the Secretary of War's judgment, I assume, rather than someone else. Mr. WOLVERTON. And you would prefer that he take the judgment of the Department of Commerce?

Mr. PETERSEN. Yes; because I think it would know more about the shipping business than the Panama Canal authorities.

Mr. WOLVERTON. Would you be just as satisfied with the judgment of the Department of Commerce if it should recommend an increase in rates?

Mr. PETERSEN. If they did that; if they decided there should be an increase in rates, if we were to be met with that difficulty, we would have to get along with it and pay the higher tolls and pay what they think we should pay.

Mr. WOLVERTON. Are we to assume, then, Captain Petersen, that you would rather take your chances with the Department of Commerce than through the other agency?

Mr. PETERSEN. Anybody would do that, to get out of difficulty, naturally.

Mr. WOLVERTON. What I wanted to find out is whether you have a practical objection, or whether the objection is based on a principle? Mr. PETERSEN. It is based on principle and is based on practical objections that the information which the President would secure would naturally come from his subordinates.

Mr. WOLVERTON. How is it based upon principle when you leave it with the President, and when you are objecting to the Panama agency, but are satisfied with the Department of Commerce? Mr. PETERSEN. We want it left where it is now.

Mr. WOLVERTON. Where it is now placed?

Mr. PETERSEN. Yes; where is it now, in the Bureau of Navigation, Department of Commerce, where the President by Executive order has centered the entire control of merchant marine. And I want to say that the merchant marine activities are

Mr. WOLVERTON (interposing). Well, if you had the same confidence in the judgment of the Panama Canal authorities as you evidently have in the Department of Commerce then you would not be fearful of the results, would you?

Mr. PETERSEN. I am not fearful as to the results as it now stands, Mr. Congressman, but I know the desire of the Governor of the Panama Canal to make a fine showing and to make plenty of money, and that is evidenced by the statement of the Governor when he said that he wanted to make 5 or 6 percent upon an increased capitalization, and we know his position in that matter, and we appreciate the desire back of it in his administration. And, previous governors have said that a 3-percent allowance is sufficient.

Mr. WOLVERTON. I am not sufficiently close to the President, being a Republican, to make this statement first hand, but it has come to me by others who have had opportunity to take up matters of importance with the President that they have been astounded at the information he has had on the subjects which they have discussed with him. So I feel that if your objection to this bill is based upon difficulties that would be created in the shipping industry, in conflict with his recovery program, that he would probably have enough information, when you presented the matter to him, that would enable him to determine the matter in a way that would be fair to shipowners and fair to his recovery program which he undoubtedly would want to see a success.

Mr. PETERSEN. Yes, Mr. Congressman; but that is only one part of this whole subject that we have got to deal with; that is only one phase of the subject, that we want to leave it with the Department of Commerce; that is only one phase of it. The other phase of it is the capital structure, the immense amount that will have to be raised to take care of this increase in capital structure, and there are other angles that will have to be considered aside from that phase of the subject.

Mr. WOLVERTON. Even though Congress should pass this bill the proclamation concerning rates must still be made by the President?

Mr. PETERSEN. So far as the recovery program itself is concerned, that is another reason why there should be no increase in rates, and why we should maintain the present set-up. We are not asking, as I say, for a reduction, but we feel that the passage of this legislation would result in an increase in tolls.

Mr. LEA. Any further questions?

Mr. MONAGHAN. Mr. Petersen, I have just one or two questions. What do you say to this: When the Governor appeared before the committee in a prior hearing, he maintained that the boats that were using the Canal, according to the United States rules of measurement, were remodeling their boats in order to avoid rates that were charged after those regulations were put into effect?

Mr. PETERSEN. The members of the association have so changed their ships-the interior of their ships-to meet these decisions of the law in relation to those requirements; all of the people have done what they were required to do.

Mr. MONAGHAN. In order to avoid the law?

Mr. PETERSEN. No; not thinking of avoiding the law, but to conform to the regulations in order to gain the advantages.

Mr. MONAGHAN. In order not to have to pay these rates?

Mr. PETERSEN. Absolutely.

Mr. MONAGHAN. But the effect, Captain, was to avoid the payment of the increased tolls that should have been paid on the basis of the ships before remodeling took place?

Mr. PETERSEN. It was not done to avoid that, Mr. Congressman, but it was the outgrowth of the controversy that took place between the Canal authorities in relation to the Panama Canal rules and the United States rules as to the basis of ships that transited the Canal, and those changes were made to make it more economical and still go according to the decisions of the Bureau of Navigation, Department of Commerce, and that was done in entire accordance with the law, not to avoid the law in any way in defeating those payments. Under those decisions the changes were made, as they were permitted to be made, and they were made in full compliance with the law.

Mr. MONAGHAN. I am not questioning that, Captain, but the point that I am making is that the law could be changed so that the effect of it could not be avoided so easily in the future.

Mr. PETERSEN. The point I am making has to do with the statement making provisions for the increase in tolls.

Mr. MONAGHAN. You think that would necessarily follow if this law were passed?

Mr. PETERSEN. Yes; it would necessarily follow, absolutely, it necessarily follows, if those rules can be applied to the measurement of ships above the cargo deck, the Panama Canal authorities will be sure to get more space to base their toll collections on; there is no question about that. And it is our contention that they are getting plenty of money now to take care of all the operation expenses that are required.

Mr. MONAGHAN. Captain Petersen, you spoke of the N.R.A.
Mr. PETERSEN. Yes.

Mr. MONAGHAN. The National Recovery Administration.

Mr. PETERSEN. Yes.

Mr. MONAGHAN. Do I understand you to say that you have agreed to come under the provisions of the National Recovery program and pay the wages, and so forth, that are set up; have you complied with that already?

Mr. PETERSEN. That is before us now. We have about finished the final draft. It is now with the Department, and Mr. Weaver, who is acting as the representative of N.R.A. The shipping industry is ready to have the code signed up. We have finished our job.

Mr. MONAGHAN. Well, I cannot quite comprehend what you may have in mind, why there should be any objection to this bill, which does perhaps increase tolls which you must pay to the Canal, and at the same time comply with the N.R.A.

Mr. PETERSEN. Let me make this point: Under the shipping code we will have to comply with a shipping code that has increased the cost of labor and everything else under the code; our cost of construction, reconstruction, repairs, and all those things are a great deal higher, and will be higher than before the code provisions went into effect; we will have to pay increased rates.

We are having to pay more for material for repairs to the ship, and if the code provisions are adopted we will pay a higher rate for labor, and we are paying higher rates for all our supplies at this time; and that has increased the overhead expense of operation many

hundreds of thousands of dollars, and if you are going to add on an increase of tolls for this so-called "open space open space", you are going to take away an additional sum of between three hundred and four hundred thousand dollars in Panama tolls, and are going to make it that much more difficult for us to do the things that we would be required to do through the operation of the National Recovery Administration.

Mr. MONAGHAN. There is some merit to your contention, of course. However, the point that I want to make is this, that if this bill is passed, you would be satisfied, as I understand you, if you did not have to pay any increase in tolls; in other words, if the tolls should be no higher.

Mr. PETERSEN. Yes.

Mr. MONAGHAN. Then any hardships which may be occasioned through the administration of the National Recovery program are merely the incidents that are occasioned to all industry, and it is not a hardship that comes to your industry alone.

Mr. PETERSEN. That is true, Mr. Monaghan, but other industries could meet the problem by raising the price of their commodities and get more money; we cannot do it. Our rates are governed by the United States Shipping Board Bureau and we cannot get any more money now to meet these additional expenses. We are not in the same position with other industries because they can pass this expense on in higher prices for their commodities, but when we increase our wage scale, we have no means to get more money with which to pay for the repairs, the construction costs, and everything else that enters into our operation.

And please remember this, Mr. Congressman: That the competition in the Canal is extremely keen, and that can also be said regarding all of the Panama trade. Unforunately, that is caused by the many ships that operate and transit the Canal, and the competition is extremely keen. That competition affects all grades of shipping, and it makes it more difficult for all of us, but perhaps it is having its worst effect upon the small vessels, and therefore they are having the greater hardship, and the poor operator would have the greater difficulty.

And the statistics which we have shown demonstrate that the Canal is making enough money now to carry on its operations, to maintain the conditions down there as they should be; they are making enough money now to meet the interest payments and to make the improvements on the Canal, and, as I say, we are just a little bit fearful that if they are given authority to carry out the provisions of this bill, that they will undertake to make enough money to pay interest on that increased capitalization at a higher rate. We maintain that they are making enough now to meet the expense of operating the Canal.

Mr. MONAGHAN. As I recall, Captain, the Governor said-I do not recall his figures, and I would like to be corrected if I am wrongbut as I understood it, he maintains that the earnings were not enough to pay the principal and to pay for improvements. Now, you just said that the Canal would be paid for, under normal circumstances, in 100 years if the program as originally planned were carried out.