J34B 
 
 *B 2flD an 
 
 CD 
 CO 
 CO 
 
 CD 
 >- 
 
LIBRARY 
 
 OF THE 
 
 University of California. 
 
 Gl FT OF 
 
 Class 
 
THE BENEFIT OF THE HEPBURN 
 LAW TO THE BANKER, BROKER, 
 SHIPPER, AND THE PUBLIC 
 
 ADDRESS DELIVERED BEFORE THE 
 FITCHBURG BOARD OF TRADE 
 WEDNESDAY EVENING, APRIL 
 BY CHARLES STEDMAJS KANj 
 
 in 2007 with funding from 
 Microsoft Corporation 
 
 PUBLISHED BY THE 
 
 AUTHORS' PUBLISHING ASSOCIATION (Inc.) 
 No. 53 STATE STREET. BOSTON, MASS. 
 
 http://www.archive.org/details/benefitofhepburnOOhankrich 
 
THE BENEFIT OF THE HEPBURN 
 LAW TO THE BANKER, BROKER, 
 SHIPPER, AND THE PUBLIC 
 
 CHESTNUT HILL. MASS. 44 CIRCUIT ROAD 
 
 Here's thinking of you. 
 
 CHARLES STEDMAN HANKS 
 
 PLEASE ACKNOWLEDGE RECEIPT BY POSTAL 
 OF THE '*^ X 
 
 / '•>^ THE " "^ 
 
 t UNIVERSITY I 
 
 PUBLISHED BY THE 
 
 AUTHORS' PUBLISHING ASSOCIATION (Inc.) 
 No. 53 STATE STREET, BOSTON. MASS. 
 
THE BENEFIT OF THE HEPBURN 
 LAW TO THE BANKER, BROKER, 
 SHIPPER, AND THE PUBLIC 
 
 ADDRESS DELIVERED BEFORE THE 
 FITCHBURG BOARD OF TRADE 
 WEDNESDAY EVENING, APRIL 3, 
 BY CHARLES STEDMAN HANKS 
 
 PRINTED BY REQUEST 
 
 PUBLISHED BY THE 
 
 AUTHORS' PUBLISHING ASSOCIATION (Inc.) 
 No. 53 STATE STREET, BOSTON. MASS. 
 

 Copyright, 1907 
 By Charles Stedman Hanka 
 
THE BENEFIT OF THE HEPBURN LAW 
 
 TO THE BANKER, BROKER, SHIPPER, 
 
 AND THE PUBLIC 
 
 When Congress passed the Hepburn bill, it 
 knew that the time had come when the govern- 
 ment must either control the railroads or the 
 railroads would control the government. Ex- 
 perience, too, had proved that there must be 
 a closer mutuality of interest between the rail- 
 roads and the shippers if the covert and destruc- 
 tive warfare which was being carried on between 
 our different railroad systems was to be pre- 
 vented, — a condition of affairs which had been 
 brought about by secret rates and the rebate 
 system. 
 
 This Hepburn bill which, on the 28th of 
 August, 1906, became a law, will prove to be 
 an epoch-making law, and, in my judgment, it is 
 as important a law as the laws which were passed 
 when Alexander Hamilton devised his plan of 
 a national credit. Before the Hepburn bill 
 
 1G0614 
 
became a law, many railroad officials, ignoring 
 the fact that railroads are public service cor- 
 porations, had forgotten that the people had 
 rights and had charged unreasonable rates, and, 
 although a shipper could file, with the Inter- 
 state Commerce Commission, a complaint that 
 a rate was unfair and unreasonable, the Com- 
 mission had no power to enforce its findings; 
 and, as the people were the ones who suffered, 
 government regulation consequently became im- 
 perative. 
 
 Soon after the bill became a law, a promi- 
 nent railroad president made the statement that 
 he intended to do what he could to prevent the 
 pernicious practices, which have heretofore ex- 
 isted, and the other day another prominent rail- 
 road man said that he believes the Hepburn 
 law is for the best interests of the railroads. 
 In other words, the attitude of railroad officials 
 is already changing. When the bill was before 
 Congress, the railroads used every influence to 
 prevent its becoming a law. Now they are 
 beginning to believe that what the government 
 was contending for is a good business propo- 
 sition. 
 
 The passage of the bill, it was hoped, would 
 
bring' about harmonious and progressive action 
 among the railroads in coping with the problem 
 to be solved in the transportation business, as 
 up to this time railroad officials had been unable 
 to agree among themselves upon any general 
 railroad policy. In order to have some definite 
 policy for carrying on the transportation business 
 of this country and also to bring about more 
 economy of operation, the building of new lines, 
 better equipment facilities for the handling of 
 traffic and to eliminate parasitic corporations 
 whose operations were affecting the earnings of 
 other roads and to prevent discriminations, re- 
 bates, and rate wars, the Hepburn law has made 
 certain rules and regulations which the railroads 
 must now follow. Many of the provisions of 
 this law were drafted for the benefit of the public, 
 and the public is now wondering what effect the 
 law is to have upon the progress and prosperity 
 of our country. In considering the law, we must 
 keep in mind: — 
 
 Firstj that the government has now a voice in 
 regulating the revenues of the railroads. 
 
 Second, that the Interstate Commerce Com- 
 mission has practically been given executive, 
 administrative, and judicial powers. 
 
Third, that Congress, when it prescribed in a 
 general way the rules and regulations for con- 
 ducting the transportation business of this coun- 
 try, made such rules and regulations that the 
 shipper need no longer have any lack of confi- 
 dence that he will be able to get the rights which 
 belong to him. 
 
 Fourth, that Congress, when it made the Inter- 
 state Commerce Commission the arbitrator to 
 decide all questions of railroad transportation, 
 passed a law which makes it impossible for any 
 combination of interests to get any privileges 
 which the smallest shipper cannot now obtain. 
 
 Under this law the fundamental remedy for 
 any injustice to a shipper by a railroad and for 
 any discrimination against a small railroad cor- 
 poration by some large railroad system lies in the 
 power of the Interstate Commerce Commission 
 to regulate rates, Section 1 of the Act saying : 
 
 All charges made for any service rendered 
 or to be rendered in the transportation of pas- 
 sengers or property as aforesaid, or in connection 
 therewith, shall be just and reasonable, and every 
 unjust and unreasonable charge for such service 
 or any part thereof is prohibited and declared to 
 be unlawful. 
 
Section 15 saying, 
 
 The Commission ... is authorized and em- 
 powered, and it shall be its duty ... to determine 
 and prescribe what will be the just and reasonable 
 rate or rates, charge or charges, to be thereafter 
 observed as the maximum rate to be charged. 
 
 Keeping in mind, therefore, these two pro- 
 visions of the Act as the governing clauses of the 
 law, it is easy to see that we can find out what 
 the remedies are for many of the evils and 
 faults which had previously existed in railroad 
 operations by mathematical calculation, as the 
 Interstate Commerce Commission, in determin- 
 ing what are fair and reasonable rates, is obliged 
 to take into consideration not only the details 
 of all receipts and disbursements of a railroad, 
 but its capitalization and financial standing, if 
 it is to make a maximum rate based upon the 
 real conditions under which the road is being 
 operated. 
 
 In order to understand the real railroad situa- 
 tion, the Interstate Commerce Commission has 
 been given the right, in the 20th Section of the 
 Act, to require every railroad to keep its accounts 
 and memoranda according to such form as it shall 
 prescribe or approve, and the law also provides 
 
8 
 
 that every railroad corporation shall annually 
 file a sworn report showing in detail its busi- 
 ness, its capitalization, and its indebtedness. If, 
 therefore, the provisions of the law are enforced, 
 there will no longer be any sensationalism in 
 the management of our railroads, and the roads 
 will be operated according to the rules of com- 
 mercialism, for the reason that the power to 
 regulate rates has been transferred from the 
 railroads to the government, and the rates must 
 now be based upon commercial conditions esti- 
 mated at their proper values. Further, if the 
 reports of the railroads are properly tabulated 
 by the statistical division of the Commission, 
 the shipper will now need no more intelligence 
 in understanding with substantial accuracy what 
 a road should earn and approximately what a 
 rate should be than he now requires in carrying 
 on his own business. 
 
 What this power to regulate rates means has 
 been stated by one of the ablest railroad attorneys 
 of this country in an article in one of our maga- 
 zines in which he says, '^ It is a matter of common 
 knowledge that the rates charged by the railroads 
 of this country affect all classes of our community, 
 that they determine very largely the* outcome of 
 
9 
 
 all private enterprises, that upon them hinges 
 only too often the national well-being, if not the 
 very existence of our villages, towns, and cities, 
 and of our seaboards and large sections of our 
 country/' 
 
 When, however, this power to regulate rates 
 was transferred by the Hepburn law from the 
 railroads to the government, an equally prominent 
 railroad man said, "The act is revengeful and 
 punitive, is drawn either in ignorance or prejudice, 
 that it has less thought of fairness to the rail- 
 roads or the interests of the public than to con- 
 centrate tremendous power in the general gov- 
 ernment, not necessary in the elimination of 
 the abuses complained of and which, if constitu- 
 tional, gives power to disarrange the established 
 market to an extent that, if exercised, will 
 produce little short of revolution, and that the 
 power to favor one section of the country and 
 punish another is too great to intrust to any set 
 of men/' As the power given to the Interstate 
 Commerce Commission is restricted to making 
 fair and reasonable rates, it does not have the 
 power to disarrange the established market of 
 this country, other than those hot-house growths 
 which have been brought about by combiua- 
 
10 
 
 tions of railroad interests. Further, there is 
 always an appeal from any decision of the 
 Commission, and any one with a grievance, 
 whether he be a shipper or a railroad corporation, 
 can have ''his day in court." Further, one of 
 the purposes of the Hepburn bill was to prevent 
 the railroads changing the natural markets of this 
 country by making preferential rates, particularly 
 on lines running from the interior to the seaboard, 
 which resulted in naturally inferior ports being 
 put on a par with the best ports and naturally 
 inferior routes on a par with the best routes, 
 all of which is prejudicial both to the producer 
 and to the shipper, and has changed the estab- 
 lished markets of this country. 
 
 The power given to the Interstate Commerce 
 Commission is a very great one. If, however, 
 the different factors interested in this transpor- 
 tation problem work in unison with the under- 
 lying thought that all rates must be just and 
 reasonable, the Commission will have less occa- 
 sion to use its powers or to regulate rates than 
 the merchandise clerk does in marking the prices 
 at which the merchandise^of his firm is to be 
 sold, for the reason that ?the ^Commission is 
 limited in the exercise of its powers to deciding 
 
11 
 
 cases where the rates are unfair and unreasonable. 
 The important fact, however, which the people 
 of this country do not yet seem to realize the 
 significance of, is that any one can now initiate 
 proceedings with the Commission which will 
 necessitate fair and reasonable rates being 
 made, — rates which are no longer to be based 
 on guess, but on facts, figures, and conditions, 
 and, as railroad operations are now to be shown 
 with such completeness that the ability to de- 
 termine what the statistical reports mean will 
 no longer be limited to the expert, the shipper 
 can now determine for himself what are ap- 
 proximately fair and reasonable rates, provided, 
 however, the reports of the railroads to the 
 Commission are properly made and are properly 
 tabulated by its statistical division. 
 
 The Statistical Reports. 
 
 The statistical reports of the Interstate 
 Commerce Commission are, therefore, one of the 
 most important elements in getting fair and 
 reasonable rates, and they should be so tabu- 
 lated that the shipper can understand them 
 as easily as he now tells from his railway guide 
 
12 
 
 the movements of passenger trains. Until these 
 statistics are a correct tabulation of the returns 
 of the railroads, the shipper has no real basis 
 upon which a complaint can be made. If these 
 statistics are to be properly tabulated, the 
 Interstate Commerce Commission must give 
 up using the Merger Rule. By this rule which 
 the Commission has adopted, a road under the 
 control of another road by a lease of long dura- 
 tion or by the ownership of the majority of its 
 stock is not obliged to make a report to the 
 Commission. The identity, therefore, of the 
 controlled road disappears, and its name is 
 dropped from the Commission's list of railroads, 
 although it still has a legal entity as a railroad 
 corporation, and its bonds are still in the hands 
 of the public. 
 
 Mr. G. W. R. Harriman, who has made an 
 examination of the statistical reports of the In- 
 terstate Commerce Commission for me, has 
 claimed that, by the application of this Merger 
 Rule to the capitalization of the railroads, the 
 value of the statistical reports is vitiated. 
 Five months after this criticism was made, an 
 editorial appeared in the March 15th number of 
 the Railway Age as follows: — 
 
13 
 
 In his annual report for the year 1905, just now 
 being distributed, Professor Henry C. Adams, 
 Statistician to the Interstate Commerce Com- 
 mission, announced that he has in progress a de- 
 tailed investigation of the duplication of the 
 railway capitalization which, when completed, 
 will enable him ^'to make an absolutely correct 
 statement of the amount of railway capital, 
 which in fact, under the existing organization of 
 railway properties, may claim support from 
 railway earnings." This is a somewhat tardy 
 step toward the elimination of a needless error 
 which has done much to mislead the general 
 public and to create sentiment adverse to the 
 great industry with which Professor Adams's 
 official duties are connected. The need of it 
 is shown by the statement in the report that 
 the total capitalization on June 30, 1905, was 
 $13,805,258,121, or $65,926 per mile, a statement 
 which, it is admitted, ^' makes no deduction of 
 stocks and bonds owned by railways in their 
 corporate capacity, and, to the extent that such 
 deductions are proper, overstates the capital." . . . 
 The true capitalization, which cannot be obtained 
 from the report except by compilation, was 
 $11,167,105,992, and the average per mile of 
 line was $53,327, a difference of nearly twenty 
 per cent. 
 
 In another issue of this same railroad publication 
 was the following statement, which was appar- 
 
14 
 
 ently the result of an interview with the Statis- 
 tician of the Commission, namely: — 
 
 It is understood that this Merger Rule is not 
 to be published as it has been, and that in the new 
 collection of statistics which begin under the 
 Hepburn law Professor Adams will accept the 
 amendment of Mr. Harriman in this and other 
 particulars. 
 
 These, together with other admissions which 
 have been made in reference to other criticisms 
 of Mr. Harriman, concerning the statistical re- 
 ports of the Commission, have already proved 
 that eighty per cent, of his criticisms were proper 
 ones, and it will only be a question of time 
 when all of his criticisms will be admitted. 
 
 If a correct tabulation of the reports of the 
 railroads is made, it will probably show that a 
 majority of the railroads of this country are 
 being operated according to business princi- 
 ples. These railroads, therefore, should not be 
 considered with those roads which are being dis- 
 credited in the way in which the public is now 
 discrediting the management and financial oper- 
 ations of all railroads. Further, an analysis 
 from, a proper statistical exhibit would locate 
 any over-capitalization, and give absolutely the 
 
15 
 
 place where the remedy should be applied. In 
 fact, the correction of any over-capitalization 
 must start with the statistical reports, for the 
 reason that prior to the passage of the Hepburn 
 bill the traffic manager made the rate accord- 
 ing to "what the traffic would bear,'' and did 
 not take into consideration the capitalization 
 of his road. The Commission, however, in regu- 
 lating a rate is obliged to take into consideration 
 this capitalization, as it is one of the elements 
 in determining what a just and reasonable 
 rate should be, because in making a just and 
 reasonable rate, it must know what is a just 
 and reasonable capitalization. 
 
 The Interstate Commerce Commission. 
 
 As the Interstate Commerce Commission has 
 now the power and a dignity practically equal 
 to that of the Supreme Court, it should be so 
 constituted that any person and any railroad 
 corporation can, without hesitation, appeal to its 
 wisdom, and expect to receive just decisions. 
 With the many mandatory provisions of the 
 Hepburn law as a guide, there need be no am- 
 biguity in interpreting the meaning of the law, 
 
16 
 
 and there should be no loss of time by the Com- 
 mission in making its decisions^ as every ship- 
 per, under the provisions of the law, has the 
 right to expect a decision within sixty days 
 after his complaint is made. These decisions 
 of the Commission must necessarily, be largely 
 based on its statistical reports, and the estimate 
 of the Statistician that it will take two years to 
 formulate a proper form of books for the rail- 
 roads to keep, is too long a time to hold the 
 situation in its present unsettled condition. 
 Many things could be done at once to relieve 
 the present situation. The distrust which the 
 public now has against all railroad corpora- 
 tions could be eliminated from a majority of 
 these corporations if the Commission should put 
 in classes by themselves those railroads which, 
 by their reports in the past, showed that they 
 complied with the request of the Commission, 
 and which now show that they are complying 
 with the provision and the purport of the Hep- 
 burn law. How these railroads can be classi- 
 fied Mr. Harriman has indicated to the Com- 
 mission. If his suggestions are followed, the 
 stocks and bonds of most of our railroads will 
 soon have a more stable value. 
 
Although the Commission has been given ex- " "— -— ^ 
 ecutive, administrative, and judicial powers in 
 interpreting the Hepburn law, and although the 
 Commission should be aggressive in protecting 
 the rights of all persons and all corporations, it 
 should only initiate proceedings as a last resort, 
 as its most valuable function, as a branch of the 
 government, is in acting as arbitrator on the 
 broad lines of co-operation between the public, 
 the shipper, and the railroads. If this is done, 
 it will at once give a feeling of security to inves- 
 tors, a guarantee of stability and uniformity of 
 rates to shippers, and create a more harmonious 
 feeling between the different railroad systems 
 in coping with the problem to be solved in the 
 transportation of persons and commodities. 
 
 Every question which the Commission has to 
 decide is an economic one which can be reduced 
 to a specific problem, can be defined in writing, 
 is susceptible of proof, and can be solved without 
 jeopardizing any interest, if the roads are hon- 
 estly financed and managed according to busi- 
 ness ethics. In the Nebraska maximum rate 
 case, where the question of how to arrive at a just 
 and reasonable rate was at issue, the Court said, 
 " In order to ascertain that [a just and reasonable 
 
18 
 
 rate], the value and the original eost of construc- 
 tion, the amount expended in permanent im- 
 provement, the amount and market value of its 
 [the road's] stocks and bonds, the present as 
 compared with the original cost of construction, 
 the probable earning capacity of the plant under 
 particular rates prescribed by statute, and the 
 sum to meet operating expenses are all matters 
 for consideration, and are to be given such weight 
 as may be just and right in such a case/' 
 
 The Parties in Interest. 
 
 With the Hepburn law stating definitely the 
 way in which transportation shall be conducted, 
 with the Interstate Commerce Commission hav- 
 ing the power to enforce these mandatory rules 
 and regulations which are now to govern all 
 railroad operations, with the certainty which 
 every shipper now has .that the rates will be 
 fair and reasonable, there are obviously nine 
 distinct factors which will be effected in the 
 solution of any transportation problem which 
 has to do with the reasonableness and the 
 justice of any rate. These factors are: — 
 
 First. — The railroad corporations. 
 
 Second. — The general shipper. 
 
19 
 
 Third, — The special shipper who controls 
 such transpartation devices as private cars, 
 spur tracks, etc. 
 
 Fourth. — The private car companies. 
 
 Fifth. — The express companies. 
 
 Sixth. — Our legislators. 
 
 Seventh. — Our bankers and brokers who deal 
 in railroad securities. 
 
 Eighth. — The investors in railroad securities. 
 
 Ninth. — The public, who in the last analysis 
 pays all the bills. 
 
 Each can demand that the Commission shall 
 give a decision in reference to the reasonableness 
 of any rate, and any one of these different factors 
 can make a move on the checkerboard which 
 will affect the interests of all the others. It is 
 this phase of the law, that any one can now 
 start the ball rolling, which the public is now 
 only beginning to realize the significance of. 
 Here, again, the statistical reports of the Com- 
 mission become an important element which 
 every factor has to consider, for, unless these 
 statistics are properly tabulated, no one can 
 know what will be uncovered. Correct statistics 
 are consequently as important to the railroads 
 as to the banker, the stock broker, the shipper, 
 
20 
 
 or the investor in railroad securities, for the 
 complaint of a small shipper, if sustained by 
 the Commission, is apt to become of vital im- 
 portance to some railroad corporation, some 
 banker or broker, or some investor in railroad 
 securities, as the decision of the Commission 
 may affect some large business proposition 
 which is being formulated. 
 
 Up to this time the public has only heard the 
 railroad side of the question, and has not taken 
 into consideration the fact that, when any 
 transportation problem now comes up for 
 decision before the Interstate Commerce Com- 
 mission, every one of these factors has some in- 
 terest at stake, and, before any correct solution 
 of the problem can be arrived at, each has a 
 right to be heard and to contribute such facts 
 as he can towards the solution of the problem. 
 Our bankers, brokers, investors, shippers, and 
 the public are only now just beginning to realize 
 the broad, range of the Hepburn law, and, now 
 that they are waking up to the fact that this 
 law affects their own business as much as it 
 does the railroads, they are beginning to see the 
 importance of having reports in detail filed by 
 the railroads, and of having these reports cor- 
 
21 
 
 rectly tabulated, so that the law can be enforced 
 with a proper understanding of the whole ques- 
 tion. 
 
 Our Bankers and Brokers. 
 
 Take, for example, the effect of the Hepburn 
 law as it applies to our stock brokers. Under 
 the old law a stock broker might know that 
 the freight rates on a particular road were 
 excessive, yet, knowing that the government had 
 no power to reduce the rates, this broker would 
 be safe in assuming that these rates would be 
 kept high enough to support the stock which 
 the road was putting upon the market, although 
 he knew that it was watered stock. Under the 
 new law, although he may be on the inside 
 and may know that watered stock is being put 
 on the market, yet, knowing that the Interstate 
 Commerce Commission may at any time lower 
 the rates, this special knowledge becomes a factor 
 which he is now obliged to consider in a different 
 way when he underwrites a block of this stock, 
 because he now realizes that some shipper may 
 at any time file a complaint with the Commission, 
 and the rate be reduced. In other words, under 
 the old law the stock broker could work with 
 
22 
 
 the railroad. Now he must base his business 
 judgment on the facts as they exist, and the 
 first question which he will ask himself is whether 
 the rates are unreasonable and therefore liable 
 to be lowered by the Interstate Commerce 
 Commission. Under the old law he studied 
 such reports as the railroads saw fit to publish. 
 Now he has to study the statistical reports of 
 the Commission, to determine what his policy 
 will be, as the data given in these reports point 
 to certain conclusions which the Interstate 
 Commerce Commission is bound to follow in 
 making its decisions. Formerly the policy of 
 the railroads was the determining element. 
 Now it is the attitude of the Interstate Commerce 
 Commission. 
 
 The Shipper. 
 
 Take also the effect of the law as it applies 
 to our shippers. In considering the law from 
 the shipper's view-point we must keep in mind 
 first that uniformity is one of the fundamental 
 principles underlying the law, not only in refer- 
 ence to the book-keeping of the railroads but 
 also in reference to railroad operations. A 
 
23 
 
 standardization of railroad operations, though 
 not specifically provided for in the Act, is, con- 
 sequently, a necessary sequence in carrying out 
 the provisions of Section 2, which says, — 
 
 That if any common carrier subject to the pro- 
 visions of this Act shall directly or indirectly 
 by any special rate, rebate, drawback, or other 
 device charge, demand, collect, or receive from 
 any person or persons a greater or less compen- 
 sation for any service rendered, or to be rendered, 
 in the transportation of passengers or property, 
 subject to the provisions of the Act, than it 
 charges, demands, collects or receives from any 
 other person or persons for doing him or them a 
 like and contemporaneous service in the trans- 
 portation of a like kind of traffic under substan- 
 tially similar circumstances and conditions, such 
 common carrier shall be deemed guilty of unjust 
 discriminations, which is thereby prohibited and 
 declared to be unlawful." 
 
 Before the Hepburn bill became a law few, 
 if any, railroad officials apparently discovered 
 that the natural consequence of carrying out 
 this provision of the Act meant that, by having 
 a uniformity of rates on each railroad system, 
 a standardization of railroad operations must 
 develop, and, as far as I know, this has never 
 
24 
 
 been suggested in any newspaper. Further, 
 the result of this provision of the Act will neces- 
 sarily be that discriminations in rates must now 
 be considered in a broad sense, and uot be con- 
 fined to competitive localities, so that shippers 
 will be able to send their goods to the best 
 market, wherever it may be. 
 
 In considering this provision of the Act, we 
 must not forget that our great railroad systems 
 are made up of many separate companies, each 
 company with its own plan of making rates 
 and that the rates on the small railroad lines 
 were frequently higher than rates would have 
 been if these smaller corporations had been a 
 part of some large railroad system. When these 
 smaller lines were consolidated into some large 
 system, little if any effort was made to reduce 
 these rates to conform to the rates of the larger 
 system. The result has been that there are now 
 inequalities in rates on nearly every railroad 
 system which must be adjusted by the Com- 
 mission in carrying out this provision of the Act, 
 as many shippers on different parts of the same 
 system now have just cause for complaint when 
 the rates which they are charged, are compared 
 with the rates charged other shippers on other 
 
25 
 
 parts of the same system. For example, the 
 rate on goods shipped from A to C may be 
 different from the rate on goods shipped from 
 B to C — ^A, B, and C being shipping points on the 
 same railroad system and the physical conditions 
 between A and C being the same as between B 
 and C. As this is a service for ^^a like kind of 
 traffic under substantially similiar circumstances 
 and conditions/' such discriminations are unlaw- 
 ful under this section of the Act. Consequently, 
 because an intelligent comparison of the detailed 
 operations in the carrying of freight can now be 
 made by examining the freight tariffs, it is in- 
 evitable that a uniform tariff must be established 
 on each road for freight transportation as well 
 as for passenger service. Further, because the 
 uniform system of book-keeping to be adopted 
 will now show which roads are able to carry 
 freight most economically, it will inevitably 
 result that every road must sooner or later con- 
 form to the standard of the road which is 
 operated on the best business principles, if the 
 industries along the lines of those roads are to 
 be maintained against the competition of com- 
 modities where freight rates are lower. Further, 
 these inequalities must also be adjusted before 
 
26 
 
 the Commission can attempt to formulate any 
 general scheme for regulating the rates of any 
 railroad system as a whole. 
 
 This underlying principle of a uniform tariff 
 has now become apparent to such of our legis- 
 lators as are familiar with the Hepburn law, 
 and with this idea in view certain bills were 
 introduced in our last Congress which had for 
 their object the enactment by law of uniform 
 passenger rates in order to minimize the necessity, 
 of future legislation, either State or National, 
 in reference to the passenger service. 
 
 As both passenger and freight rates are now 
 crystallizing into standard tariffs, it has become 
 important for the railroads to know what stand- 
 ard the Interstate Commerce Commission will 
 adopt in order that they can apply this stand- 
 ard to their own roads, even though no com- 
 plaint has been made that unreasonable rates 
 are being charged. The attitude of the Com- 
 mission, therefore, is of the utmost importance 
 to the railroads, and a correct tabulation of 
 the Commission's statistical tables is of as much 
 importance to them for the reason that i^pon 
 these publications the Commission must base 
 the standard which it adopts. 
 
27 
 
 Since the Hepburn bill has become a law, many 
 of our large railroad systems have recognized 
 this underlying principle of the standardization 
 of railroad operations, and in their passenger 
 service have made their passenger tariffs on a 
 two cent per mile basis. Of course, this two 
 cent flat rate would be too low to adopt at this 
 time in many instances, but the principle of 
 uniformity should be established, whatever the 
 rate per mile may be made, and, as uniformity 
 is the first step to be taken in solving the problem 
 of the regulation of rates, many of our railroads 
 are trying to bring it about as quickly as is con- 
 sistent with good business judgment. 
 
 Publicity of Railroad Management. 
 
 As the predominating feature of the Hepburn 
 law is that all railroad operations are to be 
 given the greatest publicity, the Interstate Com- 
 merce Commission, in addition to prescribing the 
 form of books which the railroads shall keep, 
 has been given the right to call for special 
 reports from the railroads at any time, so that 
 not only the shipper and the investing public, 
 but our bankers and brokers, can know to what 
 
28 
 
 extent the bonds, stocks, and rates are being 
 manipulated, and this means that the Commis- 
 sion, by publishing these reports, can nip in the 
 bud any bond or stock manipulation. Further, it 
 has also been given the right to require any rail- 
 road to file monthly report of its earnings and 
 expenses, and this means that investors in stocks 
 and bonds and our stockbrokers, having now up- 
 to-date figures to judge from, can easily deter- 
 mine what railroad securities to invest in, and 
 the shipper or any other one interested what 
 rates he ought to pay. 
 
 The result is that the railroads will no longer 
 be able to pad accounts or conceal items if the 
 law is enforced. This publicity not only in rates, 
 but in accounts, payments, contracts, and ad- 
 ministration, lays bare the entire railroad situa- 
 tion as never before. What has heretofore been 
 dragged out by special investigation can now be 
 ascertained as easily as the assessed valuation of 
 a piece of real estate. It is this publicity which 
 will force railroad officials to operate their roads 
 on business principles even more than the man- 
 datory provision of the Hepburn law itself, and 
 such publicity the smallest shipper is as much in- 
 terested in as some large shipper who has his own 
 
29 
 
 cars or some large banking and stock brokerage 
 house which purchases large blocks of railroad se- 
 curities. Further, a broad discussion of railroad 
 management, at any time, can produce no detri- 
 mental results, and at the present time a free 
 and open discussion of the subject on broad lines 
 would tend to adjust the present unsettled con- 
 ditions and would bring about more stability of 
 railroad operations. In fact, a discussion of this 
 question will continue until all the interested 
 parties are in accord as to the policy to be car- 
 ried out or until the Interstate Commerce Com- 
 mission, which has been given power by Congress 
 to control the situation, defines its position. 
 
 Special Features of the Law which 
 apply to the shipper. 
 
 Some of the provisions of the law particularly 
 affect the shipper yet, because the interests of 
 the railroads, the bankers, the shippers, and the 
 public are closely linked together, any decision 
 of the Interstate Commerce Commission may 
 affect them all, even in those provisions of the 
 law which only directly apply to the shipper. 
 For example, when goods are shipped over more 
 
30 
 
 than one route, if the carriers fail to agree upon 
 the division of the through rate, the Commission 
 can prescribe what will be a just and reasonable 
 proportion of the through rate for the different 
 carriers to charge. Further, when transporta- 
 tion is over more than one route, the Commis- 
 sion can prescribe the route over which the com- 
 modities shall be taken and what the through 
 rate shall be. Further, the Commission can in- 
 sist that there shall be a continuous carriage of 
 freight from place of shipment to place of desti- 
 nation without unnecessary brea'k of bulk, stop- 
 page, or interruption. Further, when any ser- 
 vice is rendered by the owner of the property 
 which is being shipped, the Commission can de- 
 termine what is a just and reasonable charge 
 for such service, and this means that favored 
 shippers can no longer be given an indirect 
 form of rebate. Further, the railroads must 
 furnish the necessary cars and facilities for trans- 
 porting the goods of a shipper without discrim- 
 ination in favor of or against any shipper. Fur- 
 ther, a railroad cannot transport any article 
 which.it itself produces, mines, or manufactures. 
 In other words, no common carrier can now en- 
 gage in any other occupation than transportation, 
 
31 
 
 — a fault which has been often pointed out, but 
 never remedied. Further, all switches, spurs, 
 and side-tracks used in the transportation of 
 persons or property are now subject to the law, 
 and a siding cannot be given to one man and re- 
 fused to another. Further, rate wars will now be 
 entered into with caution, if at all, because every 
 railroad official will hesitate to lower the rates 
 below what is fair and reasonable, knowing that, 
 if he attempts to raise them later, the Interstate 
 Commerce Commission may properly ask, "Why, 
 if you were able to do business at the lower rate, 
 do you now askjto increase your rates''? In 
 other words, the Hepburn law checkmates him. 
 All private car contracts can now be known 
 to the public, and this means that large shippers 
 can no longer be given an indirect form of rebate 
 by means of special contracts. All pipe lines 
 must now publish their rates, and through tariffs 
 now apply to these lines the same as to the 
 railroads. Steamship companies transporting 
 passengers or goods by water in connection with 
 the railroads are now subject to the law. Any 
 service performed in connection with the receipt, 
 delivery, transfer in transit or with ventilation, 
 refrigeration, icing, or storing in warehouses or 
 
32 
 
 elevators, is now subject to the law. There will 
 no longer be any midnight tariffs or tariffs 
 changed for a few hours in prder to give favored 
 shippers the opportunity to ship their goods at 
 low rates, and all tariffs must now state sepa- 
 rately all terminal charges, storage charges, icing 
 charges, and such other charges as the Commis- 
 sion may designate. When there is a joint tariff 
 of two or more carriers, the rate charged by each 
 carrier must be stated. Express companies and 
 sleeping car companies are now obliged to file 
 reports and keep their accounts as directed by 
 the Commission. Up to this- time very little 
 has been known about the special contracts 
 which these companies made with the railroads, 
 and it has even been charged that they have en- 
 joyed special favors, as railroad officials are fre- 
 quently their largest stockholders. 
 
 The Law from the Legislators' Point 
 OF View. 
 
 I^et us now look at the law from the point of 
 view of our State or National legislators. Be- 
 cause of the uncertainty which now exists as 
 to the full purport of the Hepburn law, and 
 
33 
 
 because of the distrust which the public has 
 of railroad operations — which has been brought 
 about by railroad manipulations — laws are apt 
 to be passed which will be too far in advance 
 of the times, and to control the management of 
 our railroads more than is advisable. The leg- 
 islatures of twenty-eight different States have 
 already, either enacted laws or have measures 
 pending, which will largely reduce the earnings 
 of certain of our railroads or burden them with 
 unnecessary restrictions. Nineteen States have 
 already passed laws reducing rates, and in sev- 
 eral of these States the railroads have retaliated 
 by abandoning all new construction, cutting 
 down train service, and eliminating excursion 
 rates. State legislation in reference to the rail- 
 road problem is at present inadvisable, as State 
 authority except for local questions should only 
 be exercised as an emergency right, and should 
 not be used until after the Federal Government 
 has had an opportunity to '^make good," or has 
 shown that the Hepburn law is inadequate in 
 giving justice either to the public, or to the 
 railroads. Further, it is self-evident that the 
 Interstate Commerce Commission should not be 
 hampered by State laws in regulating the rates 
 
34 
 
 of this country, as the Commission in making 
 fair and reasonable rates must consider the 
 railroad situation as a whole, and not as it exists 
 in the different States. 
 
 The standardization of our railroads is now 
 being brought about by the Hepburn law in- 
 stead of by State laws, and to-day any legisla- 
 tion in reference to the railroad situation should 
 be limited to such general legislation as will be 
 supplementary to making this Hepburn law 
 effective. Even Federal laws, introducing new 
 principles, should be passed with caution, in 
 order that the country may have time to adjust 
 itself to the changed conditions under the Hep- 
 burn law. This law has been in operation 
 seven months, but the business men of this 
 country are just awakening to the real situation, 
 and, consequently, have not adjusted their busi- 
 ness to the new conditions. Several months 
 more must elapse before there is a feeling of con- 
 fidence in the public mind that the people of this 
 country are to be benefited by this law, — a period 
 of time which will be materially shortened if 
 our railroad officials and our business men will 
 appreciate that there is now a mutuality of 
 interests between them and that by co-operation 
 
35 
 
 they can solve this railroad problem. Already 
 there is a unanimity of opinion on the part of 
 all factors interested, that they should work in 
 co-operation with the government. We are at 
 present, however, handicapped, as we are still 
 groping about in the dark to find the real issues 
 involved, since no concrete statements have yet 
 been made of the conditions to be remedied. 
 
 In considering any question of new legislation, 
 we must remember that the development of the 
 railroad systems of this country has differed 
 from the development of the railroads of Europe; 
 that in Europe commercial centres became estab- 
 lished before the railroads were built, but in this 
 country the railroads were built first, and our 
 commercial centres came as the result of the 
 development of our railroads. This develop- 
 ment of our railroads and then of our commer- 
 cial centres has been going on until we have now 
 reached the period when our larger commercial 
 centres are already established, and when any 
 part of our country can be reached by our rail- 
 roads in connection with our electric railway 
 and the steamboat service of our coast and inland 
 lakes and rivers. The construction period of 
 railroad building is, consequently, now a thing 
 
36 
 
 of the past, and during the last few years rail- 
 road financiering has been in the general develop- 
 ment of the railroads already built and in weld- 
 ing together by re-organization and consolidation 
 our separate railroad corporations into large rail- 
 road systems. Because few new lines have been 
 built into new territory, and because the spirit 
 of speculation which went with the construction 
 period, and which gave enormous profits, is now 
 rapidly disappearing, the railroad business of 
 this country is already getting upon a more 
 substantial business basis and becoming more 
 standardized. ♦ 
 
 During the last few years, nature has not 
 been niggardly, and an overwhelming impetus 
 has been added to the producing power of this 
 country by the formation of our large indus- 
 trial trusts, which has given us a period of pros- 
 perity felt by every citizen of the land. This 
 has brought about an expansion of business 
 which our great railroad captains of industry 
 have lacked the foresight to anticipate. To meet 
 this enormous development of our country, there 
 must now be a greater consolidating of interests 
 and a greater community of operations by our 
 railroads. Already an appreciation of the inter- 
 
37 
 
 state character of our railroad service is taking 
 place, — the Hepburn bill being the first expres- 
 sion toward remedying the lack of any general 
 railroad policy. This law has made the Inter- 
 state Commerce Commission a vast clearing 
 house, and the inevitable result is bound to 
 be the standardization of our railroads, physi- 
 cally, in legal requirements, and with more econ- 
 omy of operating forces. Consequently, the 
 future expansion of our railroad systems will 
 be with less waste of resources. Because an 
 effective nationalizing influence has been lacking 
 in the past, our railroads have developed under 
 uncertain and chaotic conditions and various 
 local restrictions. It is this which has brought 
 about the present acute railroad situation as 
 expressed on the stock exchange by a fluctuat- 
 ing market. 
 
 With a standard of operations there will 
 be fewer protests against the way stocks are 
 being manipulated by those who control the 
 roads. Under the pressure of facts many of the 
 officials of our larger railroad systems are now 
 shrewdly leading public opinion instead of being 
 led by it. These roads have already taken the 
 first step in the regulation of rates without any 
 
38 
 
 suggestion from the Interstate Commerce Com- 
 mission. By doing this, they have shown the 
 wholesome regard which they have for the Hep- 
 burn law, and, when the first step is taken by 
 any railroad, we may rest assured that, at 
 the proper time, the other steps will be taken 
 which will give to the shipper whatever rights 
 and privileges belong to him. 
 
 In conclusion, let me add that all great meas- 
 ures like the Hepburn law must have enough 
 time to be understood in order to be appre- 
 ciated. We must keep in mind that we are not 
 interested in past conditions, but in the future 
 welfare of this country, and that there is now a 
 starting-point to work from, for every railroad 
 manager and every banker, broker, shipper, and 
 investor. If we do this it will do more to re- 
 estabhsh confidence in railroad management and 
 railroad securities than we can do by any other 
 single act. 
 
 ^ OF THE 
 
 UNIVERSITY 
 
THIS ^ooKisvv^Jl^^ovi 
 
 jn^ OF 25 CENTS 
 
 «"-«- ^^ t ON THE DATE ''"^^^THE FOURTH 
 
 DAY AND TO S • ^^^^^^^^^^^^^^ 
 
 OVERDUE. 
 
 MAR S8 
 
 \Oec'