commission in considering rates on grain from Chicago to the Atlantic seaboard said that the interests of all competing lines must be considered and not merely that line which could handle the business the cheapest.

In the Kindel case (15 I. C. C., 555), decided March 2, 1909, the commission said:

As already suggested, we can not in determining a competitive rate select that railroad which is the shortest or the most advantageously situated and limit the rate to what would allow that property fair earnings.

We must consider this entire situation and determine a reasonable rate not merely with reference to the Union Pacific, but with reference to all lines serving these Colorado common points via reasonably direct lines.

In its report, 18 I. C. C., 440, decided February 17, 1910, the commission disposed of two complaints, one from Cincinnati and the other from Chicago. The Cincinnati complaint was against the rates from Cincinnati to the South and the C. N. O. & T. P. Ry. Co. and the Southern Railway Co. were the only carriers named as defendants. The Chicago parties complained of the rates from Chicago via Cincinnati to the South and the same two lines south of the Ohio River were made defendants therein. The commission, however, considered the rates and operating conditions via competing lines south of the Ohio River that were not named as defendants, reaffirmed the rule announced in the case above cited, and restated the above quotation from the report in the Kindel case.

Mr. Robert S. Lovett said in substance that he had seen statements or reports of statements made by three or four of the present members of the commission from which it appeared that they did not realize or were not aware that there was before this country any problem of railroad credit. I am unable to locate any statement by any member of the commission which would justify that conclusion. In our report in Advances in Rates by Carriers in Official Classification Territory (20 I. C. C., 243), we discussed at length the operating costs and the financial condition of the principal roads that were before us and in a contemporaneous and concurrent investigation of Advances in Rates by Carriers in the West (20 I. C. C., 307) we discussed at length similar questions with regard to the western carriers. We showed for a series of years as to each of the principal respondents the results from operation, the percentages earned on capitalization, and many other details of finance and revenues. We discussed these questions exhaustively in our report in the Five Per Cent case (31 I. C. C., 351). We have said in so many words that the operation and regulation of our transportation systems must be such as to induce the investment of private capital or that system must fail and be supplanted by Government ownership and operation. It is perfectly idle to say that any member of the commission fails to realize that there is a problem of railroad credit, but as I indicated a little while ago we see no way by which the credit of all railroads is to be put upon a common level. Credit is underlaid with faith. It is not what one possesses that gives him credit. It is the confidence which others have in his ability and disposition to meet his obligations.

Some propose that the commission shall be charged with the duty duty to fix rates that will produce a certain minimum percentage on stated sums of investment or value. At the present time a carrier

apparently has no legal protection against a prescribed rate unless it can show that the rate is confiscatory. Manifestly rates ought not to be so low as to barely escape confiscation of the carrier's property. It is in the public interest that the carriers should be permitted to earn reasonable returns upon the value of the property they devote to the public use. The question of what shall be the maximum or the minimum limit of those returns is one of public policy and not of administration. I have already indicated in my former appearance before the committee that in my judgment the credit of the railroads has not been enhanced by the continued declaration on the part of the accredited representatives of the railroads that they did not have any credit. I indicated that any lack of credit on the part of some was due to indefensible and inexcusable financing, the history of which had been made public record. I still adhere to those views. Doubtless the credit of railroads in general has been affected by the disclosures that have been made public as to some of them. The commission does recognize that there is a problem of railroad credit but is of opinion that railroad credit must rest upon the same sound, moral, and business considerations that underlie the credit of individuals, of other corporations, of municipalities, States, and nations. The act to regulate commerce was enacted for the purpose of checking or correcting known and admitted gross abuses and favoritism. In the main it has accomplished that purpose. Manifestly the Government should not pursue a repressive policy and it would seem that the time has come for an appropriate and reasonable measure of encouragement to railroads that are running their properties in an honest, fair-minded way, with a view to establishing and conducting business enterprises in the service of the public on fair and proper terms of compensation to the owners of the properties.

The question of regulation of rates of water lines and where jurisdiction of such regulation should rest has been widely discussed before your committee. The facts and arguments which have been presented vary, in the main, with the interests of those who have voiced them. Representatives of the regular line boats generally oppose jurisdiction of their port to port rates. They strongly favor joint through rates with rail carriers and in some instances demand such rates regardless of what might be termed the selfish interests. of the rail carriers that might be in a position to perform the transportation themselves. The representatives of the irregular or tramp boats generally oppose jurisdiction of their activities and charges. One witness suggests that Congress must decide whether it wishes to encourage the water lines or to encourage the rail lines, and said that up to the present time Congress has taken the position that its interest is in the railroads and not in the water lines. It does not seem to me that this statement is supported by the facts, which are that Congress has provided for a rather complete regulation of the rail lines but has left the water lines very largely free from regu

lation.

The impression seems to be general among representatives of the water lines that the purpose of the proposal to bring their activities under the jurisdiction of the act is to repress them and make it more difficult for them to operate properly. The purpose of the proposed legislation, as I understand it, is the antithesis of that.

It is to more completely coordinate the rail and water transportation and to protect the water lines from some of the difficulties which they have encountered in the past, and which in the earlier years resulted in the destruction of much of the water service and competition.

One witness suggested that the present law authorizes the commission to permit the railroads to make less than reasonable rates between points where steamboats transport traffic; that the only purpose of this is to permit the railroads to take from the steamship lines business which they otherwise would handle; and that there is not a line in the act to regulate commerce requiring the commission to see that the water lines continue in existence.

In one of its decisions, in considering the application of the provisions of the long-and-short-haul rule to the transcontinental rates. the commission pointed out that while the Government had constructed the Panama Canal and intended it to be a highway of commerce it also aided to a great extent in the construction of the earlier transcontinental railroads, and declared the purpose of undertaking to adjust the rates so that the large volume of traffic which is desirable for transportation either by rail or by water could be shared in on fair terms by the rail and the the water carriers. The railroad is a fixture; it can not move its plant from one place to another; it must continue to operate and to serve the same places. The water line carriers exercise the right to abandon service at will. The coastto-coast service through the canal was promptly deserted by the water lines when war conditions created more attractive business for them elsewhere. Presumably they will desire to come back. It does not seem to me to be a sound public policy to say that the water lines may operate on a given route without regulation and without fear of competition by the rail lines so long as the water lines elect to serve that route, but that they may at will abandon it, leaving the communities served to depend entirely upon rail transportation. The railroad could have no gauge or standard by which to measure the probable demands upon it from time to time. Part of the time it would get all the traffic and part of the time it would get only such traffic as the steamships did not want or could not carry. In my opinion the most disturbing element in the transcontinental and intermountain rates since the Panama Canal was opened has been the fact that at the beginning the steamship lines, in their desire to get the maximum of the traffic, made their rates too low.

The question seems to me to narrow down to this: Shall the water carriers be left free from regulation as to their port-to-port rates and the rail carriers be deprived of or severely restrained as to competition with the water lines, or shall the effort be to so coordinate the activities of both as to deal fairly with each and give the public the maximum of efficient transportation at the lowest reasonable charges? I repeat the view previously expressed that the long-andshort-haul rule is of more importance to the shipping interests of the country in its relation to competition between rail carriers than it is with regard to competition between rail and water carriers. I use the words "shipping interests" there in the sense of the shippers of the country and not the shipowners.

One witness states that there should be better provision for interchange of traffic between rail lines and water lines, and that the law should provide in mandatory terms for the readjustment of rail rates that are competitive with water rates. This presents the question which seems to be one of public policy as to the extent to which a carrier shall be obliged to join in through routes and interchange of traffic in instances in which it is in a position to complete the transportation itself or to carry farther toward destination. The act now provides that a rail carrier shall not be required against its will to participate in a through route which does not embrace substantially all its own and controlled lines which lie between the terminii of the route unless that route is found to be unreasonably long as compared to another route that could be used. If that is sound law as between railroads, it would seem to be sound law as between railroads and water carriers.

Mr. W. L. Clark, representing the Pacific Steamship Co., discussed these questions very fully. He made some statements which I feel compelled to challenge. He said in substance that the commission after very casual consideration of shipping rates already ' under its control has in some instances and does now compel water carriers to move joint rail and water cargo at a loss, with the result that the inland shippers are given an unfair rate at the expense of port-to-port shippers.

I must assume that this statement is based upon one instance in which the Pacific Steamship Co. sought the commission's approval of cancellation of all joint through rates applying between ports in California and territory in Washington, Idaho, and western Canada, and points north and east thereof. These joint rates had been voluntarily established and long maintained. They had been increased to the full extent authorized by the director general's General Order No. 28. We did not approve the application in its entirety. We permitted the cancellation of the joint through rates to the territory east of a limited territory in the northwest corner of the United States and a small portion of western Canada. To and from that limited territory we disapproved the proposed cancellation, because if it became effective there would be no rates lawfully applicable except the all-rail rates or the full combinations on the north Pacific coast ports made up of the local rates of the rail carriers and whatever rates the steamship company saw fit to charge.

Prior to the conditions created by the war it has been the general, if not invariable, rule to make rates via rail and water less than via all rail between the same points. This has been on the theory that water transportation is cheaper, and that plan is still advocated by representatives of water lines. That the commission has no disposition to embarrass the water carriers, and that it took cognizance of the increased cost of operation and the reduction in the available ships, caused by the war, is evidenced by the fact that in a supplemental order under the Fifteen Per Cent case the commission authorized the increasing of joint rail-and-water rates to the level of the existing all-rail rates between the same points. In some instances this authority was taken advantage of; in other instances the railand-water rates were increased, but were still kept at a level lower than the all-rail rates between the same points.

Mr. Clark says that the general tendency of rate control by the commission in the past has been to prevent raising a low rate filed for constructive purposes with a disregard of the showing made by the carrier that the rate was unprofitable and had been filed only temporarily for the purpose of producing a balanced traffic. I do not think that any concrete case can be cited in support of that broad statement. The Congress found it necessary in order to prevent undue preference and prejudice by manipulation of rates through so-called "midnight tariffs" to provide that 30 days' notice of change in rates shall be given except where the commission authorizes change on short notice. There is no doubt that in a great many instances both rail and water carriers have established so-called "missionary rates" to establish a producing concern or a commodity in the market. If there were occasion for it a great many instances could be cited in which the commission has approved the later proposals of the carriers to increase rates so inaugurated and purposely made low.

Mr. Clark states that the commission would in the future, as it apparently has in the past, have greater regard for the necessities of the rail lines and a disregard, in some measure at least, for the necessities of the water carriers, as well as those of the people served thereby. This suggestion has no foundation in fact. The commission's jurisdiction of the rail lines has been rather complete. Its jurisdiction of the water lines has been incomplete. It has exercised its jurisdiction within the limits of the law, which it administers without disregard at any time of the rights or necessities of either the rail lines, the water lines, or the public.

Mr. Clark suggests that section 4 of H. R. 4378 would authorize the commission to require the terminals of a water carrier to be open to the traffic of other carriers. He thinks that as to rail terminals this might prove beneficial without serious injustice to the owning company, if proper compensation is provided, but he says that as applied to water carriers, particularly in Alaska, it would result in giving advantage to foreign competing carriers in their effort to eliminate the American carrier from the field. Certainly the act neither contemplates nor authorizes the commission to require a carrier to open its terminals to another carrier that is not also under the jurisdiction of the commission.

Mr. Clark suggests that the regulation of rail rates remain with the commission and that the regulation of rates of water carriers be committed to a separate tribunal. He proposes proportional rail rates to and from the ports to be used in conjunction with proportional water rates in establishing charges on through shipments, and thinks that this is as practical as would be a through rate filed by the rail line with concurrence therein on the part of the water line. It is a little difficult to see the practicability of this suggestion, unless it is to be accompanied with some new policy with regard to through shipments and carriers' liabilities thereunder. Section 20 of the act, by what is known as the Cummins amendment, now requires the initial carrier to issue a receipt or bill of lading for the shipment, and makes it liable for any loss, damage, or injury to the shipment caused by it or by a connecting carrier which may participate in the through transportation. If we have rail rates subject