35SA3 
 
 5 
 
 £»\6a_ v ^jr fN ‘ 
 
 ADDRESS OF HON. JOHN J. ESCH, CHAIRMAN, COMMITTEE ON 
 INTERSTATE AND FOREIGN COMMERCE, UNITED STATES 
 HOUSE OF REPRESENTATIVES. 
 
 4 
 
 Mr. Chairman , Ladies and Gentlemen: 
 
 A writer to secure local color for a story visited a fishing 
 village on Long Island Sound last winter and inquired of 
 a group in an inn what they did during the long winter 
 months when their fishing grounds were frozen over; one 
 of them replied, “Well, sir, we just sit and think, and 
 sometimes only sit.” 
 
 In the critical days of 1917, shortly after the war was 
 declared, there was a man in Baltimore of large affairs and 
 holder of railroad securities who sat and thought that the 
 time had arrived when owners of securities of carriers 
 should organize for the purpose of mutual protection. His 
 thoughts translated into action resulted in a conference 
 held at Baltimore, May 23, 1917, attended by 500 repre- 
 sentatives of savings banks, life insurance companies, 
 estates, colleges and investing institutions generally, with 
 aggregate holdings of railroad securities of two billions of 
 dollars. 
 
 Under the guidance, zeal and industry of the man from 
 Baltimore, this conference developed into a National 
 Association of Owners of Railroad Securities, incor- 
 porated, well officered and with a committee representing 
 all parts of the country. During the period of Federal 
 Control the work of organization was vigorously prose- 
 cuted. The list of members increased and a legislative 
 program to meet the situation when Federal Control 
 should end was, after much study and consultation, for- 
 mulated. The leading object of the Association was “to 
 protect and stabilize the securities of the carriers of the 
 country.” This was to be done by providing a fixed per- 
 centage return of not less than 6 per cent on the aggregate 
 property investment in the railroads as a whole, with a 
 division of earnings in excess of 6 per cent. 
 
 O * 
 
 * 
 
There was a strong and determined opposition from 
 most of the leading railroad executives; there was oppo- 
 sition in the press; there was opposition in both Houses of 
 Congress. The executives proposed a statutory rule of 
 rate making which specified the items which the Inter- 
 state Commerce Commission must take into consideration 
 in determining the justness and reasonableness of rates. 
 They feared that a fixed percentage return inserted in the 
 law would make it a football of politics. 
 
 Undaunted by such a formidable array, the President of 
 the Association and his associates sought the ablest coun- 
 sel and the co-operation of other organizations. The 
 Transportation Conference as representative of the 
 United States Chamber of Commerce favored the fixed 
 percentage return, as did Judge Prouty, Director General 
 Hines, and Chairman Clark, of the Interstate Commerce 
 Commission. But Congress was the final arbiter. To per- 
 suade it to adopt the plan of a fixed percentage return the 
 President of the Association had prepared and presented 
 to the House Committee on Interstate and Foreign Com- 
 merce one of the most remarkable memorials ever offered 
 to Congress. The signers represented 19^ billions of 
 dollars, or 70 per cent of the resources of financial institu- 
 tions in the fifty-six largest cities of the United States. 
 They represented 5,000 savings banks, life insurance, fire, 
 marine, and surety companies, national and state banks 
 and trust companies. They represented other fiduciary 
 institutions such as estates and individual investors to the 
 number of 8,189. They represented 1,600 business organ- 
 izations such as boards of trade, chambers of commerce, 
 and business firms with a membership of over 30,000. 
 They represented over nine million savings depositors and 
 twenty-three millions of policy holders. Fortified by such 
 backing, the President of the Association made a forceful 
 appeal not only to the Committees of the Senate and 
 House, but also to the entire Congress and to the country. 
 The bill as passed by the House contained a statutory 
 rule of rate making. The Senate adopted the plan of a 
 fixed percentage return. After a struggle of many weeks 
 in conference, the latter was incorporated in the Trans- 
 portation Act of 1920. Who is this man who for three 
 
 2 
 
years, without pay, has devoted his energies and most of 
 his time, in the face of opposition and difficulties which 
 would have discouraged most men, “to protect and 
 stabilize the securities of the carriers of the country,” held 
 directly or indirectly by fifty millions of our people? He 
 is the man from Baltimore, President of the National 
 Association of Owners of Railroad Securities, the honor 
 guest of the evening — S. Davies Warfield. 
 
 The Transportation Act 
 
 The railroads were taken over by the President January 
 i, 1918, under a clause contained in the Army Appropria- 
 tion Bill enacted in 1916. The scope and limitations of the 
 President’s authority in connection with such taking over 
 were defined in the Federal Control Act, approved March 
 2 1, 1918. Federal Control, continuing for a period of 
 twenty-six months, was terminated by the Transporta- 
 tion Act on March 1st of this year. Between our declara- 
 tion of war, April 6, 1917, and the beginning of Federal 
 Control, January 1, 1918, the railroad executives, through 
 their War Board, sought to meet the enormously increased 
 demands for transportation necessitated by the war, by 
 combining the leading roads into a national system for 
 purposes of unified operation. While much was accom- 
 plished, legal obstacles in the form of the Sherman Anti- 
 Trust Law, failure of some of the trunk lines to co-operate, 
 and the indiscriminate issuance of priority orders by 
 various government officials, prevented the increase in 
 the quantity and efficiency of the service which the Presi- 
 dent and his advisers deemfed necessary to win the war. 
 He, therefore, took over the roads, and Congress enacted 
 the Federal Control Act to enable him to operate them. 
 
 Under Federal operation, revolutionary changes were 
 made in the matter of regulations, financing and adminis- 
 tration. Many of these changes, such as withdrawal of 
 trains, re-routing, preference in shipment to essential or 
 war industries, gave rise to widespread inconvenience, suf- 
 fered, however, uncomplainingly by our people, while the 
 war was still on. With the signing of the armistice Novem- 
 ber 11, 1918, and cessation of war production, a popular 
 
 3 
 
demand arose for a speedy termination of Federal Control 
 and a restoration of the roads to private operation, a de- 
 mand largely augmented by the fact that the roads as and 
 while operated by the Government, were failing to earn 
 the standard return guaranteed under the Federal Con- 
 trol Act, by more than a million dollars a day, a deficit 
 which had to be made good out of the Federal treasury. 
 
 The President, conscious of this demand, declared in a 
 message to Congress early in 1919, that he would, under 
 authority granted to him by the Federal Control Act, re- 
 turn the roads to their owners on January 1, 1920. He 
 did not advise Congress as to the terms and conditions 
 of such return; in fact, he frankly stated that as to the 
 solution of the grave and complicated problems arising 
 out of Federal Control, he had no confident judgment of 
 his own. The appropriate Committees of Senate and 
 House, and Congress itself, therefore, worked out their 
 own solution as now embodied in the Transportation Act. 
 
 Perhaps to no Congress has a more difficult, complicated 
 or important piece of legislation ever been submitted. Its 
 consideration extended over a period of many months, 
 hundreds of witnesses were heard, and thousands of pages 
 of testimony and exhibits were presented. After four 
 months devoted to hearings and consideration of numerous 
 plans and suggested amendments, the House passed its 
 bill November 17, 1919. The Senate passed the Cummins 
 bill December 19th. Two days later both bills were sent 
 to conference. Owing to the wide and radical differences 
 between the bills on highly important matters, it was im- 
 possible for the conferees to get action on a conference 
 report by January 1, 1920, the dated fixed originally by 
 the President for the return of the roads. The President, 
 therefore, changed the date to March 1, 1920. After eight 
 weeks of continuous and strenuous effort, the conferees 
 reported and the bill was approved February 28th. 
 
 The Transportation Act is not based upon government 
 ownership. Outside of advocates of the Plumb Plan, 
 there was little or no sentiment in Congress in its favor. 
 While there were some advocates of an extension of 
 Federal Control, they secured little support in Congress. 
 The adjustment of financial relations between the Govern- 
 
 4 
 
ment and the carriers even after twenty-six months of 
 Federal Control, has proven so complicated that were 
 control to continue two years longer, the situation would 
 have become so scrambled as to make solution impossi- 
 ble. This would have compelled government ownership 
 or made it highly probable. 
 
 The framers of the Act decided it was wisest to build 
 upon the existing Interstate Commerce Act, whose founda- 
 tions were tried and well laid, instead of building a struc- 
 ture entirely new. It would have been fatal to have re- 
 turned the roads without legislation, which made it possi- 
 ble for them to meet the new conditions consequent upon 
 the war. 
 
 Railroad Credit 
 
 The primary duty imposed upon Congress was to re- 
 store or re-establish credit which would enable the roads 
 to supply themselves with the equipment necessary to 
 handle the traffic promptly and economically and provide 
 the additions and betterments during the reconstruction 
 period. Experts declared that at least 250,000 more freight 
 cars, 9,000 more passenger cars, 4,000 more locomotives, 
 with proportionate enlargements of other facilities, were 
 needed to do the business of the country as it ought to be 
 done. But the added equipment and facilities at current 
 prices would mean an investment of over $600,000,000 
 during the year of 1920. We, therefore, were presented 
 with the problem of returning the roads to their owners 
 under such conditions as would enable them to borrow or 
 otherwise secure $600,000,000 of new money and compel 
 its expenditure for new equipment and facilities and for 
 next year to borrow or secure one billion dollars for like 
 purposes, and at least an equal amount for subsequent 
 years. We knew that at the end of Federal Control, the 
 roads, except a few of the strongest, could not finance 
 themselves, that maturities for this year and succeeding 
 years amounting to hundreds of millions of dollars had 
 to be met if roads were to be kept out of the receiver’s 
 hands, that sales of stocks was impossible and further 
 issues of bonds invited disaster. 
 
 5 
 
How the Problem Was Met 
 
 The Transportation Act seeks to solve the problem as 
 follows: 
 
 First. It refunds the indebtedness of the carriers to the 
 Government, with certain offsets, over a period of ten 
 years, with interest at 6 per cent per annum. 
 
 Second. It extends the guaranty of the standard return 
 for a period of six months after March ist. 
 
 Third. It provided a revolving fund of $300,000,000 
 out of which loans can be made to the roads at 6 per cent 
 per annum for periods not exceeding fifteen years. 
 
 Fourth. It establishes a rule of rate making under 
 which the Interstate Commerce Commission is to so ad- 
 just rates as to yield a net income of not less than 5^2 per 
 cent upon the value of the property rendering the service, 
 considered as a whole, this rule to continue for two years, 
 after March 1, 1920, and thereafter the Commission to fix 
 the rate of return. It is further provided that any road 
 earning more than 6 per cent shall divide such excess with 
 the Government. 
 
 Section 422 of the Transportation Act 
 
 This last provision is contained in Section 422 of the 
 Transportation Act and was believed to be necessary to 
 enable the roads to secure the money and the credit re- 
 quired to purchase additional equipment and betterments 
 at lowest possible rates and take care of the present and 
 immediately prospective wants of transportation. With 
 the roads again under private operation and the guaranty 
 of the standard return withdrawn, there must be proper 
 encouragement given to the investing public if the car- 
 riers are to obtain the necessary funds to provide the addi- 
 tions, betterments and extensions required by an expand- 
 ing commerce. The public cannot be compelled, but must 
 be induced to invest. Stabilizing the credit of the carriers 
 is a strong and necessary inducement. A public utility 
 which has its income controlled through the regulation of 
 its rates and its expenses, especially wages, also fixed by 
 
 6 
 
governmental authority, is entitled, upon moral if not 
 legal grounds, to fair and just treatment. 
 
 Section 422 of the Act, which provides for a fair return 
 upon the aggregate value of the property of the carriers 
 held and used in the service of transportation, established 
 a new principle in rate making and supplants the former 
 rule which gave the Interstate Commerce Commission as 
 its sole rule or standard the direction that rates must be 
 ‘‘just and reasonable.” Under this section the Commis- 
 sion must value the railroads as a whole or by territories 
 and then so adjust the rates that they will yield as a fair 
 return 5^ per cent upon the aggregate value and may 
 allow an additional one-half per cent for improvements, 
 betterments or equipment chargeable to capital account. 
 This section has given rise to most of the opposition to 
 the Act and has been wilfully misrepresented as to its pur- 
 pose and effect. It is charged that this section guarantees 
 per cent and a possible 6 per cent return on eight 
 billions of watered stock. As the amount of stock out- 
 standing January 1, 1918, amounted to nine billion dollars, 
 this would mean that practically all the stock was water, 
 which is absurd. 
 
 Few roads, as they stand today, are over-capitalized. 
 The truth is that the fair return is not based upon 
 capitalization at all, but upon aggregate value, and this 
 value as determined by the Commission in its decision 
 made public July 31st, is $18,900,000,000, which is $1,140- 
 572,611 less than the amount as claimed by the carriers, 
 and over a billion less than the capitalization. 
 
 The Commission with its record of the financial history 
 of every road, with its knowledge of their receipts and ex- 
 penditures and the data already presented to it by its 
 Valuation Board, can be trusted to determine the aggre- 
 gate value which will be just to all interests. When the 
 Valuation Board shall finish its work, the valuation it 
 fixes will thereafter become the basis. 
 
 Return Not a Guaranty 
 
 It is further charged that the 6 per cent return is a 
 guaranty, that every railroad shall receive this amount. 
 
 7 
 
This is absolutely unwarranted. The return is based on 
 the aggregate value of the roads taken country-wide or by 
 territories. Few roads would share of the total valuation. 
 Some would earn i per cent, 2 per cent, or 3 per cent, 
 some may not earn their operating expenses. It will be 
 left to each road to earn what it can, and through initiative, 
 economy, efficiency and foresight to increase its earnings. 
 There is, therefore, no guaranty, as the Government does 
 not make good to any road the difference between what it 
 earns less than 6 per cent and 6 per cent. 
 
 On the contrary, the Government will gain a half of any 
 excess over the 6 per cent and can use this excess in loans 
 to weak roads at 6 per cent interest or in providing equip- 
 ment to be leased to roads at a rental which will produce 
 6 per cent on the value of such equipment. Strong roads 
 earning more than 6 per cent strongly protested against 
 this division of an excess and questioned its constitution- 
 ality but the framers of the Act are confident it will be 
 sustained should a test be made in the courts. 
 
 That the new rule of rate making is not a guaranty is 
 further evident from the fact that “In performing its 
 duties the Commission must estimate for a future period 
 the volume of traffic and the cost of maintenance and 
 operation, and these uncertain elements necessarily re- 
 move the provisions from the field of a government 
 guaranty. ” To give assurance that there will be an excess 
 to be divided and that all earnings will not be recklessly 
 expended, Section 422 provides that management should 
 be “honest, efficient and economical” and that expendi- 
 tures for maintenance of way, structures and equipment 
 be “reasonable.” 
 
 The plan of dividing the excess over 6 per cent unless all 
 roads are under a common control or ownership, is the 
 only one which will prevent some roads earning excessive 
 profits, as rates must be uniform and the same between 
 competitive points. 
 
 The principle embodied in the Transportation Act, fix- 
 ing rates so as to provide a maximum rate of return on the 
 value of the property, is found in statutes of several of the 
 states regulating public utilities. Legislative bodies can- 
 not confiscate private property. The Courts will protect 
 
 8 
 
such property and when used in the public interest will 
 see that it gets a fair return. Instead of leaving such fair 
 return to be dependent upon the just and reasonable rates 
 which the Commission is to fix, Congress itself established 
 what in its judgment it considered to be fair, in the Trans- 
 portation Act, for the two years ending March i, 1922. 
 
 Opponents of Section 422 of the Act, which rehabilitates 
 railroad credit and enables the roads to again become 
 self-sustaining and capable of rendering the service de- 
 manded by the people, and bridges the critical period of 
 reconstruction, offer no alternative of a constructive or 
 sufficing character other than government ownership or 
 the Plumb Plan. 
 
 The Plumb Plan 
 
 The Plumb Plan involves government ownership, but 
 goes much farther by requiring operation by the employees. 
 This is more than socialism. It smacks of Sovietism. The 
 American people do not want government ownership. 
 Both Republican and Democratic platforms are against 
 it. This js no time to add to the twenty-six billions of our 
 present indebtedness, the billions that will be necessary 
 to buy the roads. Our tax burdens are already too heavy. 
 To add two million employees to the government list is a 
 situation which should cause grave forebodings. 
 
 A study of government-owned railroads in other coun- 
 tries shows higher costs, higher rates and poorer service 
 than we have had under private ownership. The maxim 
 holds good that “public waste is more than private 
 profit.” Conservative and farsighted labor leaders are not 
 in favor of government ownership, much less the Plumb 
 Plan. Samuel Gompers, head of the American Federation 
 of Labor, bitterly opposed government ownership of rail- 
 roads in the annual convention of the Federation held in 
 Montreal, Canada, last June. 
 
 Plumb contends that the Government ought to purchase 
 the roads for twelve billions. He favors the elimination of 
 capital represented by stocks. The courts, under the 
 Constitution, will not sustain his contention. The people 
 object to authorizing a board to run the roads, consisting 
 
 9 
 
of ten employees and only five representing the public. 
 It objects to such board fixing the wages which all of the 
 people must pay through freight and passenger rates. 
 The Plumb Plan provides for a distribution of the surplus, 
 if any, but leaves the payment of deficits to fall upon the 
 public treasury. 
 
 Extensions and Abandonments 
 
 Hereafter, under the Act, no carrier by railroad can 
 undertake the extension of its line of railroad or the con- 
 struction of a new line unless and until it obtains from the 
 Commission a certificate that the present or future con- 
 venience and necessity require or will require the con- 
 struction or operation, or construction and operation of 
 such additional or extended line of railroad. Nor shall 
 there be any abandonment of any existing line without 
 securing a like certificate. 
 
 This provision follows statutes in Wisconsin, New York 
 and other states, and is designed to prevent unwise exten- 
 sions of existing lines and construction of new ones. Con- 
 struction of a parallel line often makes of the existing line 
 a “weak sister.” Where a single line could be made to do 
 all the business, the additional line imposes upon the pub- 
 lic the burden of sustaining two weak lines, with poor 
 service. The same is true in a measure with reference to 
 the building of many branch and short lines. Where com- 
 munities are served by a road, it should not be permitted 
 to be abandoned without a full opportunity for all parties 
 interested to be heard before a competent and impartial 
 tribunal. 
 
 Stock and Bond Control 
 
 One of the most important provisions of the new Act is 
 contained in Section 439, giving the Commission authority 
 to pass upon issue of notes with a maturity in excess of 
 two years. In 1910, 1914, and 1916 the House of Repre- 
 sentatives passed bills having the above purpose, but 
 failed to become a law. Public sentiment has been so 
 developed since 1910 that practically no objection was 
 raised to this section during the consideration of the 
 
 10 
 
Transportation Act. The country heartily approves of 
 giving the Commission such control over the issues of 
 securities as will stabilize them and prevent their ex- 
 ploitation. It is confidently believed that the scrutiny of 
 such issues will beget a greater confidence in them on the 
 part of the investing public. Had such legislation been on 
 the statute books during the last ten years, stockholders 
 and the general public could not have been afflicted with 
 such financial fiascoes as presented by the Frisco, the 
 Rock Island, the Pere Marquette, the New Haven and 
 others. 
 
 Consolidations 
 
 The war has taught the value of consolidations and 
 combinations under proper regulation and control. The 
 Act authorizes the Commission to prepare a plan for the 
 grouping or consolidation of the many railroad systems 
 of the United States into a limited number of large com- 
 peting systems of approximately equal strength. It is con- 
 templated to gradually bring together the railroads into a 
 few systems so that these systems can “ employ uniform 
 rates in the movement of competitive traffic and under 
 efficient .management earn substantially the same rate of 
 return upon the value of their respective railway properties. ” 
 
 The carrying out of this plan will enable the Commis- 
 sion to solve the problem of the “weak sisters,” improve 
 service, and eliminate whatever of over-capitalization 
 there may be in the constituent roads making up the 
 consolidation. 
 
 Car Service 
 
 The Act amends the Car Service Act of May, 1917, by 
 extending its scope and enlarging the powers of the Com- 
 mission. Every carrier by railroad is required to furnish 
 safe and adequate car service. In cases of shortage of 
 equipment, congestion of traffic, or other emergency, the 
 Commission can make such just and reasonable directions 
 with reference to car service, without regard to ownership, 
 as in its opinion will best promote the service in the in- 
 terest of the public and the commerce of the people. It 
 can also require the joint or common use of terminals upon 
 reasonable terms. It can also give directions for prefer- 
 
 11 
 
ence or priority in transportation, embargoes, or move- 
 ment of traffic under permits. It will thus be seen that 
 the Transportation Act retains the benefits which Federal 
 Control demonstrated. These new powers in the Com- 
 mission are now being given practical application through 
 recent orders relating to the coal situation. The authority 
 granted is ample to meet emergency conditions and were 
 it nor for car shortage and recent labor troubles relief 
 could be immediate. 
 
 It may be of interest to know what has been accom- 
 plished since March 1st in relieving congestion and car 
 shortage by the Interstate Commerce Commission in the 
 exercise of the powers granted over car service by the 
 Transportation Act. 
 
 Those dissatisfied with the results of private operation 
 during the last nine months under the new Act, should 
 remember that the business offered the railroads has mate- 
 rially exceeded their capacity because: First. The volume 
 of business has greatly outgrown the railroads with refer- 
 ence to terminals, trackage, cars, locomotives, and other 
 equipment. Second. Crowded to the limit with war use, 
 the railroads were returned to their owners suffering from 
 under-maintenance. Third. The outbreak of unlawful 
 strikes in April at various gateways paralyzed traffic for 
 weeks. To overcome these obstacles and supply the de- 
 mands of commerce increased by a great crop, engaged 
 the immediate and earnest attention of the railroad 
 executives and the Interstate Commerce Commission. 
 Whatever of success they have attained is largely due to 
 the cordial and ready co-operation of shippers and the 
 general public. 
 
 On March ist, when Federal Control ended, there were 
 105,000 cars which could not be currently handled. On 
 April 1 6th, after two weeks of unlawful striking, the num- 
 ber had increased to 288,000. The situation proved so 
 serious that the Commission on May 20th, issued Service 
 Order No. 1, under which the carriers were directed to 
 forward traffic to destination by the most expeditious and 
 available routes, without regard to routing orders, speci- 
 fied by the shippers, or ownership of cars. The Car Serv- 
 ice Division of the American Railroad Association co- 
 
 12 
 
operated with the Commission and with the shippers so 
 successfully that on September 17th the car accumulation 
 had been reduced to 47,438. This reduction of congestion 
 has enabled the roads to cancel or modify many of their 
 embargoes and thus still further ease the situation. 
 
 Car shortage still remains the most pressing need of 
 transportation. There is no mystery about the existing 
 car shortage. It began in 1916 and prior to our entrance 
 into the war our car shops were manufacturing cars for 
 the use of countries which afterwards became our allies. 
 All our energies upon our entrance into the war and during 
 its continuance were directed to war production. During 
 the twenty-six months of Federal Control, only 100,000 
 freight cars and 1,900 locomotives were ordered, whereas 
 our annual output of cars prior to 1917 was over 100,000 
 and about 80,000 were annually scrapped. 
 
 During January and February, the last two months 
 under Federal Control, the average daily car shortage was 
 about 80,000. The average for the week ending September 
 1st was 146,070, but this had been reduced for the week 
 ending September 17th to 96,114. This indicates that 
 still greater efforts must be put forth if further reductions 
 are to beobtained. Not much relief can be expected from 
 new car production for the current year. From January 
 1st to August 1st, 50,275 freight cars were on order but 
 undelivered. The new rate increases which did not be- 
 come effective until August 26th, will increase orders and 
 stimulate production. 
 
 More Production Program 
 
 In July the Association of Railroad Executives met at 
 Chicago and resolved that all of its members and other 
 carriers be urged: “To devote their utmost energies to 
 the more intensive use of existing equipment and as defi- 
 nite aims undertake, with the co-operation of the public, 
 to attain: 
 
 “1. An average daily minimum movement of freight 
 cars of not less than 30 miles per day; 
 
 “2. An average loading of 30 tons per car; 
 
 13 
 
“ 3 - Reduction of bad order cars to a maximum of 4 
 per cent of total owned ; 
 
 “4. An early and substantial reduction in the number of 
 locomotives now unfit for service, and 
 
 “5. More effective efforts to bring about the return of 
 cars to the owner roads.” 
 
 As the country’s business could not wait for new cars 
 and locomotives, immediate, and, in fact, the only relief 
 lay in the more effective use of equipment already in use. 
 It may interest you to know of the progress that has been 
 made as a result of this “More Production” program, 
 aided by service orders of the Commission. 
 
 A car movement of 30 miles per day for the country as 
 a whole has never yet been attained. The significance of 
 speeding up is made clear when it is understood that an 
 increase of one mile per day for the 2,500,000 freight cars 
 in the United States is equivalent to adding 100,000 cars 
 to the available equipment. For May of this year, the 
 average movement of a freight car was 24.1 miles, for 
 June 25, for July 25.7, for September 28.4, a gratifying 
 increase. In July of last year it was only 21.3, or 4.4 less 
 than for July of this year, or an equivalent of 410,403 cars. 
 
 As to the second aim of the Railway Executives to in- 
 crease the average loading of cars to 30 tons, much atten- 
 tion has been given, with good results. “The tons per car 
 (revenue and non-revenue) for the year 1917 were 27. 
 For 1918, when the patriotic appeal was very strong, the 
 railroads, with the splendid co-operation of the shippers, 
 were able to show an average of 29.1, but for 1919, the 
 loading dropped to 27.8 tons. The figures for January, 
 February and March this year, were 28.3 tons in each 
 case, while for April the loading was 28.6, May 28.3, June 
 29 tons, and October 29.6.” This shows that the high- 
 water mark of the peak year, 1918, had been exceeded in 
 October of this year. Already a number of roads have 
 reached and some of them have passed the goal fixed by 
 the executives. An average of only one ton per each loaded 
 car would be equivalent to the addition of 80,000 new cars 
 to the available supply. 
 
 As to the third aim, reduction of bad order cars to a 
 maximum of 4 per cent of total owned, little progress has 
 
 14 
 
thus far been made, due to a lack of repair workers and 
 materials. When Federal Control began, of the 2,260,000 
 freight cars 5.7 per cent, or 120,780 cars, were reported in 
 bad order. At the end of the Federal Control, of the 
 
 2.362.000 freight cars, 6.7 per cent, or 153,727 cars were in 
 bad order. There has been little change since. Every 
 1 per cent improvement in the bad-order car situation 
 means an addition of about 25,000 cars to the available 
 supply. 
 
 As to the reduction of the number of locomotives now 
 unfit for service, no statistics are available. 
 
 As to the fifth aim of bringing about the return of cars 
 to owner roads, continued progress is shown. Prior to the 
 war, from 50 per cent to 60 per cent of freight cars were 
 on the lines owning them. During the war, cars were 
 widely scattered so that when Federal Control ended 
 March 1st of this year, only 21.9 per cent were on their 
 home lines. On October 1st, due to orders of the Commis- 
 sion and efforts of the carriers, the number had been in- 
 creased to 30 per cent and further increases are expected. 
 An important result of getting cars back to their own 
 rails lies in the fact that they will be more thoroughly and 
 promptly repaired. 
 
 Notwithstanding the fact that the business offered for 
 transportation exceeds the ability of the carriers to handle 
 it promptly, a tremendous volume of business has been 
 moving since Federal Control ended. For the four weeks 
 ended August 28th, there were more cars loaded than for 
 the corresponding periods in 1919 and the peak year, 1918. 
 This may have been due to the fact that shippers sought 
 to load prior to the advance in rates effective August 26th, 
 and yet records for the four weeks ending September 25th 
 are only slightly less than for the four weeks in August of 
 this year and are almost equal to the corresponding period 
 in the peak year, 1918. In fact, in the week ended Sep- 
 tember 25th, 994,687 cars were loaded with commercial 
 freight, which almost equals the best weekly record made 
 in 1918 under the stress of war need. A reduction of only 
 
 55.000 loads in September, as compared with August, 
 would indicate that the increase in rates in August had 
 but a slight effect in reducing the volume of business. 
 
 15 
 
Last year 70,000 grain cars were stored in the West in 
 anticipation of the harvest of that year. This year it was 
 impossible to store any. To meet this situation, the Com- 
 mission under Service Order No. 2, of May 20th, directed 
 the movement of cars from surplus territory in the East 
 to deficit territory in the West. Relocation and equaliza- 
 tion orders of the Car Service Division of the American 
 Railroad Association further aided this movement so that 
 some 90,000 box cars were delivered and more were to 
 follow. From January 1st to the end of August of this 
 year, 1,271,878 cars of grain and grain products were 
 loaded, the largest number during the last five years, ex- 
 cept 1918, and only 10,000 less than for that year. In 
 spite of this showing, from January 1st to September 18th, 
 there were 158,764 less cars of grain loaded than for the 
 corresponding period of 1919, which indicates that in- 
 creased efforts would have to be made to take care of the 
 grain movement for the balance of the year. 
 
 The statistics I have used to indicate the progress made 
 in administering the car service section of the Transporta- 
 tion Act have been supplied to me by Secretary McGinty 
 of the Interstate Commerce Commission and Julius H. 
 Parmelee, Director of the Bureau of Railway Economics. 
 They may, therefore, be taken as official. 
 
 Adjustment of Labor Disputes 
 
 Title III of the Act provides for the adjustment of labor 
 disputes. Credit and sufficient equipment will not pro- 
 vide efficient transportation without labor. Satisfied 
 labor is necessary to insure efficient service. All concede 
 that railroad employees should have good wages and 
 working conditions and reasonable hours. The problem 
 was how these could best be secured keeping in mind the 
 interests of the owners and the general public. The Act 
 creates a Railway Labor Board of nine members, ap- 
 pointed by the President and confirmed by the Senate, 
 three to represent the employees, three the owners, and 
 three the public. Some organizations objected to having 
 the public represented on the Board. As the public pays 
 the bills, in the last analysis Congress gave it equal repre- 
 
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sentation with the employees and the owners. The Board 
 is the final arbiter and in all cases relating to wages or 
 salaries, five out of the nine members must concur in the 
 decision and at least one of the five must be a representa- 
 tive of the public. There is no anti-strike provision, no 
 compulsion. The decisions are rendered effective through 
 force of public opinion and public opinion is as a rule more 
 effective than decrees of courts or the acts of legislatures. 
 
 In Conclusion 
 
 The Transportation Act can be made a success only 
 through the hearty co-operation of all interests affected. 
 Private ownership is now on trial; if it fails, government 
 ownership may have to be the only alternative. The rail- 
 road owners under the Act have been given fair and rea- 
 sonable terms. They must now work out their own sal- 
 vation. If any fail to realize the changed conditions and 
 still insist on playing the part of Bourbons, an aroused 
 public sentiment will push them aside. Self-interest, 
 rivalries and prejudice must yield to an earnest desire to 
 serve the general good. With increased rates the public 
 will deniand improved service. To insure it in fullest 
 degree there must be team work. The public must lend 
 its aid and offer during these critical days of reconstruction 
 the most hearty co-operation. 
 
 The Transportation Act is entitled to a fair trial. It is 
 not a perfect measure. Some of its salient features are the 
 result of compromise of the conflicting views of Senate and 
 House, but as a whole it is a constructive measure of great 
 and far-reaching importance. As its different provisions 
 are enforced, its scope and beneficent purpose will become 
 more and more apparent. Its success will largely depend 
 upon the manner in which it is administered by the Com- 
 mission. The country has confidence in the integrity and 
 ability of the members of the Commission and looks to 
 them with confidence. 
 
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