fall of 1920 there will be need for materially more freight cars than will be available if the corporations are not able promptly to make plans for the additional equipment which the Government has been without provision to acquire. In order to make the necessary preparations for additions and betterments, including equipment, it is obvious that considerable time must be allowed for planning the improvements and for raising the money. Even the physical planning for the improvements can not be successfully made until the legislation shall be determined upon and the improvements can not be entered upon without knowledge as to how the money can be raised to pay for them; and the raising of the money will, of course, be dependent upon the fact and character of the legislation. Even 30 days' delay in the ability to make plans means a probably much greater delay in carrying the plans into effect, and if legislation should be so delayed as to prevent the definite making of plans until well along in the spring the probability is that the plans could not be carried out at all in time to meet the railroad traffic requirements in the latter part of the summer and fall of 1920. What I have said above with regard to capital expenditures of course does not affect the situation as to maintenance work on the railroads. The Federal control act and the contracts which the Government has made with the majority of the railroad corporations imposes an obligation to return the railroads to their owners in substantially the same condition as they were in when they were taken over, and the Railroad Administration is carrying on its maintenance work on this basis. A different and entirely distinct element of great importance is the question of morale of the railroad forces. Undoubtedly uncertainty and suspense can not improve morale, and serious prolongation of uncertainty and suspense would very greatly impair morale. So far I feel both the railroad officials and the railroad employees are withstanding in a splendid way the injurious influences of uncertainty and suspense, but I am sure that it will become more and more difficult for both officials and employees to concentrate upon the present performance of their work rather than dwell upon the future condition of the railroad business and their relation thereto. This is an inevitable manifestation of human nature which is not subject to any criticism. But it is a fact and the sooner legislation can be completed the sooner can a favorable influence take the place of the unfavorable influence which the uncertainty is bound to breed. While I believe that you personally are fully alive to the importance of these factors, it has occurred to me that it might be helpful to you to have my views in regard to them. Sincerely, yours, Hon. JOHN J. ESCH, United States House of Representatives. Hon. ALBERT B. CUMMINS, United States Senate. WALKER D. HINES Mr. T. DEWITT CUYLER, WASHINGTON, D. C., October 7, 1919. Chairman Association of Railway Executives, 61 Broadway, New York City. MY DEAR MR. CUYLER: From time to time I have discussed with you and other representatives of the railroad executives the question of what, if any, increases should be made in railroad rates, and the manner in which such increases should be made. My view has been and is that this important matter must be handled in accordance with the two following considerations: First. The question of an increase in rates could not properly be considered on the exclusive basis of the unfavorable showing which the Railroad Administration was making in the early part of this year, because that showing was very largely due to an abnormally small freight business, so that the results of that period could not fairly be taken as a test for making increases in rates. Necessarily, therefore, it seemed to me that the formulation of any proposal for a general increase in rates would have to await a better opportunity for making an estimate as to what the earning capacity would be under normal conditions. I have been increasingly confirmed in this opinion by the various developments which have taken place. Second. It has seemed to me that the public would not be satisfied under existing conditions to have any general increase in rates put into effect without the concurrence of the Interstate Commerce Commission. The public sentiment to this effect has been manifested in many ways throughout the year and has been emphasized by the recent passage by the two Houses of Congress of bills providing that there shall be an opportunity to review any rates proposed by the Railroad Administration before those rates shall go into effect. It follows, therefore, that time and opportunity must be provided for public consideration by the regular rate-making authority of any rate proposals now made. Since the foregoing controlling factors must be respected, it is evident that it would be impossible for the Government to establish any general readjustment of rates prior to January 1, 1920. It is also evident that any new basis to be established for the future should naturally be considered, not from the standpoint of unified operation of all the railroads, but to a greater extent from the standpoint of the necessities of the separate railroads. A rate adjustment which might fully protect the Government when operating all the railroads as a unit might wholly fail to protect equally or fairly the different railroads when separately operated. I therefore see no escape from the conclusion that if the corporations desire to make progress at this time with this matter they enter themselves upon a study of the problem to determine what tariffs they think ought to be proposed, with a view to filing tariffs accordingly with the appropriate public authority. I suggest therefore that you advise the railroad corporations that if they desire to take this course I shall be glad to place at their disposal all the information in the possession of the Railroad Administration bearing on the subject. Since most of the traffic experts who would ordinarily be relied upon by the railroad companies in a matter of this sort are now employed by the Railroad Administration, I shall be glad to provide that the traffic experts so employed shall aid the railroad corporations in studying this problem and bringing it to a conclusion. Sincerely, yours, WALKER. D. HINES, TRADE AND TRANSPORTATION BUREAU LETTERS. TRADE AND TRANSPORTATION BUREAU, OUR WEEKLY LETTER-AS CONGRESS REACHES THE OPENING SESSION, DEAR SIR: Opinion seems to assume a more optimistic tinge as the special session gets near. The reason is apparently that some of the problems will be given a definite solution and that from drifting we will emerge into a certainty of conditions. It is not anticipated that by a wave of the magic wand our responsibilities will dissolve and our burdens disappear, but that they will be clarified in form and restricted to the lowest figures financially that national welfare will permit. Our impression is more confirmed than ever that the new Congress will work out some budget system and bring about in this respect material improvement over the present program. We know that legislation concerning railways has had most serious consideration of the chairmen of the proper committees in Senate and House and with some concrete ideas as to a future policy resulting therefrom. In this connection and as having a direct bearing and influence on what may be done, we reproduce from the Wall Street Journal a letter written by Secretary Root to S. Davies Warfield and read by him at the Missouri Bankers' Convention at St. Louis. It is in part as follows: The whole system of rate regulation and the whole business of transportation rest upon the necessity that rates for competing roads shall be the same. Yet rates so low as to prevent the most favorably situated railroads from receiving excessive returns for their service will ruin the bulk of the railroads of the country, while rates so high as to permit the bulk of the railroads of the country to live will give to the, most favorably situated roads returns that American people will not stand for. If that difficulty is solved, all other questions are comparatively easy of solution. Our present law leaves that difficulty as an insuperable obstacle to fair rate making. I think the simple provisions which you have suggested do solve the difficulty. If Congress follows your suggestion and fixes a fair rate of return for the railroads of each rate-making district as a whole and requires the rate-making authorities to fix rates which will presumptively yield that rate of return, and then requires that in case any particular road makes more than the prescribed feturn, the excess shall be taken by the Government and disposed of equitably as you propose to promote the public interest in transportation, there is no reason why railroad credit should not be reestablished and railroad development proceed promptly, and with it the development of the business of the country. This being done, all the rest of these elaborate plans become mere machinery-much of it unnecessary machinery-including doubtless many useful provisions and some necessary provisions which are adequately provided for in your plan also. I wish, however, to say one thing about the idea of compelling Federal incorporation, whether as applied to existing railroad companies or new consolidated regional companies, I think that comes under the head of ma chinery, which is not only unnecessary, but mischievous. The process of getting all the $17,000,000,000 of railroad securities of the 2,300 railroads of the country away from the millions of present holders with all the litigation and injustice and dissatisfaction and obstruction of credit involved would require so many years of controversy that it would not meet the present exigency. The patient would be dead before the remedy was applied, and nothing useful would be gained after it was over, for the power of Government to regulate the present corporations is practically as complete as it would be to regulate the proposed Federal corporations. There is really only one avowed purpose which could be accomplished by that plan, and that is to withdraw the railroads entirely from the jurisdiction of the State commissions. This is unnecessary because Congress has power to authorize the Federal rate-making authorities to overrule the State commissions in respect of rates which interfere with the interstate-commerce rates. The State commissions ought not to be destroyed. The people along the lines of the railroads in the several States ought to have near their home bodies to which they can go for a redress of grievances against the railroads. They ought not to be compelled to go to Washington for that purpose. The State commissions have been of great value hitherto, and they ought to continue their useful service under the limitations imposed by the paramount necessities of interstate commerce. If the Federal incorporation plans mean anything more than I have stated, they mean Government ownership. The same observation applies to the idea of a Government guaranty. That means an attempt to assure a given income independently of rates instead of assuring rates subject to a limit of income. The inevitable result would be that no rates would be permitted beyond those necessary to make the guaranty good, and as the Government must make the guaranty good there would be neither opportunity nor incentive for private enterprise in the management or development of railroads. The only real financial interest and the only active control stimulated by interest would be on the part of the Government, and this would lead inevitably to Government ownership. Your plan makes the railroads work for their living and assures them of a chance to earn it. The guaranty plan gives them their living whether they work for it or not. is fatal to enterprise and to efficiency. That Whatever divergent opinions are held as to railway treatment the majority opinion favors private conduct and that at the earliest possible date. The controversies as to chairmenships are not believed so acute in fact, as they are on the surface, nor is it felt that the party now in control will sacrifice harmony to satisfy personal ambitions. Compromises are always in order to promote concerted action and promote desirable lawmaking, and through these, predictions are, that the party will emerge at the opening session with its factional quarrels settled and ready for business on a business basis. Very truly, yours, TRADE AND TRANSPORTATION BUREAU, WASHINGTON, May 31, 1919. THE TOWNSEND BILLS. DEAR SIR: S. 647 and S. 648, one relating to regulation of transportation and the other to Federal incorporation are of comprehensive extent and quite complete in detail. At the moment they are the prominent outstanding proposals as formulated for the consideration of the Senate. They take on added interest because of Senator Townsend's participation in measures for regulation of the carriers heretofore. The individual shippers in many cases will undoubtedly examine these proposals with care, but those organizations in various lines of trade having a large membership will have their specialists in these matters give such legislation exhaustive analysis. Particularly we think this will be the case with the National Industrial Traffic League, an association giving special consideration to laws regulating carriers and having grown in value and influence since its inauguration. While its duty primarily is to stand for just and equitable conditions for shippers, its cooperative policy toward transportation systems was before the war of marked benefit and should be of greater aid when carriers are returned to private conduct. We are suggesting that railway lawmaking is having more generally careful and thoughtful attention and analysis of both individuals and organizations, because the desire is more genuine now than ever to reach a solution which provides a permanent basis for development, and while modifications may become necessary from time to time as to details, it is the earnest desire now to get a start to better conditions on the right fundamentals. We hear strong, quite forceful sentiment in fact, in approval of what is considered Representative Esch's plan and this seems to run in harmony with the proposals of Interstate Commerce Commissioner Clark to a very large degree. Mr. Esch as chairman of the Committee on Interstate and Foreign Commerce of the House will by his prominence be one of the deciding factors in new lawmaking and the shippers and railways have high regard for his capacity, and confidence in his broad comprehension of transportation questions. Senator Cummins is understood to have a program of much-importance and scope and he also has followed closely transportation development and conduct. As the new chairman of Senate Committee on Interstate Commerce he occupies a commanding position in solving the railway problem. In the final round-up all proposed legislation will undoubtedly take form in a consolidated measure looking to the absorption of those things in the various proposals, which are most practical and permanently beneficial, and contribute to national welfare on thoroughly acceptable economic lines for the expansion of the business of the producers and the necessary increases in carriers facilities. EX PARTE 67—ILLINOIS CLASSIFICATION, For the convenience of readers who have no copy of the order, but who are interested in the proceedings we reprint the commission's notice of a later hearing as given out by Secretary McGinty, Whereas the Director General of Railroads, in accordance with section 8 of the act of Congress approved March 21, 1918, commonly known as the Federal control act, which provides that the President may avail himself of the advice, assistance, and cooperation of the Interstate Commerce Commission, has requested that this commission investigate certain matters outlined hereinbelow and thereafter advise him whether in its opinion and judgment the present Illinois classification and the present class and commodity rates applicable between points in Illinois should be continued in effect, and if not what amendments should be made thereto, or what classification and what adjustment of class and commodity rates should be substituted therefore; and |