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permits, diversion of traffic, divisions, or otherwise, and in its recommendations to the commission have due regard for the principle that its chief function is to foster interstate commerce among the carriers subject to the act to regulate commerce, as a whole, and to assist in sustaining and stabilizing the agencies thereof to the maximum extent compatible with the public interest, and that it may, and the Interstate Commerce Commission may likewise, make due allowance for the differing requirements of the respective carriers involved and the communities which they serve, whether resulting from subnormal revenue, adverse operating conditions, or otherwise-wide discretion being vested in the association and in the commission in such matters.

SEC. 31. That the association shall have the power and be under the duty to receive, recover, and administer any funds paid or payable to it for any of its purposes or objects, and particularly such money due or paid out of the excess earnings of railroads subject to the act to regulate commerce as now or hereafter amended or as may be in accordance with law. The portions of such funds required or exacted for expenditures generally in the public interest (as distinguished from the funds for the benefit of employees) shall be available for use in furtherance of any or all of the object powers or functions of the association, and subject to expenditure by or under authority of the trustees as in the case of ordinary private corporations.

2. The association shall alone be entitled to maintain civil proceedings to recover excess earnings reduction from carriers required to account for the same, and to that end shall be subrogated to any lien or, security which may have been taken to secure the same, as well as to a lien upon any property, improvement, or betterment which may have been acquired or improved by the carrier therewith and upon any debt, lien, or mortgage of the delinquent carrier to the extent to which the funds properly payable to the association may have been employed in the purchase of such property, improvement, or betterment, or in the liquidation of such debt, lien, or mortgage, but nothing in this section contained shall be construed as preventing the commission from proceeding against any carrier for the enforcement of its valid orders or to enjoin violation thereof in respect to such fund, as in other cases.

3. In administering such funds the association will be governed by the principles laid down by Congress in respect thereto and by any lawful rules and regulations prescribed by the commission.

SEC. 32. That such portions of such funds as are or may be required to be used in the interest of employees of a particular carrier or carriers shall be administered for that purpose in accordance with such rules, regulations, and procedure as may from time to time be prescribed or approved by the commission, or upon the failure of the commission to act, by the association. No employee of any carrier shall be held to have a beneficial interest or equity in or any cause of action or right to accounting against any carrier or against the commission or the association or any coemployee or against employees of any other carrier for a recovery or accounting or contribution to secure any sum or benefit or claim against the fund as such, except as against the association alone to establish a contention that such employee or dependent is in fact a beneficiary entitled to benefits under the specific rules and regulations in force from time to time and applicable to funds which reached the association and are or were available and payable to the claimant.

Sec. 33. That for any misuse of the funds or injury, misuse, or depredation to the property of the association or of property in its custody, or for wrongful interference with its transactions, or with lawful use of its property by carriers or for any attempt or conspiracy relating thereto, any person, firm, or corporation shall be guilty of an offense against the laws of the United States of the character and degree and punishable as if the funds or property involved belonged directly to or as if such interference hindered the direct action of the United States, or were against the United States. Employees having access to funds belonging to or in custody of the association shall be bonded.

SEC. 34. That employees of the association shall not be considered as employees of the United States within the meaning of the civil-service acts or workmen's compensation acts relating to direct employees of the United States, but in all such respects the relative rights and responsibilities of the association and its employees shall be as if the association were, in respect of the matter in question, a carrier engaged in a local transaction or in interstate or intrastate commerce, as the case may be.

SEC. 35. That the acts and transactions of the association and its agreements and relations shall not constitute violation of the provisions of the act of Congress approved July 2, 1890, entitled "An act to protect trade and commerce against unlawful restraints and monopolies”; or the provisions of sections 73 to 77, both inclusive, of an act approved August 27, 1894, entitled "An act to reduce taxation, to provide revenue for the Government, and for other purposes "; or the provisions of an act approved October 15, 1914, entitled "An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes ”; or the provisions of acts amendatory thereof; or of any similar statute or ordinance of the United States or of any State or municipality, by the association, or its privies or associates, or the directors, trustees, officers, agents, representatives, or eniployees of the association, or of its privies, in respect of or arising out of such act, transaction, agreement, or relation, or the subsequent and consistent use or enjoyment of rights or property, acquired thereby; and, in any case, a finding by the Interstate Commerce Commission that the purchase, lease, or sale of or any agreement as to the joint use of property, stocks, rights, franchises, or easements, the transfer of which is within the provision of this act, already or theretofore devoted to public use in interstate commerce with the express or implied consent of any State or municipality or of securities relating thereto, is compatible with or desirable in the interest of the public and of the interstate commerce of the United States, shall constitute due corporate authority or power on the part of the proposed purchaser to acquire and use, and of the proposed vendor or the owner to sell or enter into agreements concerning, pursuant to the finding and approval of the commission, any common law or statutory or other legislation or limitation of any State or municipality to the contrary notwithstanding.

Sec. 36. That the provisions of section 1 of the act to regulate commerce approved February 4, 1887, as amended, relating to the giving of free passes and free transportation is hereby amended by inserting immediately after the words "except to its employees and their families, its officers, agents, surgeons, physicians, and attorneys at law,” the following words: “to members of the Interstate Commerce Commission or its employees, officers, or agents, or the trustees, officers, members, employees or agents of National Railways Association or regional commerce commisisons created by this act, when such persons, employees, officers, or agents are certified as eligible to receive transportation by the respective commissions or association, and while engaged in their official or public business."

SEC. 37. That the provisions of section 1 and those provisions relating to the direct application of the excess-earnings funds realized thereunder shall apply only to carriers by railroad or their employees.

Sec. 38. That if any section or provision of this act should be declared to be unconstitutional or invalid for any reason, the remainder of the act shall be unaffected thereby and shall be and remain in full force and effect.

Sec. 39. That all laws and parts of laws in conflict with the provisions of this act are hereby repealed.

SEC. 40. That this act shall be subject to repeal, alteration, or amendment at any time.


PART 16.




Thursday, September 25, 1919. The committee met at 10 o'clock a. m., Hon. John J. Esch (chairman) presiding.

The CHAIRMAN. The committee will be glad to hear Commissioner Clark.



Mr. CLARK. Mr. Chairman, I was asked to try to keep in touch with the hearings as they proceeded, with the idea of appearing before the committee as the concluding witness, and I have undertaken to do so.

You gentleman realize probably better than anybody else that it is a voluminous record and that there is a great deal of what is practically duplication in the suggestions that have been made. There is a field for endless discussion which I do not think it advisable to enter upon. I have undertaken to pick out some points, to correct some statements that are inaccurate, based upon misunderstanding or misinformation, of course; and have attempted to pick out those proposed amendments to the act which seem to me desirable to

touch upon.

I do not want to go into the matter to any unnecessary or tiresome length, and it will not embarrass me at all to be interrupted at any time, or when I have completed the suggestions that I have in mind to make I will be very glad to attempt to answer any inquiries that members may desire to propound.

One subject that has had very wide discussion, and that is the most important from the railroad side, I assume, is that commonly called railroad credit. Mr. Thom suggested that during the days when I was on the stand at the opening of the hearings I did not mention the subject of railroad credit, except upon cross-examination, and then suggested that the railroads were largely responsible for their present situation. I presume that the differences of view as to responsibilitiy for the present situation will never be brought into agreement. According to the statements of some, all that is necessary to restore railroad credit would apparently be to repeal the act to regulate commerce. But the facts are that regulation of rates by the commission has not operated to reduce the revenues of the

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carriers. The vice president of one of the Washington banks recently stated in a newspaper article that the seat of the trouble was the accounting regulations prescribed by the commission, and apparently his criticism of those regulations was that they did not adequately provide for depreciation charges. The one point in connection with the establishment of the commission's accounting regulations which was most strongly and bitterly resisted by the railroad companies was the requirement that they set up depreciation accounts with regard to their equipment. We did not prescribe the percentage to be applied.

We did not have reliable data upon which to intelligently determine what percentage should be applied. We simply required that each road should set up a depreciation account as to its rolling stock, applying thereto its experiences. In complying with this requirement the carriers set up depreciation accounts based upon charges which varied all the way from one-half of 1 per cent to 6 per cent. We have not prescribed depreciation charges as to fixed properties, because determination of the proper amount on a given railroad, to say nothing of a group of railroads or all of the railroads, requires most exhaustive study and is the subject of widely varying views on the part of different students of the question. We are pursuing that study and hope eventually to have adequate regulations which will insure appropriate and proper charges for depreciation. Certainly there was no practice among the carriers of charging any depreciation even on rolling stock until it was required by the commission.

I did not begin my statement before the committee with a discussion of the subject of railroad credit. I appeared on behalf of an administrative tribunal, possessing only delegated powers and charged with administration of certain acts of Congress. We have never thought that it was our mission to outline the public policy. The chairman of the committee stated at the opening that the hearing was on bill H. R. 4378, which was the only bill that had been referred to the committee. He said that other plans had been announced and that I should feel at liberty to discuss them. I said that I preferred not to attempt to analyze any of those plans in advance of an analysis of them being presented by their proponents and contented myself in the main with a discussion of the bill which was the subject of the hearings. The plan of the executives of the railroads is not in harmony with plans proposed by railroad security owners. It is opposed in parts at least by executives of roads apparently not represented by Mr. Thom.

Much has been said about restoring railroad credit. I confess that I do not yet definitely understand just what is meant by that phrase. I have observed throughout my life that some individuals, some firms, some corporations, some municipalities, some States, and some gorernments have good, sound credit; others have rather doubtful credit, and others have practically no credit at all. Certainly it can not be proposed that the Congress shall by legislative fiat provide that all railroads shall have a standard and uniform basis of credit. If it will be of interest to the committee I can insert figures showing the average rate of dividends declared on dividend-yielding stock of the railroads of the country for the fiscal years ended June 30, 1892,

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