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A Memorial
BY THE
Citizens' National Railroads League, Inc.
TO THE
Joint Conference Committee
of the Congress of the United States
Having under consideration
Pending Railroads Legislation
HUjjyjyjy^mOMmBBHOmKDHIMMIOOOEMO
MEMORIAL OF THE
CITIZENS' NATIONAL RAILROADS
LEAGUE, Inc.
To the Honorable Albert B. Cum mins,
Miles Poindexter, Atlee Pomerene,
Joseph T. Robinson, Frank B. Kellogg,
John J. Esch, Edward L. Hamilton,
Samuel E. Winslow, Thetus W. Sims,
Alben W. Barkley—
Gentlemen:
The Citizens' National Railroads League, actu¬
ated by a desire to help bring about a just and
clear public understanding of America's railroad
question, to the end that the early enactment of
sound and equitable legislation for the control and
operation of our railroads may be facilitated, feels
constrained to take issue with the several interests
which have recently filed memorials with your
Committee, especially with the so-called National
Shippers' Conference and the Association of Rail¬
way Executives, which memoranda bear every evi¬
dence of being inspired by motives other than those
3
of seeking to attain railroad legislation that will
accomplish the greatest good for the greatest num¬
ber.
Your attention is called to the fact that the
Representative memorandum of the Association of Railway Ex¬
ecutives in many respects does not properly repre¬
sent either the view of the majority of railroad
executives, or the interest of the majority of rail¬
road security holders, and that of the so-called
"National Shippers' Conference" does not clearly
represent the sentiment of, and is contrary to the
opinion and recommendations of a great majority
of American shipping and commercial interests.
The shipping and commercial interests of the
country held a number of conferences at Washing¬
ton last Spring, under the auspices of the Chamber
of Commerce of the United States, and deliberated
for weeks upon the railroad question and upon the
transportation needs of the country. Their find¬
ings were afterwards approved by the shipping
and commercial interests of every state in the
Union through referendum voting. President
Wheeler of the Chamber of Commerce of the
United States subsequently presented the findings
at the hearings of the House Committee on Inter¬
state and Foreign Commerce.
The House Committee's records show clearly,
therefore, that the shipping and commercial inter¬
ests of the country, despite representations of the
so-called National Shippers' Conference, are op¬
posed unalterably to the return of the railroads to
Constructive
Lesrislation
Demanded
4
pre-war conditions and are opposed to the govern¬
ment's relinquishing the railroads until definite and
constructive legislation has been enacted.
We therefore urge upon you the imperativeness
of refusing to permit any special interest to inter¬
fere with the enactment of immediate legislation
that will clarify and stabilize the present railroad
situation, which is seriously threatening the happi¬
ness and progress of our nation.
Further, we wish to impress upon you the con¬
viction that no railroad legislation can be satisfac¬
tory or enduring that is not constructed on the
principles laid down by the Federal Constitution,
under which the rights of every interest must re¬
ceive the same consideration and be weighed in the
same scales of equity and justice.
We urge that in your deliberations on proposed
railroad legislation, boundaries and demarkations
of territory, of state, of class, of party and of
special interest, should be submerged and ignored,
and that the problem be dealt with in an impersonal
and unpartisan manner; that the interest of se¬
curity owners, workers and public be measured by
the same yardstick. Legislation enacted on any
other principles is certain to prove unworkable and
worthless.
ire^'berng"'' It is our dccp conviction that many irrelevancies
are being injected into your present deliberations
by interests desirous of defeating the imperative
remedial railroad legislation at this session.
We venture to point out that there are but four
fundamental elements in the railroad question, and
if the legislation finally decided upon embodies
Avoid Class
Consideration
Injected
5
The Real Aim
of Legislation
these elements you shall have properlj^ and happily
solved the country's railroad problem for all time.
The four fundamentals may be summarized as:
(1) Adequate and economic transpor¬
tation ;
(2) Valuation and capitalization;
(3) Bates and revenue;
(4) Control and finances.
New legislation must provide rules that shall
govern future unification, pooling and consolida¬
tion of railroads so that the country's transporta¬
tion systems may be able to furnish maximum
service at minimum cost; it must determine the
principles governing future capitalization with re¬
lation to actual property values so that the public
will not be called upon to pay income on watered
capital; it must lay down principles governing
future control and financing to preclude the possi¬
bility of our railroads ever again falling into the
hands of unscrupulous directors and financiers,
who in the past have victimized both the security¬
holders and the public; and, finally, the legisla¬
tion must provide a sound rule of rate-making
by means of which the railroads can be assured
a revenue income sufficient to take care of oper¬
ating expenses, proper upkeep of properties, a
legal rate of interest or dividends on actual
value of properties in public service, and leave
a reasonable but dependable annual surplus, to
constitute a reserve fund to be drawn upon in
lean periods. A bill framed along these lines
will assure the country an adequate, sound, in¬
vigorating and enduring railroad policy.
6
THE ARGUMENT.
1.
Adecúate and
is admitted that we already have ample rail-
Economic ^
Transportation j-Qad mileage; the question is, how to get the best
use of the mileage we have so as to meet the coun¬
try's future growth without the need of building
more railroads. The answer is obviously,—in¬
crease the potential service of the existing roads
through—(a) intensive development, and {b)
intensive coordination and consolidation.
In support of the logic of these conclusions, we
cite the fact that every great railroad genius of
the country, from Vanderbilt to Harriman and
Hill has always tried to absorb and consolidate
the railroads for the purpose of economy and effi¬
ciency, and that when we entered the war, the rail¬
way executives tried very hard to give the country
the benefit of a unified railroad system, but failed
because restrictions and limitations of law pre¬
vented effective unification. Not until the govern¬
ment took over the railroads as a unit, did we get
the benefit of unified operation which enabled us
successfully to care for the great increase in traffic
incident to the war.
The argument that permanent railroad consoli¬
dation would mean high rates and poor service is
utterly without foundation because experience has
demonstrated that consolidation increases efficiency
and lessens cost.
Valuation and
Caphalization
There are many and varied views respecting
railroad capitalization, and over-capitalization, but
if the proposed legislation provides that railroads
7
shall be permitted to earn only a fair hut fixed
income upon the actual value of their properties
in public service, whatever water there may he in
railroad capitalization automatically would be
squeezed out by the operation of the law.
3.
The question of rates has always been the great
bone of contention,—the most troublesome feature
of our railroad problem,—and the system of rate
fixing has been against the interest of small manu¬
facturers and dealers and against small communi¬
ties.
In the years when the ownership of the railroads
was concentrated in the hands of a few large pro¬
moters like the Vanderbilts, Goulds, Hills and
others, rates were advanced or reduced as the
occasion seemed to require, either to crush a com¬
petitor, or build up a special industry or com¬
munity.
When Congress created the Interstate Com¬
merce Commission many of these evils were elimi¬
nated, hut rate favoritism was still possible because
the Commission had the power only to prescribe
maximum, not minimum, rates, and, therefore,
certain favored interests and industries were
allowed and are allowed to this day to be the bene¬
ficiaries of very low freight rates, which the Com¬
mission has had no power to alter, while other less
influential interests and industries have continued
to pay higher rates to make up the difference.
Not until Congress empowers the Commission
to prescribe minimum as well as maximum rates,
will this country enjoy a just and equitable rate
structure.
8
Depreciation
Alarming
Rates Never Freight Tatcs, Oil thc whole, however, have been
High Enough ®
too low for more than a decade, much against the
interest of the public,—and the public has believed
that it was greatly benefited by these low freight
rates. The truth is, however, that the only bene¬
ficiaries were certain favored industries and indi¬
viduals.
As a result of these artificially low freight rates,
the public is today confronted with the inadequacy
and inefficiency of a railroad system which has been
permitted to depreciate until it is today verging
upon physical and financial collapse.
No less an authority than the Railway Age has
recently published figures showing that the rail¬
roads of the country are short $6,000,000,000 in
maintenance and expansion. Had freight rates been
established on just and sane principles, over the
past ten years, revenues would have been available
to provide the necessary funds for proper main¬
tenance and expansion without the slightest incon¬
venience or hardship to the public, and the country
would have had a well equipped, well maintained
transportation system capable of handling all its
business at minimum cost, instead of finding itself,
as it is today, emerging from three or four years
of the greatest industrial prosperity the world has
ever known, with its railroads not only in poorer
physical condition than before the war, but without
having added a single mile of new railroad, and
with prime railroad bonds, representing the cream
of the nations investment wealth, a drug in the
market and selling at panic prices.
The public has been led to believe that this
Resultant grcat industrial prosperity has added greatly to
America's wealth. If we are to assume that the
printing of a lot of currency and government
bonds is an evidence of wealth, then the past four
years has added enormously to our wealth because
of the billions of added currencj^ and bonds. But
bonds and inflated currency evidence debts and not
wealth. The latter is generally evidenced by new
homes, farms, railroads and factories. The past
four years have added few new homes, few new
farms, and not a single mile of new railroad. As
a matter of fact, our wonderful railroad system,
the creation of the past fifty or sixty years, is today
in worse physical condition than it was ten years
ago, and, through the short-sighted policies which
have been applied to its control, the railroads have
been so weakened and devitalized that the conser¬
vative public has of late showed a preference for
investing in almost anything else than railroads.
Consequently, railroad securities have so depre¬
ciated that they are today quoted on the open mar¬
ket at less than what the equipment alone would
cost if the railroads had to buy it today, leaving
the upwards of 2.50,000 mijes of road bed, steel
rails and terminals without any value and thrown
into the bargain.
situatil°n^'''^ Some people may consider this a happy situa-
confronts Us tion, but to One wlio understands commerce and
finanee, this demoralized railroad security market
represents a deplorable condition in the country's
present affairs. It is our firm conviction that if
this condition is permitted to continue, our great
and virile country, whose industrial and commer¬
cial supremacy is the envy of the world, will soon
find itself where Rome found itself when its citi¬
zens forsook their war pursuits and other virile
10
activities, for the bath, soft raiment and other
luxuries.
We virtually will be following the example
of Rome if we continue to encourage and re¬
ward every industry and business from the
manufacture of automobiles and rubber tires,
down to coca cola, chocolate, moving picture
and other industries, which are non-creative but
consumers of public wealth, and continue to
penalize and discourage railroad building and
railroad development, the one industry that has
had more to do with making for the prosperity
of the farm, the mine, the forest and other pro¬
ducers of wealth, than any other industry in the
country.
We ask you to give your serious consideration
as to whether a policy of starving the railroads and
depriving them of their ability to render proper
service has not been too great a price for our coun-
trj^ to pay in an effort to save .02 or .03 cents
freight on a pound of bacon, beef, lard or sugar,
especially in view of the fact that these commodities
have, in the meantime, been advanced in their sell¬
ing price to the public from 100 to several hundred
percent.
We respectfully urge that your committee rec¬
ommend such legislation as will revitalize and re¬
vivify America's railroad industry, to enable us
again to enter a period of vigorous development,
upbuilding and expansion of our great railroad
system which every one admits is the necessary
propeller of commerce and industry.
Must We urge upon you our conviction that the rail-
Provided road bill upon which you are now deliberating,
while guarding against profiteering on the part
11
of the railroads, should provide ample and suffi¬
cient revenue to yield at least 6% on the value of
the properties in public service, besides setting up
a dependable annual surplus which, properly safe¬
guarded by the government, should act as a reser¬
voir to be drawn upon during periods of industrial
depression, so that the railroads in future may at
all times enjoy high credit and be able to obtain
money at low interest rates for the purpose of
improvments of their properties in the interest of
the public.
4.
We further ui'ge that in whatever bill you rec¬
ommend, it should be provided that government
credit shall aid railroad financing, with a view to
putting the railroads on a sound and independent
financial footing to preclude the necessity of their
having to go to the old Wall Street interests for
their financing.
The interest of the country and the interest of
the railroads are a unit and both will be protected
against such contingency if the government will
fund for a period of 10 or 15 years the entire
amount which the railroads now owe it, without
deducting what the government owes the railroads.
The interest rate charged by the government
should be the same as the government pays. This
will reduce interest rates on railroad obligations
and the public will he benefited thereby, because
the only proßt railroad stockholders would get
would be 6% on the actual value of their properties.
All above that, which may inure through efficiency,
economy and low interest rates, would, go to the
public in property improvement and reduced
freight rates.
12
The railroads could further be helped in obtain¬
ing money at low interest rates for use in develop¬
ment and expansion of their properties in the in¬
terest of the public, if the government would pro¬
vide a revolving fund of one billion dollars, instead
of one-half billion dollars, as has been suggested,
so that the railroads may not be forced to go to
Wall Street for money in the present money strin¬
gency, immediately they emerge from government
control.
It would seem strange indeed, if our govern¬
ment, which has loaned nine billion dollars to for¬
eign governments, among which are such small and
unstable kingdoms as Roumania and Serbia, were
to refuse to extend its financial aid to the revital¬
izing of American railroads in order that the coun¬
try may be assured adequate and effective trans¬
portation entirely free from graft and financial
exploitation. The government would he amply
protected in consideration of such financial aid as
it might extend, because there is no sounder or
safer security in the world than America's railroad
systems.
Respectfully submitted,
Nathan L. Amster, President,
Citizens' National Railroads League, Inc.
Suite 22, Equitable Building,
Boston, Mass.
13
Citizens' National Railroads League, Inc.
OFFICERS
Nathan L. Amsttr, President C. R. jeffers, Treasurer Phiup Davis, Secretary
PARTIAL LIST NATIONAL ADVISORY COUNCIL
governors
HEXRV J. ALLEN, Topeka, Kans.
T. W. BICKETT, Raleigh, N. C.
EMMET D. BOVLE, Carson City, Nev,
CHARLES H. BROUGH, Little Rock, Ark. '
SIDNEY J. CATTS, Tallahassee, Fla.
A. H. ROBERTS, Nashville, Tenn.
JOHN G. TOWNSEND, JR., Dover, Del.
ex-governors
ELIAS MILTON AMMONS, Denver, Colo.
EARL BREWER, Clarksdale, Miss.
JOSEPH M. CAREY, Cheyenne, Wyo.
F. C. CHATTERTON, Riverton, Wyo.
O. B. COLQUETT, Dallas, Texas
J. H. HAWLEY, Boise, Idaho
GEORGE H. HODGES, Olathe, Kans.
J. A. MEAD, Rutland, Vt.
JOHN H. MOREHEAD, Fall City, Neb.
EMMET O'NEAL, Birmingham, Ala.
SAMUEL M. RALSTON, Indianapolis, Ind.
mayors
HARRY BACHARACH. Atlantic City, N. J.
ERNEST G. EAGLESON. Boise City, Idaho
DAVID E. FITZGERALD, New Haven, Conn.
J. McW. FORD, Shreveport, La.
B. N. MERCER, Saginaw, Mich.
M. M. STEPHENS, East St. Louis, 111.
H. E. STEWART, Reno, Nev.
JOSEPH STILZ, West New York, N. J.
G. GLEN TOOLE, Macon, Ga.
C. A. TOWNSEND, Aurora, 111.
WILLIAM J. WALLIN, Yonkers, N. Y.
F. T. WOODMAN, Los Angeles, Gal.
L. ZUEMEUHLER, Council Bluffs, Iowa
public service commissioners
ROBERT C. BACON, Rutland, Vt.
J. H. BROWN, Olympia, Wash.
BENJAMIN F. CLEAVES, Augusta, Me.
H. H. COREY, Salem, Ore.
SIDNEY T. DOUTHITT, 2d Dist.. Newcastle, Ky.
JOSHUA GREENWOOD, Salt Lake City, Utah
C. M. JUNE, Cheyenne, Wyo.
CARL H. MOTE, Indianapolis, Ind.
WILLIAM F. RHEA, Richmond, Va.
CAMPBELL RUSSELL, Oklahoma City, Okla.
J. F. SHAUGHNESSY, Carson City, Nev.
B. W. WALTERMIRE, Columbus, Ohio
G. R. C. WILES, Charleston, W. Va.
college presidents and professors
ALFRED AKERMAN, Syracuse, N. Y.
Syracuse University
WILLIAM J. BARTHOLF, Chicago, 111.
Crane Junior College
MORTIMER E. COOLEY, Ann Arbor, Mich.
University of Michigan
LAWRENCE T. CORBLY, Huntington, Va.
CARROLL W. DOTEN, Boston, Mass.
Institute of Technology
J. G. GRABBE, Greeley, Colo.
Colorado State Teachers
PERCIVAL HALL, Washington. D. C.
Gallauden College
AVEN NELSON, Loramie, Wyo.
University of Wyoming
WILLIAM Z. RIPLEY, Cambridge, Mass.
Harvard University
JOHN A. RUSSELL, Detroit, Mich.
Detroit University
EDWARD O. SISSON, Missoula, Mont.
Montana State University
OLIVER M. SPRAGUE, Cambridge, Mass.
Harvard University
CHARLES F. THWING, Cleveland, Ohio
Western Reserve University
CHESTER WHITNEY WRIGHT, Chicago, HI.
University of Chicago
prominent men
HENRY ABRAHAMS, Boston, Mass.
Secretary Cigarmakers' Union
ROGER W. BABSON, Wellesley, Mass.
Statistician
A. H. BLANCHARD, Poughkeepsie, N. Y.
President, National Highways Association
W. R. CALICOTTE, Denver, Colo.
Chairman, Legis. Comm. Farmers' Edu. Union
J. RANDOLPH COOLIDGE, Boston, Mass.
F. A. CLEVELAND, Norwood, Mass.
DAVID A. ELLIS, Boston, Mass.
JUDGE S. E. ELLSWORTH, Jamestown, N. Dak.
JOHN H. FAHEY, Boston, Mass.
RT. REV. SAMUEL FALLOWS. Chicago, 111.
JOHN F. FITZGERALD, Dorchester, Mass.
Congressman
GEORGE F. FLANDREAUX, New Rochelle, N. Y.
EDWARD E. GORE, Chicago, 111.
MAX MITCHELL, Boston, Mass.
President, Cosmopolitan Trust
EDWARD F. McGRADY, Boston, Mass.
United States Department Labor
C. G. PATTERSON, Salt Lake City, Utah
Secretary. Intermountain Farmers' Association
JOHN A. SLEICHER, New York, N. Y.
Editor Leslie's Weekly
RABBI EMANUEL STERNHEIM, Sioux City, la.
Hex. PETER G. TEN EYCK, Albany, N. Y.
G. T. TOWNSEND, Middletown, N. Y.
Banker
ROBERT C. WATSON, Rochester, N. Y.
President, Rochester Tr. & S. D. Co.